In 1997, Enron Subic Power Corporation received a pre-assessment notice from the Bureau

of Internal Revenue (BIR). Enron allegedly had a tax deficiency of P2.8 million for the year
1996. Enron filed a protest. In 1999, Enron received a final assessment notice (FAN) from
the BIR for the same amount of tax deficiency.
Enron however assailed the FAN because according to Enron the FAN is not compliant with
Section 228 of the National Internal Revenue Code (NIRC) which provides that the legal and
factual bases of the assessment must be contained in the FAN. The FAN issued to Enron
only contained the computation of its alleged tax liability.
The Commissioner of Internal Revenue (CIR) admitted that the FAN did not contain the legal
and factual bases of the assessment however, the CIR insisted that the same has been
substantially complied with already because during the pre-assessment stage, the
representative of Enron has been advised of the said factual and legal bases of the
assessment.
ISSUE: Whether or not there is a valid final assessment notice issued to Enron.
HELD: No. The wording of Section 228 of the NIRC provides:
The taxpayer shall be informed in writing of the law and the facts on which the assessment is made;
otherwise the assessment shall be void.

The word “shall” is mandatory. The law requires that the legal and factual bases of the
assessment be stated in the formal letter of demand and assessment notice. It cannot be
substituted by other notices or advisories issued or delivered to the taxpayer during the
preliminary stage.

SILKAIR V. CIR [G.R. NO. 166482, JANUARY 25,2012]

DOCTRINE: 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.
FACTS: Petitioner filed an administrative claim for refund on the excise taxes paid on
the purchase of jet fuel from its supplier oil company for the period of July 1, 1998 to
December 31, 1998, which it alleged to have been erroneously paid based on Section
135(a) and (b) of the Tax Code of 1997. Due to inaction by respondent Commissioner,
petitioner filed a Petition for Review with the Court of Tax Appeals. The CTA denied the
petition and ruled that while petitioner’s country indeed exempts from excise taxes
petroleum products sold to international carriers, petitioner nevertheless failed to comply
with the second requirement under Section 135 (a) of the 1997 Tax Code as it failed to
prove that the jet fuel delivered by Petron came from the latter’s bonded storage tank.
Upon the denial of the motion of reconsideration, petitioner elevated the case to the CA.
The CA affirmed the denial and ruled that petitioner is not the proper party to seek for
the refund of the excise taxes paid.

HELD: The Supreme Court held that excise taxes, which apply to articles manufactured
or produced in the Philippines for domestic sale or consumption or for any other
disposition and to things imported into the Philippines, is basically an indirect tax. While
the tax is directly levied upon the manufacturer/importer upon removal of the taxable
goods from its place of production or from the customs custody, the tax, in reality, is
actually passed on to the end consumer as part of the transfer value or selling price of
the goods, sold, bartered or exchanged. 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. Petitioner, as
the purchaser and end-consumer, ultimately bears the tax burden, but this does not
transform its status into a statutory taxpayer.
SUPERAMA

In January 2001, a revenue officer was authorized to examine the books of accounts of Metro
Star Superama, Inc. In April 2002, after the audit review, the revenue district officer issued a
formal assessment notice against Metro Star advising the latter that it is liable to pay
P292,874.16 in deficiency taxes. Metro Star assailed the issuance of the formal assessment
notice as it averred that due process was not observed when it was not issued a pre-
assessment notice. Nevertheless, the Commissioner of Internal Revenue authorized the
issuance of a Warrant of Distraint and/or Levy against the properties of Metro Star.
Metro Star then appealed to the Court of Tax Appeals (CTA Case No. 7169). The CTA ruled
in favor of Metro Star.
ISSUE: Whether or not due process was observed in the issuance of the formal assessment
notice against Metro Star.
HELD: No. It is true that there is a presumption that the tax assessment was duly issued.
However, this presumption is disregarded if the taxpayer denies ever having received a tax
assessment from the Bureau of Internal Revenue. In such cases, it is incumbent upon the
BIR to prove by competent evidence that such notice was indeed received by the addressee-
taxpayer. The onus probandi was shifted to the BIR to prove by contrary evidence that the
Metro Star received the assessment in the due course of mail. In the case at bar, the CIR
merely alleged that Metro Star received the pre-assessment notice in January 2002. The CIR
could have simply presented the registry receipt or the certification from the postmaster that
it mailed the pre-assessment notice, but failed. Neither did it offer any explanation on why it
failed to comply with the requirement of service of the pre-assessment notice. The Supreme
Court emphasized that the sending of a pre-assessment notice is part of the due process
requirement in the issuance of a deficiency tax assessment,” the absence of which renders
nugatory any assessment made by the tax authorities.
Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. But even so, it is a requirement in all democratic regimes that it be exercised
reasonably and in accordance with the prescribed procedure.