DIGESTS
Rules of Procedure &
The CTA
Procedural rules.
Procedural rules are in place to facilitate the adjudication of cases and avoid delay in the resolution of rival claims. In addition, courts must strive to resolve cases on their merits, rather than summarily dismiss them on technicalities. This is especially true when the alleged procedural rules violated do not provide any sanction at all or when the transgression thereof does not result in a dismissal of the action.
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Procedural rules in the CTA.
As there is no showing of any specific rules governing the presentation of evidence in the CTA, the general rules of procedure concerning the order of trial outlined in the Rules of Court shall govern.
The fact that the of Tax Appeals decided not to alter the ordinary order of trial does not militate against its ruling, for although it could have done so, its power to deviate from technical rules of evidence is discretionary and hence not subject to review by this Court.
~~~Perez vs. Court of Tax Appeals, et al. (G.R. No. L-9193, 29 May 1957, En Banc, J. Felix)
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Procedural rules are not to be disdained as mere technicalities.
It is true that procedural rules may be relaxed in the interest of substantial justice. They are not, however, to be disdained as mere technicalities that may be ignored at will to suit the convenience of a party. They are intended to ensure the orderly administration of justice and the protection of substantive rights in judicial proceedings. Thus, procedural rules are not to be belittled or dismissed simply because their non-observance may have resulted in prejudicing a party’s substantive rights. Like all rules, they are required to be followed except only when, for the most persuasive of reasons, they may be relaxed to relieve a litigant of negative consequences commensurate with the degree of thoughtlessness in not complying with the prescribed procedure.
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Forum shopping; Identity of parties
Forum shopping exists when a party repetitively avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in or already resolved adversely by some other court. In order to prove forum shopping, the following must be shown: (a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the relief being founded on the same facts; and (c) the identity of the two preceding particulars, such that any judgment rendered in the other action will, regardless of which party is successful, amounts to res judicata in the action under consideration.
Likewise, there is an identity of parties in this case. The rule is that absolute identity of parties is not required but only a shared identity of interest. Here, although the BIR and the BOC are separate government agencies, in this particular instance, their functions overlap with respect to the assessment and collection of excise taxes for imported articles.
Undoubtedly, excise taxes are in the nature of internal revenue taxes, thus, falling under the primary jurisdiction of the BIR. However, by the express mandate of Section 12 (a) of the Tax Code, the COC and his subordinates, including the Collector, are agents of the CIR “with respect to the collection of national internal revenue taxes on imported goods.”
The subject matter of CTA Case No. 8535 solely relates to the imposition of excise taxes on PSPC’s alkylate importations. Thus, any attempt on the part of the Collector or the BOC to collect the same must necessarily proceed from their deputization as agents of the BIR. This agency relation was, in fact, confirmed by the Collector during his testimony in one of the suspension hearings.
In fine, as between as between G.R. Nos. 210501 and 211294, there is forum shopping.
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Ascertainment of a fact.
The means of ascertainment of a fact is best left to the party that alleges the same. The Court’s power is limited only to the appreciation of that means pursuant to the prevailing rules of evidence.
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The CTA’s jurisdiction is appellate, meaning it merely has the authority to review the CIR’s decisions on such matters [i.e., matters concerning tax refunds]. In the exercise of its authority to review, the CTA cannot dictate what particular evidence the parties must present to prove their respective cases. The means of ascertainment of a fact is best left to the party that alleges the same. The court’s power is limited only to the appreciation of that means pursuant to the prevailing rules of evidence.
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It is a basic rule in evidence that the person who alleges payment has the burden of proving that payment has indeed been made. More so, in cases filed before the CTA, which are litigated de novo, party-litigants must prove every minute aspect of their case.
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Affidavits are inadmissible as evidence under the hearsay rule.
In finding that the assignments of the TCCs in favor of Petron were fraudulent, we find that the CTA En Banc reversibly erred in relying on the abovementioned affidavits executed by the grantees’ former general managers/officers who, after disavowing knowledge of the assignment of the subject TCCs and Petron’s delivery of bunker fuel oil in consideration thereof, requested the cancellation of the TCCs. Without said erstwhile general managers/officers being presented on the witness stand to affirm the truth and veracity of their statements, the affidavits they executed are, however, correctly impugned by Petitioner as hearsay for lack of opportunity to cross-examine said affiants. Almost always incomplete and often inaccurate, sometimes from partial suggestion, or for want of suggestion and inquiries, the infirmity of affidavits as species of evidence is a matter of judicial experience and are thus considered inferior to the testimony given in open court. Unless the affiant is placed on the witness stand to testify thereon, the rule is settled that affidavits are inadmissible as evidence under the hearsay rule.
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Necessity of a formal offer of evidence (especially of the PAN); Strict exception thereto.
Petitioner implores unto this Court that technical rules of evidence should not be strictly applied in the interest of substantial justice, considering that the mandate of the CTA explicitly provides that its proceedings shall not be governed by the technical rules of evidence. Relying thereon, petitioner avers that while it failed to formally offer the PANs of EWTs for taxable years 1994 and 1998, their existence and due execution were duly tackled during the presentation of petitioner’s witnesses, Ruleo Badilles and Carmelita Lynne de Guzman (for taxable year 1994) and Susan Salcedo-De Castro and Edna A. Ortalla (for taxable year 1998). Petitioner further claims that although the PANs were not marked as exhibits, their existence and value were properly established, since the BIR records for taxable years 1994 and 1998 were forwarded by petitioner to the CTA in compliance with the latter’s directive and were, in fact, made part of the CTA records.
Under Section 8 of RA No. 1125, the CTA is categorically described as a court of record. As such, it shall have the power to promulgate rules and regulations for the conduct of its business, and as may be needed, for the uniformity of decisions within its jurisdiction. Moreover, as cases filed before it are litigated de novo, party-litigants shall prove every minute aspect of their cases. Thus, no evidentiary value can be given the pieces of evidence submitted by the BIR, as the rules on documentary evidence require that these documents must be formally offered before the CTA. Pertinent is Section 34, Rule 132 of the Revised Rules on Evidence which reads:
SEC. 34. Offer of evidence. – The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified.
Although in a long line of cases, we have relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the trial court, we exercised extreme caution in applying the exceptions to the rule, as pronounced in Vda. de Oñate v. Court of Appeals [320 Phil. 344 (1995)], thus:
From the foregoing provision, it is clear that for evidence to be considered, the same must be formally offered. Corollarily, the mere fact that a particular document is identified and marked as an exhibit does not mean that it has already been offered as part of the evidence of a party. In Interpacific Transit, Inc. v. Aviles [186 SCRA 385, 388-389 (1990)], we had the occasion to make a distinction between identification of documentary evidence and its formal offer as an exhibit. We said that the first is done in the course of the trial and is accompanied by the marking of the evidence as an exhibit while the second is done only when the party rests its case and not before. A party, therefore, may opt to formally offer his evidence if he believes that it will advance his cause or not to do so at all. In the event he chooses to do the latter, the trial court is not authorized by the Rules to consider the same.
However, in People v. Napat-a [179 SCRA 403 (1989)] citing People v. Mate [103 SCRA 484 (1980)], we relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the trial court provided the following requirements are present, viz.: first, the same must have been duly identified by testimony duly recorded and, second, the same must have been incorporated in the records of the case.
The evidence may, therefore, be admitted provided the following requirements are present: (1) the same must have been duly identified by testimony duly recorded; and (2) the same must have been incorporated in the records of the case. Being an exception, the same may only be applied when there is strict compliance with the requisites mentioned above; otherwise, the general rule in Section 34 of Rule 132 of the Rules of Court should prevail.
In the case at bar, petitioner categorically admitted that it failed to formally offer the PANs as evidence. Worse, it advanced no justifiable reason for such fatal omission. Instead, it merely alleged that the existence and due execution of the PANs were duly tackled by petitioner’s witnesses. We hold that such is not sufficient to seek exception from the general rule requiring a formal offer of evidence, since no evidence of positive identification of such PANs by petitioner’s witnesses was presented. Hence, we agree with the CTA En Banc’s observation that the 1994 and 1998 PANs for EWT deficiencies were not duly identified by testimony and were not incorporated in the records of the case, as required by jurisprudence.
While we concur with petitioner that the CTA is not governed strictly by technical rules of evidence, as rules of procedure are not ends in themselves but are primarily intended as tools in the administration of justice, the presentation of PANs as evidence of the taxpayer’s liability is not mere procedural technicality. It is a means by which a taxpayer is informed of his liability for deficiency taxes. It serves as basis for the taxpayer to answer the notices, present his case and adduce supporting evidence. More so, the same is the only means by which the CTA may ascertain and verify the truth of respondent’s claims. We are, therefore, constrained to apply our ruling in Heirs of Pedro Pasag v. Spouses Parocha [550 Phil. 571 (2007)], viz.:
x x x. A formal offer is necessary because judges are mandated to rest their findings of facts and their judgment only and strictly upon the evidence offered by the parties at the trial. Its function is to enable the trial judge to know the purpose or purposes for which the proponent is presenting the evidence. On the other hand, this allows opposing parties to examine the evidence and object to its admissibility. Moreover, it facilitates review as the appellate court will not be required to review documents not previously scrutinized by the trial court.
Strict adherence to the said rule is not a trivial matter. The Court in Constantino v. Court of Appeals ruled that the formal offer of one’s evidence is deemed waived after failing to submit it within a considerable period of time. It explained that the court cannot admit an offer of evidence made after a lapse of three (3) months because to do so would “condone an inexcusable laxity if not non-compliance with a court order which, in effect, would encourage needless delays and derail the speedy administration of justice.”
Applying the aforementioned principle in this case, we find that the trial court had reasonable ground to consider that petitioners had waived their right to make a formal offer of documentary or object evidence. Despite several extensions of time to make their formal offer, petitioners failed to comply with their commitment and allowed almost five months to lapse before finally submitting it. Petitioners’ failure to comply with the rule on admissibility of evidence is anathema to the efficient, effective, and expeditious dispensation of justice. x x x.
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Necessity of proving fraud by clear and convincing evidence.
While the CTA is not governed strictly by technical rules of evidence on the principle that rules of procedure are not ends in themselves but are primarily intended as tools in the administration of justice, respondent’s presentation of evidence to prove the fraud which attended the issuance of the subject TCCs is not a mere procedural technicality which may be disregarded considering that it is the very basis for the claim that Petron’s payment of its excise tax liabilities had been avoided. It cannot be over-emphasized that fraud is a question of fact which cannot be presumed and must be proven by clear and convincing evidence by the party alleging the same. Without even presenting the documents which served as bases for the issuance of the subject TCCs from 1994 to 1997, respondent miserably failed in discharging his evidentiary burden with the presentation of the Center’s cancellation memoranda to which were simply annexed some of the grantees’ original registration documents and their Financial Statements for an average of two years.
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Prima facie correctness of tax assessments; The determination of the CTA must rest on all the evidence introduced.
We agree with the contention of the petitioner that, as a general rule, tax assessments by tax examiners are presumed correct and made in good faith. All presumptions are in favor of the correctness of a tax assessment. It is to be presumed, however, that such assessment was based on sufficient evidence. Upon the introduction of the assessment in evidence, a prima facie case of liability on the part of the taxpayer is made. If a taxpayer files a petition for review in the CTA and assails the assessment, the prima facie presumption is that the assessment made by the BIR is correct, and that in preparing the same, the BIR personnel regularly performed their duties. This rule for tax initiated suits is premised on several factors other than the normal evidentiary rule imposing proof obligation on the petitioner-taxpayer: the presumption of administrative regularity; the likelihood that the taxpayer will have access to the relevant information; and the desirability of bolstering the record-keeping requirements of the NIRC.
However, the prima facie correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation, meaning it is arbitrary and capricious. Where the BIR has come out with a “naked assessment,” i.e., without any foundation character, the determination of the tax due is without rational basis. In such a situation, the U.S. Court of Appeals ruled [in Clark and Clark v. CIR, 266 F.2d 698 (1959)] that the determination of the Commissioner contained in a deficiency notice disappears. Hence, the determination by the CTA must rest on all the evidence introduced and its ultimate determination must find support in credible evidence.
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Relief from judgment, when allowed.
Relief from judgment under Rule 38 of the Rules of Court is a legal remedy that is allowed only in exceptional cases whereby a party seeks to set aside a judgment rendered against him by a court whenever he was unjustly deprived of a hearing or was prevented from taking an appeal, in either case, because of fraud, accident, mistake or excusable neglect.
Petitioner argues that it was denied due process when it was not given the opportunity to be heard to prove that its failure to file a motion for reconsideration or appeal from the dismissal of its petition for review was due to the failure of its employee to forward the copy of the September 10, 2003 Resolution which constitutes excusable negligence.
Petitioner’s argument lacks merit.
It is basic that as long as a party is given the opportunity to defend his interests in due course, he would have no reason to complain, for it is this opportunity to be heard that makes up the essence of due process. In Batongbakal v. Zafra (G.R. No. 141806 17 January 2005), the Court held that:
There is no question that the “essence of due process is a hearing before conviction and before an impartial and disinterested tribunal” but due process as a constitutional precept does not, always and in all situations, require a trial-type proceeding. The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of one’s defense. “To be heard” does not only mean verbal arguments in court; one may be heard also through pleadings. Where opportunity to be heard, either through oral arguments or pleadings, is accorded, there is no denial of procedural due process. (Emphasis supplied)
As correctly pointed by the Office of the Solicitor General (OSG), the CTA Second Division set the case for hearing on April 2, 2004 after the filing by the petitioner of its petition for relief from judgment. Petitioner’s counsel was present on the scheduled hearing and in fact orally argued its petition.
Moreover, after the CTA Second Division dismissed the petition for relief from judgment in a Resolution dated May 3, 2004, petitioner filed a motion for reconsideration and the court further required both parties to file their respective memorandum. Indeed, petitioner was not denied its day in court considering the opportunities given to argue its claim.
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.
The Court has repeatedly admonished lawyers to adopt a system whereby they can always receive promptly judicial notices and pleadings intended for them. Apparently, petitioner’s counsel was not only remiss in complying with this admonition but he also failed to check periodically, as an act of prudence and diligence, the status of the pending case before the CTA Second Division. The fact that counsel allegedly had not renewed the employment of his secretary, thereby making the latter no longer attentive or focused on her work, did not relieve him of his responsibilities to his client. It is a problem personal to him which should not in any manner interfere with his professional commitments.
In exceptional cases, when the mistake of counsel is so palpable that it amounts to gross negligence, this Court affords a party a second opportunity to vindicate his right. But this opportunity is unavailing in the case at bar, especially since petitioner had squandered the various opportunities available to it at the different stages of this case. Public interest demands an end to every litigation and a belated effort to reopen a case that has already attained finality will serve no purpose other than to delay the administration of justice.
