OTHER PERCENTAGE TAXES

CBC relied on the Tax Courts ruling in Asian

Bank that
Section
4(e)
of
Revenue
Regulations No. 12-80 authorizes the
exclusion of the final tax from the banks
taxable gross receipts. Section 4(e) provides
that the rates of taxes to be imposed on the
gross
receipts
of
such
financial
institutions shall be based on all items of
income actually received. The final tax,
not having been received by the petitioner
but instead went to the coffers of the
government, should no longer form part of
its gross receipts for the purpose of
computing the GRT.

CASE No. 1
[G.R. No. 146749. June 10, 2003]
CHINA
BANKING
CORPORATION, petitioner, vs.
COURT OF APPEALS, COURT OF
TAX APPEALS, and COMMISSIONER
OF
INTERNAL
REVENUE,respondents.
[G.R. No. 147938. June 10, 2003]
COMMISSIONER
OF
INTERNAL
REVENUE, petitioner, vs.
CHINA
BANKING
CORPORATION, respondent.

The Supreme Court, however, ruled that the

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

FACTS: CBC paid P12,354,933.00 as gross

receipts tax on its income from interests on
loan investments, commissions, services,
etc. during the second quarter of 1994.
Thereafter, Court of Tax Appeals in Asian
Bank Corporation v. Commissioner of
Internal Revenue[4] ruled that the 20% final
withholding tax on a banks passive interest
income does not form part of its taxable
gross receipts.
CBC filed with the CIR a formal claim for
tax refund or credit of P1,140,623.82 from
the P12,354,933.00 gross receipts tax that
CBC paid for the second quarter of
1994. CBC also filed on the same day a
petition for review with the Court of Tax
Appeals. Citing Asian Bank, CBC argued
that it was not liable for the gross receipts
tax - amounting to P1,140,623.82 - on the
sums withheld by the Bangko Sentral ng
Pilipinas as final withholding tax on CBCs
passive
interest
incomehttp://sc.judiciary.gov.ph/jurisprudenc
e/2003/jun2003/146749.htm - _ftn7 in 1994.

CBCs argument will create tax exemptions

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

ISSUE: WON the 20% final withholding tax on

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

CASE No. 2
CIR vs. PAL (OPT #2)
1

Facts: A franchise is a legislative grant to

operate a public utility. In the present case,
P.D. 1590 granted PAL an option to pay the
lower of two alternatives: (a) the basic
corporate income tax based on PALs annual
net taxable income computed in accordance
with the provisions of the NIRC or (b) a
franchise tax of 2% of gross revenues.
Availment of either of these two alternatives
shall exempt the airline from the payment of
all other taxes including the 20 percent
final withholding tax on bank deposits. On
Nov. 5, 1997, PALs AVP-Revenue filed with
the CIR a written request for refund in the
amount of P2M, which represents the total
amount of 20% final withholding tax withheld
from the respondent by various withholding
agent banks. CTA ruled PAL was not entitled
to refund. The CA held that PAL was bound to
pay only either (A) or (B); that Sec. 13 of PD
1590 exempts respondent form paying all
other taxes, duties, royalties and other feeds
of any kind. Having chosen to pay its
corporate income tax liability, respondent
should now be exempt from paying all other
taxes including the final withholding tax.

The definition of gross income is broad

enough to include all passive incomes
subject to specific rates or final taxes.
However, since these passive incomes are
already subject to different rates and taxed
finally at source, they are no longer included
in the computation of gross income, which
determines taxable income.
Thus, PALs franchise exempts it from paying
any tax other than the option it chooses:
either the basic corporate income tax or
the 2% gross revenue tax.
CASE No. 3
CIR v Solidbank
Facts: Solidbank has previously paid its 1995
quarterly percentage tax returns for its gross
receipts tax inclusive of its interest income.
However, in 1996 [the Court of Tax Appeals]
rendered a decision in CTA Case No. 4720
entitled Asian
Bank
Corporation
vs.
Commissioner of Internal Revenue[,] wherein
it was held that the 20% final withholding tax
on [a] banks interest income should not form
part of its taxable gross receipts for purposes
of computing the gross receipts tax.

Issue: Whether the CA erred on a question of

law ruling that the in lieu of all other taxes
provisions in Sec. 13 of PD No. 1590 applies
even if there were in fact no taxes paid under
any of subsections (A) and (B) of the said
decree.

Thus, Solidbank filed a claim for refund or

issuance of tax credit certificate with the BIR
for the overpaid gross receipts tax for the
year 1995.

Held: Note that the tax liability of PAL under

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

Issue: Whether or not the 20% final

withholding tax on [a] banks interest income
forms part of the taxable gross receipts in
computing the 5% gross receipts tax
Ruling: Yes.
1. FWT and GRT are two different taxes.
The 5% GRT[15] is included under Title V.
Other Percentage Taxes of the Tax Code and
is not subject to withholding. The banks and
non-bank financial intermediaries liable
therefor shall, under Section 125(a)(1), [16] file
quarterly returns on the amount of gross
receipts and pay the taxes due thereon
within twenty (20)[17] days after the end of
each taxable quarter.
The 20% FWT is a Tax on Income. It is a
tax on passive income, deducted and
withheld at source by the payor-corporation
2

and/or person as withholding agent pursuant

to Section 50,[20] and paid in the same
manner and subject to the same conditions
as provided for in Section 51.[21]

claims that it derives no pecuniary benefit or

advantage
through
the
withholding
process. There being constructive receipt of
such income -- part of which is withheld -- RR
17-84 applies, and that income is included as
part of the tax base upon which the GRT is
imposed. (RR 12-80 the regulation invoked
by solidbank stating that only incomes
actually received is subjected to GRT has
already been superseded through implied
repeal by RR 17-84, a regulation which no
longer
excepts
incomes
constructively
received)

A perusal of these provisions clearly

shows that two types of taxes are involved in
the present controversy: (1) the GRT, which
is a percentage tax; and (2) the FWT, which
is an income tax. As a bank, petitioner is
covered by both taxes.
A percentage tax is a national tax
measured by a certain percentage of the
gross selling price or gross value in money of
goods sold, bartered or imported; or of the
gross receipts or earnings derived by any
person engaged in the sale of services. [22] It
is not subject to withholding.

3. No double taxation.
Double taxation means taxing the same
property twice when it should be taxed only
once; that is, x x x taxing the same person
twice by the same jurisdiction for the same
thing.[117] It is obnoxious when the taxpayer is
taxed twice, when it should be but once.
[118]
Otherwise described as direct duplicate
taxation,[119] the two taxes must be imposed on
the same subject matter, for the same
purpose, by the same taxing authority, within
the same jurisdiction, during the same taxing
period; and they must be of the same kind or
character.[120]

An income tax, on the other hand, is a

national tax imposed on the net or the gross
income realized in a taxable year. [23] It is
subject to withholding.
2. Solidbank argues that gross receipt
tax can only be subjected on income actually
received by the bank, invoking Section 4(e)
of RR 12-80. The court overruled its
argument by applying the provisions of
possession under the civil code. Article 531
of the Civil Code clearly provides that the
acquisition of the right of possession is
through the proper acts and legal formalities
established therefor. The withholding process
is
one
such
act. There
may
not
be actual receipt of the income withheld;
however, as provided for in Article 532,
possession by any person without any power
whatsoever shall be considered as acquired
when ratified by the person in whose name
the act of possession is executed.

First, the taxes herein are imposed on

two different subject matters. The subject
matter of the FWT is the passive income
generated in the form of interest on deposits
and yield on deposit substitutes, while the
subject matter of the GRT is the privilege of
engaging in the business of banking.
A tax based on receipts is a tax on
business rather than on the property; hence,
it is an excise[121] rather than a property tax It
is not an income tax, unlike the FWT. In fact,
we have already held that one can be taxed
for engaging in business and further taxed
differently for the income derived therefrom.
[123]
Akin to our ruling in Velilla v. Posadas,
these two taxes are entirely distinct and are
assessed under different provisions.

In our withholding tax system, possession is

acquired by the payor as the withholding
agent of the government, because the
taxpayer ratifies the very act of possession
for
the
government. There
is
thus constructive receipt. The processes of
bookkeeping and accounting for interest on
deposits and yield on deposit substitutes that
are subjected to FWT are indeed -- for legal
purposes -- tantamount to delivery, receipt
or remittance.[35] Besides, respondent itself
admits that its income is subjected to a tax
burden immediately upon receipt, although it

Second, although both taxes are national

in scope because they are imposed by the
same taxing authority -- the national
government under the Tax Code -- and
operate
within
the
same
Philippine
jurisdiction for the same purpose of raising
revenues, the taxing periods they affect are
3

different. The FWT is deducted and withheld

as soon as the income is earned, and is paid
after every calendar quarter in which it is
earned. On the other hand, the GRT is
neither deducted nor withheld, but is paid
only after every taxable quarter in which it is
earned.

of the Tax Code; that RMO No. 15-91 is not

implementing any provision of the Internal
Revenue laws but is a new and additional tax
measure on pawnshops, which only Congress
could enact, and that it impliedly amends the
Tax Code, and that it is a class legislation as
it singles out pawnshops.
On 1998, the BIR issued Warrant of Distraint
and/or Levy against Lhuilliers property for
the enforcement and payment of the
assessed percentage tax.

Third, these two taxes are of different

kinds or characters. The FWT is an income
tax subject to withholding, while the GRT is a
percentage tax not subject to withholding.

When Lhuiller's protest was not acted upon,

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

In short, there is no double taxation,

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

On 2000, the CTA held the the RMOs were

void and that the Assessment Notice should
be cancelled.
The CIR filed a motion for review with the CA
which only affirmed the CTA's decision thus
this case in bar.

CASE No. 4
CIR vs Lhuillier GR No. 15094 (15 July
2003)

ISSUES:
a Whether pawnshops included in the
term lending investors for the purpose
of imposing the 5% percentage tax
under the NIRC.
b Whether or not the RMOs in question
are valid

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

RULING:
a While it is true that pawnshops are
engaged in the business of lending
money, they are not considered
lending investors for the purpose of
imposing the 5% percentage taxes
citing the following reasons:
Pawnshops and lending investors
were subjected to different tax
treatments as per the NIRC.
Congress
never
intended
pawnshops to be treated in the
same way as lending investors.
The BIR had ruled several times
prior to the issuance of the RMOs
that pawnshops were not subject to
the 5% percentage tax imposed by
Section 116 of the NIRC of 1977.
As Section 116 of the NIRC of 1977
was practically lifted from Section

On 1997, the Bureau of Internal Revenue

(BIR) issued an Assessment Notice against
Lhuillier demanding payment of deficiency
percentage.
Lhuillier filed an administrative protest with
the Office of the Revenue Regional Director
contending that neither the Tax Code nor the
VAT Law expressly imposes 5% percentage
tax on the gross income of pawnshops; that
pawnshops
are
different from
lending
investors, which are subject to the 5%
percentage tax under the specific provision
4

175 of the NIRC of 1986, and there

being no change in the law, the
interpretation thereof should not
have been altered.
Section 116 of the NIRC of 1977, as
amended by E.O. No. 273, subjects
to percentage tax dealers in
securities and lending investors
only. There is no mention of
pawnshops.
In the NIRC, the term lending
investor includes all persons who
make a practice of lending money
for
themselves or
others
at
interest. A pawnshop, on the other
hand, is defined under Section 3 of
P.D. No. 114 as a person or entity
engaged in the business of lending
money
on
personal
property
delivered as security for loans.
The RMOs are not valid.

RMO No. 15-91 and RMC No. 43-91

cannot
be
viewed
simply
as
implementing rules or corrective
measures revoking in the process the
previous
rulings
of
past
Commissioners.
Specifically,
they
would
have
been
amendatory
provisions applicable to pawnshops.
Without these disputed CIR issuances,
pawnshops would not be liable to pay
the 5% percentage tax, considering
that they were not specifically
included in Section 116 of the NIRC of
1977, as amended. In so doing, the
CIR did not simply interpret the law.
The
due
observance
of
the
requirements of notice, hearing, and
publication should not have been
ignored.
Thus, the Supreme Court held that
even though the RMOs were issued in
accordance with the power of the CIR,
they cannot issue administrative
rulings or circulars not consistent with
the law sought to be applied. It should
remain consistent with the law they
intend to carry out. Only Congress can
repeal or amend the law.

There are two kinds of administrative

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

CASE No. 5
TAMBUNTING PAWNSHOP V. CIR
Facts: The CIR sent Tambunting Pawnshop,
Inc. (petitioner) an assessment notice dated
January
15,
2003
for
P3,055,564.34
deficiency
value-added
tax
(VAT),
P406,092.50 deficiency documentary stamp
tax on pawn tickets, P67,201.55 deficiency
withholding tax on compensation, and
P21,723.75 deficiency expanded withholding
tax, all inclusive of interests and surcharges
for the taxable year 1999.

When an administrative rule is merely

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

Petitioner protested the assessment. 2 As the

protest merited no response, it filed a
Petition for Review 3 with the Court of Tax
Appeals. It contended that Pawn Tickets are
not subject to DST.
The First Division of the CTA ruled that
petitioner is liable for VAT and documentary
stamp tax but not for withholding tax on
5

compensation
tax.

and

expanded

withholding

True, the law does not consider said ticket as

an evidence of security or indebtedness.
However, for purposes of taxation, the same
pawn ticket is proof of an exercise of a
taxable privilege of concluding a contract of
pledge. There is therefore no basis in
petitioner's assertion that a DST is literally a
tax on a document and that no tax may be
imposed on a pawn ticket. 23 (emphasis and
underscoring supplied)

Petitioner's Motion for Partial Reconsideration

11 having been denied, 12 it filed a Petition
for Review 13 before the CTA En Banc which
dismissed 14 it as it did petitioner's Motion
for Reconsideration. 15
Issue: Whether Pawn Tickets are subject to
DST.
Held: YES.
Section 195 of the National Internal Revenue
Code provides:
Section 195. On every mortgage or pledge of
lands, estate or property, real or personal,
heritable or movable, whatsoever, where the
same shall be made as a security for the
payment of any definite and certain sum of
money lent at the time or previously due and
owing or forborne to be paid, being payable,
and on any conveyance of land, estate, or
property whatsoever, in trust or to be sold, or
otherwise converted into money which shall
be and intended only as security, either by
express stipulation or otherwise,there shall
be collected a documentary stamp tax . . . .
(underscoring supplied)
A D[ocumentary] S[tamp] T[ax] is an excise
tax on the exercise of a right or privilege to
transfer obligations, rights or properties
incident thereto.
Pledge is among the privileges, the exercise
of which is subject to DST. A pledge may be
defined as an accessory, real and unilateral
contract by virtue of which the debtor or a
third person delivers to the creditor or to a
third person movable property as security for
the performance of the principal obligation,
upon the fulfillment of which the thing
pledged, with all its accessions and
accessories, shall be returned to the debtor
or to the third person.
Section 3 of the Pawnshop Regulation Act
defines a pawn ticket as follows:
"Pawn ticket" is the pawnbrokers' receipt for
a pawn. It is neither a security nor a printed
evidence of indebtedness."
6

CASE No. 6

of the United States (our SC said that

the US case relied upon by MERALCO
is not applicable in their case).
Issue: WON the disputed tax is one imposed
by the Commonwealth of the Phils.
upon a
contract beyond its
jurisdiction.
Held: The Commonwealth of the Phils. has
the power to impose the tax upon the
insured, regardless of whether the
contract is executed in a foreign
country and with a foreign corporation
where:
a Where the insured in the Phils.
b the risk insured against also
within the Phils.
c and certain incidents of the
contract are to be attended to in
the Phils.
such as:
payment of dividends when
received in cash
sending of an adjuster into
the Phils. in case of dispute
or making of proof of loss
Under such circumstances, substantial
elements of the contract may be said
to be so situated in the Phils. as to
give its government the power to tax.
And, even if it be assumed that the tax
imposed upon the insured will
ultimately be passed on to the insurer,
thus constituting an indirect tax upon
the foreign corporation, it would still
be
valid
because
the
foreign
corporation, by the stipulations of its
contract, has subjected itself to the
taxing jurisdiction of the Phils.

MANILA ELECTRIC COMPANY VS. YATCO

The premium tax is due on a policy
issued by a foreign insurance company,
although perfected abroad, if the risk
covered by the insurance is located in
the Phils.
Facts:
Manila Electric Company (MERALCO) is
a corporation organized and existing
under the laws of the Phils. with its
principal office and place of business
in the City of Manila.
In 1953, it insured with the City of
New York Insurance Company and
the
United
States
Guaranty
Company, certain real and personal
properties situated in the Phils. The
insurance was entered into in behalf of
MERALCO by its broker in New York
City.
The insurance companies are foreign
corporations not licensed to do
business in the Phils. and having no
agents therein.
MERALCO throught its broker, paid, in
New York the insurance premiums in
the sum of P91,696. The CIR, under
the authority of Sec. 192 of Act. No.
2427, as amended, assessed and
levied a tax of 1% on said premiums
which MERALCO paid under protest.
SEC 192.
xxx
. . . In all cases where
owners of property obtain
insurance directly with foreign
companies, it shall be the duty
of said owners to report to the
insurance commissioner and to
the CIR each case where
insurance has been so effected,
and shall pay the tax of one
per centum on premium
paid, in the manner required by
law of insurance companies,
and shall be subject to the same
penalties for failure to do so.
MERALCO assailed the constitutionality
of this provision relying upon a
decision made by the Supreme Court

DOCUMENTARY STAMP TAX

CASE No. 1
Philippine Banking Corp. vs CIR
G.R. No. 170574
Facts:
Philippine Banking Corp. (PBC) is a banking
institution which offered its SSDA to its
depositors. The SSDA is a form of a savings
7

deposit evidenced by a passbook and

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

CASE No. 2
Fort
Bonifacio
Development
Corp.,
Petitioner vs. Commissioner of Internal
Revenue (CIR)
Facts:
Congress
created
the
Bases
Conversion Development Authority(BCDA) for
the purpose of raising funds through the sale
to private investors of military camps located
in Metro Manila. To do this, BCDA established
the Fort Bonifacio Development Corporation
(FBDC ) to develop a 440-hectare area in Fort
Bonifacio, Taguig City, for mixed residential,
commercial,
business,
institutional,
recreational, tourism, and other purposes
The Republic sold the Fort Bonifacio land to
FBDC under a special patent and the latter
paid for it with a promissory note.
Subsequently, the Republic executed a Deed
of Absolute sale. Congress then, enacted R.A.
7917, declaring exempt from all forms of
taxes the proceeds of the Government sale
of the Fort Bonifacio land.
More than three years later the CIR issued a
Letter of Authority, providing for the
examination of FBDC's books and other
accounting records covering all its internal
revenue liabilities for the 1995 taxable year,
the year it came into being. It issued a Final
Assessment Notice to FBDC for deficiency
documentary
stamp
tax
of
P1,068,412,560.00 based on the Republic's
1995 sale to it of the Fort Bonifacio land.
FBDC protested the assessment invoking R.A.
7917, which exempted the proceeds of the
sale of the Fort Bonifacio land from all forms
of taxes.
CTA denied FBDC's petition and affirming the
Commissioner's DST assessment. The CTA
treated the Republic's issuance of the Special
Patent separate and distinct from the Deed
of Absolute Sale that it executed. The former,
said the CTA, was tax exempt but the latter
was not.
During the pendency of these petitions or on
December 17, 2004 the FBDC filed a
manifestation and motion informing the
Court that the disputed assessment had
already been paid.
Issue
8

Whether or not the FBDC is liable for the

payment of the DST and a 20% delinquency
interest on the Deed of Absolute Sale of the
214-hectare Fort Bonifacio land that the
Republic executed in FBDC's favor

FACTS:
On December 14, 1999, based on the
findings of its Revenue Officers, the
petitioner
BIR
issued
a
Preliminary
Assessment Notice against the respondent
Manila Bankers Life Insurance Corporation for
its deficiency internal revenue taxes for the
year 1997.The respondent agreed to all the
assessments issued against it except to the
amount of P2,351,680.90 representing
deficiency documentary stamp taxes on its
policy premiums and penalties.
Thus, on January 4, 2000, the petitioner
issued against the respondent a Formal
Letter of Demand with the corresponding
Assessment Notices attached, one of which
was pertaining to the documentary stamp
taxes due on respondents policy premiums.
On February 3, 2000, the respondent filed its
Letter of Protest with the Bureau of Internal
Revenue (BIR) contesting the assessment for
deficiency documentary stamp tax on its
insurance policy premiums. It remained
unacted upon, and thus, on October 26,
2000, the respondent filed a Petition for
Review with the CTA for the cancellation of
Assessment Notice. The CTA granted the
petition, which the CA affirmed. Thus, this
petition filed by the CIR.
The deficiency documentary stamp tax was
assessed on the increases in the life
insurance coverage of two kinds of policies:
the "Money Plus Plan," which is an ordinary
term life insurance policy; and the group life
insurance policy. The increases in the
coverage of the life insurance policies were
brought about by the premium payments
made subsequent to the issuance of the
policies. The Money Plus Plan is a 20-year
term ordinary life insurance plan with a
"Guaranteed
Continuity
Clause"
which
allowed the policy holder to continue the
policy after the 20-year term subject to
certain conditions. Under the plan, the policy
holders paid their premiums in five separate
periods, with the premium payments, after
the first period premiums, to be made only
upon reaching a certain age. The succeeding
premium payments translated to increases in
the sum assured. Thus, the petitioner

The Ruling of the Court

No.
The Republic's subsequent execution of a
Deed of Absolute Sale cannot be regarded
as a separate transaction subject to the
payment of DST. The Republic's sale of the
land to FBDC under the Special Patent was
a complete and a valid sale that conveyed
ownership of the land to the buyer.
Clearly, in acknowledging that the Republic
"has issued . . . a Special Patent which will
absolutely and irrevocably grant and convey"
the legal title over the land to FBDC, the
Republic in effect admitted that the Deed of
Absolute Sale was only a formality, not a
vehicle for conveying ownership, that it
thought essential for the issuance of an
Original Certificate of Title (OCT) covering
the land. The issuance of the OCT lent itself
to unrestricted commercial use that helped
attain the law's objective of raising through
the BCDA and its subsidiaries the funds
needed for specified government projects.
Furthermore, the government warranted
under the Deed of Absolute Sale it executed
in FBDC's favor that "[T]here are no . . . taxes
due and owing on or in respect of the subject
property or the transfer thereof in favor of
the buyer."
The sale of Fort Bonifacio land was not a
privilege but an obligation imposed by law
which was to sell lands in order to fulfill a
public purpose. To charge DST on a
transaction which was basically a compliance
with a legislative mandate would go against
its very nature as an excise tax.
CASE No. 3
COMMISSIONER OF INTERNAL REVENUE,
Petitioner , v. MANILA BANKERS' LIFE
INSURANCE
CORPORATION,
Respondent (G.R. No. 169103:March
16, 2011.)
9

believed that since the documentary stamp

tax was affixed on the policy based only on
the first period premiums, then the
succeeding premium payments should
likewise be subject to documentary stamp
tax. In the case of respondents group
insurance, the deficiency documentary
stamp tax was imposed on the premiums for
the additional members to already existing
and effective master policies. The petitioner
concluded that any additional member to the
group of employees, who were already
insured under the existing mother policy,
should
similarly
be
subjected
to
documentary stamp tax.
ISSUE
Whether or not documentary stamp tax
should be imposed on increase due to
additional premiums in the Money Plus Plan
and the group insurance plan

fixed term of twenty years. And although the

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

HELD
The petition is granted.
TAXATION: Documentary stamp tax on
insurance policies.
Under Section 173 of the Tax Code, the
documentary stamp tax becomes due and
payable at the time the insurance policy is
issued, with the tax based on the amount
insured by the policy as provided for in
Section 183. The provision which specifically
applies to renewals of life insurance policies
is Section 183, which states that on all
policies of insurance or other instruments by
whatever name the same may be called,
whereby any insurance shall be made or
renewed upon any life or lives, there shall be
collected a documentary stamp tax.