Since petitioner’s ground for relief is not well-taken, it follows that the assailed judgment stands.
cf: Resolution dated 24 April 2007
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The civil action filed by a taxpayer to question an FDDA is not deemed instituted with the criminal case for tax evasion filed by the government; Distinction between a tax evasion (criminal) case, and petition for review to assail an FDDA.
Rule 9, Section 11 of A.M. No. 05-11-07-CTA, otherwise known as the RRCTA, states that:
SEC. 11. Inclusion of civil action in criminal action. – In cases within the jurisdiction of the Court, the criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall be deemed jointly instituted in the same proceeding. The filing of the criminal action shall necessarily carry with it the filing of the civil action. No right to reserve the filing of such civil action separately from the criminal action shall be allowed or recognized.
Petitioner claimed that by virtue of the above provision, the civil aspect of the criminal case, which is the Petition for Review Ad Cautelam, is deemed instituted upon the filing of the criminal action. Thus, the CTA had long acquired jurisdiction over the civil aspect of the consolidated criminal cases. Therefore, the CTA erred in dismissing the case.
We do not agree.
Rule 111, Section 1(a) of the Rules of Court provides that what is deemed instituted with the criminal action is only the action to recover civil liability arising from the crime. Civil liability arising from a different source of obligation, such as when the obligation is created by law, such civil liability is not deemed instituted with the criminal action.
It is well-settled that the taxpayer’s obligation to pay the tax is an obligation that is created by law and does not arise from the offense of tax evasion, as such, the same is not deemed instituted in the criminal case.
In the case of Republic of the Philippines v. Patanao [127 Phil. 105 (1967)], We held that:
Civil liability to pay taxes arises from the fact, for instance, that one has engaged himself in business, and not because of any criminal act committed by him. The criminal liability arises upon failure of the debtor to satisfy his civil obligation. The incongruity of the factual premises and foundation principles of the two cases is one of the reasons for not imposing civil indemnity on the criminal infractor of the income tax law. x x x Considering that the Government cannot seek satisfaction of the taxpayer’s civil liability in a criminal proceeding under the tax law or, otherwise stated, since the said civil liability is not deemed included in the criminal action, acquittal of the taxpayer in the criminal proceeding does not necessarily entail exoneration from his liability to pay the taxes. It is error to hold, as the lower court has held that the judgment in the criminal cases Nos. 2089 and 2090 bars the action in the present case. The acquittal in the said criminal cases cannot operate to discharge defendant appellee from the duty of paying the taxes which the law requires to be paid, since that duty is imposed by statute prior to and independently of any attempts by the taxpayer to evade payment. Said obligation is not a consequence of the felonious acts charged in the criminal proceeding nor is it a mere civil liability arising from crime that could be wiped out by the judicial declaration of non existence of the criminal acts charged. x x x. (Citations omitted and emphasis ours)
Further, in a more recent case of Proton Pilipinas Corp. v. Republic of the Phils., We ruled that:
While it is true that according to the aforesaid Section 4, of Republic Act No. 8249, the institution of the criminal action automatically carries with it the institution of the civil action for the recovery of civil liability, however, in the case at bar, the civil case for the collection of unpaid customs duties and taxes cannot be simultaneously instituted and determined in the same proceedings as the criminal cases before the Sandiganbayan, as it cannot be made the civil aspect of the criminal cases filed before it. It should be borne in mind that the tax and the obligation to pay the same are all created by statute; so are its collection and payment governed by statute. The payment of taxes is a duty which the law requires to be paid. Said obligation is not a consequence of the felonious acts charged in the criminal proceeding nor is it a mere civil liability arising from crime that could be wiped out by the judicial declaration of non-existence of the criminal acts charged. Hence, the payment and collection of customs duties and taxes in itself creates civil liability on the part of the taxpayer. Such civil liability to pay taxes arises from the fact, for instance, that one has engaged himself in business, and not because of any criminal act committed by him. (Citations omitted and emphasis ours)
Under Sections 254 and 255 of the NIRC, the government can file a criminal case for tax evasion against any taxpayer who willfully attempts in any manner to evade or defeat any tax imposed in the tax code or the payment thereof. The crime of tax evasion is committed by the mere fact that the taxpayer knowingly and willfully filed a fraudulent return with intent to evade and defeat a part or all of the tax. It is therefore not required that a tax deficiency assessment must first be issued for a criminal prosecution for tax evasion to prosper.
While the tax evasion case is pending, the BIR is not precluded from issuing a final decision on a disputed assessment, such as what happened in this case. In order to prevent the assessment from becoming final, executory and demandable, Section 9 of RA No. 9282 allows the taxpayer to file with the CTA, a Petition for Review within 30 days from receipt of the decision or the inaction of the respondent.
The tax evasion case filed by the government against the erring taxpayer has, for its purpose, the imposition of criminal liability on the latter. While the Petition for Review filed by the petitioner was aimed to question the FDDA and to prevent it from becoming final. The stark difference between them is glaringly apparent. As such, the Petition for Review Ad Cautelam is not deemed instituted with the criminal case for tax evasion.
In fact, in the Resolution dated June 6, 2012, the CTA recognized the separate and distinct character of the Petition for Review from the criminal case, to wit:
As regards, [petitioner’s] Urgent Motion (With Leave of Court for Confirmation that the Civil Action for Recovery of Civil Liability for Taxes and Penalties is Deemed Instituted in the Consolidated Criminal Cases) filed on May 30, 2012, the same is hereby GRANTED. The civil action for recovery of the civil liabilities of [petitioner] for taxable year 2008 stated in the [FDDA] dated May 18, 2012 is DEEMED INSTITUTED with the instant consolidated criminal cases, without prejudice to the right of the [petitioner] to avail of whatever additional legal remedy he may have, to prevent the said FDDA from becoming final and executory for taxable year 2008. (Emphasis ours)
In the said resolution, what is deemed instituted with the criminal action is only the government’s recovery of the taxes and penalties relative to the criminal case. The remedy of the taxpayer to appeal the disputed assessment is not deemed instituted with the criminal case. To rule otherwise would be to render nugatory the procedure in assailing the tax deficiency assessment.
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Payment of docket and other legal fees.
While it is true that the Petition for Review Ad Cautelam is not deemed instituted with the criminal case, We hold that the CTA En Banc still erred in affirming the dismissal of the case.
Rule 6, Section 3 of the RRCTA provides that:
SEC. 3. Payment of docket fees. – The Clerk of Court shall not receive a petition for review for filing unless the petitioner submits proof of payment of the docket fees. Upon receipt of the petition or the complaint, it will be docketed and assigned a number, which shall be placed by the parties on all papers thereafter filed in the proceeding. The Clerk of Court will then issue the necessary summons to the respondent or defendant.
Basic is the rule that the payment of docket and other legal fees is both mandatory and jurisdictional. The court acquires jurisdiction over the case only upon the payment of the prescribed fees.
However, the mere failure to pay the docket fees at the time of the filing of the complaint, or in this case the Petition for Review Ad Cautelam, does not necessarily cause the dismissal of the case. As this Court held in Camaso v. TSM Shipping (Phils.), Inc. [G.R. No. 223290. 7 November 2016], while the court acquires jurisdiction over any case only upon the payment of the prescribed docket fees, its nonpayment at the time of filing of the initiatory pleading does not automatically cause its dismissal so long as the docket fees are paid within a reasonable period; and that the party had no intention to defraud the government.
In this case, records reveal that petitioner has no intention to defraud the government in not paying the docket fees. In fact, when he appealed the FDDA insofar as the taxable year 2007 was concerned, he promptly paid the docket fees when he filed his Petition for Review.
Confusion resulted when the FDDA also covered tax deficiencies pertaining to taxable year 2008 which was also the subject of the consolidated criminal cases for tax evasion. To guide the petitioner, he sought the advise of the CTA First Division on whether he was still required to pay the docket fees. The CTA First Division issued its Resolution dated June 6, 2012 ruling that the civil action for recovery of the civil liabilities of petitioner for taxable year 2008 stated in the FDDA was deemed instituted with the consolidated criminal cases. Pursuant to said CTA Resolution, the Clerk of Court issued a computed “zero filing fees” when petitioner filed his Petition for Review Ad Cautelam.
Petitioner merely relied on good faith on the pronouncements of the CTA First Division that he is no longer required to pay the docket fees. As such, the CTA cannot just simply dismiss the case on the ground of nonpayment of docket fees. The CTA should have instead directed the clerk of court to assess the correct docket fees and ordered the petitioner to pay the same within a reasonable period. It should be borne in mind that technical rules of procedure must sometimes give way, in order to resolve the case on the merits and prevent a miscarriage of justice.
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As a rule, a judicial admission requires no proof, and thus, cannot lightly be set aside.
Under Section 4, Rule 129 of the Rules of Court, a judicial admission requires no proof. The Court cannot lightly set it aside, especially when the opposing party relies upon it and accordingly dispenses with further proof of the fact already admitted. The exception provided in Rule 129, Section 4 is that an admission may be contradicted only by a showing that it was made through a palpable mistake, or that no such admission was made. In this case, however, exception to the rule does not exist.
We agree with the pronouncement of the CTA En Banc that Petron has not been shown or proven to have participated in the alleged fraudulent acts involved in the transfer and utilization of the subject TCCs. Petron had the right to rely on the joint stipulation that absolved it from any participation in the alleged fraud pertaining to the issuance and procurement of the subject TCCs. The joint stipulation made by the parties consequently obviated the opportunity of the CIR to present evidence on this matter, as no proof is required for an admission made by a party in the course of the proceedings. Thus, the CIR cannot now be allowed to change its stand and renege on that admission.
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When there is no judicial admission made.
Section 4 of Rule 129 of the Rules of Court states:
SEC. 4. Judicial Admissions. – An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.
In this case, EBCC claims that the CTA En Banc erred in failing to consider the judicial admission made by the CIR in her Memorandum that EBCC remitted FWT in the amount of P2,842,630.20.
We do not agree.
A careful reading of the Memorandum reveals that the alleged remittance of the amount of P2,842,630.20 was based on a Memorandum Report prepared by the revenue officers recommending the denial of EBCC’s protest, which was issued prior to EBCC’s filing of its Petition for Review before the CTA. In fact, there was no mention of such remittance in the Joint Stipulations of Facts and Issues by the parties and in the Answer filed by the CIR. Thus, we find no error on the part of the CTA En Banc in not considering such statement as a judicial admission.
Besides, the CTA Former Second Division, in its April 7, 2011 Resolution already explained how it computed EBCC’s deficiency FWT, to wit:
It must be emphasized that the assessment for deficiency FWT against [EBCC] in the amount of P10,227,622.72 is composed of FWT on Interest Payments on Syndicated Loan in Dollars in the amount of P2,520,117.76 and FWT on Interest on Loan Agreement with Ogden Power International Holdings, Inc. (Ogden) in the amount of P7,707,504.96. Since [EBCC] presented documentary evidence in support of its Petition for Review assailing respondent’s assessments, the Court considered said documentary evidence in deciding the instant case. In other words, the Court did not consider outright the alleged withholding remittances of P12,842,630.20 as a deduction to [EBCC’s] FWT liability, but first examined the supporting documents presented by [EBCC].
At the risk of being repetitive, although we found that [EBCC] is not liable to pay FWT on interest payment on loan from Ogden in the amount of P7,707,504.96; however, as regards the deficiency assessment of FWT on Interest Payments on Syndicated Loan in Dollars, in the amount of P2,520,117.76, the Court found that petitioner failed to present proof of withholding and/or remittance of FWT on its interest payments to UCPB and Sung Hung Kai Bank. Likewise, BIR Forms No. 2306 (Certificates of Final Income Tax Withheld), pertaining to petitioner’s alleged interest payments to First Metro Investment Corporation and United Overseas Bank/Westmont Bank, were not considered by the Court for reasons stated in our Decision dated November 30, 2010.
Therefore, [EBCC’s] contention that the amount of P2,842,630.20 should still be deducted from the deficiency assessment, as found by this Court in the amount of P1,785,717.53 is misplaced. As heretofore discussed, out of P2,520,117.76 deficiency FWT assessment on Interest Paid on Syndicated Loan in US Dollars, [EBCC] was able to substantiate FWT remittance in the total amount of P734,400.23 only. Thus, we found [EBCC] liable to pay basic deficiency FWT for the year 2000 in the amount of P1,785,717.53.
Moreover, considering that EBCC filed the Petition for Review before the CTA to question the deficiency tax assessment issued by the CIR, it was incumbent upon EBCC to prove that the deficiency tax assessment bad no legal or factual basis or that it had already paid or remitted the deficiency tax assessment as it is the taxpayer that has the burden of proof to impugn the validity and correctness of the disputed deficiency tax assessment. In addition, it is a basic rule in evidence that the person who alleges payment has the burden of proving that payment has indeed been made. More so, in cases filed before the CTA, which are litigated de novo, party-litigants must prove every minute aspect of their case.
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Failure to object to the offered evidence.
As pointed out by respondent, petitioner did not object to the admissibility of the 622 withholding tax certificates when these were formally offered by respondent before the tax court. Hence, petitioner is deemed to have admitted the validity of these documents. Petitioner’s “failure to object to the offered evidence renders it admissible, and the court cannot, on its own, disregard such evidence.”
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When objections to evidence should be made
Objection to oral evidence must be raised at the earliest possible time, that is after the objectionable question is asked or after the answer is given if the objectionable issue becomes apparent only after the answer was given. In case of documentary evidence, offer is made after all the witnesses of the party making the offer have testified, specifying the purpose for which the evidence is being offered. It is only at this time, and not at any other, that objection to the documentary evidence may be made.
Objection to documentary evidence must be made at the time it is formally offered, not earlier. Because at that time the purpose of the offer has already been disclosed and ascertained. Suffice it to say that the identification of the document before it is marked as an exhibit does not constitute the formal offer of the document as evidence for the party presenting it. Objection to the identification and marking of the document is not equivalent to objection to the document when it is formally offered in evidence. What really matters is the objection to the document at the time it is formally offered as an exhibit. However, while objection was prematurely made, this does not mean that petitioner had waived any objection to the admission of the same in evidence. Petitioner can still reiterate its former objections, this time seasonably, when the formal offer of exhibits was made.
~~~Magsino vs. Magsino (G.R. No. 205333, 18 February 2019, 2nd Div., J. J. Reyes, Jr.)
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Admissibility vs. Probative value
At any rate, it must be stressed that admissibility of evidence should not be confused with its probative value. Admissibility refers to the question of whether certain pieces of evidence are to be considered at all, while probative value refers to the question of whether the admitted evidence proves an issue. Thus, a particular item of evidence may be admissible, but its evidentiary weight depends on judicial evaluation within the guidelines provided by the rules of evidence.
~~~Magsino vs. Magsino (G.R. No. 205333, 18 February 2019, 2nd Div., J. J. Reyes, Jr.)
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Photographic evidence
As this Court held, “photographs, when presented in evidence, must be identified by the photographer as to its production and he must testify as to the circumstances under which they were produced.” This requirement for admissibility was similarly stated in Section 1, Rule 11 of the Rules on Electronic Evidence when it required photographic evidence of events to be “identified, explained or authenticated by the person who made the recording or by some other person competent to testify on the accuracy thereof.” While We have allowed witnesses (other than the person who took the photograph) to identify pictures presented in evidence, the said witness must be competent to identify the photograph as a faithful representation of the object portrayed. A competent witness must be able to “assure the court that they know or are familiar with the scenes or objects shown in the pictures and the photographs depict them correctly.”
~~~Guerrero vs. Phil. Phoenix Surety & Insurance, Inc. (G.R. No. 223178, 9 December 2020, 1st Div., J. Carandang)
N.B.: This is not a tax case.
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A party’s cause is not necessarily lost in case of failure to formally offer evidence.
The claimant’s failure to formally offer his evidence renders his evidence incompetent for consideration by the trial court. But the claimant’s cause is not necessarily lost if other evidence on record as well as the adverse party’s own admissions can support the former’s claim. Every court has the positive duty to consider and give due regard to everything on record that is relevant and competent to its resolution fo the ultimate issue presented for its adjudication.
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Presentation of new and additional evidence to the CTA.
The CTA is not precluded from accepting respondent’s evidence assuming these were not presented at the administrative level. Cases filed in the CTA are litigated de novo. Thus, respondent “should prove every minute aspect of its case by presenting, formally offering and submitting . . . to the Court of Tax Appeals [all evidence] . . . required for the successful prosecution of [its] administrative claim.”
*******
The CTA is not limited by the evidence presented in the administrative claim in the BIR. The claimant may present new and additional evidence to the CTA to support its case for tax refund.
Section 4 of the NIRC states that the CIR has the power to decide on tax refunds, but his or her decision is subject to the exclusive appellate jurisdiction of the CTA.
RA No. 9282, amending RA No. 1125, is the governing law on the jurisdiction of the CTA. Section 7 provides that the CTA has exclusive appellate jurisdiction over tax refund claims in case the CIR fails to act on them.
This means that while the CIR has the right to hear a refund claim first, if he or she fails to act on it, it will be treated as a denial of the refund, and the CTA is the only entity that may review this ruling.
The power of the CTA to exercise its appellate jurisdiction does not preclude it from considering evidence that was not presented in the administrative claim in the BIR.
RA No. 1125 states that the CTA is a court of record. As such, parties are expected to litigate and prove every aspect of their case anew and formally offer all their evidence. No value is given to documentary evidence submitted in the BIR unless it is formally offered in the CTA. Thus, the review of the CTA is not limited to whether or not the CIR committed gross abuse of discretion, fraud, or error of law, as contended by the CIR. As evidence is considered and evaluated again, the scope of the CTA’s review covers factual findings.
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Question of law and question of fact
There is a question of law when it seeks to determine whether or not the legal conclusions of the lower courts from a given set of facts are correct, i.e., what is the law, given a particular set of circumstances? On the other hand, there is a question of fact when the issue involves the truth or falsity of the parties’ allegations. The test in determining if an issue is a question of law or fact is whether or not there is a need to evaluate evidence to resolve the issue. If there is a need to review the evidence or witnesses, it is a question of fact. If there is no need, it is a question of law.
*******
The fundamental rule is that the scope of our judicial review under Rule 45 of the Rules of Court is confined only to errors of law and does not extend to questions of fact. It is basic that where it is the sufficiency of evidence that is being questioned, there is a question of fact. Evidently, the CIR does not point out any specific provision of law that was wrongly interpreted by the CTA En Banc in the latter’s assailed Decision. Petitioner anchors it contention on the alleged existence of the sufficiency of evidence it had proffered to prove that Petron was involved in the perpetration of fraud in the transfer and utilization of the subject TCCs, an allegation that the CTA En Banc failed to consider. We have consistently held that it is not the function of this Court to analyze or weigh the evidence all over again, unless there is a showing that the findings of the lower court are totally devoid of support or are glaringly erroneous as to constitute palpable error or grave abuse of discretion. Such an exception does not obtain in the circumstances of this case.
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Findings and conclusions of the CTA.
The findings of fact of the CTA, as a highly specialized court, are accorded respect and are deemed final and conclusive.
*******
The findings and conclusions of the tax court are accorded great weight because of its expertise on the subject.
*******
It is apt to restate here the time-honored doctrine that the findings and conclusions of the CTA are accorded the highest respect and will not be lightly set aside. The CTA, by the very nature of its functions, is dedicated exclusively to the resolution of tax problems and has accordingly developed an expertise on the subject unless there has been an abusive or improvident exercise of authority.
The Court finds no abusive or improvident exercise of authority on the part of the CTA. Since there is no showing of gross error or abuse on the part of the CTA, and its findings are supported by substantial evidence, there is no cogent reason to disturb its findings and conclusions.
*******
It is apt to restate here the hornbook doctrine that the findings and conclusions of the CTA are accorded the highest respect and will not be lightly set aside. The CTA, by the very nature of its functions, is dedicated exclusively to the resolution of tax problems and has accordingly developed an expertise on the subject unless there has been an abusive or improvident exercise of authority.
Consequently, its conclusions will not be overturned unless there has been an abuse or improvident exercise of authority. Its findings can only be disturbed on appeal if they are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the Tax Court. In the absence of any clear and convincing proof to the contrary, this Court must presume that the CTA rendered a decision which is valid in every respect.
This Court finds no abusive or improvident exercise of authority on the part of the CTA in Division. Since there is no showing of gross error or abuse on the part of the CTA in Division, and its findings are supported by substantial evidence which were thoroughly considered during the trial, there is no cogent reason to disturb its findings and conclusions.
*******
This finding of fact is given respect, if not finality, as the CTA, which by the very nature of its functions of dedicating itself exclusively to the consideration of the tax problems has necessarily developed an expertise on the subject.
*******
The members of the CTA First Division were in the best position as trial judges to examine the documents submitted in relation thereto, and to make the proper findings thereon.
*******
It is well settled that factual findings of the CTA when supported by substantial evidence, will not be disturbed on appeal. Due to the nature of its functions, the tax court dedicates itself to the study and consideration of tax problems and necessarily develops expertise thereon. Unless there has been an abuse of discretion on its part, the Court accords the highest respect to the factual findings of the CTA.
The SC will not set aside lightly the conclusion reached by the CTA which, by the very nature of its function, is dedicated exclusively to the consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority.
*******
The well-settled doctrine is that factual findings of the CTA are binding upon this court and can only be disturbed on appeal if not supported by substantial evidence.
*******
True, the factual findings of the CTA are generally not disturbed on appeal when supported by substantial evidence and in the absence of gross error or grave abuse of discretion. However, the CTA’s application of the law to the facts of this controversy is an altogether different matter, for it involves a legal question. There is a question of law when the issue is the application of the law to a given set of facts. On the other hand, a question of fact involves the truth or falsehood of alleged facts. In the present case, the Court of Appeals ruled not on the truth or falsity of the facts found by the CTA, but on the latter’s application of the law on prescription.
*******
Thus, the Court held in Philippine Refining Co. vs. Court of Appeals (256 SCRA 66), that the CTA is a highly specialized body specifically created for the purpose of reviewing tax cases. As a matter of principle, this Court will not set aside the conclusion reached by an agency such as the CTA which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax problems, and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority.
*******
Jurisprudence has consistently shown that this Court accords the findings of fact by the CTA with the highest respect. In Sea-Land Service Inc. v. Court of Appeals this Court recognizes that the CTA, which by the very nature of its function is dedicated exclusively to the consideration of tax problems, has necessarily developed an expertise on the subject, and its conclusions will not be overturned unless there has been an abuse or improvident exercise of authority. Such findings can only be disturbed on appeal if they are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the Tax Court. In the absence of any clear and convincing proof to the contrary, this Court must presume that the CTA rendered a decision which is valid in every respect.
*******
This Court has consistently held that findings and conclusions of the CTA shall be accorded the highest respect and shall be presumed valid, in the absence of any clear and convincing proof to the contrary. The CTA, as a specialized court dedicated exclusively to the study and resolution of tax problems, has developed an expertise on the subject of taxation. As such, its decisions shall not be lightly set aside on appeal, unless this Court finds that the questioned decision is not supported by substantial evidence or there is a showing of abuse or improvident exercise of authority on the part of the Tax Court.
*******
The Court wishes to note and reiterate that it is not a trier of facts. The CIR mainly raised issues on factual findings which have already been thoroughly discussed below by both the CTA First Division and the CTA En Banc. Oft-repeated is the rule that the Court will not lightly set aside the conclusions reached by the CTA which, by the very nature of its function of being dedicated exclusively to the resolution of tax problems, has accordingly developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority. This Court recognizes that the CTA’s findings can only be disturbed on appeal if they are not supported by substantial evidence, or there is a showing of gross error or abuse on the part of the Tax Court. In the absence of any clear and convincing proof to the contrary, the Court must presume that the CTA rendered a decision which is valid in every respect. It has been the Court’s long-standing policy and practice to respect the conclusions of quasi-judicial agencies such as the CTA, a highly specialized body specifically created for the purpose of reviewing tax cases.
*******
The general rule is that findings of fact of the CTA are not to be disturbed by this Court unless clearly shown to be unsupported by substantial evidence. Since by the very nature of its functions, the CTA has developed an expertise to resolve tax issues, the Court will not set aside lightly the conclusions reached by them, unless there has been an abuse or improvident exercise of authority.
*******
We need not belabor that “findings and conclusions of the CTA are accorded the highest respect and will not be lightly set aside because by [its] very nature x x x, it is dedicated exclusively to the resolution of tax problems and has accordingly developed an expertise on the subject.”
*******
It is doctrinal that the Court will not lightly set aside the conclusions reached by the CTA which, by the very nature of its function of being dedicated exclusively to the resolution of tax problems, has developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority. We thus accord the findings of fact by the CTA with the highest respect. These findings of facts can only be disturbed on appeal if they are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the CTA. In the absence of any clear and convincing proof to the contrary, this Court must presume that the CTA rendered a decision which is valid in every respect.
*******
We adopt the above-mentioned findings of fact of the CTA Special First Division, as affirmed by the CTA EB. Whether TSC complied with the substantiation requirements of Section 112 of the NIRC and RR No. 3-88 is a question of fact, which could only be answered after reviewing, examining, evaluating, or weighing all over again the probative value of the evidence before the CTA, which this Court does not have reason to do in the present petition for review on certiorari. The findings of fact of the CTA are not to be disturbed unless clearly shown to be unsupported by substantial evidence. Since by the very nature of its functions, the CTA has developed an expertise on this subject, the Court will not set aside lightly the conclusions reached by them, unless there has been an abuse or improvident exercise of authority.
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CTA is a highly specialized body
The CTA is a highly specialized body that reviews tax cases and conducts trial de novo. Thus, without any showing that the findings of the CTA are unsupported by substantial evidence, its findings are binding on this Court.
*******
As a matter of principle, it is not advisable for this Court to set aside the conclusion reached by an agency such as the CTA which is, by the very nature of its functions, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of its authority.
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CTA: A quasi-judicial agency?
It has been the long standing policy and practice of this Court to respect the conclusions of quasi-judicial agencies, such as the CTA which, by the nature of its functions, is dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of its authority.
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Superiority of SC decisions over CTA decisions.
Even assuming that the Court reverses itself and pronounces the indispensability of presenting the quarterly ITRs to prove entitlement to the claimed refund, petitioner should not be prejudiced for relying on Philam. The CTA En Banc merely based its pronouncement on a case that does not enjoy the benefit of stare decis et non quieta movere which means “to adhere to precedents, and not to unsettle things which are established.” As between a CTA En Banc Decision (Millennium) and this Court’s Decision (Philam), it is elementary that the latter should prevail.
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Persuasive effect of decisions of subordinate courts, such as the CTA.
The CTA is not a mere superior administrative agency or tribunal but is a part of the judicial system of the Philippines. It was created by Congress pursuant to RA No. 1125, effective June 16, 1954, as a centralized court specializing in tax cases. It is a regular court vested with exclusive appellate jurisdiction over cases arising under the NIRC, the Tariff and Customs Code, and the Assessment Law.
Although only the decisions of the SC establish jurisprudence or doctrines in this jurisdiction, nonetheless the decisions of subordinate courts have a persuasive effect and may serve as judicial guides. It is even possible that such a conclusion or pronouncement can be raised to the status of a doctrine if, after it has been subjected to test in the crucible of analysis and revision the SC should find that it has merits and qualities sufficient for its consecration as a rule of jurisprudence.
Furthermore, as a matter of practice and principle, the SC will not set aside the conclusion reached by an agency such as the CTA, which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority on its part.
~~~Commissioner of Internal Revenue vs. Court of Appeals, et al., et seq. (G.R. Nos. 104151 and 105563, 10 March 1995, 2nd Div., J. Regalado)
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SC Minute Resolutions affirming CTA Decisions are not binding precedents.
A minute resolution is not a binding precedent.
At the outset, this Court’s minute resolution on Mirant (Phils.) Operations Corp. vs. CIR [CTA EB No. 40, 7 June 2005] is not a binding precedent.
Even if we had affirmed the CTA in Mirant, the doctrine laid down in that Decision cannot bind this Court in cases of a similar nature. There are differences in parties, taxes, taxable periods, and treaties involved; more importantly, the disposition of that case was made only through a minute resolution.
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The SC has no jurisdiction to review tax cases at the first instance without first letting the CTA to study and resolve the same.
Rule 4, Section 3(a), paragraph 1 of the RRCTA provides that the CTA First Division has exclusive appellate jurisdiction over decisions of the CIR on disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws administered by the BIR, to wit:
SEC. 3. Cases within the jurisdiction of the Court in Divisions. – The Court in Divisions shall exercise:
(a) Exclusive original or appellate jurisdiction to review by appeal the following:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;
The above provision means that the CTA exercises exclusive appellate jurisdiction to resolve decisions of the commissioner of internal revenue. There is no other court that can exercise such jurisdiction. “[I]t should be noted that the CTA has developed an expertise on the subject of taxation because it is a specialized court dedicated exclusively to the study and resolution of tax problems.” Thus, this Court has no jurisdiction to review tax cases at the first instance without first letting the CTA to study and resolve the same.
Under Rule 16, Section 1 of the RRCTA, this Court’s review of the decision of the CTA En Banc is limited in determining whether there is grave abuse of discretion on the part of the CTA in resolving the case. Basic is the rule that delving into factual issues in a petition for review on certiorari is not a proper recourse, since a Rule 45 petition is only limited to resolutions on questions of law.