DST on Group Life Insurance

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

DST on Money Plus Plan

To argue that there was no new legal
relationship created by the availment of the
guaranteed continuity clause would mean
that any option to renew, integrated in the
original agreement or contract, would not in
reality be a renewal but only a discharge of a
pre-existing obligation. The truth of the
matter is that the guaranteed continuity
clause only gave the insured the right to
renew his life insurance policy which had a

CASE No. 4
10

H. TAMBUNTING VS CIR

personal, heritable or movable, whatsoever,

where the same shall be made as a security
for the payment of any definite and certain
sum of money lent at the time or previously
due and owing or forborne to be paid,.

The law imposes DST on documents

issued
in
respect
of
the
specified
transactions, such as pledge, and not only on
papers evidencing indebtedness. Therefore,
a pawn ticket, being issued in respect of a
pledge
transaction,
is
subject
to
documentary stamp tax.

Petitioners
explanations
fail
to
dissuade us from recognizing the pawn ticket
as the document that evidences the pledge.
True, the pawn ticket is neither a security nor
a printed evidence of indebtedness. But,
precisely being a receipt for a pawn, it
documents the pledge. A pledge is a real
contract, hence, it is necessary in order to
constitute the contract of pledge, that the
thing pledged be placed in the possession of
the creditor, or of a third person by common
agreement.[15] Consequently, the issuance
of the pawn ticket by the pawnshop means
that the thing pledged has already been
placed in its possession and that the pledge
has been constituted.

FACTS:

The case stemmed from a PreAssessment

Notice[4]
issued
by
the
Commissioner of Internal Revenue (CIR)
against H. Tambunting Pawnshop, Inc.
(Tambunting) for, among others, deficiency
documentary stamp tax (DST) of P50,910.

Tambunting filed its written protest to

the assessment notice alleging that it was
not subject to documentary stamp tax under
Section 195[7] of the National Internal
Revenue Code (NIRC) because documentary
stamp taxes were applicable only to pledge
contracts, and the pawnshop business did
not involve contracts of pledge.
AARGUMENTS:

SOLGEN: argues that Section 195 of

the NIRC expressly provides that a
documentary stamp tax shall be collected on
every pledge of personal property as a
security for the fulfillment of the contract of
loan. Since the transactions in a pawnshop
business partake of the nature of pledge
transactions,
then
pawn
transactions
evidenced by pawn tickets, are subject to
documentary stamp taxes.

PETITIONER TAMBUNTING: Petitioner

contends that it is the document evidencing
a pledge of personal property which is
subject to the DST. A pawn ticket is defined
under Section 3 of Presidential Decree No.
114[11] as the pawnbrokers receipt for a
pawn [and] is neither a security nor a printed
evidence of indebtedness. Petitioner argues
that since the document taxable under
Section 195 must show the existence of a
debt, a pawn ticket which is merely a receipt
for a pawn is not subject to DST.

Petitioner further contends that the

DST is imposed on the documents issued,
not the transactions so had or accomplished.
It insists that the document to be taxed
under the transaction contemplated should
be the pledge agreement, if any is issued,
not the pawn ticket.
ISSUES:
RULING:
LEGAL PROVISION APPLICABLE:

DECISION: TAMBUNTING is hereby ordered to

pay petitioner Commissioner of Internal
Revenue, the amount of Php50,910.00 as
1997 deficiency documentary stamp tax
assessment. EXCLUDING SURCHARGES
CASE No. 5
COMMISSIONER OF INTERNAL REVENUE
vs.
LINCOLN
PHILIPPINE
LIFE
INSURANCE
COMPANY,
INC.
(now
JARDINE-CMA
LIFE
INSURANCE
COMPANY, INC.) and THE COURT OF
APPEALS
G.R. No. 119176 | March 19, 2002
Facts:
In the years prior to 1984, private
respondent issued a special kind of life
insurance policy known as the "Junior Estate
Builder Policy," the distinguishing feature of
which is a clause providing for an automatic
increase in the amount of life insurance
coverage upon attainment of a certain age
by the insured without the need of issuing a

SEC. 195. Stamp Tax on Mortgages, Pledges

and Deeds of Trust. On every mortgage or
pledge of lands, estate, or property, real or
11

new policy. The clause was to take effect in

the year 1984. Documentary stamp taxes
due on the policy were paid by petitioner
only on the initial sum assured.
Subsequently, petitioner issued deficiency
documentary stamps tax assessment for the
year 1984 in the amount of P464,898.75
corresponding to the amount of automatic
increase of the sum assured on the policy
issued by respondent.
Private respondent questioned the deficiency
assessments and sought their cancellation in
a petition filed in the Court of Tax Appeals.
The Court of Tax Appeals found no valid basis
for the deficiency tax assessment on the
insurance policy. The Court of Appeals
affirmed the decision of the Court of Tax
Appeals decision insofar as it nullified the
deficiency assessment on the insurance
policy.
The Commissioner of Internal Revenue filed
the present petition questioning that portion
of the Court of Appeals decision which
invalidated the deficiency assessment on the
insurance policy.
Petitioner claims that the "automatic
increase clause" in the subject insurance
policy is separate and distinct from the main
agreement and involves another transaction;
and that, while no new policy was issued, the
original policy was essentially re-issued when
the additional obligation was assumed upon
the effectivity of this "automatic increase
clause" in 1984; hence, a deficiency
assessment
based
on
the
additional
insurance not covered in the main policy is in
order.
Issues:
1. Whether or not the automatic increase
clause is a single agreement embodied in the
policy or a separate agreement.
2. Whether or not the Court of Appeals erred
in not computing the amount of tax on the
total value of the insurance assured in the
policy including the additional increase
assured by the automatic increase clause.
Ruling:
The petition is impressed with merit.
It is clear from Section 173 that the payment
of documentary stamp taxes is done at the
time the act is done or transaction had and
the tax base for the computation of
documentary stamp taxes on life insurance
policies under Section 183 is the amount

fixed in policy, unless the interest of a person

insured is susceptible of exact pecuniary
measurement. The amount fixed in the policy
is the figure written on its face and whatever
increases will take effect in the future by
reason of the "automatic increase clause"
embodied in the policy without the need of
another contract.
Here, although the automatic increase in the
amount of life insurance coverage was to
take effect later on, the date of its effectivity,
as well as the amount of the increase, was
already definite at the time of the issuance
of the policy. Thus, the amount insured by
the policy at the time of its issuance
necessarily included the additional sum
covered by the automatic increase clause
because it was already determinable at the
time the transaction was entered into and
formed part of the policy.
The deficiency of documentary stamp tax
imposed on private respondent is definitely
not on the amount of the original insurance
coverage, but on the increase of the amount
insured upon the effectivity of the "Junior
Estate Builder Policy."
To claim that the increase in the amount
insured (by virtue of the automatic increase
clause incorporated into the policy at the
time of issuance) should not be included in
the computation of the documentary stamp
taxes due on the policy would be a clear
evasion of the law requiring that the tax be
computed on the basis of the amount insured
by the policy.
CASE No. 6
JAKA INVESTMENTS CORP. VS. CIR, GR
NO. 147629, JULY 28, 2010
Facts:
Sometime in 1994, petitioner sought to
invest in JAKA Equities Corporation (JEC),
which was then planning to undertake an
initial public offering (IPO) and listing of its
shares of stock with the Philippine Stock
Exchange. JEC increased its authorized
capital stock from One Hundred Eighty-Five
Million Pesos (P185,000,000.00) to Two
Billion Pesos (P2,000,000,000.00). Petitioner
proposed to subscribe to Five Hundred Eight
Million Eight Hundred Six Thousand Two
12

Hundred Pesos (P508,806,200.00) out of the

increase in the authorized capital stock of
JEC through a tax-free exchange under
Section 34(c)(2) of the National Internal
Revenue Code (NIRC) of 1977, as amended,
which was effected by the execution of a
Subscription Agreement and Deed of
Assignment of Property in Payment of
Subscription. Under this agreement the
petitioner assigned and transferred to JEC all
its shares from Republic Glass Holdings
Corp., Phil. Global Communications, Inc.,
United Coconut Planters Bank and Far East
Bank and Trust Company.

Section 176 of the National Internal Revenue

Code of 1977, as amended by Republic Act
No. 7660, or the New Documentary Stamps
Tax Law (the 1994 Tax Code), the law
applicable at the time of the transaction.
Petitioner argues that the cash component of
its payment for its subscription to the JEC
shares, totaling Three Hundred Seventy
Million Seven Hundred Sixty-Six Thousand
Pesos (P370,766,000.00) should not have
been charged any documentary stamp tax.
CTA denied its petition for refund.
CA sustained the CTA.
Issue: WON petitioner is entitled to a partial
refund of the DST and surcharges it paid on
the execution of the Amended Subscription
Agreement.

The intended IPO and listing of shares of JEC

did not materialize. However, JEC still
decided to proceed with the increase in its
authorized capital stock and petitioner
agreed to subscribe thereto, but under
different terms of payment. Thus, petitioner
and JEC executed the Amended Subscription
Agreement[4] on September 5, 1994,
wherein the above-enumerated RGHC, PGCI,
and UCPB shares of stock were transferred to
JEC. In lieu of the FEBTC shares, however, the
amount of Three Hundred Seventy Million
Seven Hundred Sixty-Six Thousand Pesos
(P370,766,000.00) was paid for in cash by
petitioner to JEC.

Held: NO.
The court cited Compagnie Financiere Sucres
Et Denrees v. Commissioner of Internal
Revenue:
x x x Tax refunds are a
derogation of the State's taxing
power.
Hence,
like
tax
exemptions, they are construed
strictly against the taxpayer and
liberally in favor of the State.
Consequently, he who claims
a refund or
exemption
from
taxes has the burden of
justifying the exemption by
words too plain to be mistaken
and too categorical to be
misinterpreted. x x x.

On October 17, 1994, Revenue District

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

It was thus incumbent upon petitioner to

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

Petitioners main contention in this claim for

refund is that the tax base for the
documentary stamp tax on the Amended
Subscription Agreement should have been
only the shares of stock in RGHC, PGCI, and
UCPB that petitioner had transferred to JEC
as payment for its subscription to the JEC
shares, and should not have included the
cash portion of its payment, based on

Xxxxxxxxxx

13

Sec. 173. Stamp taxes upon documents,

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

substitution for, or replacement of the

1,313,176 FEBTC shares, its payment of
P1,003,835.65 documentary stamps tax
pursuant to Section 175 of NIRC is in order.
A documentary stamp tax is in the nature of
an excise tax. It is not imposed upon the
business transacted but is an excise upon
the privilege, opportunity or facility offered
at exchanges for the transaction of the
business. It is an excise upon the facilities
used in the transaction of the business
separate and apart from the business itself.
Documentary stamp taxes are levied on the
exercise by persons of certain privileges
conferred by law for the creation, revision, or
termination of specific legal relationships
through
the
execution
of
specific
instruments.
Thus, we have held that documentary stamp
taxes are levied independently of the legal
status of the transactions giving rise thereto.
The documentary stamp taxes must be paid
upon the issuance of the said instruments,
without regard to whether the contracts
which gave rise to them are rescissible, void,
voidable, or unenforceable.

The DST imposition is essentially

addressed and directly brought to bear upon
the DOCUMENT evidencing the transaction of
the parties which establishes its rights and
obligations.

The relevant provisions of the Tax Code at

the time of the transaction are quoted below:
Sec. 175. Stamp tax on original issue of
certificates of stock. On every original issue,
whether on organization, reorganization or
for any lawful purpose, of certificates of
stock by any association, company, or
corporations, there shall be collected a
documentary stamp tax of Two pesos (P2.00)
on each two hundred pesos, or fractional
part thereof, of the par value of such
certificates: Provided, That in the case of the
original issue of stock without par value the
amount of the documentary stamp tax
herein prescribed shall be based upon the
actual consideration received by the
association, company, or corporation for the
issuance of such stock, and in the case of
stock dividends on the actual value
represented by each share.

In the case at bar, the rights and obligations

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

Sec. 176. Stamp tax on sales, agreements

to sell, memoranda of sales, deliveries or
transfer
of
due-bills,
certificates
of
obligation, or shares or certificates of stock.
14

On all sales, or agreements to sell, or

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

Philippine Consolidated Coconut Ind., Inc. v.

Collector of Internal Revenue:
When is the certificate of stock deemed
'issued' for the purpose of imposing the
documentary stamp tax? Ordinarily, when a
corporation issues a certificate of stock
(representing the ownership of stocks in the
corporation to fully paid subscription) the
certificate of stock can be utilized for the
exercise of the attributes of ownership over
the stocks mentioned on its face. The stocks
can be alienated; the dividends or fruits
derived therefrom can be enjoyed, and they
can be conveyed, pledged or encumbered.
The certificate as issued by the corporation,
irrespective of whether or not it is in the
actual or constructive possession of the
stockholder, is considered issued because it
is with value and hence the documentary
stamp tax must be paid as imposed by
Section 212 of the National Internal Revenue
Code, as amended.
In Compagnie Financiere Sucres et Denrees
v. Commissioner of Internal Revenue, the
Court held that under Section 176 of the Tax
Code, sales to secure the future transfer of
due-bills, certificates of obligation or
certificates of
stock are
subject to
documentary stamp tax.
RMO
08-98,
reiterating
Revenue
Memorandum Circular No. 47-97 (RMC 4797), also states that what is being taxed is
the privilege of issuing shares of stock, and,
therefore, the taxes accrue at the time the
shares are issued. RMC 47-97 also defines
issuance as the point in which the
stockholder acquires and may exercise
attributes of ownership over the stocks.

The court cited its previous rulings:

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

As pointed out by the CTA, Sections 175 and

176 of the Tax Code contemplate a
subscription agreement in order for a
taxpayer to be liable to pay the DST. A
subscription contract is defined as any
contract for the acquisition of unissued
stocks in an existing corporation or a
corporation still to be formed. A stock
subscription is a contract by which the
subscriber agrees to take a certain number
of shares of the capital stock of a
15

corporation, paying for the same or expressly

or impliedly promising to pay for the same.

CIR through Acting Regional Director

of Revenue Region 6, issued assessment
notices against First Express Pawnshop
Company, Inc. (FIPC) for deficiency income
tax, VAT and DST on deposit on subscription
and on pawn tickets. FIPC filed its written
protest on the assessments. Since CIR did
not act on the protest during the 180-day
period, FIPC filed a petition before the CTA.
On liability to pay DST:
FIPC contends that it is not liable for
the deficiency in DST on deposit on
subscription.
The P800, 000 represents the payment
by the stockholders to the company for the
deposit for future subscription. As there had
been yet no subscription contract, FIPC
should not be liable for DST.
On finality of assessment:
CIR asserts that even if FIPC filed a
protest, it did not offer evidence to prove its
claim that the deposit on subscription was an
advance made by FIPCs stockholders. CIR
alleges that FIPCs failure to submit
supporting documents within 60 days from
the filing of its protest as required
under
Section 228 of the Tax Code caused the
assessment of P12, 328.45 for deposit on
subscription
to
become
final
and
unassailable.
Issue:
1. Whether respondent is liable to pay
P12, 328.45 as DST on deposit on
subscription of capital stock.
2. Whether the assessment (#3) has
become final and unappealable.
Held:
1. NO, deposit on stock subscription is
merely an amount of money received by a
corporation with a view of applying the same
as payment for additional issuance of shares
in the future, an event which may or may not
happen.
A subscription contract is defined as
any contract for the acquisition of unissued
stocks in an existing corporation or a
corporation still to be formed.
A stock subscription is a
contract by which the subscriber agrees to
take a certain number of shares of the
capital stock of a corporation, paying for the
same or expressly or impliedly promising to
pay for the same.

Petitioner claims overpayment of the

documentary stamp tax but its basis for such
is not clear at all. While insisting that the
documentary stamp tax it had paid for was
not based on the original issuance of JEC
shares as provided in Section 175 of the
1994 Tax Code, petitioner failed in showing,
even through a mere basic computation of
the tax base and the tax rate, that the
documentary stamp tax was based on the
transfer of shares under Section 176 either. It
would have been helpful for petitioners
cause had it submitted proof of the par value
of the shares of stock involved, to show the
actual basis for the documentary stamp tax
computation. For comparison, the original
Subscription Agreement ought to have been
submitted as well.
All that petitioner submitted to back up its
claim were the certifications issued by then
RDO Esquivias. As correctly pointed out by
respondent, however, the amounts in the
RDO certificates were the amounts of
documentary stamp tax representing the
equivalent of each group of shares being
applied for payment. The purpose for issuing
such certifications was to allow registration
of transfer of shares of stock used in partial
payment for petitioners subscription to the
original issuance of JEC shares. It should not
be used as evidence of payment of
documentary stamp tax. Neither should it be
the lone basis of a claim for a documentary
stamp tax refund.
The fact that it was petitioner and not JEC
that paid for the documentary stamp tax on
the original issuance of shares is of no
moment, as Section 173 of the 1994 Tax
Code states that the documentary stamp tax
shall be paid by the person making, signing,
issuing, accepting or transferring the
property, right or obligation.
CASE No. 7
CIR
vs
First
Company, Inc.