Here, petitioner insists that the 10 parcels of idle land he sold on July 11, 2008 in a single transaction to Eagle I are capital assets. Thus, the said parcels of land are properly subject to capital gains tax and documentary stamp tax and not to the regular income tax and VAT. The CIR, on the other hand argues that the 10 parcels of land sold by petitioner are ordinary assets, hence should be subject to income tax and value-added tax. The CIR reasoned that the sole purpose of petitioner in acquiring the said lots was for the latter to make a profit. Further, the buying and selling of the said lots all occurred within the period of eight months and it involved sale transactions with a ready buyer.
To determine as to whether the transaction between petitioner and Eagle I is an isolated transaction or whether the 10 parcels of land sold by petitioner is classified as capital assets or ordinary assets should properly be resolved by the CTA. Thus, it would be more prudent for Us to remand the case to CTA for the latter to conduct a full-blown trial where both parties are given the chance to present evidence of their claim. Well-settled is the rule that this Court is not a trier of facts.
Considering Our foregoing disquisitions, the proper remedy is to remand the case to the CTA First Division and to order the Clerk of Court to assess the correct docket fees for the Petition for Review Ad Cautelam and for petitioner to pay the same within ten (10) days from receipt of the correct assessment of the clerk of court.
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Stare decisis.
Once a case has been decided one way, the rule is settled that any other case involving exactly the same point at issue should be decided in the same manner under the principle stare decisis et non quieta movere.
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The CIR’s power to interpret tax laws is not absolute.
Even conceding that the construction of a statute by the CIR is to be given great weight, the courts, which include the CTA, are not bound thereby if such construction is erroneous or is clearly shown to be in conflict with the governing statute or the Constitution or other laws. “It is the role of the Judiciary to refine and, when necessary, correct constitutional (and/or statutory) interpretation, in the context of the interactions of the three branches of the government.” It is furthermore the rule of long standing that this Court will not set aside lightly the conclusions reached by the CTA which, by the very nature of its functions, is dedicated exclusively to the resolution of tax problems and has, accordingly, developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority.
A revenue memorandum circular is an administrative ruling issued by the CIR to interpret tax laws. It is widely accepted that an interpretation by the executive officers, whose duty is to enforce the law, is entitled to great respect from the courts. However, such interpretation is not conclusive and will be disregarded if judicially found to be incorrect. Verily, courts will not tolerate administrative issuances that override, instead of remaining consistent and in harmony with, the law they seek to implement.
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If the pleadings or the evidence on record show that the claim is barred by prescription, the court must dismissed the same, even if prescription is not raised as a defense.
If the pleadings or the evidence on record show that the claim is barred by prescription, the court is mandated to dismiss the claim even if prescription is not raised as a defense. In Heirs of Valientes v. Ramas (G.R. No. 157852, 15 December 2010), we ruled that the CA may motu proprio dismiss the case on the ground of prescription despite failure to raise this ground on appeal. The court is imbued with sufficient discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a complete and just resolution of the case. More so, when the provisions on prescription were enacted to benefit and protect taxpayers from investigation after a reasonable period of time.
*******
We note that petitioner has raised the issue of prescription for the first time only before this Court. While we are mindful of the established rule of remedial law that the defense of prescription must be raised at the trial court that has also been applied for tax cases. Thus, as a rule, the failure to raise the defense of prescription at the administrative level prevents the taxpayer from raising it at the appeal stage.
This rule, however, is not absolute.
The facts of the present case are substantially identical to those in the 2014 case, Bank of the Philippine Islands (BPI) v. Commissioner of Internal Revenue. In that case, petitioner received an assessment notice from the BIR for deficiency DST based on petitioner’s SWAP transactions for the year 1985 on 16 June 1989. On 23 June 1989, BPI, through its counsel, filed a protest requesting the reinvestigation and/or reconsideration of the assessment for lack of legal or factual bases. Almost ten years later, the CIR, in a letter dated 4 August 1998, denied the protest. On 4 January 1999, BPI filed a Petition for Review with the CTA. On 23 February 1999, the CIR filed an Answer with a demand for BPI to pay the assessed DST. It was only when the case ultimately reached this Court that the issue of prescription was brought up. Nevertheless, the Court ruled that the CIR could no longer collect the assessed tax due to prescription. Basing its ruling on Section 1, Rule 9 of the Rules of Court and on jurisprudence, the Court held as follows:
In a Resolution dated 5 August 2013, the Court, through the Third Division, found that the assailed tax assessment may be invalidated because the statute of limitations on the collection of the alleged deficiency DST had already expired, conformably with Section 1, Rule 9 of the Rules of Court and the Bank of the Philippine Islands v. Commissioner of Internal Revenue decision. However, to afford due process, the Court required both BPI and CIR to submit their respective comments on the issue of prescription.
Only the CIR filed his comment on 9 December 2013. In his Comment, the CIR argues that the issue of prescription cannot be raised for the first time on appeal. The CIR further alleges that even assuming that the issue of prescription can be raised, the protest letter interrupted the prescriptive period to collect the assessed DST, unlike in the Bank of the Philippine Islands case.
x x x x
We deny the right of the BIR to collect the assessed DST on the ground of prescription.
Section 1, Rule 9 of the Rules of Court expressly provides that:
Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on recordthat the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by prior judgment or by the statute of limitations, the court shall dismiss the claim.
If the pleadings or the evidence on record show that the claim is barred by prescription, the court is mandated to dismiss the claim even if prescription is not raised as a defense. In Heirs of Valientes v. Ramas, we ruled that the CA may motu proprio dismiss the case on the ground of prescription despite failure to raise this ground on appeal. The court is imbued with sufficient discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a complete and just resolution of the case. More so, when the provisions on prescription were enacted to benefit and protect taxpayers from investigation after a reasonable period of time.
Thus, we proceed to determine whether the period to collect the assessed DST for the year 1985 has prescribed.
To determine prescription, what is essential only is that the facts demonstrating the lapse of the prescriptive period were sufficiently and satisfactorily apparent on the record either in the allegations of the plaintiff’s complaint, or otherwise established by the evidence. Under the then applicable Section 319(c) [now, 222(c)] of the National Internal Revenue Code (NIRC) of 1977, as amended, any internal revenue tax which has been assessed within the period of limitation may be collected by distraint or levy, and/or court proceeding within three years following the assessment of the tax. The assessment of the tax is deemed made and the three-year period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent by the BIR to the taxpayer.
In the present case, although there was no allegation as to when the assessment notice had been released, mailed or sent to BPI, still, the latest date that the BIR could have released, mailed or sent the assessment notice was on the date BPI received the same on 16 June 1989. Counting the three-year prescriptive period from 16 June 1989, the BIR had until 15 June 1992 to collect the assessed DST. But despite the lapse of 15 June 1992, the evidence established that there was no warrant of distraint or levy served on BPI’s properties, or any judicial proceedings initiated by the BIR.
The earliest attempt of the BIR to collect the tax was when it filed its answer in the CTA on 23 February 1999, which was several years beyond the three-year prescriptive period. However, the BIR’s answer in the CTA was not the collection case contemplated by the law. Before 2004 or the year Republic Act No. 9282 took effect, the judicial action to collect internal revenue taxes fell under the jurisdiction of the regular trial courts, and not the CTA. Evidently, prescription has set in to bar the collection of the assessed DST. (Emphasis supplied)
BPI thus provides an exception to the rule against raising the defense of prescription for the first time on appeal: the exception arises when the pleadings or the evidence on record show that the claim is barred by prescription.
In this case, the fact that the claim of the government is time-barred is a matter of record. As can be seen from the previous discussion on the determination of the prescription of the right of the government to claim deficiency DST, the conclusion that prescription has set in was arrived at using the evidence on record. The date of receipt of the assessment notice was not disputed, and the date of the attempt to collect was determined by merely checking the records as to when the Answer of the CIR containing the demand to pay the tax was filed.
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The 30-day period to appeal to the CTA is jurisdictional.
Without going into the merits of the decision absolving the respondent corporation of tax liability, We find that the assessment made by the CIR should be maintained, for the simple reason that when the petition for review was brought to the CTA by the respondent corporation, the said Court no longer had jurisdiction to entertain the same. The assessment had long become final. A petition for review should be presented, within the reglementary period, as provided for in Section 11, Republic Act No. 1125, which is “thirty (30) days from receipt of the assessment.” The thirty (30) day period is jurisdictional.
Failure to comply with the thirty-day statutory period would bar appeal and deprive the CTA of its jurisdiction to entertain and determine the correctness of the assessment .
~~~Commissioner of Internal Revenue vs. West Pacific Corp. (G.R. No. L-18804, 27 May 1965, En Banc, J. Paredes)
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Where an adverse ruling has been rendered by the CIR with reference to a disputed assessment or a claim for refund or credit, the taxpayer may appeal the same within thirty (30) days after receipt thereof.
*******
The CIR’s action in response to a taxpayer’s request for reconsideration or reinvestigation of the assessment constitutes the decision, the receipt of which will start the 30-day period for appeal.
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In case of inaction of administrative claim for the refund of input VAT (prior to TRAIN [RA No. 10963]).
Pertinently, the CTA law expressly provides that when the CIR fails to take action on the administrative claim, the “inaction shall be deemed a denial” of the application for tax refund or credit. The taxpayer-claimant must strictly comply with the mandatory period by filing an appeal with the CTA within thirty days from such inaction, otherwise, the court cannot validly acquire jurisdiction over it.
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Effect of the CTA’s lack of jurisdiction.
Due to the lack of jurisdiction of the CTA over the Nippon Express petition before it, all the proceedings held in that court must be void. The rule is that where there is want of jurisdiction over a subject matter, the judgment is rendered null and void. It follows that the decision and the resolution of the CTA Division, as well as the decision rendered by the CTA En Banc on appeal, should be vacated or set aside.
In sum, the CTA did not acquire jurisdiction over Nippon Express’ judicial claim considering that its petition was filed beyond the mandatory 30-day period of appeal. Logically, there is no reason to allow the petitioner to submit further evidence by way of official receipts to substantiate its zero-rated sales of services. Likewise, there is no need to pass upon the issue on whether sales invoices or documents other than official receipts can support a sale of service considering the CTA’s lack of jurisdiction. Even so, we find that VAT official receipts are indispensable to prove sales of services by a VAT-registered taxpayer. Consequently, the petitioner is not entitled to the claimed refund or TCC.
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When an appeal filed beyond the 30-day period may be allowed.
Section 228 of the 1997 NIRC … provides for the remedies of a taxpayer in case of an adverse final decision by the CIR on Disputed Assessment.
It bears to stress that the perfection of an appeal within the statutory period is a jurisdictional requirement and failure to do so renders the questioned decision or decree final and executory and no longer subject to review.
In the instant case, petitioner allegedly failed to observe the 30-day period within which to appeal the final decision of the CIR to the CTA. As records would show, petitioner admittedly received the FDDA on March 28, 2011. Reckoned from this date of receipt, it has until April27, 2011, within which to appeal with the CTA. However, petitioner filed its appeal (Petition for Review) only on July 26, 2011 or after the lapse of ninety-three (93) days from its receipt of the FDDA. It appears that petitioner’s filing of an appeal with the CTA was beyond the statutory period to appeal.
Nonetheless, this Court has on several occasions relaxed this strict requirement. We have on several instances allowed the filing of an appeal outside the period prescribed by law in the interest of justice, and in the exercise of its equity jurisdiction. Thus:
x x x [F]or a party to seek exception for its failure to comply strictly with the statutory requirements for perfecting its appeal, strong compelling reasons such as serving the ends of justice and preventing a grave miscarriage thereof must be shown, in order to warrant the Court’s suspension of the rules. Indeed, the Court is confronted with the need to balance stringent application of technical rules vis-a-vis strong policy considerations of substantial significance to relax said rules based on equity and justice. (Emphasis supplied; citation omitted) [Trans International v. Court of Appeals, 348 Phil. 830 (1998)]
Petitioner averred that after receiving the Amended Assessment Notice and the FDDA of the CIR on March 28, 2011, it filed, without the assistance of a counsel, a letter protesting the Amended Assessment Notice, with Regional Director Mr. Jaime B. Santiago, of RDO No. 049, Makati City. This letter of protest was filed by petitioner on April 11, 2011 or within the statutory period within which to appeal. Apparently, petitioner was merely relying on the statement in the said Amended Assessment Notice, which reads:
IF YOU DISAGREE WITH THIS ASSESSMENT, FILE YOUR PROTEST IN WRITING INDICATING YOUR REASONS WITH THE COMMISSIONER OF INTERNAL REVENUE, BIR DILIMAN, QUEZON CITY OR THE REGIONAL DIRECTOR WITHIN 30 DAYS FROM RECEIPT HEREOF: x x x
Thus, petitioner opted to file the protest with the Regional Director. On May 12, 2011, petitioner received a letter informing it that its filing of a letter of protest was an improper remedy. Therefore, petitioner, on May 27, 2011, filed a Petition for Relief from Judgment on the ground of mistake in good faith for relying on the statement provided in the Amended Assessment Notice. Petitioner contends that the CTA En Banc should have taken into consideration that the filing of the Petition for Relief from Judgment has stopped the running of the period to appeal. Petitioner insists that all of these incidents constitute excusable delay that justified its belated filing of an appeal with the CTA.
We sustain petitioner’s argument.
When petitioner sent a letter-reply dated April 8, 2011 to the Regional Director, it was actually protesting both the Amended Assessment Notice and the FDDA. The Amended Assessment Notice reflects the amended deficiency EWT of petitioner after reinvestigation while the FDDA reflects the Final Decision on: (a) petitioner’s deficiency EWT; (b) Final Withholding of VAT; and (c) Compromise Penalty. Since the deficiency EWT is a mere component of the aggregate tax due as reflected in the FDDA, then the FDDA cannot be considered as the final decision of the CIR as one of its components – the amended deficiency EWT – is still under protest.
Petitioner was correct when it protested with the Regional Director the deficiency EWT as per the Amended Assessment Notice sent by the BIR. However, instead of resolving the protest, the Regional Director informed the petitioner that it was an improper remedy. A ruling totally inconsistent with the statement reflected in the Amended Assessment Notice, which states that protest must be filed with the CIR or the Regional Director within 30 days from receipt thereof. Apparently, the Regional Director has hastily presumed that petitioner was already protesting the FDDA, which incidentally was received by petitioner on the same date as that of the Amended Assessment Notice.
With petitioner’s pending protest with the Regional Director on the amended EWT, then technically speaking, there was yet no final decision that was issued by the CIR that is appealable to the CTA. It is still incumbent for the Regional Director to act upon the protest on the amended EWT- whether to grant or to deny it. Only when the CIR settled (deny/grant) the protest on the deficiency EWT could there be a final decision on petitioner’s liabilities. And only when there is a final decision of the CIR, would the prescriptive period to appeal with the CTA begin to run.