Express

Pawnshop

Facts:
16

Based
on
Rosarios
(companys
external auditor) testimony and respondents
financial statements as of 1998, there was
no agreement to subscribe to the unissued
shares.
As regards those certificates of
stocks temporarily subject to suspensive
conditions they shall be liable for said tax
only when released from said conditions, for
then and only then shall they truly acquire
any practical value for their owners.
(Commissioner of Internal Revenue v.
Construction Resources of Asia, Inc.)
Clearly,
the
deposit
on
stock
subscription as reflected in respondents
Balance Sheet as of 1998 is not a
subscription agreement subject to the
payment of DST. There is no P800, 000 worth
of subscribed capital stock that is reflected in
respondents GIS.
The
deposit
on
stock
subscription is merely an amount of money
received by a corporation with a view of
applying the same as payment for additional
issuance of shares in the future, an event
which may or may not happen.
The person making a deposit on
stock subscription does not have the
standing of a stockholder and he is not
entitled to dividends, voting rights or other
prerogatives and attributes of a stockholder.
Hence, respondent is not liable
for the payment of DST on its deposit on
subscription for the reason that there is yet
no subscription that creates rights and
obligations between the subscriber and the
corporation.
2. No. Respondent has complied with
the requisites in disputing an assessment
pursuant to Section 228 of the Tax Code.
Hence, the tax assessment cannot be
considered
as
final,
executory
and
demandable. Further, respondents deposit
on subscription is not subject to the payment
of DST. Consequently, respondent is not
liable to pay the deficiency DST of P12,
328.45.
We reject petitioners view that the
assessment
has
become
final
and
unappealable. It cannot be said that
respondent failed to submit relevant
supporting documents that would render the
assessment final because when respondent
submitted its protest, respondent attached

the GIS and Balance Sheet. Further,

petitioner cannot insist on the submission of
proof of DST payment because such
document does not exist as respondent
claims that it is not liable to pay, and has not
paid, the DST on the deposit on subscription.
The
term
relevant
supporting
documents should be understood as those
documents necessary to support the legal
basis in disputing a tax assessment as
determined by the taxpayer. The BIR can
only inform the taxpayer to submit additional
documents.
The BIR
cannot
demand
what
type
of
supporting
documents
should
be
submitted. Otherwise, a
taxpayer will be at the mercy of the BIR,
which may require the production of
documents that a taxpayer cannot submit.
After respondent submitted its letterreply stating that it could not comply with
the presentation of the proof of DST
payment, no reply was received from
petitioner.
Section 228 states that if the
protest is not acted upon within 180 days
from submission of documents, the taxpayer
adversely affected by the inaction may
appeal to the CTA within30 days from the
lapse
of
the
180-day
period.
Respondent,
having
submitted
its
supporting documents on the same day the
protest was filed, had until 31 July 2002 to
wait for petitioners reply to its protest. On
28 August 2002 or within 30 days after the
lapse of the 180-day period counted from the
filing of the protest as the supporting
documents
were
simultaneously
filed,
respondent filed a petition before the CTA.
CASE No. 8
INTERNATIONAL
CIR

EXCHANGE

BANK

VS

FACTS:
The International Exchange Bank (IEB) personally
Documentary Stamp Tax (DST) on its purchases o
Pilpinas (BSP)or Government Securities Purchased-Re
its Savings Account-Fixed Savings Deposit (FSD) for t

The IEB then filed a protest letter alleging that its FS

considered a certificate of deposit subject to DST
unlike a certificate of deposit which is a negotiable
17

pay
an person
annual as
membership
FSD was not payable to the order of the depositorprograms
or to some
other
the deposit fee
and
are entitled
to various preventive,
could only be withdrawn by the depositor or by a duly
authorized
representative.
diagnostic and curative medical services
provided
its duly
licensed
physicians,
Furthermore, the bank argued that deposits evidenced
by a by
passbook
which
have features
specialists
and
technical
akin to a time deposit such as petitioners FSD, is not
subject to
DSTother
underprofessional
the Tax Code
and
staff participating in the group practice
the NIRC
health
deliveryby
system
at a hospital
or to
clinic
ISSUES: Whether or not the IEBs Fixed Savings Deposit
evidenced
a passbook
is subject
owned,
operated
or
accredited
by
it.
Documentary Stamp Tax for the years assessed
RULING:
On January
27,a bank
2000,
respondent
A passbook representing an interest earning deposit account
issued by
qualifies
as
Commissioner
of
Internal
Revenue
sent
a certificate of deposit drawing interest. A document to be deemed a certificate of deposit
petitioner
a
formal
demand
letter
and
requires no specific form as long as there is some written memorandum that the bankthe
corresponding
assessment
notices
accepted a deposit of a sum of money from a depositor.
What is important
and controlling
demanding
thenot
payment
of deficiency
is the nature or meaning conveyed by the passbook
and
the particular
label taxes,
or
including
surcharges
and
interest,
for
the
nomenclature attached to it, inasmuch as substance, not form, is paramount.
taxable
years
1996
and
1997
in
the
total
The negotiable character of any and all documents under Section 180 is immaterial for
amount
ofof
P224,702,641.18.
purposes of imposing DST. Orders for the payment
of sum
money payable at sight or on
demand are of course explicitly exempted from the payment of DST.
deficiency DST
assessment
Thus, a regular savings account with a passbook whichThe
is withdrawable
at any
time is notwas
imposed
on
petitioners
health
care
subject to DST, unlike a time deposit which is payable on a fixed maturity date.
agreement with the members of its health
As for the IEBs argument that its FSD is similar to a regular savings deposit because it is
care program pursuant to Section 185 of the
evidenced by a passbook, the same does not lie. 1997 Tax Code which provides:
The FSD, like a time deposit, provides for a higher interest rate when the deposit is not
withdrawn within the required fixed period; otherwise, it earns
interest
Section
185. pertaining
Stamp taxto a
regular savings deposit. Having a fixed term and the reduction
of
interest
rates
case of
on fidelity bonds and in
other
pre-termination are essential features of a time deposit.
It
bears
emphasis
that
DST
insurance
policies. On
allis an
excise tax upon the privilege, opportunity or facility
offered of
at exchanges
policies
insurancefor
or the
transaction of the business. While tax avoidance schemes
and
arrangements
are
bonds or obligations of the not
prohibited, tax laws cannot be circumvented in order tonature
evade payment
of just taxes.
of indemnity
for
To claim that time deposits evidenced by passbooks should
not
be
subject
to DST
is a clear
loss, damage, or
liability
evasion of the rule on equality and uniformity in taxation
thatorrequires
the imposition
made
renewed
by any of
DST on documents evidencing transactions of the sameperson,
kind, in thisassociation
particular case,or
on all
certificates of deposits drawing interest
company
or
corporation
transacting the business
CASE No. 9
of accident, fidelity, employers
liability, plate, glass, steam
PHILIPPINE HEALTH CARE PROVIDERS,
boiler,
burglar,
elevator,
INC., Petitioner, v.
automatic sprinkler, or other
COMMISSIONER OF INTERNAL REVENUE,
branch of insurance (except
Respondent.
life, marine, inland, and fire
G.R. No. 167330
insurance), and all bonds,
June 12, 2008
undertakings, or recognizances,
conditioned
for
the
FACTS: Petitioner is a domestic corporation
performance of the duties of
whose primary purpose is [t]o establish,
any office or position, for the
maintain, conduct and operate a prepaid
doing or not doing of anything
group practice health care delivery system or
therein specified, and on all
a health maintenance organization to take
obligations guaranteeing the
care of the sick and disabled persons
validity or legality of any bond
enrolled in the health care plan and to
or other obligations issued by
provide for the administrative, legal, and
any province, city, municipality,
financial responsibilities of the organization.
or other public body or
[2]
Individuals enrolled in its health care
organization,
and
on
all
18

[18]

obligations guaranteeing the

title to any real estate, or
guaranteeing any mercantile
credits, which may be made or
renewed by any such person,
company or corporation, there
shall
be
collected
a
documentary stamp tax of fifty
centavos (P0.50) on each four
pesos (P4.00), or fractional part
thereof,
of
the
premium
charged. (emphasis supplied)

The
health
care agreement
in that
case entitled the subscriber to avail of the
hospitalization benefits, whether ordinary or
emergency, listed therein. It also provided
for out-patient benefits such as annual
physical examinations, preventive health
care and other out-patient services.This
Court ruled in Philamcare Health Systems,
Inc.:
[T]he insurable interest of [the
subscriber] in obtaining the
health care agreement was his
own health. The health care
agreement
was
in
the
nature
of
non-life
insurance,
which
is
primarily a contract of
indemnity. Once the member
incurs hospital, medical or any
other expense arising from
sickness,
injury
or
other
stipulated contingency, the
health care provider must pay
for the same to the extent
agreed
upon
under
the
contract.[19] (emphasis
supplied)

ISSUE: Is a health care agreement in the

nature of an insurance contract and
therefore subject to the documentary stamp
tax (DST) imposed under Section 185 of
Republic Act 8424 (Tax Code of 1997)?
RULING: Yes.
The DST is levied on the exercise by
persons of certain privileges conferred by law
for the creation, revision, or termination of
specific legal relationships through the
execution of specific instruments.[12] It is an
excise upon the privilege, opportunity, or
facility offered at exchanges for the
transaction
of
the
business.[13] In
particular, the DST under Section 185 of
the 1997 Tax Code is imposed on the
privilege of making or renewing any
policy of insurance (except life, marine,
inland and fire insurance), bond or
obligation in the nature of indemnity for
loss, damage, or liability.

Moreover, DST is not a tax on the

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

Under the law, a contract of insurance

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

CASE No. 10
G.R. No. 166786 September 11, 2006
MICHEL
J.
LHUILLER
PAWNSHOP,
INC.,petitioner, vs. COMMISSIONER OF
INTERNAL REVENUE,respondent.

Petitioners health care agreement is

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

FACTS:
MICHEL J. LHUILLER PAWNSHOP,
INC. is a corporation engaged in the
pawnshop business, received Assessment
Notice issued by the Chief Assessment
Division, Revenue Region No. 13, Cebu City,
for deficiency VAT in the amount of
P19,961,636.09 and deficiency DST in the
amount of P13,142,986.02, for the year

Petitioners health care agreement is

substantially similar to that involved
in Philamcare Health Systems, Inc. v. CA.
19

1997.

In general, documentary stamp taxes

are levied on the exercise by persons of
certain privileges conferred by law for the
creation, revision, or termination of specific
legal relationships through the execution of
specific instruments. Examples of such
privileges, the exercise of which, as effected
through
the
issuance
of
particular
documents, are subject to the payment of
documentary stamp taxes are leases of
lands, mortgages, pledges and trusts,
and conveyances of real property
Section 195 of the National Internal
Revenue Code (NIRC) imposes a DST on
every pledge regardless of whether the same
is a conventional pledge governed by the
Civil Code or one that is governed by the
provisions of P.D. No. 114. All pledges are
subject to DST, unless there is a law
exempting them in clear and categorical
language.
These pledges are already
covered by Section 195 and to create a
separate provision especially for them would
be superfluous.
it is the exercise of the privilege to
enter into an accessory contract of pledge,
as distinguished from a contract of loan,
which gives rise to the obligation to pay DST.
If the DST under Section 195 is levied on the
loan or the exercise of the privilege to
contract a loan, then there would be no use
for Section 179 of the NIRC, to separately
impose stamp tax on all debt instruments,
like a simple loan agreement. It is for this
reason why the definition of pawnshop ticket,
as not an evidence of indebtedness, is
inconsequential to and has no bearing on the
taxability of contracts of pledge entered into
by pawnshops. For purposes of Section 195,
pawnshop tickets need not be an evidence of
indebtedness nor a debt instrument because
it taxes the same as a pledge instrument.
Neither should the definition of pawnshop
ticket, as not a security, exempt it from the
imposition of DST. It was correctly defined as
such because the ticket itself is not the
security but the pawn or the personal
property pledged to the pawnbroker.
Moreover, it should be pointed out
that the provisions of the NIRC on DST has
recently been amended by R.A. No. 9243.
Among the highlights thereof were the
amendments
to
Section
199,
which
incorporated
12
more
categories
of

Petitioner contends that before an

exercise of a taxable privilege may be
subject to DST, it is indispensable that the
transaction must be embodied in and
evidenced by a document. Since a pawn
ticket as defined in Presidential Decree (P.D.)
No. 114 or the Pawnshop Regulation Act is
merely the pawnbrokers' receipt for a pawn
and not a security nor a printed evidence of
indebtedness, it cannot be considered as
among the documents subject to DST.
ISSUE:
1.Whether
petitioners
pawnshop
transactions are subject to DST
2. Whether the petitioner is liable to
pay surcharges and interest?
RULING:
1.) The Court rules in the affirmative.
Sections 173 and 195 of the NIRC, state:
SEC. 173.Stamp Taxes Upon Documents,
Loan Agreements, Instruments, and Papers.
Upon documents, instruments, loan
agreements and papers, and upon
acceptances, assignments, sales and
transfers of the obligation, right or
property incident thereto, there shall be
levied, collected and paid for, and in respect
of the transaction so had or accomplished,
the corresponding documentary stamp taxes
x x x. (Emphasis supplied)
SEC. 195.Stamp Tax on Mortgages, Pledges,
and Deeds of Trust. On every mortgage or
pledge of lands, estate, or property, real or
personal, heritable or movable, whatsoever,
where the same shall be made as security for
the payment of any definite and certain sum
of money lent at the time or previously due
and owing or forborne to be paid, being
payable and on any conveyance of land,
estate, or property whatsoever, in trust or to
be sold, or otherwise converted into money
which shall be and intended only as security,
either
by
express
stipulation
or
otherwise, there shall be collected a
documentary stamp tax at the following
rates:
"(a) When the amount secured does not
exceed Five thousand pesos (P5,000), Twenty
pesos (P20).1avvphil.net
(b) On each Five thousand pesos (P5,000), or
fractional part thereof in excess of Five
thousand pesos (P5,000), an additional tax of
Ten pesos (10.00).
20

documents in addition to the initial two

categories exempted from DST. As stated in
our May 3, 2006 Decision, pawnshop tickets
is not one of them. Expressio unious est
exclusion alterius. The omission of pawnshop
tickets only means that it is not among the
documents exempted from DST.
In establishing tax exemptions, it
should be borne in mind that taxation is the
rule,
exemption
is
the
exception.
Accordingly,
statutes
granting
tax
exemptions must be construed in strictissimi
juris against the taxpayer and liberally in
favor of the taxing authority. One who claims
an exemption from tax payments rests the
burden of justifying the exemption by words
too plain to be mistaken and too categorical
to be misinterpreted.
2.) NO. He is not liable to surcharge and
interest. The settled rule is that good faith
and honest belief that one is not subject to
tax on the basis of previous interpretation of
government agencies tasked to implement
the tax law, are sufficient justification to
delete the imposition of surcharges and
interest.
TARIFF AND CUSTOMS CODE

ISSUE: WoN the interception and seizure by

the customs officials on the high seas, of the
5 sailing vessels and the cargo loaded
therein for smuggling, was valid.
HELD: Yes. It is of no doubt that the ships
intercepted were of Philippine registry. The
Revised Penal Code leaves no doubt as to its
applicability and enforceability not only
within the Philippines, its interior waters and
maritime zone, but also outside of its
jurisdiction against those committing offense
while on a Philippine ship.
Furthermore, it has been an establish
principle that a state has the right to protect
itself and its revenues, a right not limited to
its own territory but extending to the high
seas. The authority of a nation within its own
territory is absolute and exclusive. The
seizure of a vessel within the range of its
cannon by a foreign force is an invasion of
that territory, and is a hostile act which it is
its duty to repel. But its power to secure
itself from injury may certainly be exercised
beyond the limits of its territory.
Hence, CTA's decision sustaining the action
taken by respondent Commissioner of
Customs is affirmed.

CASE No. 1
ILLUH
ASAALI,
HATIB
ABDURASID,
INGKOH BANTALA, BASOK INGKIN, and
MOHAMMAD BANTALLA,petitioners, vs.
THE COMMISSIONER OF CUSTOMS,
respondent.
G.R. No. L-24170
December 16, 1968

CASE No. 2
PILIPINAS
SHELL
PETROLEUM
CORPORATION vs COMMISSIONER OF
CUSTOMS, G.R. No. 176380
Facts:
Shell is engaged in the importation of
petroleum and its by-products into the
country. Shell was assessed and required to
pay customs duties and internal revenue
taxes.

FACTS: Illuh Asaali et al. owned 5 sailing

vessels ships bound for Tawi-tawi, Sulu. Said
ships were intercepted by customs officials
on the high seas. The ship contained rattan
products and cigarettes which the customs
confiscated on the ground of smuggling.
Asaali et al did not have the required import
permits for the said goods. Asaali contended
that the interception and confiscation were
not valid because the customs officers made
such not within Philippine waters but rather,
on the high seas. Hence, according to him,
Philippine importation laws are not applicable
to the case at bar.
The Commissioner of Customs decided in
favor of its validity which the CTA likewise
reached such conclusion. Hence this appeal.

In 1997 and 1998, Shell settled its liabilities

for customs duties and internal revenue
taxes using tax credit certificates (TCCs) that
were transferred to it for value by several
Board
of
Investment
(BOI)-registered
companies which were accepted by the BIR
and BOC on the belief that such were good
and valid.
In a letter dated November 3, 1999, the
Center, through the Secretary of the DOF,
21

informed Shell that it was cancelling the

TCCs transferred to and used as payment. It
was discovered that the TCCs had been
fraudulently secured by the original grantees
before transferring them to Shell. In view of
the cancellation, the Center required Shell to
pay the BIR and BOC the amounts
corresponding to the TCCs Shell had used to
settle its liabilities.

having been filed on May 23, 2002, was thus

instituted within the period provided by law.
Issue: Whether or not Shells petition was
filed within the reglementary period
Held: No. The present case does not involve
a tax protest case which is within the
jurisdiction of the CTA to resolve.
In the present case, the facts reveal that
Shell received three sets of letters:
a.
the Centers November 3 letter, signed
by the Secretary of Finance, informing it of
the cancellation of the TCCs;
b.
the respondents November 19 letter
requiring it to replace the amount equivalent
to the amount of the cancelled TCCs used by
Shell; and
c.
the respondents collection letters
issued
through
Atty. Valera, formally
demanding the amount covered by the
cancelled TCCs.

Shell objected to the cancellation of the TCCs

claiming that it had been denied due
process. Apparently, Shell had sent a letter
to the Center on November 3, 1999 adducing
reasons why the TCCs should not be
cancelled.
But, the Center didnt act on Shells letter,
instead, they sent a letter on November 19,
1999 requiring Shell to replace the amount
equivalent to the TCCs however, Shell still
maintained that the cancellation was
improper.

None of these letters, however, can be

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

Three years later, through letters signed by

Atty. Valera, dated February 15, February 20,
and April 12, 2002, the respondent, formally
demanded from Shell payment of the
amounts corresponding to the listed TCCs
that the Center had previously cancelled.
Shell received on April 23, 2002 the
summons in one of the three collection cases
filed by respondent against Shell before the
Regional Trial Court (RTC) of Manila and on
May 23, 2002, Shell filed with the CTA a
Petition for Review questioning the BOC
collection efforts for lack of legal and factual
basis. But the respondent filed a motion to
dismiss Shells petition for review on the
ground of prescription claiming that Shells
petition was filed beyond the 30-day period
provided by law for appeals of decisions of
the Commissioner of Customs to the CTA.
Also this 30-day period should be counted
from the time Shell received the respondents
collection letters.

Thus, Shell never protested the original

assessments of its tax liabilities and in fact
settled them using the TCCs. These original
assessments, therefore, have become final,
incontestable, and beyond any subsequent
protest proceeding, administrative or judicial,
to rule upon.

Shell
countered
that
the
30-day
reglementary period should be counted from
the date it received the summons for one of
the collection cases filed by respondent or,
specifically, on April 23, 2002, not from the
date that it received the respondents
collection letters. The petition for review,

Shells petition before the CTA principally

questioned the validity of the cancellation of
22

the TCCs a decision that was made not by

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

On August 10, 1990, the Office of the

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

In Dayrit v. Cruz, as declared: [A] suit for the

collection of internal revenue taxes, where
the assessment has already become final
and executory, the action to collect is akin to
an action to enforce the judgment. No inquiry
can be made therein as to the merits of the
original case or the justness of the judgment
relied upon.
CASE No. 3
NARCISO O. JAO and BERNARDO M.
EMPEYNADO, petitioners, vs. COURT OF
APPEALS; COMMISSIONER OF CUSTOMS;
COLLECTOR OF CUSTOMS, Port of
Manila
Can the Collector of Customs issue
warrant of seizure and detention for
untaxed imported articles, and can the
Regional Trial Court enjoin the Collector
of Customs from the exercise of such
power? The Collector can issue warrant
of seizure and detention of untaxed
imported articles, and the Regional Trial
Court lacks the jurisdiction to enjoin the
Collector from the exercise of such
power. The Collector of Customs when
sitting in forfeiture proceedings constitutes a
tribunal expressly vested by law with
jurisdiction to hear and determine the
subject matter of such proceedings without
any interference from the Court of First
Instance. (Auyong Hian v. Court of Tax
Appeals, et al., 19 SCRA 10).

Issue:
Whether or not the Regional Trial Court has
jurisdiction to issue the questioned order.
Ruling:
No. The Regional Trial Court has no
jurisdiction to issue the questioned order.

Facts:

There is no question that Regional Trial

Courts are devoid of any competence to pass
upon the validity or regularity of seizure and
23

forfeiture proceedings conducted by the

Bureau of Customs and to enjoin or
otherwise interfere with these proceedings .
The Collector of Customs sitting in seizure
and forfeiture proceedings has exclusive
jurisdiction to hear and determine all
questions touching on the seizure and
forfeiture of dutiable goods. The Regional
Trial Courts are precluded from assuming
cognizance over such matters even through
petitions
of certiorari,
prohibition
or
mandamus.

CASE No. 4
HON.
SALVADOR
M.
MISON,
Commissioner of Customs v. HON. ELI
G.C. NATIVIDAD, Presiding Judge of the
Regional Trial Court [G.R. No. 82586.
September 11, 1992.]
Facts: A team from the National Customs
Police
proceeded
to
San
Fernando,
Pampanga to act on the information given on
the existence of both assembled and
disassembled
knocked-down
vehicles,
particularly Toyota Lite Aces, at the
compoung of CVC Trading.
Upon arrival at the place the team found a
fenced area containing twenty (20) units of
fully and partly assembled Toyota Lite Ace
vans. It immediately took possession and
control of the motor vehicles by cordoning off
the enclosure. Thereafter, at about 11:30 p
m., two (2) members of the team were
designated to secure a warrant of seizure
and detention from the Collector of Customs
of the Subport of Clark. A collector of the
Customs instituted seizure proceedings
against the abovementioned vehicles for the
violation of "Section 2530 (f) and (1)-1 & 5"
of the Tariff and Customs Code, in relation to
Central Bank regulations. Accordingly, at
about 8:00 a.m. on 12 February 1988, he
issued a Warrant of Seizure and Detention. .

It is likewise well-settled that the provisions

of the Tariff and Customs Code and that of
Republic Act No. 1125, as amended,
otherwise known as "An Act Creating the
Court of Tax Appeals," specify the proper
procedure for the ventilation of any legal
objections or issues raised concerning these
proceedings. Thus, actions of the Collector of
Customs are appealable to the Commissioner
of Customs, whose decision, in turn, is
subject to the exclusive appellate jurisdiction
of the Court of Tax Appeals and from there to
the Court of Appeals.
The rule that Regional Trial Courts have no
review powers over such proceedings is
anchored upon the policy of placing no
unnecessary hindrance on the government's
drive, not only to prevent smuggling and
other frauds upon Customs, but more
importantly, to render effective and efficient
the collection of import and export duties
due
the
State,
which
enables
the
government to carry out the functions it has
been instituted to perform.

At about 11:00 a.m. on 12 February 1988,

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

Even if the seizure by the Collector of

Customs were illegal, which has yet to be
proven, we have said that such act does not
deprive the Bureau of Customs of jurisdiction
thereon. The Collector of Customs when
sitting in forfeiture proceedings constitutes a
tribunal expressly vested by law with
jurisdiction to hear and determine the
subject matter of such proceedings without
any interference from the Court of First
Instance. (Auyong Hian v. Court of Tax
Appeals, et al., 19 SCRA 10).
24

On 17 February 1988, the private respondent

filed an Oppositions/Comment on the Motion
to Dismiss 13 alleging, among others, that
the Warrant of Seizure and Detention did not
comply with the requirements for a valid
search warrant under the Constitution, and
that taxes for the vehicles have been paid to
the Bureau of Internal Revenue (BIR).
Issue: Whether or not the Regional Trial
Court lacked jurisdiction over the subject
vehicles.

NESTLE PHILIPPINES, INC., (FORMERLY

FILIPRO, INC.), petitioner, vs. HONORABLE
COURT OF APPEALS, COURT OF TAX
APPEALS
and
COMMISSIONER
OF
CUSTOMS,respondents.
G.R. No. 134114

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

July 6, 2001

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

1984. Nestle paid the tax but filed protest

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

October 14, 1986. Nestle filed a claim for

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

On the other hand, the sixteen (16) protest

cases for refund of alleged overpaid
customs duties were left with the Collector
of Customs of Manila. However, the said
Collector of Customs failed to render his
decision thereon after almost six (6) years

CASE No. 5
25

since petitioner paid under protest the

customs duties on the said sixteen (16)
importations of milk and milk products and
filed the corresponding protests.

2. The petitioner is mistaken in its contention

that its claims for refund of allegedly
overpaid customs duties are governed by
Article 215418 of the New Civil Code on quasicontract, or the rule on solutio indebiti, which
prescribes in six (6) years pursuant to Article
1145 of the same Code.

August 2, 1990. To prevent the claim from

becoming
stale
on
the
ground
of
prescription, Nestle filed a petition for review
with the CTA despite absence of the ruling of
the Collector of Customs and Commissioner
of Customs.

The inaction of the Collector of Customs of

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

CTA dismissed the PFR.

ISSUE

This belief or contention of the petitioner is

misplaced.

WON the claims for refund of alleged

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

In order for the rule on solution indebiti to

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

WON the pendency of the protest cases

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

RULING

In the present case, there is no factual

showing that the collection of the alleged
overpaid customs duties was more than what
is required of the petitioner when it made the
aforesaid separate importations. There is no
factual finding yet by the government
agency concerned that petitioner is indeed
entitled to its claim of overpayment and, if
true, for how much it is entitled. It bears
stress that in determining whether or not
petitioner is entitled to refund of alleged
overpayment of customs duties, it is
necessary to determine exactly how much

1. No. Any outright award for the refund of

allegedly overpaid customs duties in favor of
petitioner on its subject sixteen (16)
importations is not favored in this jurisdiction
unless there is a direct and clear finding. The
relinquishment of the power to tax is not
presumed.

26

the Government is entitled to collect as

customs duties on the importations. Thus, it
would only be just and fair that the
petitioner-taxpayer and the Government
alike be given equal opportunities to avail of
the remedies under the law to contest or
defeat each other's claim and to determine
all matters of dispute between them in one
single case. Case remanded to CTA for
hearing and reception of evidence.

It was found that the import entries were

filed beyond the 30-day non-extendible
period prescribed under Section 1301 of the
TCC. They concluded that the importations
were already considered abandoned in favor
of the government. They also found that
fraud was committed by petitioner in
collusion with the former District Collector.
Respondent informed petitioner of the
findings of irregularity in the filing and
acceptance of the import entries beyond the
period required by customs law and in the
release of the shipments after the same had
already been deemed abandoned in favor of
the government.
Issues:
1. whether "entry" under Section 1301
in relation to Section 1801 of the TCC
refers to the IED or the IEIRD;
2. whether fraud was perpetrated by
petitioner and
3. whether the importations can be
considered abandoned under Section
1801.
"ENTRY" IN SECTIONS 1301 AND 1801
OF THE TCC REFERS TO BOTH THE IED
AND IEIRD
Under Section 1301 of the TCC, imported
articles must be entered within a nonextendible period of 30 days from the date of
discharge of the last package from a vessel.
Otherwise, the BOC will deem the imported
goods impliedly abandoned under Section
1801.
The term "entry" in customs law has a triple
meaning. It means (1) the documents filed at
the customs house; (2) the submission and
acceptance of the documents and (3) the
procedure of passing goods through the
customs house.22
The IED serves as basis for the payment of
advance duties on importations whereas the
IEIRD evidences the final payment of duties
and taxes. The question is: was the filing of
the IED sufficient to constitute "entry" under
the TCC?
the operative act that constitutes "entry" of
the imported articles at the port of entry is
the filing and acceptance of the "specified
entry form" together with the other
documents required by law and regulations.
The "specified entry form" refers to the
IEIRD.

CASE No. 6
CHEVRON
PHILIPPINES,
INC.
COMMISSIONER OF THE BUREAU
CUSTOMS

vs.
OF

Petitioner Chevron Philippines, Inc. is

engaged in the business of importing,
distributing and marketing of petroleum
products in the Philippines. In 1996, the
importations subject of this case arrived and
were covered by eight bills of lading. The
shipments were unloaded from the carrying
vessels onto petitioners oil tanks over a
period of three days from the date of their
arrival. Subsequently, the import entry
declarations (IEDs) were filed and 90% of the
total customs duties were paid.
The importations were appraised at a duty
rate of 3% as provided under RA 8180 and
petitioner paid the import duties amounting
to P316,499,021.7 Prior to the effectivity of
RA 8180 on April 16, 1996, the rate of duty
on imported crude oil was 10%.
It was alleged that there was deliberate
concealment, manipulation and scheme
employed by petitioner and Pilipinas Shell in
the importation of crude oil.Petitioner
received from the District Collector a
demand letter requiring the immediate
settlement of the amount of P73,535,830
representing the difference between the 10%
and 3% tariff rates on the shipments.
Petitioner objected to the demand for
payment of customs duties using the 10%
duty rate and reiterated its position that the
3% tariff rate should instead be applied. It
likewise raised the defense of prescription
against the assessment pursuant to Section
1603 of the Tariff and Customs Code.
27

The filing of the IEIRDs has several important

purposes: to ascertain the value of the
imported articles, collect the correct and final
amount of customs duties and avoid
smuggling of goods into the country.It is the
IEIRD which accompanies the final payment
of duties and taxes. These duties and taxes
must be paid in full before the BOC can allow
the release of the imported articles from its
custody. The submission of the IEIRD cannot
be left to the exclusive discretion or whim of
the importer.
Both the IED and IEIRD should be filed within
30 days from the date of discharge of the
last package from the vessel or aircraft.
THE
EXISTENCE
OF
FRAUD
WAS
ESTABLISHED
There was a calculated and preconceived
course of action adopted by petitioner
purposely to evade the payment of the
correct customs duties then prevailing. This
was done in collusion with the former District
Collector, who allowed the acceptance of the
late IEIRDs and the collection of duties using
the 3% declared rate. A clear indication of
petitioners deliberate intention to defraud
the government was its non-disclosure of
discrepancies on the duties declared in the
IEDs (10%) and IEIRDs (3%) covering the
shipments. Due to the presence of fraud, the
prescriptive period of the finality of
liquidation was inapplicable.
THE IMPORTATIONS WERE ABANDONED
IN FAVOR OF THE GOVERNMENT
The law is clear and explicit. It gives a nonextendible period of 30 days for the importer
to file the entry which we have already ruled
pertains to both the IED and IEIRD. Thus
under Section 1801 in relation to Section
1301, when the importer fails to file the
entry within the said period, he "shall be
deemed to have renounced all his interests
and property rights" to the importations and
these
shall
be
considered
impliedly
abandoned in favor of the government.
Unfortunately for petitioner, it was the law
itself which considered the importation
abandoned when it failed to file the IEIRDs
within the allotted time. The law no longer
requires that there be other acts or
omissions where an intent to abandon can be
inferred. It is enough that the importer fails
to file the required import entries within the
reglementary period.

NOTICE WAS NOT NECESSARY UNDER

THE CIRCUMSTANCES OF THIS CASE
Petitioner also avers that the importations
could not be deemed impliedly abandoned
because respondent did not give it any
notice. Under the peculiar facts and
circumstances of this case, due notice was
not necessary. Fraud was established against
petitioner; it colluded with the former District
Collector. Because of this, the scheme was
concealed from respondent. The government
was unable to protect itself until the plot was
uncovered. The government cannot be
crippled by the malfeasance of its officials
and employees. Consequently, it was
impossible for respondent to comply with the
requirements under the rules.
Also, petitioner, a regular, large-scale and
multinational importer of oil and oil products,
fell under the category of a knowledgeable
importer which was familiar with the
governing rules and procedures in the
release of importations.
Furthermore, notice to petitioner was
unnecessary because it was fully aware that
its shipments had in fact arrived in the Port
of Batangas. The oil shipments were
discharged from the carriers docked in its
private pier or wharf, into its shore tanks.
From then on, petitioner had actual physical
possession of its oil importations. It was thus
incumbent upon it to know its obligation to
file the IEIRD within the 30-day period
prescribed by law.
The purpose of posting an "urgent notice to
file entry" pursuant to Section B.2.1 of CMO
15-94 is only to notify the importer of the
"arrival of its shipment" and the details of
said shipment. Since it already had
knowledge of such, notice was superfluous.
Besides, the entries had already been filed,
albeit belatedly. It would have been
oppressive to the government to demand a
literal
implementation
of
this
notice
requirement.
CONCLUSION
Petitioners failure to file the required entries
within a non-extendible period of thirty days
from date of discharge of the last package
from the carrying vessel constituted implied
abandonment of its oil importations. This
means that from the precise moment that
the non-extendible thirty-day period lapsed,
the abandoned shipments were deemed the
28

property of the government. Therefore, when

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

respondents goods. Accordingly, we agree

with the lower courts directive that
Petitioner Republic of the Philippines, upon
payment of the necessary customs duties by
respondent Unimex Micro-Electronics GmBH,
should pay the value of the subject shipment
in the amount of Euro 669,982.565.
Petitioners liability may be paid in Philippine
currency, computed at the exchange rate
prevailing at the time of actual payment.

CASE No. 7
Republic vs. Unimex Micro-Electronic,
G.R. No. 166309-10, March 9, 2007

*Modification of
Executory Judgment

Final

And

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

In the case at bar, parties do not dispute the

fact that after the June 15, 1992 CTA decision
became final and executory, respondents
goods were inexplicably lost while under the
BOCs custody. Certainly, this fact presented
a
supervening
event
warranting
the
modification of the CTA decision.

*Laches Did Not Set in to

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

The BOC Commissioner argued that the CTA

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

Held:
Government Liability For Actual
Damages

CASE No. 8

As previously discussed, the Court cannot

turn a blind eye to BOCs ineptitude and
gross negligence in the safekeeping of

Rieta v. People of the Philippines

29

Corpus delicti refers to the fact of the

commission of the crime. It may be proven
by the credible testimonies of witnesses, not
necessarily by physical evidence. In-court
identification of the offender is not essential,
as long as the identity of the accused is
determined with certainty by relevant
evidence. In the present case, there is no
doubt that petitioner was the same person
apprehended
by
the
authorities
and
mentioned in the Information. His possession
of the smuggled cigarettes carried the prima
facie presumption that he was engaged in
smuggling. Having failed to rebut this
presumption, he may thus be convicted of
the crime charged.
The Case
Petitioner and his six co-accused -- Arturo
Rimorin, Fidel Balita, Gonzalo Vargas,
Robartolo Alincastre, Guillermo Ferrer and
Ernesto Miaco were charged of smuggling
three hundred five (305) cases of assorted
brands of blue seal cigarettes which are
foreign articles valued at P513,663.47
including duties and taxes which was found
in the possession of said accused and under
their control which articles said accused fully
well knew have not been properly declared
and that the duties and specific taxes
thereon have not been paid to the proper
authorities in violation of said Sec. 3601 of
the Tariff and Customs Code of the
Philippines

30

ISSUES
1.
The respondents trial and appellate
courts committed grave abuse of discretion
tantamount to lack and/or excess of
jurisdiction when [they] convicted herein
petitioner notwithstanding the prosecutions
failure to prove the guilt of the petitioner
beyond reasonable doubt.

uncorroborated testimony, if credible, may

suffice to prove it and warrant a conviction
therefor.

Corpus
delicti
may
even
be
established by circumstantial evidence.

Both the RTC and the CA ruled that the

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

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

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

HELD:
The Petition has no merit.

The existence of the 305 cases of blue-seal

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

First Issue:
Sufficiency of Evidence
Petitioner contends that the existence of the
untaxed blue seal cigarettes was not
established, because the prosecution had not
presented them as evidence. He further
argues that there was no crime committed,
as the corpus delicti was never proven
during the trial.
Corpus Delicti Established
by Other Evidence
We do not agree. Corpus delicti refers to the
specific injury or loss sustained. It is the fact
of the commission of the crime that may be
proved by the testimony of eyewitnesses. In
its legal sense, corpus delicti does not
necessarily refer to the body of the person
murdered, to the firearms in the crime of
homicide with the use of unlicensed firearms,
to the ransom money in the crime of
kidnapping for ransom, or -- in the present
case -- to the seized contraband cigarettes.

Prima Facie Proof of

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

In Rimorin v. People, it was held:

Since the corpus delicti is the fact of

the commission of the crime, this Court has
ruled
that
even
a
single
witness

Where the negative of an issue does not

permit of direct proof, or where the facts are
31

more immediately within the knowledge of

the accused, the onus probandi rests upon
him.

adds that he had no knowledge that untaxed

cigarettes were in the truck.
Petitioners contention is untenable.

Stated otherwise, it is not incumbent upon

the prosecution to adduce positive evidence
to support a negative averment the truth of
which is fairly indicated by established
circumstances and which, if untrue, could
readily be disproved by the production of
documents or other evidence within the
defendants knowledge or control. (For
example, where a charge is made that a
defendant carried on a certain business
without a license x x x, the fact that he has a
license is a matter which is peculiar[ly]
within his knowledge and he must establish
that fact or suffer conviction).

Persons found to be in possession of

smuggled items are presumed to be engaged
in smuggling, pursuant to the last paragraph
of Section 3601 of the Tariff and Customs
Code.

The burden of proof is thus shifted to

them. To rebut this presumption, it is not
enough for petitioner to claim good faith and
lack of knowledge of the unlawful source of
the cigarettes.
In the case adverted to earlier, Rimorin v.
People, we held thus:

The truth of the negative averment that the

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

In order that a person may be deemed guilty

of smuggling or illegal importation under the
foregoing statute three requisites must
concur:
(1) that the merchandise must have been
fraudulently or knowingly imported contrary
to law;
(2) that the defendant, if he is not the
importer himself, must have received,
concealed, bought, sold or in any manner
facilitated the transportation, concealment or
sale of the merchandise; and
(3) that the defendant must be shown to
have knowledge that the merchandise had
been illegally imported. If the defendant,
however, is shown to have had possession of
the illegally imported merchandise, without
satisfactory explanation, such possession
shall be deemed sufficient to authorize
conviction.

Hence, it was up to petitioner to disprove

these damning circumstances, simply by
presenting the receipts showing payment of
the taxes. But he did not do so; all that he
could offer was his bare and self-serving
denial.
Knowledge of the Illegal
Nature of Goods

The involvement or participation he and his

co-accused had in the smuggling of the
goods was confirmed by their lack of proper
and reasonable justification for the fact that
they had been found inside the cargo truck,
seated in front, when it was intercepted by
the authorities. Despite his protestation, it is
obvious that petitioner was aware of the
strange nature of the transaction, and that
he was willing to do his part in furtherance
thereof. The evidence presented by the

The fact that 305 cases of blue-seal

cigarettes were found in the cargo truck, in
which petitioner and his co-accused were
riding,
was
properly
established.
Nonetheless, he insists that his presence
there was not enough to convict him of
smuggling, because the element of illegal
possession had not been duly proved. He
32

prosecution established his work of guarding

and escorting the contraband to facilitate its
transportation from the Port Area to Malabon,
an act punishable under Section 3601 of the
Tax Code.

the need to priorly obtain a judicial warrant,

the Code specifically allows police authorities
to enter, pass through or search any land,
enclosure, warehouse, store or building that
is not a dwelling house; and also to inspect,
search and examine any vessel or aircraft
and any trunk, package, box or envelope or
any person on board; or to stop and search
and examine any vehicle, beast or person
suspected of holding or conveying any
dutiable or prohibited article introduced into
the Philippines contrary to law.

Second Issue:
Validity of the Search and Seizure
Petitioner contends that his arrest by
virtue of Arrest Search and Seizure Order
(ASSO) No. 4754 was invalid, as the law upon
which it was predicated -- General Order No.
60, issued by then President Ferdinand E.
Marcos -- was subsequently declared by the
Court, in Taada v. Tuvera, to have no force
and effect. Thus, he asserts, any evidence
obtained pursuant thereto is inadmissible in
evidence.
We do not agree. In Taada, the Court
addressed the possible effects of its
declaration of the invalidity of various
presidential issuances.
The Chicot doctrine cited in Taada advocates
that, prior to the nullification of a statute,
there is an imperative necessity of taking
into account its actual existence as an
operative fact negating the acceptance of a
principle of absolute retroactive invalidity.
Whatever was done while the legislative or
the executive act was in operation should be
duly recognized and presumed to be valid in
all respects. The ASSO that was issued in
1979 under General Order No. 60 -- long
before our Decision in Taada and the arrest
of petitioner -- is an operative fact that can
no longer be disturbed or simply ignored.

WHEREFORE, the Petition is DENIED.

CASE No. 9
EL
GRECO
SHIP
MANNING
AND
MANAGEMENT
CORPORATION,
vs.
COMMISSIONER OF CUSTOMS. [G.R. No.
177188. December 4, 2008.]
Facts: The vessel M/V Criston docked at the
Port of Tabaco, Albay, carrying a shipment of
35,000 bags of imported rice, consigned to
Antonio Chua, Jr. (Chua) and Carlos Carillo
(Carillo), payable upon its delivery to Albay.
Glucer Shipping Company, Inc. (Glucer
Shipping) is the operator of M/V Criston.
Upon the directive of then Commissioner
Titus Villanueva of the Bureau of Customs
(BOC), a Warrant of Seizure and Detention
was issued by the Legaspi District
Collectorfor the 35,000 bags of imported rice
shipped by M/V Criston, on the ground that it
left the Port of Manila without the necessary
clearance from the Philippine Coast Guard.
Asubsequent Warrant of Seizure and
Detention, was issued particularly for the
said vessel. The BOC District Collector of the
Port of Legaspi thereafter commenced
proceedings for the forfeiture of M/V Criston
and its. Chua and Carillo filed before the
Regional Trial Court (RTC) of Tabaco, Albay, a
Petition for Prohibition with Prayer for the
Issuance of Preliminary Injunction and
Temporary Restraining Order (TRO) assailing
the authority of the Legaspi District
Collectors to issue the Warrants of Seizure
and Detention and praying for a permanent
injunction against the implementation of the
said Warrants.In the meantime, while M/V

Furthermore, the search and seizure of

goods, suspected to have been introduced
into the country in violation of customs laws,
is one of the seven doctrinally accepted
exceptions to the constitutional provision.
Such provision mandates that no search or
seizure shall be made except by virtue of a
warrant issued by a judge who has
personally determined the existence of
probable cause.
Under the Tariff and Customs Code, a search,
seizure and arrest may be made even
without a warrant for purposes of enforcing
customs and tariff laws. Without mention of
33

Criston was berthing at the Port of Tabaco

under the custody of the BOC, the Province
of Albay was hit by typhoon "Manang". In
order to avert any damage which could be
caused by the typhoon, the vessel was
allowed to proceed to another anchorage
area to temporarily seek shelter. After
typhoon "Manang" had passed through Albay
province, M/V Criston, however, failed to
return to the Port of Tabaco and was nowhere
to be found.Manila District Collector issued
an Order quashing the Warrant of Seizure
and Detention it issued against M/V Neptune
Breeze in Seizure Identification No. 2001-208
for lack of probable cause. The BOC
Commissioner, CTA Second Division and CTA
en banc all ruled that M/V Neptune Breeze is
one and the same as M/V Criston which had
been detained at the Port of Tabaco, Albay,
for carrying smuggled imported rice and had
fled the custody of the customs authorities to
evade its liabilities and ardered its forfeiture.

El Greco Ship Manning and Management

Corp. v. Commissioner of Customs, G.R.
No. 177188, 4 December 2008
Facts:
On 23 September 2001, the vessel M/V
Criston docked at the Port of Tabaco, Albay,
carrying a shipment of 35,000 bags of
imported rice.
Upon the directive of then Commissioner
Titus Villanueva of the Bureau of Customs
(BOC), a Warrant of Seizure and Detention
for the 35,000 bags of imported rice shipped
by M/V Criston, on the ground that it left the
Port of Manila without the necessary
clearance from the Philippine Coast Guard.
And a subsequent Warrant of Seizure and
Detention,
particularly
for
the
said
vessel. The BOC District Collector of the Port
of Legaspithereafter
commenced
proceedings for the forfeiture of M/V Criston
and its cargo.