Hence, petitioner’s belated filing of an appeal with the CTA is not without strong, compelling reason. We could say that petitioner was merely exhausting all administrative remedies available before seeking recourse to the judicial courts. While the rule is that a taxpayer has 30 days to appeal to the CTA from the final decision of the CIR, the said rule could not be applied if the Assessment Notice itself clearly states that the taxpayer must file a protest with the CIR or the Regional Director within 30 days from receipt of the Assessment Notice. Under the circumstances obtaining in this case, we opted not to apply the statutory period within which to appeal with the CTA considering that no final decision yet was issued by the CIR on petitioner’s protest. The subsequent appeal taken by petitioner is from the inaction of the CIR on its protest.
In this case, petitioner’s appeal with the CTA was basically anchored on two points of contention, to wit: (a) the BIR’s assessment of EWT which has no basis in fact and in law. Petitioner argues that it is not a top 10,000 Corporation, hence, not all its purchases are subject to the 1% and 2% EWT; and (b) the withholding of the VAT on royalty payments for the software application it purchased from a non-resident foreign corporation. Petitioner argues that it is only a reseller (engaged in the buy and sell) of Microsoft products and not a licensor. Thus, the income payments made to Microsoft do not constitute royalty income subject to withholding VAT but merely a business income. It maintained that even RMC No. 44-2005 issued by the BIR on September 7, 2005 does not consider payments for computer software as royalties but business income. And lastly, petitioner argues that RMC No. 7-2003 issued on November 18, 2003, which was relied upon by the BIR in assessing it with deficiency withholding tax on VAT on royalties, does not expressly state when it would take effect. Thus, petitioner opined that it cannot be given retroactive effect (to cover its case), otherwise, it will impose liabilities not existing at the time of its passage.
If petitioner’s right to appeal would be curtailed by the mere expediency of holding that it had belatedly filed its appeal, then this Court as the final arbiter of justice would be deserting its avowed objective, that is to dispense justice based on the merits of the case and not on a mere technicality.
Since the CTA First Division has the exclusive appellate jurisdiction over decisions of the CIR on disputed assessment it is just proper to remand the case to it in order to determine whether petitioner is indeed liable to pay the deficiency withholding tax on VAT on royalties. It should be noted that the CTA has developed an expertise on the subject of taxation because it is a specialized court dedicated exclusively to the study and resolution of tax problems. Thus, this Court has no jurisdiction to review tax cases at the first instance without first letting the CTA study and resolve the same.
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Jurisdiction; Distinguished from the exercise thereof.
The power of a court to hear and decide a controversy is called its jurisdiction, which includes the power to determine whether or not it has the authority to hear and determine the controversy presented, and the right to decide whether or not the statement of facts that confer jurisdiction exists, as well as all other matters that arise in the case legitimately before the court. Jurisdiction imports the power and authority to declare the law, to expound or to apply the laws exclusive of the idea of the power to make the laws, to hear and determine issues of law and of fact, the power to hear, determine, and pronounce judgment on the issues before the court, and the power to inquire into the facts, to apply the law, and to pronounce the judgment. But judicial power is to be distinguished from jurisdiction in that the former cannot exist without the latter and must of necessity be exercised within the scope of the latter, not beyond it.
Jurisdiction is a matter of substantive law because it is conferred only by law, as distinguished from venue, which is a purely procedural matter. The conferring law may be the Constitution, or the statute organizing the court or tribunal, or the special or general statute defining the jurisdiction of an existing court or tribunal, but it must be in force at the time of the commencement of the action. Jurisdiction cannot be presumed or implied, but must appear clearly from the law or it will not be held to exist, but it may be conferred on a court or tribunal by necessary implication as well as by express terms. It cannot be conferred by the agreement of the parties; or by the court’s acquiescence; or by the erroneous belief of the court that it had jurisdiction; or by the waiver of objections; or by the silence of the parties.
The three essential elements of jurisdiction are: one, that the court must have cognizance of the class of cases to which the one to be adjudged belongs; two, that the proper parties must be present; and, three, that the point decided must be, in substance and effect, within the issue. The test for determining jurisdiction is ordinarily the nature of the case as made by the complaint and the relief sought; and the primary and essential nature of the suit, not its incidental character, determines the jurisdiction of the court relative to it.
Jurisdiction may be classified into original and appellate, the former being the power to take judicial cognizance of a case instituted for judicial action for the first time under conditions provided by law, and the latter being the authority of a court higher in rank to re-examine the final order or judgment of a lower court that tried the case elevated for judicial review. Considering that the two classes of jurisdiction are exclusive of each other, one must be expressly conferred by law. One does not flow, nor is inferred, from the other.
Jurisdiction is to be distinguished from its exercise. When there is jurisdiction over the person and subject matter, the decision of all other questions arising in the case is but an exercise of that jurisdiction. Considering that jurisdiction over the subject matter determines the power of a court or tribunal to hear and determine a particular case, its existence does not depend upon the regularity of its exercise by the court or tribunal. The test of jurisdiction is whether or not the court or tribunal had the power to enter on the inquiry, not whether or not its conclusions in the course thereof were correct, for the power to decide necessarily carries with it the power to decide wrongly as well as rightly. In a manner of speaking, the lack of the power to act at all results in a judgment that is void; while the lack of the power to render an erroneous decision results in a judgment that is valid until set aside. That the decision is erroneous does not divest the court or tribunal that rendered it of the jurisdiction conferred by law to try the case. Hence, if the court or tribunal has jurisdiction over the civil action, whatever error may be attributed to it is simply one of judgment, not of jurisdiction; appeal, not certiorari, lies to correct the error.
~~~Salvador, et al. vs. Patricia, Inc., et al. (G.R. No. 195834, 9 November 2016, 1st Div., J. Bersamin)
N.B.: This is not a tax case.
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The constitutional rule-making authority of the SC.
The 2005 CTA Rules were approved by the Court En Banc on November 22, 2005, in A.M. No. 05-11-07-CTA, pursuant to its constitutional rule-making authority. Under Article VIII, Section 5, paragraph 5 of the 1987 Constitution:
Section 5. The Supreme Court shall have the following powers:
. . . .
(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts, the admission to the practice of law, the Integrated Bar, and legal assistance to the underprivileged. Such rules shall provide a simplified and inexpensive procedure for the speedy disposition of cases, shall be uniform for all courts of the same grade, and shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court. (Emphases supplied)
In Metro Construction, Inc. v. Chatham Properties, Inc. [418 Phil. 176 (2001)], this Court held:
There is no controversy on the principle that the right to appeal is statutory. However, the mode or manner by which this right may be exercised is a question of procedure which may be altered and modified provided that vested rights are not impaired. The Supreme Court is bestowed by the Constitution with the power and prerogative, inter alia, to promulgate rules concerning pleadings, practice and procedure in all courts, as well as to review rules of procedure of special courts and quasi-judicial bodies, which, however, shall remain in force until disapproved by the Supreme Court. This power is constitutionally enshrined to enhance the independence of the Supreme Court. (Citation omitted)
Carpio-Morales v. Court of Appeals [772 Phil. 672 (2015)] elucidated that while Congress has the authority to establish the lower courts, including the CTA, and to define, prescribe, and apportion their jurisdiction, the authority to promulgate rules of procedure is exclusive to this Court:
A court’s exercise of the jurisdiction it has acquired over a particular case conforms to the limits and parameters of the rules of procedure duly promulgated by this Court. In other words, procedure is the framework within which judicial power is exercised. In Manila Railroad Co. v. Attorney-General, the Court elucidated that “[t]he power or authority of the court over the subject matter existed and was fixed before procedure in a given cause began. Procedure does not alter or change that power or authority; it simply directs the manner in which it shall be fully and justly exercised. To be sure, in certain cases, if that power is not exercised in conformity with the provisions of the procedural law, purely, the court attempting to exercise it loses the power to exercise it legally. This does not mean that it loses jurisdiction of the subject matter.”
While the power to define, prescribe, and apportion the jurisdiction of the various courts is, by constitutional design, vested unto Congress, the power to promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts belongs exclusively to this Court. (Emphasis in the original, citations omitted)
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The 30-day period is not tolled by the filing of a motion of reconsideration of the denial of the administrative protest.
Section 228 of the 1997 Tax Code provides that an assessment
x x x may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable. (underscoring supplied)
In the case at bar, petitioner’s administrative protest was denied by Final Decision on Disputed Assessment dated August 2, 2005 issued by respondent and which petitioner received on August 4, 2005. Under the above-quoted Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal respondent’s denial of its protest to the CTA.
Since petitioner received the denial of its administrative protest on August 4, 2005, it had until September 3, 2005 to file a petition for review before the CTA Division. It filed one, however, on October 20, 2005, hence, it was filed out of time. For a motion for reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to the CTA.
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The CTA exercises exclusive appellate jurisdiction to review by appeal decisions of the CIR in cases involving disputed assessments.
The CTA, being a court of special jurisdiction, can take cognizance only of matters that are clearly within its jurisdiction. Section 7 of RA 9282 provides:
Sec. 7. Jurisdiction. — The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial; (Emphasis supplied)
x x x x
The word “decisions” in the above quoted provision of RA 9282 has been interpreted to mean the decisions of the CIR on the protest of the taxpayer against the assessments. Corollary thereto, Section 228 of the NIRC provides for the procedure for protesting an assessment. It states:
SECTION 228. Protesting of Assessment. – When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, That a preassessment notice shall not be required in the following cases:
(a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or
(d) When the excise tax due on excisable articles has not been paid; or
(e) When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.
In the instant case, petitioner timely filed a protest after receiving the PAN. In response thereto, the BIR issued a Formal Letter of Demand with Assessment Notices. Pursuant to Section 228 of the NIRC, the proper recourse of petitioner was to dispute the assessments by filing an administrative protest within 30 days from receipt thereof. Petitioner, however, did not protest the final assessment notices. Instead, it filed a Petition for Review with the CTA. Thus, if we strictly apply the rules, the dismissal of the Petition for Review by the CTA was proper.
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The 30-day period to appeal is not merely directory but mandatory and it is beyond the power of the courts to extend the same; The options to file a petition for review or to await the CIR’s decision on disputed assessment are mutually exclusive and resort to one bars the application of the other.
Petitioner’s failure to file a petition for review with the CTA 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.
The CTA is a court of special jurisdiction and can only take cognizance of such matters as are clearly within its jurisdiction. Section 7 of RA No. 9282, amending RA No. 1125, otherwise known as the Law Creating the Court of Tax Appeals, provides:
Sec. 7. Jurisdiction. — The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial;
Also, Section 3, Rule 4 and Section 3(a), Rule 8 of the Revised Rules of the Court of Tax Appeals state:
RULE 4
Jurisdiction of the Court
x x x x
SECTION 3. Cases Within the Jurisdiction of the Court in Divisions. — The Court in Divisions shall exercise:
(a) Exclusive original or appellate jurisdiction to review by appeal the following:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; and Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code;
x x x x
RULE 8
Procedure in Civil Cases
x x x x
SECTION 3. Who May Appeal; Period to File Petition. — (a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period prescribed by law from payment or collection of the taxes. (n)
From the foregoing, it is clear that the jurisdiction of the CTA has been expanded to include not only decisions or rulings but inaction as well of the CIR. The decisions, rulings or inaction of the Commissioner are necessary in order to vest the CTA with jurisdiction to entertain the appeal, provided it is filed within 30 days after the receipt of such decision or ruling, or within 30 days after the expiration of the 180-day period fixed by law for the Commissioner to act on the disputed assessments. This 30-day period within which to file an appeal is jurisdictional and failure to comply therewith would bar the appeal and deprive the CTA of its jurisdiction to entertain and determine the correctness of the assessments. Such period is not merely directory but mandatory and it is beyond the power of the courts to extend the same.
In case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: 1) file a petition for review with the CTA 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 CTA within 30 days after receipt of a copy of such decision. However, these options are mutually exclusive, and resort to one bars the application of the other.
In the instant case, the Commissioner failed to act on the disputed assessment within 180 days from date of submission of documents. Thus, petitioner opted to file a petition for review before the CTA. Unfortunately, the petition for review was filed out of time, i.e., it was filed more than 30 days after the lapse of the 180-day period. Consequently, it was dismissed by the Court of Tax Appeals for late filing. Petitioner did not file a motion for reconsideration or make an appeal; hence, the disputed assessment became final, demandable and executory.
Based on the foregoing, petitioner can not now claim that the disputed assessment is not yet final as it remained unacted upon by the Commissioner; that it can still await the final decision of the Commissioner and thereafter appeal the same to the CTA. This legal maneuver cannot be countenanced. After availing the first option, i.e., filing a petition for review which was however filed out of time, petitioner can not successfully resort to the second option, i.e., awaiting the final decision of the Commissioner and appealing the same to the CTA, on the pretext that there is yet no final decision on the disputed assessment because of the Commissioner’s inaction.
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Section 228 of the NIRC is instructional as to the remedies of a taxpayer in case of the inaction of the Commissioner on the protested assessment, to wit:
SEC. 228. Protesting of Assessment. – x x x
x x x x
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise the decision shall become final, executory and demandable. (Emphasis supplied).
Respondent, however, insists that in case of the inaction by the Commissioner on the protested assessment within the 180-day reglementary period, petitioner should have appealed the inaction to the CTA. Respondent maintains that due to Lascona’s failure to file an appeal with the CTA after the lapse of the 180-day period, the assessment became final and executory.
We do not agree.
In RCBC v. CIR, the Court has held that in case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: (1) file a petition for review with the CTA 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 CTA within 30 days after receipt of a copy of such decision.
This is consistent with Section 3 A (2), Rule 4 of the Revised Rules of the Court of Tax Appeals, to wit:
SEC. 3. Cases within the jurisdiction of the Court in Divisions. – The Court in Divisions shall exercise:
(a) Exclusive original or appellate jurisdiction to review by appeal the following:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; and Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code;
(Emphasis ours)
In arguing that the assessment became final and executory by the sole reason that petitioner failed to appeal the inaction of the Commissioner within 30 days after the 180-day reglementary period, respondent, in effect, limited the remedy of Lascona, as a taxpayer, under Section 228 of the NIRC to just one, that is – to appeal the inaction of the Commissioner on its protested assessment after the lapse of the 180-day period. This is incorrect.
As early as the case of CIR v. Villa [130 Phil. 3 (1968)], it was already established that the word “decisions” in paragraph 1, Section 7 of RA No. 1125, quoted above, has been interpreted to mean the decisions of the CIR on the protest of the taxpayer against the assessments. Definitely, said word does not signify the assessment itself. We quote what this Court said aptly in a previous case:
In the first place, we believe the respondent court erred in holding that the assessment in question is the respondent Collector’s decision or ruling appealable to it, and that consequently, the period of thirty days prescribed by section 11 of Republic Act No. 1125 within which petitioner should have appealed to the respondent court must be counted from its receipt of said assessment. Where a taxpayer questions an assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer) believes he is not liable therefor, the assessment becomes a “disputed assessment” that the Collector must decide, and the taxpayer can appeal to the Court of Tax Appeals only upon receipt of the decision of the Collector on the disputed assessment, . . .