Issues/ Held: W/N M/V Neptune Breeze is one

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

In the meantime, while M/V Criston was

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

Ratio: The crime laboratory report of the PNP

shows that the serial numbers of the engines
and generators of the two vessels are
identical. There is no question that M/V
Neptune Breeze, then known as M/V Criston,
was carrying 35,000 bags of imported rice
without the necessary papers showing that
they were entered lawfully through a
Philippine port after the payment of
appropriate taxes and duties thereon. This
gives rise to the presumption that such
importation was illegal. Consequently, the
rice subject of the importation, as well as the
vessel M/V Neptune Breeze used in
importation are subject to forfeiture. The
burden is on El Greco, as the owner of M/V
Neptune Breeze, to show that its conveyance
of the rice was actually legal.

Alarmed, the BOC and the Philippine Coast

Guard coordinated with the Philippine Air
Force to find the missing vessel. On 8
November
2001,
the
BOC
received
information that M/V Criston was found in the
waters of Bataan sporting the name of M/V
Neptune Breeze
On the premise that the two vessel are the
same, the Legaspi District Collector rendered
a Decision ordering the forfeiture of the M/V
Criston, also known as M/V Neptune Breeze,
and its cargo, for violating Section 2530 (a),
(f) and (k) of the Tariff and Customs Code.

TARIFF AND CUSTOMS CODE

34

Issue:

k. Any conveyance actually being used for

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

WHETHER OR NOT M/V NEPTUNE BREEZE

AND M/V CRISTON ARE ONE AND THE SAME
VESSEL?
WHETHER
OR
NOT
M/V NEPTUNE BREEZE IS QUALIFIED TO
BE THE SUBJECT OF FORFEITURE UNDER
SECTION 2531 OF THE TARIFF AND
CUSTOMS CODE?
Held:
Yes, they are the same. The crime laboratory
report of the PNP shows that the serial
numbers of the engines and generators of
the two vessels are identical. El Greco failed
to rebut this piece of evidence that decisively
identified M/V Neptune Breeze as the same
as M/V Criston.

The penalty of forfeiture is imposed on any

vessel engaged in smuggling, provided that
the following conditions are present:

Yes, the vessel is qualified to be the

subject of forfeiture.

(1) The vessel is used unlawfully in the

importation or exportation of articles into or
from the Philippines;

SEC. 2530. Property Subject to Forfeiture

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

(2) The articles are imported to or exported

from any Philippine port or place, except a
port of entry; or

a. Any vehicle, vessel or aircraft, including

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

(3) If the vessel has a capacity of less than

30 tons and is used in the importation of
articles into any Philippine port or place
other than a port of the Sulu Sea, where
importation in such vessel may be
authorized by the Commissioner, with the
approval of the department head.
There is no question that M/V Neptune
Breeze, then known as M/V Criston, was
carrying 35,000 bags of imported rice
without the necessary papers showing that
they were entered lawfully through a
Philippine port after the payment of
appropriate taxes and duties thereon. This
gives rise to the presumption that such
importation was illegal.Consequently, the
rice subject of the importation, as well as the
vessel M/V Neptune Breeze used in
importation are subject to forfeiture. The
burden is on El Greco, as the owner of M/V
Neptune Breeze, to show that its conveyance

f. Any article, the importation or exportation

of which is effected or attempted contrary to
law, or any article of prohibited importation
or exportation, and all other articles which, in
the opinion of the Collector, have been used,
are or were intended to be used as
instruments in the importation or exportation
of the former;
35

of the rice was actually legal. The issue that

the said cargo is of local origin is barren of
any evidence or records as such from the
authorities.

filed a petition for review with the CTA

questioning the legality of the cancellation of
the TCC's. While it was still pending,
respondent filed a complaint for collection
with the RTC. Petitioner filed for dismissal
contending that the RTC has no jurisdiction
over the case because of the pending case in
the CTA, and RTC only acquires jurisdiction
only if the assessment made by the CIR
becomes final and incontestable.

There is nothing in Section 2313 of

the Tariff and Customs Code to support the
position of El Greco. As the CTA en
banc explained,
in
case
the
BOC
Commissioner fails to decide on the
automatic appeal of the Collectors Decision
within 30 days from receipt of the records
thereof, the case shall again be deemed
automatically appealed to the Secretary of
Finance. Also working against El Greco is the
fact that jurisdiction over M/V Neptune
Breeze, otherwise known as M/V Criston, was
first acquired by the Legaspi District
Collector; thus, the Manila District Collector
cannot validly acquire jurisdiction over the
same vessel. Judgment rendered without
jurisdiction is null and void, and void

Issue: Whether RTC has jurisdiction

over the case?
Ruling:
The filing of the petition is a proper
remedy.
Assessments inform taxpayers of their tax
liabilities. Under the TCCP, the assessment is
in the form of a liquidation made on the face
of the import entry return and approved by
the Collector of Customs.[37] Liquidation is
the final computation and ascertainment
by the Collector of Customs of the
duties
due
on
imported
merchandise based on official reports as to
the quantity, character and value thereof,
and the Collector of Customs' own finding as
to the applicable rate of duty.[38] A
liquidation is considered to have been made
when the entry is officially stamped
liquidated.[39]

Pilipinas Shell v. Republic of the

Philippines, G.R. No. 161953, 6 March
2008
Facts:
Petitioner Pilipinas Shell was an
assignee of various Tax Credit memos and
Tax Credit Certificates from different entities.
The assignment had the a[[roval of BOI and
the One Stop Shop Inter-agency Tax Credit
and duty Drawback Center. Some of these
TCC's were accepted by payment by the
Bureau of customs in relation to its taxes and
import duties. Later, The Finance Secretary
informed petitioner that the said TCC's were
fraudulently
issued
amounted
to
P209,129,141.00
and
demanded
the
payment of the same. Petitioner assailed the
action of the Secretary contending that he
was an assignee in good faith and the it was
genuine and authentic but the Bureau of
Custom demanded the said payment
prompting the petitioner to file a protest but
was denied by the bureau. Petitioner later

Petitioner claims that it paid the duties due

on its importations. Section 1603 of the old
TCCP stated:
Section
1603. Finality
of
Liquidation. When articles have
been entered and passed free
of duty or final adjustments of
duties made, with subsequent
delivery,
such
entry
and
passage free of duty or
settlement of duties will, after
the expiration of one year from
the date of the final payment
of duties, in the absence of
fraud or protest, be final and
conclusive upon all parties,
36

unless the liquidation of the

import
entry
was
merely
tentative.[40]
An assessment or liquidation by the BoC
attains finality and conclusiveness one year
from the date of the final payment of duties
except when:
1. There was fraud
2. There is a pending protest or the
liquidation of import entry was merely
tentative
None of the foregoing exceptions is present
in this case. There was no fraud as petitioner
claimed (and was presumed) to be in good
faith. Respondent does not dispute this.
Moreover, records show that petitioner paid
those duties without protest using its
TCCs. Finally, the liquidation was not a
tentative one as the assessment had long
become
final
and
incontestable.
Consequently, pursuant to Yabes[41] and
because of the cancellation of the TCCs,
respondent had the right to file a collection
case
Section 1204 of the TCCP provides:

government may choose to enforce while the

imported articles are either in its custody or
under its control.
When respondent released petitioner's
goods, its (respondents) lien over the
imported
goods
was
extinguished.
Consequently, respondent could only enforce
the payment of petitioner's import duties in
full by filing a case for collection against
petitioner.
THE
SUBJ
ECT
MAT
TER
FALL
S
WITH
IN
THE
JURI
SDIC
TION
OF
THE
RTC
Respondent filed its complaint for collection
on April 3, 2002. The governing law at that
time was RA[43] 1125 or the old CTA Law.
Section 7 thereof stated:

Section
1204. Liability
of
Importer for Duties. Unless
relieved
by
laws
or
regulations, the liability for
duties, taxes, fees and
other charges attaching on
importation
constitutes
a personal debt due from
the
importer
to
the
government which can be
discharged only by payment in
full of all duties, taxes, fees
and other charges legally
accruing. It also constitutes
a lien upon the articles
imported which may be
enforced
while
such
articles are in the custody
or subject to the control of
the government. (emphasis
supplied)
Under this provision, import duties constitute
a personal debt of the importer that must be
paid in full. The importers liability therefore
constitutes a lien on the article which the

Section 7. Jurisdiction. The

Court of Tax Appeals shall
exercise exclusive appellate
jurisdiction
to
review
by
appeal, as herein provided
(1) Decision
of
the
Commissioner
of
Internal
Revenue in cases involving
disputed assessment, refunds
of internal revenue taxes, fees
or other charges, penalties
imposed in relation thereto, or
other matters arising under the
National
Internal
Revenue
Code or other laws or part of
law
administered
by
the
Bureau of Internal Revenue;
37

The case centers on the interpretation of

provisions of Republic Act No. 8800, the
Safeguard Measures Act ("SMA"), which was
one of the laws enacted by Congress soon
after the Philippines ratified the General
Agreement on Tariff and Trade (GATT) and
the
World
Trade
Organization
(WTO)
Agreement. 3 The SMA provides the
structure and mechanics for the imposition of
emergency measures, including tariffs, to
protect domestic industries and producers
from increased imports which inflict or could
inflict serious injury on them. 4

(2) Decisions
of
the
Commissioner of Customs
in cases involving liability
for customs duties, fees or
other
money
charges;
seizure,
detention
or
release
of
property
affected; fines
and
forfeitures
or
other
penalties
imposed
in
relation thereto; or other
matters
arising
under
Customs Law or other laws
or part of law administered
by the Bureau of Customs;
and

Philcemcor, an association of at least

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

(3) Decisions of the provincial

or city Boards of Assessment
Appeals in cases involving the
assessment and taxation of
real property or other matters
arising under the Assessment
Law,
including
rules
and
regulations relative thereto.
[44] (emphasis supplied)
Inasmuch as the present case did not involve
a decision of the Commissioner of Customs
in any of the instances enumerated in
Section 7(2) of RA 1125, the CTA had no
jurisdiction over the subject matter. It was
the RTC that had jurisdiction under Section
19(6) of the Judiciary Reorganization Act of
1980, as amended

After the Tariff Commissions investigation, it

reported that there was no need for
definitive safeguard measures. The DTI
Secretary then denied Philamcemcors
petition but expressed his opinion that he
disagreed with the Tariff Commissions
findings.
Philcemcor challenged this decision in the
CA. The CA ruled that the DTI Secretary was
no bound by the Tariff Commissions report
since it was merely recommendatory. Based
on this Decision, the DTI Secretary then
imposed a definitive safeguard measure on
the importation of gray Portland cemen for 3
years.

Section 19. Jurisdiction in Civil

Cases. Regional Trial Courts
shall exercise exclusive original
jurisdiction:
(6) In all cases not within the
exclusive jurisdiction of any
court, tribunal, person or body
exercising judicial or quasijudicial functions, xxx.

Southern Cross challenged both CA and DTI

Secretary decisions.
I. Jurisdiction of the Court of Tax Appeals

Southern Cross Cement

Manufacturers Assoc

vs

Under Section 29 of the SMA

Cement
38

It should be emphasized again that by

utilizing the phrase "in connection with," it is
the SMA that expressly vests jurisdiction on
the CTA over petitions questioning the nonimposition by the DTI Secretary of safeguard
measures. The Court is simply asserting, as it
should, the clear intent of the legislature in
enacting the SMA. Without "in connection
with" or a synonymous phrase, the Court
would
be
compelled
to
favor
the
respondents' position that only rulings
imposing safeguard measures may be
elevated on appeal to the CTA. But
considering that the statute does make use
of the phrase, there is little sense in delving
into alternate scenarios.

course, whether the ruling under review calls

for the imposition or non-imposition of the
safeguard measure, the common question
for resolution still is whether or not the tariff
should be imposed an issue definitely
fraught
with
a
tax
dimension.
The
determination of the question will call upon
the same kind of expertise that a specialized
body as the CTA presumably possesses.
In response to the Court's observation that
the setup proposed by respondents was
novel, unusual, cumbersome and unwise,
public respondents invoke the maxim that
courts should not be concerned with the
wisdom and efficacy of legislation. 47 But
this prescinds from the bogus claim that the
CTA may not exercise judicial review over a
decision not to impose a safeguard measure,
a prohibition that finds no statutory support.
It is likewise settled in statutory construction
that an interpretation that would cause
inconvenience and absurdity is not favored.
Respondents do not address the particular
illogic that the Court pointed out would
ensue if their position on judicial review were
adopted. According to the respondents, while
a ruling by the DTI Secretary imposing a
safeguard measure may be elevated on
review to the CTA and assailed on the ground
of errors in fact and in law, a ruling denying
the imposition of safeguard measures may
be assailed only on the ground that the DTI
Secretary committed grave abuse of
discretion. As stressed in the Decision,
"[c]ertiorari is a remedy narrow in its scope
and inflexible in its character. It is not a
general utility tool in the legal workshop." 48

Respondents fail to convincingly address the

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

It is incorrect to say that the Decision bars

any effective remedy should the Tariff
Commission act or conclude erroneously in
making its determination whether the factual
conditions exist which necessitate the
imposition of the general safeguard measure.
If the Tariff Commission makes a negative
final determination, the DTI Secretary, bound
as he is by this negative determination, has
to render a decision denying the application
for safeguard measures citing the Tariff

Philcemcor imputes intelligent design behind

the alleged intent of Congress to limit CTA
review only to impositions of the general
safeguard measures. It claims that there is a
necessary tax implication in case of an
imposition of a tariff where the CTA's
expertise is necessary, but there is no such
tax implication, hence no need for the
assumption of jurisdiction by a specialized
agency, when the ruling rejects the
imposition of a safeguard measure. But of
39

Commission's findings as basis. Necessarily

then, such negative determination of the
Tariff Commission being an integral part of
the DTI Secretary's ruling would be open for
review before the CTA, which again is
especially qualified by reason of its expertise
to examine the findings of the Tariff
Commission. Moreover, considering that the
Tariff Commission is an instrumentality of the
government, its actions (as opposed to those
undertaken by the DTI Secretary under the
SMA) are not beyond the pale ofcertiorari
jurisdiction. Unfortunately for Philcemcor, it
hinged its cause on the claim that the DTI
Secretary's actions may be annulled on
certiorari, notwithstanding the explicit grant
of judicial review over that cabinet member's
actions under the SMA to the CTA. IEHTaA

->The safeguard measures imposable under

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

Finally on this point, Philcemcor argues that

assuming this Court's interpretation of
Section 29 is correct, such ruling should not
be given retroactive effect, otherwise, a
gross violation of the right to due process
would be had. This erroneously presumes
that it was this Court, and not Congress,
which vested jurisdiction on the CTA over
rulings of non-imposition rendered by the DTI
Secretary. We have repeatedly stressed that
Section 29 expressly confers CTA jurisdiction
over rulings in connection with the
imposition of the safeguard measure, and
the reassertion of this point in the Decision
was a matter of emphasis, not of
contrivance. The due process protection does
not shield those who remain purposely blind
to the express rules that ensure the sporting
play of procedural law.

The Court acknowledges the basic postulates

ingrained in the provision, and, hence,
governing in this case. They are:

The Congress may, by law, authorize the

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

(1)It is Congress which authorizes the

President to impose tariff rates, import and
export quotas, tonnage and wharfage dues,
and other duties or imposts. Thus, the
authority cannot come from the Finance
Department,
the
National
Economic
Development Authority, or the World Trade
Organization, no matter how insistent or
persistent these bodies may be.
(2)The authorization granted to the President
must be embodied in a law. Hence, the
justification cannot be supplied simply by
inherent executive powers. It cannot arise
from administrative or executive orders
promulgated by the executive branch or from
the wisdom or whim of the President.

Besides, respondents' claim would also apply

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

(3)The authorization to the President can be

exercised only within the specified limits set
in the law and is further subject to limitations
and restrictions which Congress may impose.
Consequently, if Congress specifies that the
tariff rates should not exceed a given
amount, the President cannot impose a tariff
rate that exceeds such amount. If Congress
stipulates that no duties may be imposed on
the importation of corn, the President cannot
impose duties on corn, no matter how
actively the local corn producers lobby the
40

President. Even the most picayune of limits

or restrictions imposed by Congress must be
observed by the President.

acts as alter ego of the President. The SMA

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

There is one fundamental principle that

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

Concurrently, the tasking of the Tariff

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

Without Section 28(2), Article VI, the

executive branch has no authority to impose
tariffs and other similar tax levies involving
the importation of foreign goods. Assuming
that Section 28(2) Article VI did not exist, the
enactment of the SMA by Congress would be
voided on the ground that it would constitute
an undue delegation of the legislative power
to tax. The constitutional provision shields
such delegation from constitutional infirmity,
and should be recognized as an exceptional
grant of legislative power to the President,
rather than the affirmation of an inherent
executive power.
This being the case, the qualifiers mandated
by the Constitution on this presidential
authority attain primordial consideration.
First, there must be a law, such as the SMA.
Second, there must be specified limits, a
detail which would be filled in by the law.
And further, Congress is further empowered
to impose limitations and restrictions on this
presidential authority. On this last power, the
provision does not provide for specified
conditions, such as that the limitations and
restrictions must conform to prior statutes,
internationally accepted practices, accepted
jurisprudence, or the considered opinion of
members of the executive branch. aHIDAE

->There is no question that Section 5 of the

SMA operates as a limitation validly imposed
by Congress on the presidential 52 authority
under the SMA to impose tariffs and imposts.
That the positive final determination
operates as an indispensable requisite to the
imposition of the safeguard measure, and
that it is the Tariff Commission which makes
such determination, are legal propositions
plainly expressed in Section 5 for the easy
comprehension
for
everyone
but
respondents. CEIHcT

The Court recognizes that the authority

delegated to the President under Section
28(2), Article VI may be exercised, in
accordance with legislative sanction, by the
alter egos of the President, such as
department secretaries. Indeed, for purposes
of the President's exercise of power to
impose tariffs under Article VI, Section 28(2),
it is generally the Secretary of Finance who

It can be surmised at once that respondents'

preferred interpretation is based not on the
41

express language of the SMA, but from

implications derived in a roundabout manner.
Certainly, no provision in the SMA expressly
authorizes the DTI Secretary to impose a
general safeguard measure despite the
absence of a positive final recommendation
of the Tariff Commission. On the other hand,
Section 5 expressly states that the DTI
Secretary "shall apply a general safeguard
measure upon a positive final determination
of the [Tariff] Commission." The causal
connection in Section 5 between the
imposition by the DTI Secretary of the
general safeguard measure and the positive
final determination of the Tariff Commission
is patent, and even respondents do not
dispute such connection.

domestic industry. Any disputation to the

contrary is, at best, the product of wishful
thinking.

Notwithstanding, Congress in enacting the

SMA and prescribing the roles to be played
therein by the Tariff Commission and the DTI
Secretary did not envision that the President,
or his/her alter ego, could exercise
supervisory
powers
over
the
Tariff
Commission. If truly Congress intended to
allow the traditional "alter ego" principle to
come to fore in the peculiar setup
established by the SMA, it would have
assigned the role now played by the DTI
Secretary under the law instead to the NEDA.
The Tariff Commission is an attached agency
of the National Economic Development
Authority, 68 which in turn is the
independent planning
agency
of the
government. 69

Respondents employed considerable effort to

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

The Tariff Commission does not fall under the

administrative supervision of the DTI. 70 On
the
other
hand,
the
administrative
relationship between the NEDA and the Tariff
Commission is established not only by the
Administrative Code, but similarly affirmed
by the Tariff and Customs Code.
Congress in enacting the SMA and
prescribing the roles to be played therein by
the Tariff Commission and the DTI Secretary
did not envision that the President, or his/her
alter ego could exercise supervisory powers
over the Tariff Commission. If truly Congress
intended to allow the traditional alter ego
principle to come to fore in the peculiar
setup established by the SMA, it would have
assigned the role now played by the DTI
Secretary under the law instead to the NEDA,
the body to which the Tariff Commission is
attached under the Administrative Code.

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

The Court has no issue with upholding

administrative
control
and
supervision
exercised by the head of an executive
department, but only over those subordinate
offices that are attached to the department,
42

or which are, under statute, relegated under

its supervision and control. To declare that a
department secretary, even if acting as alter
ego of the President, may exercise such
control or supervision over all executive
offices below cabinet rank would lead to
absurd results such as those adverted to
above. As applied to this case, there is no
legal justification for the DTI Secretary to
exercise control, supervision, review or
amendatory
powers
over
the
Tariff
Commission
and
its
positive
final
determination

falls within the plenary province of Congress

under
our
representative
system
of
democracy. Moreover, respondents' own
suggested interpretation falls wayward of
expectations of practical fair play.
Adopting respondents' suggestion that the
DTI Secretary may disregard the factual
findings of the Tariff Commission and
investigatory process that preceded it, it
would seem that the elaborate procedure
undertaken by the Commission under the
SMA, with all the attendant guarantees of
due process, is but an inutile spectacle. As
Justice Garcia noted during the oral
arguments, why would the DTI Secretary
bother with the Tariff Commission and
instead conduct the investigation himself. 99

Indeed, a declaration that the Tariff

Commission possesses quasi-judicial powers,
even if ascertained for the limited purpose of
exercising its functions under the SMA, may
have the unfortunate effect of expanding the
Commission's
powers
beyond
that
contemplated by law. After all, the Tariff
Commission is by convention, a fact-finding
body, and its role under the SMA, burdened
as it is with factual determination, is but a
mere continuance of this tradition. However,
Congress through the SMA offers a
significant deviation from this traditional role
by tying the decision by the DTI Secretary to
impose a safeguard measure to the required
positive factual determination by the Tariff
Commission. Congress is not bound by past
traditions, or even by the jurisprudence of
this Court, in enacting legislation it may
deem as suited for the times. The sole
benchmark for judicial substitution of
congressional
wisdom
is
constitutional
transgression,
a
standard
which
the
respondents do not even attempt to match.

Certainly, nothing in the SMA authorizes the

DTI Secretary, after making the preliminary
determination, to personally oversee the
investigation, hear out the interested parties,
or receive evidence. 100 In fact, the SMA
does not even require the Tariff Commission,
which is tasked with the custody of the
submitted evidence, 101 to turn over to the
DTI Secretary such evidence it had evaluated
in order to make its factual determination.
102 Clearly, as Congress tasked it to be, it is
the Tariff Commission and not the DTI
Secretary which acquires the necessary
intimate acquaintance with the factual
conditions and evidence necessary for the
imposition of the general safeguard measure.
Why then favor an interpretation of the SMA
that leaves the findings of the Tariff
Commission bereft of operative effect and
makes them subservient to the wishes of the
DTI Secretary, a personage with lesser
working familiarity with the relevant factual
milieu? In fact, the bare theory of the
respondents would effectively allow the DTI
Secretary to adopt, under the subterfuge of
his "discretion", the factual determination of
a private investigative group hired by the
industry
concerned,
and
reject
the
investigative
findings
of
the
Tariff
Commission as mandated by the SMA. It
would be highly irregular to substitute what
the law clearly provides for a dubious setup

Respondents' Suggested Interpretation

Of the SMA Transgresses Fair Play
Respondents have belabored the argument
that the Decision's interpretation of the SMA,
particularly of the role of the Tariff
Commission vis- -vis the DTI Secretary, is
noxious
to
traditional
notions
of
administrative control and supervision. But in
doing so, they have failed to acknowledge
the congressional prerogative to redefine
administrative relationships, a license which
43

of no statutory basis that would be readily

susceptible to rank chicanery.

designed to protect domestic industries from

the possible ill-effects of our accession to the
global trade order. Inconveniently perhaps
for respondents, the SMA also happens to
provide for a procedure under which such
protective measures may be enacted. The
Court cannot just impose what it deems as
the spirit of the law without giving due
regard to its letter.

->The Court has been emphatic that a

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

->Public respondents allege that the

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

There is no evident legislative intent by the

authors of the SMA to provide for a
procedure of administrative review. If ever
there is a procedure for administrative
review over the final determination of the
Tariff Commission, such procedure must be
done in a manner that does not contravene
or disregard legislative prerogatives as
expressed in the SMA or the Administrative
Code,
or
fundamental
constitutional
limitations.

This is balderdash, as with any and all claims

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

->In response to our citation of Section

28(2), Article VI, respondents elevate two
arguments grounded in constitutional law.
One is based on another constitutional
provision, Section 12, Article XIII, which
mandates that "[t]he State shall promote the
preferential use of Filipino labor, domestic
materials and locally produced goods and
adopt measures that help make them
competitive." By no means does this
provision dictate that the Court favor the
domestic industry in all competing claims
that it may bring before this Court. If it were
so, judicial proceedings in this country would
be rendered a mockery, resolved as they
would be, on the basis of the personalities of
the litigants and not their legal positions.

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

Moreover, the duty imposed on by Section

12, Article XIII falls primarily with Congress,
which in that regard enacted the SMA, a law
44

jurisdiction. We find no reason to disturb our

earlier finding that the Court of Appeals'
Decision is null and void.

NIRC REMEDIES

At the same time, the Court in its Decision

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

1 CIR v. Standard Chartered Bank,

G.R. No. 192173, July 29, 2015.
Facts:

Standard Chartered Bank received a formal

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

Standard Chartered protested the said

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

Accordingly, the Court reaffirms as a nullity

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

The decision of the CTA in Division, which

was later on concurred by the CTA En Banc,
is that petitioners subject Formal Letter of
Demand and Assessment Notices should be
cancelled considering that the same was
already barred by prescription for having
been
issued
beyond
the
three-year
prescriptive period provided for in Section
203 of the National Internal Revenue Code.
Although waivers of the statute of limitations
were executed by the parties on July 20,
2001 and April 4, 2002, these did not extend
the aforesaid prescriptive period because
they were invalid by reason of failure to

WHEREFORE, respondents' Motions for

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

45

comply with the requirements set forth in

RMO No. 20-90.

assessment after such time, the tax

may be assessed within the period
agreed upon. (Section 222(b) of the NIRC of
1997)

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

I. WON the CIRs right to assess Standard

Chartered for deficiency income tax and final
income tax covering taxable year 1998 has
already prescribed, despite the waiver of
statute of limitations executed by the parties

II. WON Standard Chartered is estopped

from questioning the validity of the waivers
of the Statute of Limitations in view of the
partial payments it made on the deficiency
taxes sought to be collected

RMO No. 20-90 implements the provisions

of the NIRC relating to the period of
prescription
for
the
assessment
and
collection of taxes. The provisions of the RMO
explicitly show their mandatory nature,
requiring strict compliance. Hence, failure to
comply with any of the requisites renders a
waiver defective and ineffectual.

Held:

I. [YES] At the outset, the period for

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

In the instant case, the subject waivers did

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

II. [NO] When respondent paid the

deficiency WTC and FWT assessments,
petitioner accepted said payment without
any opposition. This effectively extinguished
respondents obligation to pay the subject
taxes. It bears emphasis that, obligations are
extinguished, among others, by payment or
performance.

Thus, in the present case, petitioner only had

three years, counted from the date of actual
filing of the return or from the last date
prescribed by law for the filing of such
return, whichever comes later, to assess a
national internal revenue tax or to begin a
court proceeding for the collection thereof
without an assessment. However, one of the
exceptions to the three-year prescriptive
period on the assessment of taxes is when
before the expiration of the time prescribed
in Section 203 for the assessment of the tax,
both
the
Commissioner
and
the
taxpayer have agreed in writing to its

The facts of this case do not call for

the application of the doctrine of estoppel. It
must be remembered that the execution of a
Waiver of Statute of Limitations results to a
derogation of some of the rights of the
taxpayer, the same must be executed in
46

accordance with pre-set guidelines and

procedural requirements. The Court cannot
turn blind on the importance of the Statute of
Limitations upon the assessment and
collection of internal revenue taxes provided
for
under
the
NIRC.

Should TSCs claim for tax credit/refund be

granted.

Ruling
No. The claim should not be granted for
failure to comply with the statutory and
administrative procedures in claiming for tax
credit/refund.

Ruling: In fine, the period to assess or collect

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

balik2x rani siya na rulign sa mga cases nothing different

Rationale
2 years admin claimwithin 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

WHEREFORE, the petition is DENIED.

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

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

Facts
Team Sual Corporation (TSC), a VATregistered corporation, is principally
engaged in the business of power
generation and the subsequent sale
thereof
solely
to
National
Power
Corporation (NPC).
The Commissioner of Internal Revenue
(CIR) granted TSC's application for zerorating arising from its sale of power
generation services to NPC for the taxable
year 2000.
TSC filed its VAT returns for the first,
second, third, and fourth quarters of such
year.
TSC filed with the BIR an administrative
claim for refund, claiming that it is
entitled to the unutilized input VAT in
the amount of more than P179m arising
from its zero-rated sales to NPC for the
taxable year 2000.
On April 1, 2002, without awaiting the
CIR's resolution of its administrative claim
for refund/tax credit, TSC filed a petition
for review with the CTA seeking the
refund or the issuance of a tax credit
certificate for the amount stated.
Issue

30 days- file for judicial claim with the Court

of Tax Appeals.
denial denial of the claim for tax
refund or tax credit,
or the failure on the part of the
Commissioner to act on the application
within the period prescribed above
(120days

TSC filed its administrative claim for

refund/tax credit with the BIR on March 11,
2002, which is still within the two-year
prescriptive period. However, without waiting
for the CIR decision or the lapse of the 120day period from the time it submitted its
complete documents in support of its claim,
TSC filed a petition for review with the CTA
on April 1, 2002 a mere 21 days after it
filed its administrative claim with the
BIR. Clearly, TSC's petition for review with
47

the CTA was prematurely filed; the CTA had

no jurisdiction to take cognizance of TSC's
petition since there was no decision as yet by
the CIR denying TSC's claim, fully or partially,
and the 120-day period had not yet lapsed.

cooking gas; (4) Laundry soap,

detergents,
and
medicine;
(5)
Agricultural implements, equipment
and post- harvest facilities, fertilizers,
pesticides, insecticides, herbicides
and other farm inputs; (6) Poultry
feeds and other animal feeds; (7)
School supplies; and (8) Cement. x x x
x

3. Team Pacific Corporation vs. Daza as

Municipal Treasurer of Taguig, G.R. No.
167732, July 11, 2012.

When it renewed its business license

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

FACTS: A domestic corporation engaged in

the business of assembling and exporting
semiconductor devices, TPC conducts its
business at the FTI Complex in the then
Municipality of Taguig. It appears that since
the start of its operations in 1999, TPC had
been paying local business taxes assessed at
one-half (1/2) rate pursuant to Section 75 (c)
of Ordinance No. 24-93, otherwise known as
the Taguig Revenue Code. Consistent with
Section 143 (c)2 of Republic Act (RA) No.
7160, otherwise known as the Local
Government Code of 1991, said provision of
the Taguig Revenue Code provides as
follows:
Section 75. Imposition of Tax.
There is hereby imposed on the
following persons, natural or juridical,
who establish, operate conduct or
maintain their respective businesses
within the Municipality of Taguig, a
graduated business tax in the
amounts hereafter prescribed: x x x x
(c)
On
exporters,
and
on
manufacturers, millers, producers,
wholesalers, distributors, dealers or
retailers of essential commodities
enumerated hereunder at a rate not
exceeding one-half (1/2) of the rates
prescribed under subsections (a), (b)
and (d) of this Section: (1) Rice and
corn; (2) Wheat or cassava flour,
meat,
dairy
products,
locally
manufactured, processed or preserved
food,
sugar,
salt
and
other
agricultural, marine, and fresh water
products, whether in their original
state or not; (3) Cooking oil and

Subsequent to its 13 April 2004 demand for

the refund and/or issuance of a tax credit
which it considered as an overpayment of its
business taxes for the same year, TPC filed a
petition for certiorari under Rule 65
Alleging that no formal action was
taken regarding its protest on or before
19 March 2004 or within the period of
sixty (60) days from the filing thereof as
prescribed under Article 195 of the
Local
Government
Code,
TPC
maintained that it was simply informed
by Atty. Marianito D. Miranda, Chief of
the
Taguig
Business
Permit
and
Licensing Office, that the assessment of
its business tax at the full rate was
justified by the fact that it was not an
exporter of the essential commodities
enumerated under Section 143 of the
Local Government Code and Section 75
of the Taguig Revenue Code. Arguing that
Daza acted with grave abuse of discretion in
not applying the one-half (1/2) rate provided
48

under paragraph (c) of the same provisions,

TPC prayed for the issuance of a temporary
restraining
order
and/or
permanent
injunction to restrain the former from
assessing business taxes at the full rate, the
refund of its overpayment as well as the
grant of its claims for exemplary damages
and attorneys fees.

appeal provided under Article 195 of

the Local Government Code. As then
Municipal Treasurer of Taguig, Daza
argued that she did not exceed her
jurisdiction or abuse her discretion in
assessing TPCs business tax pursuant
to Section 143 (c) of the same Code
and Section 75 (c) of the Taguig
Revenue Code. Not being an exporter
of the basic commodities enumerated
under the subject provisions, TPC
cannot insist on the computation of its
business taxes on the basis of the onehalf (1/2) rate prescribed for a
category of taxpayers to which it
clearly did not belong. In view of TPCs
choice of the wrong mode of appeal,
Daza maintained that the assailed
assessment had already attained
finality and can no longer be modified.

ISSUES:
(a) Whether or not it availed of the
correct remedy against Dazas illegal
assessment when it filed its petition for
certiorari before the RTC
(b) whether or not, as an exporter of
semiconductor devices, it should be
assessed business taxes at the full rate
instead of the one-half (1/2) rates
provided under Section 75 (c) of the
Taguig Revenue Code and 143 (c) of the
Local Government Code.

TPC argues that, without the remedy

of appeal being specified with
particularity under Article 195 of the
Local Government Code, a Rule 65
petition for certiorari is the proper and
logical remedy since Daza acted with
grave abuse of discretion in assessing
its business taxes at the full rate.
Although it is an exporter of
semiconductors, TPC insists that its
business tax should have been
computed at one-half (1/2) rate in
accordance with the clear intendment
of the law. It likewise claimed that its
position
is
congruent
with
administrative determinations as well
as Dazas own act of reverting back to
the half rate assessment of its
business tax for the second quarter of
2006.

RULING: We find the dismissal of the

petition in order.
A taxpayer dissatisfied with a local
treasurers denial of or inaction on his
protest over an assessment has thirty (30)
days within which to appeal to the court of
competent jurisdiction. Under the law, said
period is to be reckoned from the taxpayers
receipt of the denial of his protest or the
lapse of the sixty (60) day period within
which the local treasurer is required to
decide the protest, from the moment of its
filing.
SEC. 195. Protest of Assessment. When the local treasurer or his duly
authorized representative finds that
correct taxes, fees, or charges have
not been paid, he shall issue a notice
of assessment stating the nature of
the tax, fee or charge, the amount of
deficiency, the surcharges, interests
and penalties. Within sixty (60)
days from the receipt of the
notice
of
assessment,
the
taxpayer may file a written
protest with the local treasurer

Daza, in turn, asserted that the RTC

correctly dismissed TPCs petition for
certiorari in view of its failure to avail
of the proper remedy of ordinary
49

contesting
the
assessment;
otherwise, the assessment shall
become final and executory. The
local treasurer shall decide the protest
within sixty (60) days from the time of
its filing. If the local treasurer finds the
protest to be wholly or partly
meritorious, he shall issue a notice
canceling wholly or partially the
assessment. However, if the local
treasurer finds the assessment to be
wholly or partly correct, he shall deny
the protest wholly or partly with notice
to the taxpayer. The taxpayer shall
have thirty (30) days from the receipt
of the denial of the protest or from the
lapse of the sixty (60) day period
prescribed herein within which to
appeal with the court of competent
jurisdiction otherwise the assessment
becomes
conclusive
and
unappealable.
Absent any showing of the formal denial
of the protest by Atty. Miranda, then
Chief of the Taguig Business Permit and
Licensing Office, we find that TPCs
filing of its petition before the RTC on
19 April 2004 still timely. Reckoned
from the filing of the letter protest on
19 January 2004, Daza had sixty (60)
days or until 19 March 2004 within
which to resolve the same in view of the
fact that 2004 was a leap year. From the
lapse of said period, TPC, in turn, had
thirty (30) days or until 18 March 2004
within which to file its appeal to the
RTC. Since the latter date fell on a
Sunday, the RTC correctly ruled that
TPCs filing of its petition on 19 April
2004 was still within the period
prescribed under the above quoted
provision.

We find that TPC erroneously

availed of the wrong remedy in
filing a Rule 65 petition for
certiorari
to
question
Dazas
inaction on its letter-protest. The
rule is settled that, as a special civil
action, certiorari is available only if the
50

following essential requisites concur:

(1) it must be directed against a
tribunal, board, or officer exercising
judicial or quasi-judicial functions; (2)
the tribunal, board, or officer must
have acted without or in excess of
jurisdiction or with grave abuse of
discretion amounting to lack or excess
of jurisdiction; and, (3) there is no
appeal nor any plain, speedy, and
adequate remedy in the ordinary
course of law.
o
Judicial function entails the
power to determine what the
law is and what the legal rights
of the parties are, and then
undertakes to determine these
questions and adjudicate upon
the rights of the parties.
o Quasi-judicial function, on
the other hand, refers to the
action and discretion of public
administrative
officers
or
bodies, which are required to
investigate facts or ascertain
the existence of facts, hold
hearings, and draw conclusions
from them as a basis for their
official action and to exercise
discretion of a judicial nature.
Daza cannot be said to be
performing a judicial or quasijudicial function in assessing TPCs
business
tax
and/or
effectively
denying its protest as then Municipal
Treasurer of Taguig. For this reason,
Dazas actions are not the proper
subjects of a Rule 65 petition for
certiorari which is the appropriate
remedy in cases where a the
tribunal,
board,
or
officer
exercising
judicial
or
quasijudicial functions acted without or
in grave abuse of discretion
amounting to lack or excess of
jurisdiction and there is no appeal
or
any
plain,
speedy,
and

adequate remedy in law. It is

likewise considered mutually exclusive
with appeal like the one provided by
Article 195 of the Local Government
Code for a local treasurers denial of or
inaction on a protest.
Even if, in the interest of substantial
justice, we were to consider its
petition for certiorari as an appeal
from Dazas denial of its protest, TPCs
availment of the wrong mode of
appeal from the RTCs assailed order
has moreover, clearly rendered the
same final and executory. Granted that
a Rule 45 petition for review on
certiorari is the proper mode of appeal
when the issues raised are purely
questions of law, TPC lost sight of the
fact that Section 725 of RA No.
112526 has vested the Court of
Tax Appeals (CTA) with the
exclusive appellate jurisdiction
over, among others, appeals from
the judgments, resolutions or
orders of the RTC in tax collection
cases originally decided by them
in their respective territorial
jurisdiction. As amended it likewise
requires that the appeal be
perfected within thirty (30) days
after receipt of the decision and
shall be made by filing a petition
for review under a procedure
analogous to that provided for under
Rule 42 of the 1997 Rules of Civil
Procedure.
To our mind, TPCs erroneous
availment of the wrong mode of
appeal and direct resort to this
Court instead of the CTA both
warrant the dismissal of the
petition at bench. The rule is
settled that the perfection of an
appeal in the manner and within
the period fixed by law is not only
mandatory but jurisdictional and
non-compliance with these legal

requirements is fatal to a partys

cause.
Although appeal is an essential
part of our judicial process, it
has been held, time and again,
that the right thereto is not a
natural right or a part of due
process but is merely a
statutory privilege. Thus, the
perfection of an appeal in the
manner and within the period
prescribed by law is not only
mandatory
but
also
jurisdictional and failure of a
party to conform to the rules
regarding appeal will render the
judgment final and executory.
Once a decision attains finality,
it becomes the law of the case
irrespective of whether the
decision is erroneous or not and
no court not even the
Supreme Court has the power
to revise, review, change or
alter the same.

4. ADAMSON VS CA

FACTS: Adamson and AMC sold 131,897

common shares of stock in Adamson and
Adamson, Inc. Commissioner issued a Notice
of Taxpayer informing them of deficiencies
on their payment of capital gains tax and
Value Added Tax (VAT). Adamson filed a
letter request for re-investigation with the
Commissioner. before the Commissioner
could act on their letter-request, AMC, Lucas
G. Adamson, Therese June D. Adamson and
Sara S. de los Reyes filed a Petition for
Review with the CTA. They assailed the
Commissioners finding of tax evasion against
them. The Commissioner moved to dismiss
the petition, on the ground that it was
premature, as she had not yet issued a
formal assessment of the tax liability of
therein petitioners. On September 19, 1994,
the CTA denied the Motion to Dismiss. It
considered the criminal complaint filed by
51

the Commissioner with the DOJ as an implied

formal assessment, and the filing of the
criminal information with the RTC as a denial
of petitioners protest regarding the tax
deficiency. Commissioner repaired to the
Court of Appeals on the ground that
the CTA acted
with
grave
abuse
of
discretion. She contended that, with regard
to the protest provided under Section 229 of
the NIRC, there must first be a formal
assessment issued by the Commissioner,
and it must be in accord with Section 6 of
Revenue
Regulation
No.
12-85. She
maintained that she had not yet issued a
formal assessment of tax liability, and the
tax deficiency amounts mentioned in her
criminal complaint with the DOJ were given
only to show the difference between the tax
returns filed and the audit findings of the
revenue examiner.

3.

RULING:
I

We rule that the recommendation

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

ISSUES: The issues in G.R. No. 124557

and G.R. No. 120935 can be compressed
into three:

1.

2.

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

1.
It was not addressed
taxpayers.

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

to the

2.

There was no demand

made on the taxpayers to
pay the tax liability, nor a
period for payment set
therein.

3.

The letter was never mailed or

sent to the taxpayers by the
Commissioner.

Recommendation letter served merely

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

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

II

52

When fraudulent tax returns are

involved as in the cases at bar, a
proceeding in court after the
collection of such tax may be

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

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

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

An assessment of a deficiency is not

necessary to a criminal prosecution for
willful attempt to defeat and evade
the income tax. A crime is complete
when the violator has knowingly and
willfully filed a fraudulent return, with
intent to evade and defeat the
tax. The perpetration of the crime is
grounded upon knowledge on the part
of the taxpayer that he has made an
inaccurate
return,
and
the
governments failure to discover the
error and promptly to assess has no
connections with the commission of
the crime.

III

5. RIZAL COMMERCIAL BANKING

CORPORATION vs. COMMISSIONER
OF INTERNAL REVENUE

RESOLUTION

Jurisdiction. The Court of Tax

Appeals
shall
exercise
exclusive
appellate
jurisdiction to review by
appeal, as herein provided -

Petitioner reiterates its claim that its former

counsel's failure to file petition for review
with the Court of Tax Appeals within the
period set by Section 228 of the National
Internal Revenue Code of 1997 (NIRC) was
excusable and raised the following issues for
resolution:

(1) Decisions of
the Commissioner
of Internal Revenue
53

Other than the issue of prescription, which is

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

that rules of procedure are intended to help

secure, not override, substantial justice.
Petitioner's arguments fail to persuade us.
As correctly observed by the Court of Tax
Appeals in its Decision dated June 7, 2005:

I. Petitioner maintains that its counsel's

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

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

We are not persuaded.