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.
It must be emphasized, however, that 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.
Accordingly, considering that Lascona opted to await the final decision of the Commissioner on the protested assessment, it then has the right to appeal such final decision to the Court by filing a petition for review within thirty days after receipt of a copy of such decision or ruling, even after the expiration of the 180-day period fixed by law for the CIR to act on the disputed assessments. Thus, Lascona, when it filed an appeal on April 12, 1999 before the CTA, after its receipt of the Letter 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.
Finally, the CIR should be reminded that taxpayers cannot be left in quandary by its inaction on the protested assessment. It is imperative that the taxpayers are informed of its action in order that the taxpayer should then at least be able to take recourse to the tax court at the opportune time. As correctly pointed out by the tax court:
x x x to adopt the interpretation of the respondent will not only sanction inefficiency, but will likewise condone the Bureau’s inaction. This is especially true in the instant case when despite the fact that respondent found petitioner’s arguments to be in order, the assessment will become final, executory and demandable for petitioner’s failure to appeal before us within the thirty (30) day period.
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An option not to appeal the CIR’s inaction over sa disputed assessment.
Section 228 of the Tax Code amended Section 229 of the Old Tax Code by adding, among others, the 180-day rule. This new provision presumably avoids the situation in the past when a taxpayer would be held hostage by the Commissioner’s inaction on his or her protest. Under the Old Tax Code, in conjunction with Section 11 of RA No. 1125, only the decision or ruling of the Commissioner on a disputed assessment is appealable to the CTA. Consequently, the taxpayer then had to wait for the Commissioner’s action on his or her protest, which more often was long-delayed. With the amendment introduced by RA No. 8424, the taxpayer may now immediately appeal to the CTA in case of inaction of the Commissioner for 180 days from submission of supporting documents.
RA No. 9282, or the new CTA Law, which took effect on April 23, 2004, amended RA No. 1125 and included a provision complementing Section 228 of the Tax Code, as follows:
Section 7. Jurisdiction. — The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
. . . .
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial[.] (Emphasis supplied)
Under Section 7(a)(2) above, it is expressly provided that the “inaction” of the Commissioner on his or her failure to decide a disputed assessment within 180 days is “deemed a denial” of the protest.
In Rizal Commercial Banking Corporation v. CIR, this Court, by way of an obiter, ruled as follows:
In case the Commissioner failed to act on the disputed assessment within the 180-day period from the date of submission of documents, a taxpayer can either: 1) file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or 2) await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. However, these options are mutually exclusive, and resort to one bars the application of the other.
In Rizal Commercial Banking Corporation, the Commissioner failed to act on the disputed assessment within 180 days from date of submission of documents. Thus, Rizal Commercial Banking Corporation opted to file a Petition for Review before the CTA. Unfortunately, it was filed more than 30 days following the lapse of the 180-day period. Consequently, it was dismissed by the CTA for late filing. Rizal Commercial Banking Corporation did not file a Motion for Reconsideration or make an appeal; hence, the disputed assessment became final and executory.
Subsequently, Rizal Commercial Banking Corporation filed a petition for relief from judgment on the ground of excusable negligence, but this was denied by the CTA for lack of merit. This Court affirmed the CTA. It further held that even if the negligence of Rizal Commercial Banking Corporation’s counsel was excusable and the petition for relief from judgment would be granted, it would not fare any better because its action for cancellation of assessments had already prescribed since its Petition was filed beyond the 180+30-day period stated in Section 228.
Rizal Commercial Banking Corporation then filed a Motion for Reconsideration. Denying the motion, this Court held that it could not anymore “claim that the disputed assessment is not yet final as it remained unacted upon by the Commissioner; that it can still await the final decision of the Commissioner and thereafter appeal the same to the Court of Tax Appeals.” Since it had availed of the first option by filing a petition for review because of the Commissioner’s inaction, although late, it could no longer resort to the second option.
Rizal Commercial Banking Corporation referred to Rule 4, Section 3(a)(2) of the 2005 RRCTA, or the 2005 CTA Rules, which provides:
Section 3. Cases Within the Jurisdiction of the Court in Divisions. — The Court in Divisions shall exercise:
(a) Exclusive original or appellate jurisdiction to review by appeal the following:
. . . .
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; and Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code[.] (Emphasis supplied)
In Lascona Land Co., Inc. v. CIR,[173] this Court reaffirmed Rizal Commercial Banking Corporation, viz:
In arguing that the assessment became final and executory by the sole reason that petitioner failed to appeal the inaction of the Commissioner within 30 days after the 180-day reglementary period, respondent, in effect, limited the remedy of Lascona, as a taxpayer, under Section 228 of the NIRC to just one, that is — to appeal the inaction of the Commissioner on its protested assessment after the lapse of the 180-day period. This is incorrect.
. . . .
[W]hen 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.
This Court, nonetheless, stressed that these two (2) options of the taxpayer, i.e., to (1) file a petition for review before the CTA within 30 days after the expiration of the 180-day period; or (2) to await the final decision of the Commissioner on the disputed assessment and appeal this final decision to the CTA within 30 days from receipt of it, “are mutually exclusive and resort to one bars the application of the other.”
Rule 4, Section 3(a)(2) of the 2005 CTA Rules clarifies Section 7(a)(2) of RA No. 9282 by stating that the “deemed a denial” rule is only for the “purposes of allowing the taxpayer to appeal” in case of inaction of the Commissioner and “does not necessarily constitute a formal decision of the Commissioner.” Furthermore, the same provision clarifies that the taxpayer may choose to wait for the final decision of the Commissioner even beyond the 180-day period, and appeal from it.
The 2005 CTA Rules were approved by the Court En Banc on November 22, 2005, in A.M. No. 05-11-07-CTA, pursuant to its constitutional rule-making authority. Under Article VIII, Section 5, paragraph 5 of the 1987 Constitution:
Section 5. The Supreme Court shall have the following powers:
. . . .
(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts, the admission to the practice of law, the Integrated Bar, and legal assistance to the underprivileged. Such rules shall provide a simplified and inexpensive procedure for the speedy disposition of cases, shall be uniform for all courts of the same grade, and shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court. (Emphases supplied)
In Metro Construction, Inc. v. Chatham Properties, Inc. [418 Phil. 176 (2001)], this Court held:
There is no controversy on the principle that the right to appeal is statutory. However, the mode or manner by which this right may be exercised is a question of procedure which may be altered and modified provided that vested rights are not impaired. The Supreme Court is bestowed by the Constitution with the power and prerogative, inter alia, to promulgate rules concerning pleadings, practice and procedure in all courts, as well as to review rules of procedure of special courts and quasi-judicial bodies, which, however, shall remain in force until disapproved by the Supreme Court. This power is constitutionally enshrined to enhance the independence of the Supreme Court. (Citation omitted)
Carpio-Morales v. Court of Appeals [772 Phil. 672 (2015)] elucidated that while Congress has the authority to establish the lower courts, including the CTA, and to define, prescribe, and apportion their jurisdiction, the authority to promulgate rules of procedure is exclusive to this Court:
A court’s exercise of the jurisdiction it has acquired over a particular case conforms to the limits and parameters of the rules of procedure duly promulgated by this Court. In other words, procedure is the framework within which judicial power is exercised. In Manila Railroad Co. v. Attorney-General, the Court elucidated that “[t]he power or authority of the court over the subject matter existed and was fixed before procedure in a given cause began. Procedure does not alter or change that power or authority; it simply directs the manner in which it shall be fully and justly exercised. To be sure, in certain cases, if that power is not exercised in conformity with the provisions of the procedural law, purely, the court attempting to exercise it loses the power to exercise it legally. This does not mean that it loses jurisdiction of the subject matter.”
While the power to define, prescribe, and apportion the jurisdiction of the various courts is, by constitutional design, vested unto Congress, the power to promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts belongs exclusively to this Court. (Emphasis in the original, citations omitted)
Section 228 of the Tax Code and Section 7 of RA No. 9282 should be read in conjunction with Rule 4, Section 3(a)(2) of the 2005 CTA Rules. In other words, the taxpayer has the option to either elevate the case to the CTA if the Commissioner does not act on his or her protest, or to wait for the Commissioner to decide on his or her protest before he or she elevates the case to the CTA. This construction is reasonable considering that Section 228 states that the decision of the Commissioner not appealed by the taxpayer becomes final, executory, and demandable.
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The appealable decision to the CTA; Exhaustion of administrative remedies.
Appealable to the Tax Court is a decision that refers not to the assessment itself, but to one made on the protest against such assessment. The CIR’s action in response to a taxpayer’s request for reconsideration or reinvestigation of the assessment constitutes the decision, the receipt of which will start the 30-day period for appeal.
Section 229 (now Section 228, NIRC of 1997) does not prevent a taxpayer from exhausting administrative remedies by filing a request for reconsideration, then a request for reinvestigation. Furthermore, under Section 7(1) of RA 1125, as amended, the Tax Court exercised exclusive appellate jurisdiction to review not the assessments themselves, but the decisions involving disputed ones arising under the NIRC.
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Even when the taxpayer, upon request from the BIR, had copies of the assessment notices only after the service of the PCL, the said assessment must still be the subject of a protest, before going to the CTA. Otherwise, there would be a violation of the doctrine of exhaustion of administrative remedies.
It bears emphasis that the CTA, being a court of special jurisdiction, can take cognizance only of matters that are clearly within its jurisdiction. Section 7 of RA No. 1125, as amended by RA No. 9282, specifically provides:
SEC. 7. Jurisdiction. — The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws, administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal. Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial;
x x x.
In relation thereto, Section 228 of RA No. 8424 or The Tax Reform Act of 1997, as amended, implemented by RR No. 12-99, provides for the procedure to be followed in issuing tax assessments and in protesting the same. Thus:
Section 228. Protesting of Assessment. — When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, That a pre-assessment notice shall not be required in the following cases:
(a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or
(d) When the excise tax due on excisable articles has not been paid; or
(e) When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice.
If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant, supporting documents shall have been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.
On the other hand, Section 3.1.5 of RR No. 12-99, implementing Section 228 above, provides:
3.1.5. Disputed Assessment. — The taxpayer or his duly authorized representative may protest administratively against the aforesaid formal letter of demand and assessment notice within thirty (30) days from date of receipt thereof. . .
x x x x
If the taxpayer fails to file a valid protest against the formal letter of demand and assessment notice within thirty (30) days from date of receipt thereof, the assessment shall become final, executory and demandable.
If the protest is denied, in whole or in part, by the Commissioner, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the date of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable.
In general, if the protest is denied, in whole or in part, by the Commissioner or his duly authorized representative, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from date of receipt of the said decision, otherwise, the assessment shall become final executory and demandable: Provided, however, that if the taxpayer elevates his protest to the Commissioner within thirty (30.) days from date of receipt of the final decision of the Commissioner’s duly authorized representative, the latter’s decision shall not be considered final, executory and demandable, in which case, the protest shall be decided by the Commissioner.
If the Commissioner or his duly authorized representative fails to act on the taxpayer’s protest within one hundred eighty (180) days from date of submission, by the taxpayer, of the required documents in support of his protest, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the lapse of the said 180-day period, otherwise the assessment shall become final, executory and demandable. (Emphasis ours)
It is clear from the said provisions of the law that a protesting taxpayer like V.Y. Domingo has only three options to dispute an assessment:
1. If the protest is wholly or partially denied by the CIR or his authorized representative, then the taxpayer may appeal to the CTA within 30 days from receipt of the whole or partial denial of the protest;
2. If the protest is wholly or partially denied by the CIR’s authorized representative, then the taxpayer may appeal to the CIR within 30 days from receipt of the whole or partial denial of the protest;
3. If the CIR or his authorized representative failed to act upon the protest within 180 days from submission of the required supporting documents, then the taxpayer may appeal to the CTA within 30 days from the lapse of the 180-day period.
In this case, records show that on August 11, 2011, V.Y. Domingo received the PCL issued by petitioner CIR informing it of Assessment Notice Nos. 32-06-IT-0242 and 32-06-VT-0243 dated November 18, 2010. On September 12, 2011, the former sent a letter request to the BIR requesting for certified true copies of the said Assessment Notices.
However, instead of filing an administrative protest against the assessment notice within thirty (30) days from its receipt of the requested copies of the Assessment Notices on September 15, 2011, V.Y. Domingo elected to file its petition for review before the CTA First Division on September 16, 2011, ratiocinating that the issuance of the PCL and the alleged finality of the terms used for demanding payment therein proved that its Request for Re-evaluation/Re-investigation and Reconsideration had been denied by the CIR.
That V.Y. Domingo believed that the PCL “undeniably shows” the intention of the CIR to make it as its final “decision” did not give it cause of action to disregard the procedure set forth by the law in protesting tax assessments and act prematurely by filing a petition for review before the courts. The word “decisions” in the aforementioned provision of RA No. 9282 has been interpreted to mean the decisions of the CIR on the protest of the taxpayer against the assessments. Definitely, said word does not signify the assessment itself. Where a taxpayer questions an assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer) believes he is not liable therefor, the assessment becomes a “disputed assessment” that the Collector must decide, and the taxpayer can appeal to the CTA only upon receipt of the decision of the Collector on the disputed assessment.
Admitting for the sake of argument the claim of V.Y. Domingo in its Comment — that its case does not involve an appeal from a decision of the CIR on a disputed assessment since in the first place, there is no disputed assessment to speak of — admits the veracity of petitioner CIR’s claim: there being no disputed assessment to speak of when V.Y. Domingo filed its petition for review before the CTA First Division, the latter had no jurisdiction to entertain the same. Thus, the latter’s dismissal of the petition for review was proper.
Evidently, V.Y. Domingo’s immediate recourse to the CTA First Division was in violation of the doctrine of exhaustion of administrative remedies.
Under the doctrine of exhaustion of administrative remedies, before a party is allowed to seek the intervention of the court, he or she should have availed himself or herself of all the means of administrative processes afforded him or her. Section 228 of the Tax Code requires taxpayers to exhaust administrative remedies by filing a request for reconsideration or reinvestigation within 30 days from receipt of the assessment. Exhaustion of administrative remedies is required prior to resort to the CTA precisely to give the Commissioner the opportunity to “re-examine its findings and conclusions” and to decide the issues raised within her competence.