In our Decision, we held that:
Relief cannot be granted on
the flimsy excuse that the
failure to appeal was due to
the neglect of petitioner's
counsel. Otherwise, all that a
losing party would do to
salvage his case would be to
invoke neglect or mistake of
his counsel as a ground for
reversing or setting aside the
adverse judgment, thereby
putting no end to litigation.
Negligence to be "excusable"
must be one which ordinary
diligence and prudence could
not have guarded against and
by reason of which the rights
of an aggrieved party have
probably
been
impaired.
Petitioner's former counsel's
omission could hardly be
characterized as excusable,
much less unavoidable.

petitioner's failure to file a petition for

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

II. Petitioner also argues that, in the interest

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

In case the Commissioner failed to act on the

disputed assessment within the 180-day
period
from
date
of
submission
of
documents, a taxpayer can either:
54

1) file a petition for review with the Court of

Tax Appeals within 30 days after the
expiration of the 180-day period; or

Petitioner is the widow of the late Mr. Po Bien

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

2) await the final decision of the

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

On the basis of a denunciation against Silver

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

In the instant case, the Commissioner failed

to act on the disputed assessment within 180
days from date of submission of documents.
Thus, petitioner opted to file a petition for
review before the Court of Tax Appeals.
Unfortunately, the petition for review was
filed out of time. Petitioner did not file a
motion for reconsideration or make an
appeal; hence, the disputed assessment
became final, demandable and executory.
III. Lastly, we note that petitioner is raising
the issue of prescription for the first time in
the instant motion for reconsideration. The
rule is well-settled that points of law,
theories,
issues
and
arguments
not
adequately brought to the attention of the
lower court need not be considered by the
reviewing court as they cannot be raised for
the first time on appeal, 8 much more in a
motion for reconsideration as in this case,
because this would be offensive to the basic
rules of fair play, justice and due process.

Mr. Po Bien Sing did not produce his books of

accounts as requested. This prompted the
team with the assistance of the PC Company,
Cebu City, to enter the factory bodega of
Silver Cup and seized different brands,
consisting of 1,555 cases of alcohol products.

On the basis of the team's report of

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

WHEREFORE, in view of the foregoing,

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

Petitioner
protested
the
deficiency
assessments through letters which protests
were referred for reinvestigation. The
corresponding report dated August 13, 1981
recommended
the
reiteration
of
the
assessments in view of the taxpayer's
persistent failure to present the books of

6. BONIFACIA SY PO v. CTA
G.R. No. 81446 August 18, 1988

FACTS:
55

accounts
for
examination,
compelling
respondent to issue warrants of distraint and
levy.

Commissioner shall make or amend the

return from his own knowledge and from
such information as he can obtain through
testimony or otherwise, which shall be prima
facie correct and sufficient for all legal
purposes.

The warrants were admittedly received by

petitioner on October 14, 1981, which
petitioner deemed respondent's decision
denying her protest on the subject
assessments. Hence, petitioner's appeal on
October 29,1981.

The law is specific and clear. The rule on the

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

ISSUE:
In the instant case, the persistent failure of
the late Po Bien Sing and the herein
petitioner to present their books of accounts
for examination for the taxable years
involved left the Commissioner of Internal
Revenue no other legal option except to
resort to the power conferred upon him
under Section 16 of the Tax Code.

Whether or not the assessments have valid

and legal bases

HELD:

Yes. The applicable legal provision is Section

16(b) of the National Internal Revenue Code
of 1977 as amended. It reads:

The tax figures arrived at by the

Commissioner of Internal Revenue are by no
means arbitrary.

Sec. 16. Power of the Commissioner of

Internal Revenue to make assessments

Where the taxpayer is appealing to the tax

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

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

Tax assessments by tax examiners are

presumed correct and made in good faith.
The taxpayer has the duty to prove
otherwise. In the absence of proof of any
irregularities in the performance of duties, an
assessment duly made by a Bureau of

In case a person fails to file a required return

or other document at the time prescribed by
law, or willfully or otherwise, files a false or
fraudulent return or other documents, the
56

Internal Revenue examiner and approved by

his superior officers will not be disturbed. All
presumptions are in favor of the correctness
of tax assessments.

On September 1, 1999, Branch 38 of the

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

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

In the meantime, Capitol Steel requested the

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

FACTS:

Petitioner, Capitol Steel, is a domestic

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

Respondent, PHIVIDEC, is a governmentowned and controlled corporation organized

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

By letter 14 of November 21, 2003, PHIVIDEC

informed Capitol Steel that it would file anew
an expropriation case and that it had
deposited the amount of P116,563,500 in the
name of Capitol Steel, P51,818,641 of which
was deposited at the Landbank of the
Philippines (Landbank) and P64,744,859 at
the Development Bank of the Philippines
(DBP). PHIVIDEC further informed Capitol
Steel that the total amount deposited
represents the zonal value of the properties,
and may be withdrawn at any time.

The properties of Capitol Steel were

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

Subsequently, PHIVIDEC, represented by the

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

On August 24, 1999, PHIVIDEC filed an

expropriation case before the RTC of Misamis
Oriental, docketed as Civil Case No. 99-477,
and raffled to Branch 38 thereof.

And on December 8, 2003, PHIVIDEC filed an

Urgent Motion for the Issuance of a Writ of
Possession 15 to which it attached a
57

Certificate of Availability of Funds, 16 and

Certifications from the Landbank 17 and the
DBP 18 that it deposited the total amount of
P116,563,500 required under Republic Act
No. 8974 (R.A. 8974), "AN ACT TO FACILITATE
THE ACQUISITION OF RIGHT-OF-WAY, SITE OR
LOCATION FOR NATIONAL GOVERNMENT
INFRASTRUCTURE
PROJECTS
AND
FOR
OTHER PURPOSES."

RULING:

The total amount deposited represents one

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

RMO 56-89 provides for the procedures for

the establishment of the zonal values of real
properties, viz:

The "current relevant zonal valuation" under

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

(1). The submission or review by the

Revenue District Offices
Sub-Technical Committee
of
the
schedule
of
recommended
zonal
values to the TCRPV;

Capitol Steel opposed the application of D.O.

40-97, claiming instead that under the TCRPV
Resolution, the properties have been
revalued at P700 per square meter.

(2) The evaluation by TCRPV of the

submitted schedule of
recommended
zonal
values of real properties;

RTC ruled in favor of Capitol, on appeal, CA

reversed the ruling of RTC.

(3) Except in cases of correction or

adjustment, the TCRPV
finalizes the schedule and
submits the same to the
Executive Committee on
Real Property Valuation
(ECRPV);

Petitioner insists that the RTC was correct in

ruling that the P700 per square meter
valuation should be used in computing the
provisional value of the property as the
valuation under D.O. 40-97 has been
"effectively superseded" by the TCRPV
Resolution.

(4) Upon approval of the schedule of

zonal values by the
ECRPV, the same is
embodied
in
a
Department Order for
implementation
and
signed by the Secretary
of Finance. Thereafter,
the schedule takes effect

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

58

(15)
days
after
its
publication in the Official
Gazette 53 or in any
newspaper of general
circulation. HDIaET

Sony Philippines was ordered examined for

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

This Court finds that the determination of

P300 and P500 per square meter zonal
values were, along with the zonal values of
other real properties located in all
municipalities under the jurisdiction of
Revenue District Office No. 98 (Cagayan de
Oro City), Revenue Region No. 16 (Cagayan
de Oro City), the subject of a public hearing
on February 5, 1996. On March 19, 1997, the
zonal values were approved by both the
TCRPV and the ECRPV and on even date, the
Secretary
of
Finance,
upon
the
recommendation of the BIR, issued D.O. 4097 to implement the schedule of zonal
values. D.O. 40-97 thereafter took effect on
October 21, 1997, 15 days after its
publication in The Philippine Journal.

ISSUES:
(1) Is Petitioner liable for deficiency Value
Added Tax?
(2) Was the investigation of its 1998 Final
Withholding Tax return valid?

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

In contrast, the P700 per square meter zonal

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

IN FINE, all the requirements set forth under

Section 4 of R.A. 8974 have been
satisfactorily complied with, there is no legal
impediment to the issuance of a writ of
possession in favor of respondent.

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

(2) NO. A Letter of Authority should cover a

taxable period not exceeding one year and to
indicate that it covers unverified prior years

FACTS:
59

should be enough to invalidate it. In addition,

even if the Final Withholding Tax was covered
by Sony Philippines fiscal year ending March
1998, the same fell outside of the period
1997 and was thus not validly covered by
the Letter of Authority.

respondent for having been issued

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

Issue:
WON THE CTA ERRED IN RULING THAT THE
GOVT. RIGHT TO ASSESS UNPAID TAXES OF
RESPONDENT PRESCRIBED.

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

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

Facts:
1

2
3

Kudos Metal Corporation filed its

Annual Income Tax Return (ITR) for the
taxable year 1998. (BIR) served upon
respondent
three
Notices
of
Presentation of Records. Respondent
failed to comply with these notices,
hence, the BIR issued a Subpeona
Duces Tecum dated September 21,
2006,
receipt
of
which
was
acknowledged
by
respondents
President, Mr. Chan Ching Bio, in a
letter dated October 20, 2000.
Respondent accountant, executed two
Waiver of the Defense of Prescription.
BIR issued a Preliminary Assessment
Notice for the taxable year 1998
against the respondent. This was
followed by a Formal Letter of Demand
with Assessment Notices for taxable
year 1998.
Respondent
challenged
the
assessments by filing its Protest on
Various
Tax
Assessments
on
December 3, 2003 and its Legal
Arguments and Documents in Support
of
Protests
against
Various
Assessments on February 2, 2004.
BIR rendered a final Decision on the
matter, requesting the immediate
payment of the Respondents tax
liabilities.
Respondent filed a Petition for Review
with the CTA. CTA cancelled the
assessment notices issued against

The waivers executed by respondents

accountant did not extend the period within
which the assessment can be made
Petitioner does not deny that the assessment
notices were issued beyond the three-year
prescriptive period, but claims that the
period was extended by the two waivers
executed by respondents accountant.
Section 222 (b) of the NIRC provides that the
period to assess and collect taxes may only
be extended upon a written agreement
between the CIR and the taxpayer executed
before the expiration of the three-year
period.
A perusal of the waivers executed by
respondent's
accountant
reveals
the
following infirmities:
1.The waivers were executed
without the notarized
written
authority
of
60

Pasco to sign the waiver

in behalf of respondent.
2.The

waivers
failed
indicate the date
acceptance.

amounts
of
P7,498,434.65
and
P3,015,236.35 for the years 1986 and 1987,
respectively.

to
of

CIR filed a criminal complaint before the DOJ

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

3.The fact of receipt by the

respondent of its file
copy was not indicated
in the original copies of
the waivers.
Conversely, in this case, the assessments
were issued beyond the prescribed period.
The doctrine of estoppel cannot be applied in
this case as an exception to the statute of
limitations on the assessment of taxes
considering that there is a detailed
procedure for the proper execution of the
waiver, which the BIR must strictly follow. As
we have often said, the doctrine of estoppel
is predicated on, and has its origin in, equity
which, broadly defined, is justice according
to natural law and right. As such, the
doctrine of estoppel cannot give validity to
an act that is prohibited by law or one that is
against public policy. It should be resorted to
solely as a means of preventing injustice and
should not be permitted to defeat the
administration of the law, or to accomplish a
wrong or secure an undue advantage, or to
extend beyond them requirements of the
transactions in which they originate.24
Simply put, the doctrine of estoppel must be
sparingly applied.

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

Private respondents then elevated the

Decision of the CIR to the Court of Tax
Appeals. CIR filed a Motion to Dismiss the
petition on the ground that the CTA has no
jurisdiction over the subject matter of the
petition, as there was no formal assessment
issued against the petitioners. The CTA
denied the said motion to dismiss and
ordered the CIR to file an answer within thirty
(30) days from receipt of said resolution but
CIR did not file an answer nor did she move
to reconsider the resolution.
CIR, instead, filed a petition with the CA on
the ground Respondent Court of Tax Appeals
acted with grave abuse of discretion and
without jurisdiction in considering the
affidavit/report of the revenue officer and the
indorsement of said report to the secretary
of justice as assessment which may be
appealed to the Court of Tax Appeals. CA
sustained the CTA and dismissed the
petition.

and

Issue:

Facts:

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

CIR authorized several revenue officers to

examine the books of accounts and other
accounting records of Pascor Realty and
Development Corporation (PRDC) for the
years ending 1986, 1987 and 1988. The said
examination resulted in a recommendation
for the issuance of an assessment in the

Ruling:
61

Petitioner argues that the filing of the

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

whether interest and penalty may accrue

thereon.
In the present case, the revenue officers
Affidavit merely contained a computation of
respondents tax liability. It did not state a
demand or a period for payment. Worse, it
was addressed to the justice secretary, not
to the taxpayers.
That the BIR examiners Joint Affidavit
attached
to
the
Criminal
Complaint
contained some details of the tax liabilities of
private respondents does not ipso facto
make it an assessment. The purpose of the
Joint Affidavit was merely to support and
substantiate the Criminal Complaint for tax
evasion. Clearly, it was not meant to be a
notice of the tax due and a demand to the
private respondents for payment thereof.

We agree with petitioner. Neither the NIRC

nor the revenue regulations governing the
protest of assessments provide a specific
definition or form of an assessment.
However, the NIRC defines the specific
functions and effects of an assessment. To
consider the affidavit attached to the
Complaint as a proper assessment is to
subvert the nature of an assessment and to
set a bad precedent that will prejudice
innocent taxpayers

Private respondents maintain that the filing

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

To start with, an assessment must be sent to

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

11. Republic v. Dela Rama

62

FACTS:

filed a complaint against the heirs of Esteban

de la Rama. The Trial court, however,
dismissed the complaint on the ground that
[relevant to the subject heading]it was Eliseo
Hervas, and neither Leonor nor Lourdes, who
was the proper administrator at the time,
and to whom the assessment should have
been sent.

The estate of the late Esteban de la Rama

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

The appellant contended that the

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

The Collector of Internal Revenue

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

ISSUE: WON there was proper notice of the

tax assessment

RATIO: If the notice was not sent to the

taxpayer for the purpose of giving effect to
the assessment, said notice cannot produce
any effect.

HELD: The SC sustained the finding of the

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

Plaintiff-appellant also contends that

the lower court could not take cognizance of
the defense that the assessment was
erroneous, this being a matter that is within

The deficiency income tax not having

been paid, the Republic of the Philippines
63

the exclusive jurisdiction of the Court of Tax

Appeals. This contention has no merit.
According to Republic Act 1125, the Court of
Tax Appeals has exclusive jurisdiction to
review by appeal decisions of the Collector of
Internal Revenue in cases involving disputed
assessments, and the disputed assessment
must be appealed by the person adversely
affected by the decision within thirty days
after the receipt of the decision. In the
instant case, the person adversely affected
should have been the administrator of the
estate, and the notice of the assessment
should have been sent to him. The
administrator had not received the notice of
assessment, and he could not appeal the
assessment to the Court of Tax Appeals
within 30 days from notice. Hence the
assessment did not fall within the exclusive
jurisdiction of the Court of Tax Appeals.

the BIR P17,693.37 plus interests in

the amount of P14,455.76.
On October 8, 1997, she filed another
amended
return
indicating
an
overpayment of P358,274.63.
Claiming that the income taxes
withheld and paid by Intel and
respondent
resulted
in
an
overpayment
of
P340,918.92, respondent
filed
on
April 15, 1999 a petition for review
with the CTA.
CIR moved to dismiss the petition for
failure of respondent to file the
mandatory written claim for refund
before the CIR.
The CTA dismissed respondent's
petition. First, the CTA ruled that
respondent failed to file a written
claim for refund with the CIR, a
condition precedent to the filing of a
petition
for
review
before
the
CTA. Second, the CTA noted that
respondent's omission, inadvertently
or otherwise, to allege in her petition
the date of filing the final adjustment
return, deprived the court of its
jurisdiction over the subject matter of
the case
CA reversed the CTA and directed the
latter to resolve respondent's petition
for review. Applying Section 204 (c) of
the 1997 NIRC, the CA ruled that
respondent's filing of an amended
return indicating an overpayment was
sufficient
compliance
with
the
requirement of a written claim for
refund.

DISPOSITION:
Petition
is
DISMISSED,
decision appealed from is AFFIRMED

12. Commissioner of Internal Revenue v.

Acosta, G.R. No. 154068, August 3,
2007

FACTS:
Respondent is an employee of Intel
Manufacturing Phils., Inc.
For the period January 1, 1996 to
December 31, 1996, respondent was
assigned in a foreign country. During
that period, Intel withheld the taxes
due on respondent's compensation
income and remitted to the BIR the
amount of P308,084.56.
On March 21, 1997, respondent and
her husband filed with the BIR their
Joint Individual Income Tax Return for
the year 1996.
On June 17, 1997, respondent filed an
amended return and a Non-Resident
Citizen Income Tax Return, and paid

ISSUE:
1

64

Does the amended return filed by

respondent indicating an overpayment
constitute the written claim for refund
required by law, thereby vesting the
CTA with jurisdiction over this case?

Can the 1997

retroactively?

NIRC

be

applied

reasonable
intendment
of
the
language actually used by the legislature in
granting the refund.

RULING:

SC said that they cannot apply the liberal

interpretation of the law based on their
pronouncement in the case of BPI-Family
Savings Bank, Inc. v. Court of Appeals, as
asserted by respondent because in that case
the taxpayer filed a written claim for refund
aside from presenting other evidence to
prove its claim, unlike this case.

1. NO. The applicable law on refund of taxes

pertaining to the 1996 compensation income
is Section 230 of the old Tax Code, which was
the law then in effect, and not Section 204
(c) of the new Tax Code, which was effective
starting only on January 1, 1998.
The requirements under Section 230 for
refund claims are as follows:

2. NO. Petitioner argues that the 1997 NIRC

cannot be applied retroactively as the instant
case involved refund of taxes withheld on a
1996 income. Respondent, however, points
out that when the petition was filed with the
CTA on April 15, 1999, the 1997 NIRC was
already in effect, hence, Section 204 (c)
should apply, despite the fact that the refund
being sought pertains to a 1996 income tax.
Note that the issue on the retroactivity of
Section 204 (c) of the 1997 NIRC arose
because the last paragraph of Section 204
(c) was not found in Section 230 of the old
Code.

1. A written claim for refund or tax

credit must be filed by the taxpayer with the
Commissioner;
2. The claim for
a categorical
reimbursement; DAESTI

refund must be
demand for

3. The claim for refund or tax credit

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

SC ruled that they cannot give retroactive

application to Section 204 (c). Tax laws are
prospective in operation, unless the
language of the statute clearly provides
otherwise.

The law is clear. A claimant must first file a

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

13. CIR vs. The Estate of Benigno P.

Toda, Jr., et al.,
G.R. No. 147188, September 14, 2004

Tax refunds are in the nature of tax

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

Facts:

MCIC authorized Benigno P. Toda, Jr.,

President and owner of 99.991% of its issued
and outstanding capital stock, to sell the
Cibeles Building and the two parcels of land
on which the building stands for an amount
of not less than P90 million.
65

scheme was adopted by CIC, the same

constituted mere tax avoidance, and not tax
evasion. There being no proof of fraudulent
transaction, the applicable period for the BIR
to assess CIC is that prescribed in Section
203 of the NIRC of 1986, which is three years
after the last day prescribed by law for the
filing of the return. Thus, the governments
right to assess CIC prescribed on 15 April
1993. The assessment issued on 9 January
1995 was, therefore, no longer valid.

On 30 August 1989, Toda purportedly sold

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

For the sale of the property to RMI, Altonaga

paid capital gains tax in the amount of P10
million.

Issue:

On 16 April 1990, CIC filed its corporate

annual income tax return for the year 1989,
declaring, among other things, its gain from
the sale of real property.

Is this a case
avoidance?

of

tax

evasion

or

tax

Has the period of assessment prescribed?

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

Held:

On 29 March 1994, the Bureau of Internal

Revenue (BIR) sent an assessment notice
and demand letter to the CIC for deficiency
income tax for the year 1989.

That Altonaga was a mere conduit finds

support in the admission of respondent
Estate that the sale to him was part of the
tax planning scheme of CIC.

The new CIC asked for a reconsideration,

asserting that Toda had undertaken to hold
the buyer of his stockholdings and the CIC
free from all tax liabilities for the fiscal years
1987-1989.

The scheme resorted to by CIC in making it

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

On 27 January 1995, the Estate of Benigno P.

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

Here, it is obvious that the objective of the

sale to Altonaga was to reduce the amount of
tax to be paid especially that the transfer
from him to RMI would then subject the
income to only 5% individual capital gains
tax, and not the 35% corporate income tax.
Altonagas sole purpose of acquiring and
transferring title of the subject properties on
the same day was to create a tax shelter.
Altonaga never controlled the property and
did not enjoy the normal benefits and

The CTA held that the Commissioner failed to

prove that CIC committed fraud to deprive
the government of the taxes due it. It ruled
that even assuming that a pre-conceived
66

burdens of ownership. The sale to him was

merely a tax ploy, a sham, and without
business purpose and economic substance.
Doubtless, the execution of the two sales
was calculated to mislead the BIR with the
end in view of reducing the consequent
income tax liability.