V.Y. Domingo posits that its case is an exception to the rule on exhaustion of administrative remedies and the rule on primary jurisdiction as it cannot be expected to be able to file an administrative protest to the Assessment Notices which it never received. It expressly admitted that it did not file an administrative protest, based on its alleged non-receipt of the same. Citing the case of Allied Banking Corporation v. CIR, wherein this Court ruled that the filing of therein petitioner of a petition for review with the CTA without first contesting the FAN issued against it was an exception to the rule on exhaustion of administrative remedies, V.Y. Domingo maintains that in its case, the CIR was similarly estopped from claiming that the filing of the petition for review was premature.
However, as previously mentioned, the records of the case show that V.Y. Domingo did receive the certified true copies of the Assessment Notices it requested on September 15, 2011, the day before it filed its petition for review before the CTA First Division. V.Y. Domingo cannot now assert that its recourse to the court was based on its non-receipt of the Assessment Notices that it requested.
Likewise, this Court cannot apply the ruling in Allied Banking Corporation v. CIR, wherein the demand letter sent by the CIR was worded as follows:
It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to delinquency. This is our final decision based on investigation. If you disagree, you may appeal the final decision within thirty (30) days from receipt hereof, otherwise said deficiency tax assessment shall become final, executory and demandable.
The ruling of this Court in the said case was grounded on the language used and the tenor of the demand letter, which indicate that it was the final decision of the CIR on the matter. The words used, specifically the words “final decision” and “appeal,” taken together led therein petitioner to believe that the FLD with Assessment Notices was, in fact, the final decision of the CIR on the letter-protest it filed and that the available remedy was to appeal the same to the CTA.
Comparing the wording of the above-quoted demand letter with that sent by the CIR to V.Y. Domingo in the instant case, it becomes apparent that the latter’s invocation of the ruling in the Allied Banking Corporation case in misguided as the foregoing statements and terms are not present in the subject PCL dated August 10, 2011.
What is evident in the instant case is that Assessment Notice Nos. 32-06-IT-0242 and 32-06-VT-0243 dated November 18, 2010 have not been disputed by V.Y. Domingo at the administrative level without any valid basis therefor, in violation of the doctrine of exhaustion of administrative remedies. To reiterate, what is appealable to the CTA are decisions of the CIR on the protest of the taxpayer against the assessments. There being no protest ruling by the CIR when V.Y. Domingo’s petition for review was filed, the dismissal of the same by the CTA First Division was proper. As correctly put by Associate Justice Roman G. Del Rosario in his Dissenting Opinion, “(C)learly, petitioner did not exhaust the administrative remedy provided under Section 228 of the NIRC of 1997, as amended, and RR No. 12-99 which is fatal to its cause. Consequently, the non-filing of the protest against the FLD let to the finality of the assessment.”
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An exception to the rule on exhaustion of administrative remedies: Estoppel on the part of the BIR.
A careful reading of the Formal Letter of Demand with Assessment Notices leads us to agree with petitioner that the instant case is an exception to the rule on exhaustion of administrative remedies, i.e., estoppel on the part of the administrative agency concerned.
In the case of Vda. De Tan v. Veterans Backpay Commission [105 Phil. 377 (1959)], the respondent contended that before filing a petition with the court, petitioner should have first exhausted all administrative remedies by appealing to the Office of the President. However, we ruled that respondent was estopped from invoking the rule on exhaustion of administrative remedies considering that in its Resolution, it said, “The opinions promulgated by the Secretary of Justice are advisory in nature, which may either be accepted or ignored by the office seeking the opinion, and any aggrieved party has the court for recourse”. The statement of the respondent in said case led the petitioner to conclude that only a final judicial ruling in her favor would be accepted by the Commission.
Similarly, in this case, we find the CIR estopped from claiming that the filing of the Petition for Review was premature because petitioner failed to exhaust all administrative remedies.
The Formal Letter of Demand with Assessment Notices reads:
Based on your letter-protest dated May 26, 2004, you alleged the following:
1. That the said assessment has already prescribed in accordance with the provisions of Section 203 of the Tax Code.
2. That since the exemption of FCDUs from all taxes found in the Old Tax Code has been deleted, the wording of Section 28(A)(7)(b) discloses that there are no other taxes imposable upon FCDUs aside from the 10% Final Income Tax.
Contrary to your allegation, the assessments covering GRT and DST for taxable year 2001 has not prescribed for [sic] simply because no returns were filed, thus, the three year prescriptive period has not lapsed.
With the implementation of the CTRP, the phrase “exempt from all taxes” was deleted. Please refer to Section 27(D)(3) and 28(A)(7) of the new Tax Code. Accordingly, you were assessed for deficiency gross receipts tax on onshore income from foreign currency transactions in accordance with the rates provided under Section 121 of the said Tax Code. Likewise, deficiency documentary stamp taxes was [sic] also assessed on Loan Agreements, Bills Purchased, Certificate of Deposits and related transactions pursuant to Sections 180 and 181 of NIRC, as amended.
The 25% surcharge and 20% interest have been imposed pursuant to the provision of Section 248(A) and 249(b), respectively, of the National Internal Revenue Code, as amended.
It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to delinquency. This is our final decision based on investigation. If you disagree, you may appeal this final decision within thirty (30) days from receipt hereof, otherwise said deficiency tax assessment shall become final, executory and demandable. (Emphasis supplied)
It appears from the foregoing demand letter that the CIR has already made a final decision on the matter and that the remedy of petitioner is to appeal the final decision within 30 days.
In Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue, we considered the language used and the tenor of the letter sent to the taxpayer as the final decision of the CIR.
In this case, records show that petitioner disputed the PAN but not the Formal Letter of Demand with Assessment Notices. Nevertheless, we cannot blame petitioner for not filing a protest against the Formal Letter of Demand with Assessment Notices since the language used and the tenor of the demand letter indicate that it is the final decision of the respondent on the matter. We have time and again reminded the CIR to indicate, in a clear and unequivocal language, whether his action on a disputed assessment constitutes his final determination thereon in order for the taxpayer concerned to determine when his or her right to appeal to the tax court accrues. Viewed in the light of the foregoing, respondent is now estopped from claiming that he did not intend the Formal Letter of Demand with Assessment Notices to be a final decision.
Moreover, we cannot ignore the fact that in the Formal Letter of Demand with Assessment Notices, respondent used the word “appeal” instead of “protest”, “reinvestigation”, or “reconsideration”. Although there was no direct reference for petitioner to bring the matter directly to the CTA, it cannot be denied that the word “appeal” under prevailing tax laws refers to the filing of a Petition for Review with the CTA. As aptly pointed out by petitioner, under Section 228 of the NIRC, the terms “protest”, “reinvestigation” and “reconsideration” refer to the administrative remedies a taxpayer may take before the CIR, while the term “appeal” refers to the remedy available to the taxpayer before the CTA. Section 9 of RA 9282, amending Section 11 of RA 1125, likewise uses the term “appeal” when referring to the action a taxpayer must take when adversely affected by a decision, ruling, or inaction of the CIR. As we see it then, petitioner in appealing the Formal Letter of Demand with Assessment Notices to the CTA merely took the cue from respondent. Besides, any doubt in the interpretation or use of the word “appeal” in the Formal Letter of Demand with Assessment Notices should be resolved in favor of petitioner, and not the respondent who caused the confusion.
To be clear, we are not disregarding the rules of procedure under Section 228 of the NIRC, as implemented by Section 3 of BIR RR No. 12-99. It is the Formal Letter of Demand and Assessment Notice that must be administratively protested or disputed within 30 days, and not the PAN. Neither are we deviating from our pronouncement in St. Stephen’s Chinese Girl’s School v. Collector of Internal Revenue [104 Phil. 314 (1958)], that the counting of the 30 days within which to institute an appeal in the CTA commences from the date of receipt of the decision of the CIR on the disputed assessment, not from the date the assessment was issued.
What we are saying in this particular case is that, the Formal Letter of Demand with Assessment Notices which was not administratively protested by the petitioner can be considered a final decision of the CIR appealable to the CTA because the words used, specifically the words “final decision” and “appeal”, taken together led petitioner to believe that the Formal Letter of Demand with Assessment Notices was in fact the final decision of the CIR on the letter-protest it filed and that the available remedy was to appeal the same to the CTA.
We note, however, that during the pendency of the instant case, petitioner availed of the provisions of RR No. 30-2002 and its implementing RMO by submitting an offer of compromise for the settlement of the GRT, DST and VAT for the period 1998-2003, as evidenced by a Certificate of Availment dated November 21, 2007. Accordingly, there is no reason to reinstate the Petition for Review in CTA Case No. 7062.
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Estoppel or waiver prevents the government from invoking the rule against the issue of prescription for the first time on appeal.
In this case, petitioner may have raised the question of prescription only on appeal to this Court. The BIR could have crushed the defense by the mere invocation of the rule against setting up the defense of prescription only at the appeal stage. The government, however, failed to do so.
On the contrary, the BIR was silent despite having the opportunity to invoke the bar against the issue of prescription. It is worthy of note that the Court ordered the BIR to file a Comment. The government, however, did not offer any argument in its Comment about the issue of prescription, even if petitioner raised it in the latter’s Petition. It merely fell silent on the issue. It was given another opportunity to meet the challenge when this Court ordered both parties to file their respective memoranda. The CIR, however, merely filed a Manifestation that it would no longer be filing a Memorandum and, in lieu thereof, it would be merely adopting the arguments raised in its Comment. Its silence spoke loudly of its intent to waive its right to object to the argument of prescription.
We are mindful of the rule in taxation that estoppel does not prevent the government from collecting taxes; it is not bound by the mistake or negligence of its agents. The rule is based on the political law concept “the king can do no wrong,” which likens a state to a king: it does not commit mistakes, and it does not sleep on its rights. The analogy fosters inequality between the taxpayer and the government, with the balance tilting in favor of the latter. This concept finds justification in the theory and reality that government is necessary, and it must therefore collect taxes if it is to survive. Thus, the mistake or negligence of government officials should not bind the state, lest it bring harm to the government and ultimately the people, in whom sovereignty resides.
Republic v. Ker & Co. Ltd. [124 Phil. 822 (1966)] involved a collection case for a final and executory assessment. The taxpayer nevertheless raised the prescription of the right to assess the tax as a defense before the Court of First Instance. The Republic, instead of objecting to the invocation of prescription as a defense by the taxpayer, litigated on the issue and thereafter submitted it for resolution. The Supreme Court ruled for the taxpayer, treating the actuations of the government as a waiver of the right to invoke the defense of prescription. Ker effectively applied to the government the rule of estoppel. Indeed, the no-estoppel rule is not absolute.
The same ingredients in Ker – procedural matter and injustice – obtain in this case. The procedural matter consists in the failure to raise the issue of prescription at the trial court/administrative level, and injustice in the fact that the BIR has unduly delayed the assessment and collection of the DST in this case. The fact is that it took more than 12 years for it to take steps to collect the assessed tax. The BIR definitely caused untold prejudice to petitioner, keeping the latter in the dark for so long, as to whether it is liable for DST and, if so, for how much.
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Rule for the CTA to acquire jurisdiction over the CIR’s decision on a disputed assessment; Instance where it may be presumed that the demand letter have been duly directed, mailed and received by the taxpayer in the regular course of the mail.
The rule is that for the CTA to acquire jurisdiction, an assessment must first be disputed by the taxpayer and ruled upon by the CIR to warrant a decision from which a petition for review may be taken to the CTA. Where an adverse ruling has been rendered by the CIR with reference to a disputed assessment or a claim for refund or credit, the taxpayer may appeal the same within thirty (30) days after receipt thereof.
We agree with the factual findings of the CTA that the demand letter may be presumed to have been duly directed, mailed and was received by petitioner in the regular course of the mail in the absence of evidence to the contrary. This is in accordance with Section 2(v), Rule 131 of the Rules of Court, and in this case, since the period to appeal has commenced to run from the time the letter of demand was presumably received by petitioner within a reasonable time after January 24, 1991, the period of thirty (30) days to appeal the adverse decision on the request for reconsideration had already lapsed when the petition was filed with the CTA only on November 8, 1991. Hence, the CTA properly dismissed the petition as the tax delinquency assessment had long become final and executory.
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CTA’s jurisdiction over direct challenges to the validity of tax issuances.
It is relevant to note that during the pendency of the proceedings, the issue anent the certiorari jurisdiction of the CTA over direct challenges to the validity of tax issuances was not yet definitely settled. Accordingly, the parties cited conflicting jurisprudence in their numerous pleadings before the CTA and this Court.
However, on August 16, 2016, the Court En Banc promulgated Banco De Oro v. Republic of the Philippines (Banco De Oro), wherein it was definitively settled that the CTA has jurisdiction over challenges to the validity of tax issuances. Notably, this overturned the previous doctrine in British American Tobacco v. Camacho, which held that such jurisdiction lies in the regular courts, and not the CTA.
To recount, in Banco De Oro, the Court held that the CTA’s power to issue writs of certiorari in order to strike down tax issuances is inherent in the exercise of its appellate jurisdiction as derived from the CTA Law, which – being the special and later law – should take precedence over the general provision of Batas Pambansa Bilang 129.
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Direct challenge of tax issuances: Some exceptions to the doctrine of exhaustion of administrative remedies: (1) purely legal questions, and (2) urgency of judicial intervention.
Under the doctrine of exhaustion of administrative remedies, recourse through court action cannot prosper until after all such administrative remedies have first been exhausted. If remedy is available within the administrative machinery, this should be resorted to before resort can be made to courts. It is settled that non-observance of the doctrine of exhaustion of administrative remedies results in the lack of cause of action, which is one of the grounds in the Rules of Court justifying the dismissal of the complaint. As case law illumines, the rule on exhaustion of administrative remedies emanates from the policy of allowing administrative agencies to tackle matters within the specialized areas of their respective competence, which, in turn, is based on comity and convenience.
In the matter of tax issuances, such as BIR Rulings, the power of the CIR to interpret the provisions of the Tax Code and other tax laws is subject to the administrative remedy of a direct review of the Secretary of Finance (SOF). Failure to raise the matter to the SOF constitutes a violation of the exhaustion doctrine.
The doctrine of exhaustion of administrative remedies, however, admits of certain exceptions. With respect to challenges against tax issuances, Banco De Oro recognized the following exceptions: “[the] question involved is purely legal; the urgency of judicial intervention x x x; and the futility of an appeal to the Secretary of Finance as the latter appeared to have adopted the challenged Bureau of Internal rulings.” This was reiterated more recently by the Court in Association of Non-Profit Clubs, Inc. v. Bureau of Internal Revenue, when it allowed a direct challenge to the tax issuance assailed therein on the ground that “the issue involved is purely a legal question x x x, or when there are circumstances indicating the urgency of judicial intervention.”