As stated above, the prescriptive period to

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

In a nutshell, the intermediary transaction,

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

14. CIR v. Hambrecht

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

General rule: BIR has 3 years to collect and

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

It is true that in a query dated 24 August

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

ISSUE: Can the CTA still take cognizance of

an assessment case which has become final
and unappealable for failure of the taxpayer
to protest within the 30-day protest period?
HELD: YES. The appellate jurisdiction of the
CTA is not limited to cases which involve
decisions of the CIR on matters relating to
assessments or refunds. The CTA law clearly
bestows jurisdiction to the CTA even on
other matters arising under the National
Internal Revenue Code. Thus, the issue of
whether the right of the CIR to collect has
prescribed, collection being one of the duties
of the BIR, is considered covered by the term
other matters. The fact that assessment
has become final for failure to protest only
means that the validity or correctness of the
assessment may no longer be questioned on
appeal. However, this issue is entirely
distinct from the issue of whether the right
to collect has in fact prescribed.
67

The Court ruled that the right to collect has

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

prove by contrary evidence that the Metro

Star received the assessment in the due
course of mail. In the case at bar, the CIR
merely alleged that Metro Star received the
pre-assessment notice in January 2002. The
CIR could have simply presented the registry

15. CIR vs Metro Star Superama

receipt

or

postmaster

FACTS:

the
that

certification
it

from

the

the

pre-

mailed

assessment notice, but failed. Neither did it

In January 2001, a revenue officer was

offer any explanation on why it failed to

authorized to examine the books of accounts

comply with the requirement of service of

of Metro Star Superama, Inc. In April 2002,

the pre-assessment notice. The Supreme

after the audit review, the revenue district

Court emphasized that the sending of a pre-

officer issued a formal assessment notice

assessment notice is part of the due process

against Metro Star advising the latter that it

requirement in the issuance of a deficiency

is liable to pay P292,874.16 in deficiency

tax assessment, the absence of which

taxes. Metro Star assailed the issuance of the

renders nugatory any assessment made by

formal assessment notice as it averred that

the tax authorities.

due process was not observed when it was

not

issued

pre-assessment

Taxes are the lifeblood of the government

notice.

and

Nevertheless, the Commissioner of Internal

Revenue

authorized

the

issuance

of

so

should

be

collected

without

unnecessary hindrance. But even so, it is a

requirement in all democratic regimes that it

Warrant of Distraint and/or Levy against the

be exercised reasonably and in accordance

properties of Metro Star.

with the prescribed procedure.

Metro Star then appealed to the Court of Tax

Appeals (CTA Case No. 7169). The CTA ruled

16. CIR v. Enro Subic Power Corp.

in favor of Metro Star.

GR No. 166387; January 19, 2009

ISSUE: Whether or not due process was

observed in the issuance of the formal
assessment notice against Metro Star.
HELD: No.

It

is

true

that

there

Facts:
is

In 1997, Enron Subic Power Corporation

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

presumption that the tax assessment was

duly issued. However, this presumption is
disregarded if the taxpayer denies ever
having received a tax assessment from the
Bureau of Internal Revenue. In such cases, it
is incumbent upon the BIR to prove by
competent evidence that such notice was

Enron however assailed the FAN because

according to Enron the FAN is not compliant
with Section 228 of the National Internal
Revenue Code (NIRC) which provides that the

indeed received by the addressee-taxpayer.

The onus probandi was shifted to the BIR to
68

legal and factual bases of the assessment

must be contained in the FAN. The FAN
issued to Enron only contained the
computation of its alleged tax liability.

increments. Upon protest by [respondent's]

counsel, the said preliminary assessment
was reduced to the amount of P325,869.44,
a breakdown of which follows:

The Commissioner of Internal Revenue (CIR)

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

Deficiency

Income

Tax

P321,022.68
Deficiency

Expanded

Withholding

Tax

4,846.76
Total

Issue:

P325,869.44

Whether or not the disputed assessment

valid?

On February 23, 1990, [respondent] received

Held:

from [petitioner] an assessment letter, dated

NO. The assessment is not valid. Although

the revenue examiners discussed their
findings with Respondents representative
during the pre-assessment stage, the same,
together with the Preliminary Five-Day Letter
and Petitioners Annex G, were not sufficient
to comply with the procedural requirement of
due process. The Tax Code provides that a
taxpayer shall be informed (and not merely
notified as was the requirement before) in
writing of the law and the facts on which the
assessment
is
made;
otherwise,
the
assessment shall be void. The use of the
word shall indicates the mandatory nature
of the requirement. Moreover, It cannot be
substituted by other notices or advisories
issued or delivered to the taxpayer during
the preliminary stage.

February 9, 1990, demanding payment of the

amounts of P333,196.86 and P4,897.79 as
deficiency

income

tax

and

expanded

withholding tax inclusive of surcharge and

interest, respectively, for the taxable period
from January 1, 1986 to December 31, 1986.
Respondent

filed with the [petitioner's]

office on March 23, 1990 a request for

reconsideration of the subject assessment
and, on April 18, 1990, a letter was sent and
were attached certain documents supportive
of its protest, as well as a Waiver of Statute
of Limitation, dated April 17, 1990, where it
was indicated that [petitioner] would only
have until April 5, 1991 within which to asses

17.

COMMISSIONER

REVENUE

vs.

OF

INTERNAL

ISABELA

CULTURAL

and collect the taxes that may be found due

from [respondent] after the re-investigation.

CORPORATIO

On February 9, 1995, [respondent] received

from

Facts: In an investigation conducted on the

1986

books

of

account

of

[petitioner]

Final

Notice

Before

Seizure, dated December 22, 1994. In said

[respondent,

letter, [petitioner] demanded payment of the

petitioner] had the preliminary [finding] that

subject assessment within ten (10) days from

[respondent] incurred a total income tax

receipt thereof. Otherwise, failure on its part

deficiency of P9,985,392.15, inclusive of

would constrain [petitioner] to collect the

69

subject

assessment

through

summary

on which it must render a decision. That

remedies.

decision is appealable to the Court of Tax

Appeals for review.

The

CTA

having

rendered

judgment

dismissing the petition, [respondent] filed

Prior

the

assessment, there may still be exchanges

instant

petition

anchored

on

the

to

the

decision

between

Final Notice Before Seizure constitutes [its]

revenue (CIR) and the taxpayer. The former

decision

may ask clarificatory questions or require the

[respondent's]

request

for

to

commissioner

submit

of

disputed

argument that [petitioner's] issuance of the

on

the

on

additional

internal

reinvestigation, which the [respondent] may

latter

evidence.

appeal to the CTA.

However, the CIR's position regarding the

disputed assessment must be indicated in

The CA considered the final notice sent by

the final decision. It is this decision that is

petitioner as the latter's decision, which was

properly appealable to the CTA for review.

appealable to the CTA. The appellate court

reasoned that the final Notice before seizure

Indisputably,

had effectively denied petitioner's request

assessment letter dated February 9, 1990,

for a reconsideration of the commissioner's

stating that it had delinquent taxes due; and

assessment.

it

Thus, petitioner presents for

this Court's consideration the issue.

respondent

subsequently

reconsideration

filed
on

received

its

March

motion
23,

1990.

an

for
In

support of its request for reconsideration, it

Issue: Whether or not the Final Notice Before

sent to the CIR additional documents on April

Seizure dated February 9, 1995 signed by

18,

Acting

Officer

respondent received was already the Final

Milagros Acevedo against ICC constitutes the

Notice Before Seizure dated November 10,

final decision of the CIR appealable to the

1994.

Chief

Revenue

Collection

1990.

The

next

communication

CTA.
In the light of the above facts, the Final
Ruling:

In the normal course, the revenue

Notice

Before

Seizure

cannot

but

be

district officer sends the taxpayer a notice of

considered as the commissioner's decision

delinquent

period

disposing of the request for reconsideration

covered, the amount due including interest,

filed by respondent, who received no other

and the reason for the delinquency. If the

response to its request. Not only was the

taxpayer disagrees with or wishes to protest

Notice

the assessment, it sends a letter to the BIR

content and tenor supported the theory that

indicating its protest, stating the reasons

it was the CIR's final act regarding the

therefor, and submitting such proof as may

request for reconsideration. The very title

be necessary. That letter is considered as the

expressly indicated that it was a final notice

taxpayer's request for reconsideration of the

prior to seizure of property. The letter itself

delinquent assessment. After the request is

clearly stated that respondent was being

filed

the

given "this LAST OPPORTUNITY" to pay;

assessment becomes a disputed assessment

otherwise, its properties would be subjected

and

taxes,

indicating

received

by

the

the

BIR,

70

the

only

response

received;

its

to distraint and levy.

filed by PGCI. PGCI then filed a petition for

review with the Court of Tax Appeals (CTA).

Furthermore, Section 228 of the National

The CIR filed its answer in January 2003. The

Internal

CTA ruled that the CIR can no longer collect

nevertheless

because it is already barred by prescription.

directly appeal a disputed assessment, if its

The CIR argued that the prescriptive period

request for reconsideration remains unacted

has been extended because PGCI asked for a

upon 180 days after submission thereof.

reinvestigation.

In this case, the said period of 180 days had

ISSUE: Whether or not the CIR is barred by

already lapsed when respondent filed its

prescription.

Revenue

delinquent

Code

taxpayer

states

may

that

request for reconsideration on March 23,

1990, without any action on the part of the

RULING:

CIR.

Yes. Under the law, the CIR has 3 years from

the issuance of the FAN to make its collection

Thus, petition is denied.

Section 269(c) of the Tax Code of 1977,

which reads:
18.

CIR

VS

PHILIPPINE

Section 269. Exceptions as to the

period of limitation of assessment and
collection of taxes. x x x

GLOBAL

COMMUNICATIONS INC

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

FACTS:
In

April

1991,

Communication,

Philippine

Inc.

(PGCI)

annual income

tax return

taxable

1990.

year

Global
filed

its

for

the

audit

was

(ITR)
tax

The law prescribed a period of three years

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

subsequently conducted by the Bureau of

Internal Revenue (BIR) and eventually a final
assessment notice (FAN) was timely issued in
April 1994. The FAN demanded PGCI to pay
P118 million in deficiency taxes inclusive of
surcharge and interest. PGCI was able to file
a protest within the reglementary period.
PGCI

however

produce additionalevidence.

refused
In

to
October

2002, eight years after the FAN was issued,

the Commissioner of Internal Revenue (CIR)
issued a final decision denying the protest
71

If the BIR issued this assessment within the

three-year period or the ten-year period,
whichever was applicable, the law provided
another three years after the assessment for
the collection of the tax due thereon through
the administrative process of distraint and/or
levy or through judicial proceedings. 15 The
three-year period for collection of the
assessed tax began to run on the date the
assessment notice had been released,
mailed or sent by the BIR.

Petitioner was assessed for income tax,

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

The FAN was issued in April 1994 and so the

CIR has until April 1997 to make a collection.
Within that period, the CIR never issued a

ISSUE:

warrant of distraint/levy. Its earliest collection

effort was only when it filed an answer to the

Did the filing of a Reconsideration toll the

running of the 30-day period to appeal to the
Court
of
Tax
Appeals?

appeal filed by PGCI. CIRs answer was filed

in January 2003 which was way beyond the
three year prescriptive period to collect the
assessed taxes.

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

The CIR cannot invoke that the protest filed

by

PGCI

is

in

effect

request

for

reinvestigation. Under the law, a request for

reinvestigation shall toll the running of the
prescriptive period to collect. However in the
case at bar, the protest filed by PGCI is not a
request for reinvestigation but rather it was a

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

request for reconsideration. And in such

case,
period.

it

did
The

reconsideration

not suspend the

protest

is

because

adduce additional evidence

prescriptive
request

PGCI
or

did

for

FACTS:

not

documents.

PGCI merely sought the CIR to review the

existing records on file.

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

FACTS:
72

On March 27, 1998, the Commissioner

of Internal Revenue (CIR) issued
Assessment Notice No. 0000047-93407 against Lascona Land Co., Inc.
(Lascona) informing the latter of its
alleged deficiency income tax for the
year
1993
in
the
amount
of P753,266.56.
On April 20, 1998, Lascona filed a
letter protest, but was denied by
Norberto R. Odulio, Officer-in-Charge
(OIC), Regional Director, Bureau of
Internal Revenue, Revenue Region No.

8,Makati City,
in
his
Letter
dated March 3, 1999 which says: we
cannot give due course to your
request to cancel or set aside the
assessment notice issued to your
client for the reason that the case
was not elevated to the Court of
Tax Appeals as mandated by the
provisions of the last paragraph
of Section 228 of the Tax Code.
On April 12, 1999, Lascona appealed
the decision before the CTA alleging
that the Regional Director erred in
ruling that the failure to appeal to the
CTA within thirty (30) days from the
lapse of the 180-day period rendered
the assessment final and executory.
CTA, in its Decision, nullified the
subject assessment. It held that in
cases of inaction by the CIR on the
protested assessment, Section 228 of
the NIRC provided two options for the
taxpayer: (1) appeal to the CTA within
thirty (30) days from the lapse of the
one hundred eighty (180)-day period,
or (2) wait until the Commissioner
decides on his protest before he
elevates the case.
The CIR moved for reconsideration. It
argued that in declaring the subject
assessment as final, executory and
demandable, it did so pursuant to
Section
3
(3.1.5)
of
Revenue
Regulations
No.
12-99
dated September 6, 1999 which reads,
thus:

day period; otherwise, the

assessment shall become final,
executory and demandable.

CTA denied the CIR's motion for

reconsideration for lack of merit. It
held that Revenue Regulations No. 1299 must conform to Section 228 of the
NIRC. It pointed out that the former
spoke of an assessment becoming
final, executory and demandable by
reason of the inaction by the
Commissioner,
while
the
latter
referred to decisions becoming final,
executory and demandable should the
taxpayer adversely affected by the
decision fail to appeal before the CTA
within the prescribed period. Finally, it
emphasized
that
in
cases
of
discrepancy, Section 228 of the NIRC
must prevail over the revenue
regulations.
Court of Appeals granted the CIR's
petition and set aside the Decision
dated January 4, 2000 of the CTA and
its Resolution dated March 3, 2000. It
further declared that the subject
Assessment Notice No. 0000047-93407 dated March 27, 1998 as final,
executory and demandable.

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

If the Commissioner or his duly

authorized representative fails
to act on the taxpayer's protest
within one hundred eighty (180)
days from date of submission,
by the taxpayer, of the required
documents in support of his
protest, the taxpayer may
appeal to the Court of Tax
Appeals within thirty (30) days
from the lapse of the said 180-

RULING:
NO.
In RCBC v. CIR,[12] the Court has held that in
case the Commissioner failed to act on the
disputed assessment within the 180-day
period
from
date
of
submission
of
73

documents, a taxpayer can either: (1) file a

petition for review with the Court of Tax
Appeals within 30 days after the expiration of
the 180-day period; or (2) await the final
decision of the Commissioner on the
disputed assessments and appeal such final
decision to the Court of Tax Appeals within
30 days after receipt of a copy of such
decision.

protested assessment, it then has the right

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

In arguing that the assessment became final

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

21.
COMMISSIONER
OF
REVENUE and ARTURO V.

INTERNAL

PARCERO in his official capacity

Revenue District Officer of

Therefore, as in Section 228, when the law

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

Revenue District No. 049

petitioners, vs. PRIMETOWN

as

(Makati),

PROPERTY GROUP, INC., respondent .

Gilbert Yap of Primetown Property Group,

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

in case of the inaction of the CIR on the

protested assessment, while we reiterate
the taxpayer has two options, either: (1) file
a petition for review with the CTA within 30
days after the expiration of the 180-day
period; or (2) await the final decision of the
Commissioner on the disputed assessment
and appeal such final decision to the CTA
within 30 days after the receipt of a copy of
such decision, these options are mutually
exclusive and resort to one bars the
application of the other.

Respondent submitted additional required

documents but its claim was not acted upon.
Thus, on April 14, 2000, it filed a petition for
review in the CTA. However, the CTA
dismissed the petition as it was filed beyond
the two-year prescriptive period for filing a
judicial claim for tax refund or tax credit,
invoking Sec. 229 of NIRC. CTA found that
respondent filed its final adjusted return on

Considering that Lascona opted to await the

final decision of the Commissioner on the
74

April 14, 1998. According to the CTA,

applying Article 13 of the Civil Code, the twoyear prescriptive period under Section 229 of
the NIRC for the filing of judicial claims was
equivalent to 730 days. Because the year
2000 was a leap year, respondent's petition,
which was filed 731 days after respondent
filed its final adjusted return, was filed
beyond the reglementary period.

Administrative Code of 1987. For this reason,

we hold that Section 31, Chapter VIII, Book I
of the Administrative Code of 1987, being
the
more
recent
law,
governs
the
computation of legal periods. Lex posteriori
derogat priori.

Applying Section 31, Chapter VIII, Book I of

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

CA reversed and set aside the decision of the

CTA. It ruled that Article 13 of the Civil Code
did not distinguish between a regular year
and a leap year. The rule that a year has 365
days applies, notwithstanding the fact that a
particular year is a leap year. In that, even if
the year 2000 was a leap year, the periods
covered by
April 15, 1998 to April 14, 1999 and April 15,
1999 to April 14, 2000 should still
be counted as 365 days each or a total of
730 days.

22. CIR vs Smart Communication Inc.

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

Issue:
WON respondents claim was filed beyond
the two-year prescriptive period for filing
judicial claim for tax refund or tax credit.

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

On September 24, 2003, or within the

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

There
obviously
exists
a
manifest
incompatibility in the manner of computing
legal periods under the Civil Code and the
75

Lower courts decided in favor of respondent

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

these sections, the person entitled to claim a

tax refund is the taxpayer. However, in case
the taxpayer does not file a claim for refund,
the withholding agent may file the claim.
Relationship is not required or that the
lack of such relation deprives the withholding
agent of the right to file a claim for refund.
Rather, what is clear is that a withholding agent
has a legal right to file a claim for refund for two
reasons. First, he is considered a taxpayer under
the NIRC as he is personally liable for the
withholding tax as well as for deficiency
assessments, surcharges, and penalties, should
the amount of the tax withheld be finally found
to be less than the amount that should have
been withheld under law. Second, as an agent of
the taxpayer, his authority to file the necessary
income tax return and to remit the tax withheld
to the government impliedly includes the
authority to file a claim for refund and to bring
an action for recovery of such claim.

In this connection, it is however

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

Issues

The two issues to be resolved are: (1)

whether respondent has the right to file the
claim for refund; and (2) if respondent has the
right, whether the payments made to Prism
constitute business profits or royalties.

As to Silkair (Singapore) Pte, Ltd. v.

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

Held:

Under the RP-Malaysia Tax Treaty, the

term royalties is defined as payments of any
kind received as consideration for: (i) the use of,
or the right to use, any patent, trade mark,
design or model, plan, secret formula or process,

The petition is bereft of merit. Withholding

agent may file a claim for refund as Sections
204(c) and 229 of the National Internal
Revenue Code (NIRC) provide. Pursuant to
76

any copyright of literary, artistic or scientific

work, or for the use of, or the right to use,
industrial, commercial, or scientific equipment,
or for information concerning industrial,
commercial or scientific experience; (ii) the use
of, or the right to use, cinematograph films, or
tapes for radio or television broadcasting. These
are taxed at the rate of 25% of the gross
amount.

subject to DST. We ruled therein that DST is

essentially an excise tax; it is not an
imposition on the document itself but on the
privilege to enter into a taxable transaction
of pledge.

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

Under the same Treaty, the business

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

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

Section 195 of the NIRC imposes a DST on

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

In the instant case, it was established

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

It is the exercise of the privilege to enter

into an accessory contract of pledge, as
distinguished from a contract of loan, which
gives rise to the obligation to pay DST. If the
DST under Section 195 is levied on the loan
or the exercise of the privilege to contract a
loan, then there would be no use for Section
179 of the NIRC, to separately impose stamp
tax on all debt instruments, like a simple
loan agreement. It is for this reason why the
definition of pawnshop ticket, as not an
evidence of indebtedness, is inconsequential
to and has no bearing on the taxability of
contracts of pledge entered into by
pawnshops. For purposes of Section 195,
pawnshop tickets need not be an evidence of

23. MICHEL J. LHUILLIER PAWNSHOP,

INC.
vs.
CIR,
G.R.
No.
166786.
September 11, 2006

Facts:
This resolution addresses petitioner's motion
for reconsideration of the May 3, 2006
Decision of the Court holding that contracts
of pledge entered into by pawnshops are
77

indebtedness nor a debt instrument because

it taxes the same as a pledge instrument.
Neither should the definition of pawnshop
ticket, as not a security, exempt it from the
imposition of DST. It was correctly defined as
such because the ticket itself is not the
security but the pawn or the personal
property pledged to the pawnbroker.

amendments to Section 199,

which
incorporated
12
more
categories
of
documents in addition to the initial two
categories exempted from DST. A pawnshop
tickets is not one of them. Expressio unious
est exclusion alterius. The omission of
pawnshop tickets only means that it is not
among the documents exempted from DST.

The law is clear and needs no further

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

WHEREFORE, the motion for reconsideration

is partly GRANTED. The December 29, 2004
Decision of the Court of Appeals in CA-G.R.
SP No. 67667 ordering petitioner Michel J.
Lhuillier Pawnshop, Inc. to pay deficiency
documentary stamp tax is AFFIRMED with
the MODIFICATION that surcharges and all
the interests imposed thereon are DELETED.

Moreover, the provisions of the NIRC on DST

has recently been amended by R.A. No.
9243. Among the highlights thereof were the

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