Indeed, the validity of Document No. M-059-2012 is clearly a legal question that is best left for the courts to resolve. Furthermore, the necessity of judicial intervention was shown when the CTA granted the Suspension Orders through its October 22, 2012 and July 15, 2013 Resolutions. In fact, this Court itself recognized the urgency of judicial intervention when it issued its July 7, 2014 TRO. As such, the above-exceptions to the exhaustion doctrine similarly attend in this case.
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Instances where the CTA has jurisdiction over a tax assessment (without a protest being filed first or at all).
Based on the facts on record, it should be noted that PSPC’s original petition filed before the CTA was later amended to include the October 1, 2012 Demand Letter sent by the Collector for the payment of deficiency taxes in the amount of ₱1,994,500.677.47 for January 2010 to June 2012. Thus, based on PSPC’s allegations (which is – as mentioned – determinative of subject matter jurisdiction), there is a concurrent challenge to the validity of a tax issuance coupled with a specific appeal over the tax assessments proceeding therefrom.
Contrary to CTA’s opinion, its jurisdiction is not based on its jurisdiction “over matters arising under the National Internal Revenue [Code] or other laws administered by the Bureau of Internal Revenue”, as found in Section 7 of the CTA Law, but rather, from its appellate jurisdiction over a decision involving disputed final assessment, which is the nature of the October 1, 2012 Demand Letter.
The October 1, 2012 Demand Letter issued by the Collector states that it is based on Document No. M-059-2012, the COC’s August 31, 2012 Letter to the CIR asking for the latter’s computation of deficiency excise taxes against PSPC, and the CIR’s letter-reply thereto, while simultaneously attaching the said documents. In fact, the said attachments reveal that the computation amounting to ₱1,994,500.677.47 came from the CIR herself. It is therefore clear that the assessment against PSPC, as contained int he October 1, 2012 Demand Letter, did not really come from the Collector, but actually from the COC and the CIR. It has already been held that the designation of the demand letter is not the real test on whether it should constitute the final decision of the taxing authority which is ripe for judicial appeal; rather, the language and tenor should likewise be examined.
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When the CIR claims that the appeal of the taxpayer was filed out of time, the latter must show proof of receipt by the latter.
The OSG relies heavily on the letter dated February 5, 1992—that it was a “final decision” denying Citytrust’s protest. Citytrust’s failure to appeal the “final decision” within 30 days from receipt thereof rendered the tax assessment final, executory, and unappealable. Thus, BPI’s Second CTA petition in 2011 was filed out of time, over which the court below did not acquire jurisdiction.
Petitioner’s reasoning is specious and misplaced.
This was the CIR’s same argument in the 2018 Case. To recall, the Court did not give evidentiary weight to the letter dated February 5, 1992 due to the CIR’s failure to prove Citytrust’s receipt thereof. In the present case, not only is there still no proof of receipt. The CIR did not even attach a copy of the letter relied upon to the present petition. Notably, failure to append “material portions of the record as would support the petition” is a ground for dismissal thereof.
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The CTA’s jurisdiction is not limited to cases involving the CIR’s decisions on matter relating to assessments or refunds; CTA’s jurisdiction over “other matters”.
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 second part of the provision covers other cases that arise out of the NIRC or related laws administered by the BIR. The wording of the provision is clear and simple. It gives the CTA the jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was validly effected.
This is not the first case where the CTA validly ruled on issues that did not relate directly to a disputed assessment or a claim for refund. In Pantoja v. David [111 Phil. 197 (1961)], we upheld the jurisdiction of the CTA to act on a petition to invalidate and annul the distraint orders of the CIR. Also, in CIR v. CA, the decision of the CTA declaring several waivers executed by the taxpayer as null and void, thus invalidating the assessments issued by the BIR, was upheld by this Court.
*******
The CTA did not err in its ruling that it has jurisdiction over cases asking for the cancellation and withdrawal of a warrant of distraint and/or levy as provided under Section 7 of [RA No. 1125, as amended by] RA No. 9282.
*******
Petitioner argues that the CTA had no jurisdiction over the case since the CTA itself had ruled that the assessment had become final and unappealable. Citing Protector’s Services, Inc. v. Court of Appeals [386 Phil. 611 (2000)], the CIR argued that, after the lapse of the 30-day period to protest, respondent may no longer dispute the correctness of the assessment and its appeal to the CTA should be dismissed. The CIR took issue with the CTA’s pronouncement that it had jurisdiction to decide “other matters” related to the tax assessment such as the issue on the right to collect the same since the CIR maintains that when the law says that the CTA has jurisdiction over “other matters,” it presupposes that the tax assessment has not become final and unappealable.
We cannot countenance the CIR’s assertion with regard to this point. The jurisdiction of the CTA is governed by Section 7 of RA No. 1125, as amended, and the term “other matters” referred to by the CIR in its argument can be found in number (1) of the aforementioned provision, to wit:
Section 7. Jurisdiction. – The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided –
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law as part of law administered by the Bureau of Internal Revenue. (Emphasis supplied.)
Plainly, the assailed CTA En Banc Decision was correct in declaring that there was nothing in the foregoing provision upon which petitioner’s theory with regard to the parameters of the term “other matters” can be supported or even deduced. What is rather clearly apparent, however, is that the term “other matters” is limited only by the qualifying phrase that follows it.
Thus, on the strength of such observation, we have previously ruled that 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 second part of the provision covers other cases that arise out of the NIRC or related laws administered by the BIR.
In the case at bar, the issue at hand is whether or not the BIR’s right to collect taxes had already prescribed and that is a subject matter falling under Section 223(c) of the 1986 NIRC [now Section 222(c), NIRC of 1997)], the law applicable at the time the disputed assessment was made. To quote Section 223(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. (Emphases supplied.)
In connection therewith, Section 3 of the 1986 NIRC states that the collection of taxes is one of the duties of the BIR, to wit:
Sec. 3. Powers and duties of Bureau. – The powers and duties of the Bureau of Internal Revenue shall comprehend the assessment and collection of all national internal revenue taxes, fees, and charges and the enforcement of all forfeitures, penalties, and fines connected therewith including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts. Said Bureau shall also give effect to and administer the supervisory and police power conferred to it by this Code or other laws. (Emphasis supplied.)
Thus, from the foregoing, the issue of prescription of the BIR’s right to collect taxes may be considered as covered by the term “other matters” over which the CTA has appellate jurisdiction.
Furthermore, the phraseology of Section 7, number (1), denotes an intent to view the CTA’s jurisdiction over disputed assessments and over “other matters” arising under the NIRC or other laws administered by the BIR as separate and independent of each other. This runs counter to petitioner’s theory that the latter is qualified by the status of the former, i.e., an “other matter” must not be a final and unappealable tax assessment or, alternatively, must be a disputed assessment.
Likewise, the first paragraph of Section 11 of RA No. 1125, as amended by RA No. 9282, belies petitioner’s assertion as the provision is explicit that, for as long as a party is adversely affected by any decision, ruling or inaction of petitioner, said party may file an appeal with the CTA within 30 days from receipt of such decision or ruling. The wording of the provision does not take into account the CIR’s restrictive interpretation as it clearly provides that the mere existence of an adverse decision, ruling or inaction along with the timely filing of an appeal operates to validate the exercise of jurisdiction by the CTA.
To be sure, the fact that an assessment has become final for failure of the taxpayer to file a protest within the time allowed only means that the validity or correctness of the assessment may no longer be questioned on appeal. However, the validity of the assessment itself is a separate and distinct issue from the issue of whether the right of the CIR to collect the validly assessed tax has prescribed. This issue of prescription, being a matter provided for by the NIRC, is well within the jurisdiction of the CTA to decide.
*******
Preliminarily, we shall take up the CTA’s jurisdiction to rule on the issue of the scope of authority of the revenue officers to conduct the examination of Lancaster’s books of accounts and accounting records.
The law vesting unto the CTA its jurisdiction is Section 7 of RA No. 1125, which in part provides:
Section 7. Jurisdiction. – The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue; xxx (emphasis supplied)
Under the aforecited provision, the jurisdiction of the CTA is not limited only to cases which involve decisions or inactions of the CIR on matters relating to assessments or refunds but also includes other cases arising from the NIRC or related laws administered by the BIR. Thus, for instance, we had once held that the question of whether or not to impose a deficiency tax assessment comes within the purview of the words “other matters arising under the National Internal Revenue Code.”
The jurisdiction of the CTA on such other matters arising under the NIRC was retained under the amendments introduced by RA No. 9282. Under RA No. 9282, Section 7 now reads:
Sec. 7. Jurisdiction. – The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial; x x x.” (emphasis supplied)
Is the question on the authority of revenue officers to examine the books and records of any person cognizable by the CTA?
It must be stressed that the assessment of internal revenue taxes is one of the duties of the BIR. Section 2 of the NIRC states:
Sec. 2. Powers and Duties of the Bureau of Internal Revenue. – The Bureau of Internal Revenue shall be under the supervision and control of the Department of Finance and its powers and duties shall comprehend, the assessment and collection of all national internal revenue taxes, fees, and charges, and the enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts.
The Bureau shall give effect to and administer the supervisory and police powers conferred to it by this Code or other laws. (emphasis supplied)
In connection therewith, the CIR may authorize the examination of any taxpayer and correspondingly make an assessment whenever necessary. Thus, to give more teeth to such power of the CIR, to make an assessment, the NIRC authorizes the CIR to examine any book, paper, record, or data of any person. The powers granted by law to the CIR are intended, among other things, to determine the liability of any person for any national internal revenue tax.
It is pursuant to such pertinent provisions of the NIRC conferring the powers to the CIR that the petitioner (CIR) had, in this case, authorized its revenue officers to conduct an examination of the books of account and accounting records of Lancaster, and eventually issue a deficiency assessment against it.
From the foregoing, it is clear that the issue on whether the revenue officers who had conducted the examination on Lancaster exceeded their authority pursuant to LOA No. 00012289 may be considered as covered by the terms “other matters” under Section 7 of RA No. 1125 or its amendment, RA No. 9282. The authority to make an examination or assessment, being a matter provided for by the NIRC, is well within the exclusive and appellate jurisdiction of the CTA.
*******
Even if this Court were to disregard the Collection Letter as a final decision of the Commissioner on Avon’s protest, the Collection Letter constitutes an act of the Commissioner on “other matters” arising under the NIRC, which, pursuant to Philippine Journalists, Inc. v. CIR, may be the subject of an appropriate appeal before the CTA.
******
The aforementioned letter is irrelevant in ascertaining whether or not the tax court properly took cognizance of BPI’s Second CTA Petition. As the CTA correctly pointed out, BPI did not come to question any final decision issued in connection with Citytrust’s assessments. They went before the CTA primarily to assail the November 2011 Warrant’s issuance and implementation. To be sure, the issue for the CTA to resolve was the propriety not of any assessment but of a tax collection measure implemented against BPI. Accordingly, the CTA’s disposition was distinctly for the cancellation of the warrant and nothing else.
The law expressly vests the CTA the authority to take cognizance of “other matters” arising from the 1977 Tax Code and other laws administered by the BIR which necessarily includes rules, regulations, and measures on the collection of tax. Tax collection is part and parcel of the CIR’s power to make assessments and prescribe additional requirements for tax administration and enforcement.
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When the CIR claims that the appeal of the taxpayer was filed out of time, the latter must show proof of receipt by the latter.
The OSG relies heavily on the letter dated February 5, 1992—that it was a “final decision” denying Citytrust’s protest. Citytrust’s failure to appeal the “final decision” within 30 days from receipt thereof rendered the tax assessment final, executory, and unappealable. Thus, BPI’s Second CTA petition in 2011 was filed out of time, over which the court below did not acquire jurisdiction.
Petitioner’s reasoning is specious and misplaced.
This was the CIR’s same argument in the 2018 Case. To recall, the Court did not give evidentiary weight to the letter dated February 5, 1992 due to the CIR’s failure to prove Citytrust’s receipt thereof. In the present case, not only is there still no proof of receipt. The CIR did not even attach a copy of the letter relied upon to the present petition. Notably, failure to append “material portions of the record as would support the petition” is a ground for dismissal thereof.
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A “specific period for action”.
Under Section 112(C) of the NIRC, in case of failure on the part of the CIR to act on the application, the taxpayer affected may, within 30 days after the expiration of the 120-day period, appeal the unacted claim with the CTA. The charter of the CTA also expressly provides that if the Commissioner fails to decide within “a specific period” required by law, such “inaction shall be deemed a denial” of the application for tax refund or credit. In Commissioner of Internal Revenue v. San Roque Power Corporation, we emphasized that compliance with the 120-day waiting period is mandatory and jurisdictional. In this case, when TSC filed its administrative claim on 21 December 2005, the CIR had a period of 120 days, or until 20 April 2006, to act on the claim. However, the CIR failed to act on TSC’s claim within this 120-day period. Thus, TSC filed its petition for review with the CTA on 24 April 2006 or within 30 days after the expiration of the 120-day period. Accordingly, we do not find merit in the CIR’s argument that the judicial claim was prematurely filed.
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CTA’s jurisdiction to take cognizance of criminal and civil cases.
Under RA No. 1125 (An Act Creating the Court of Tax Appeals) as amended, the rulings of the Commissioner are appealable to the CTA, thus:
SEC. 7. Jurisdiction. – The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided –
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue;
RA No. 8424, titled “An Act Amending the National Internal Revenue Code, As Amended, And For Other Purposes,” later expanded the jurisdiction of the Commissioner and, correspondingly, that of the CTA, thus:
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. – The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.
The latest statute dealing with the jurisdiction of the CTA is RA No. 9282. It provides:
SEC. 7. Section 7 of the same Act is hereby amended to read as follows:
Sec. 7. Jurisdiction. — The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial;
(3) Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction;
x x x
(b) Jurisdiction over cases involving criminal offenses as herein provided:
(1) Exclusive original jurisdiction over all criminal offenses arising from violations of the National Internal Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of Internal Revenue or the Bureau of Customs: Provided, however, That offenses or felonies mentioned in this paragraph where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos (P1,000,000.00) or where there is no specified amount claimed shall be tried by the regular courts and the jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with, and jointly determined in the same proceeding by the CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and no right to reserve the filling of such civil action separately from the criminal action will be recognized.
(2) Exclusive appellate jurisdiction in criminal offenses:
(a) Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases originally decided by them, in their respected territorial jurisdiction.
(b) Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in their respective jurisdiction.
(c) Jurisdiction over tax collection cases as herein provided:
(1) Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees, charges and penalties: Provided, however, That collection cases where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos (P1,000,000.00) shall be tried by the proper Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court.
(2) Exclusive appellate jurisdiction in tax collection cases:
(a) Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection cases originally decided by them, in their respective territorial jurisdiction.
(b) Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the exercise of their appellate jurisdiction over tax collection cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction.
These 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.
Finally, we hold that contrary to private respondents’ stance, the doctrines laid down in CIR v. Union Shipping Co. and Yabes v. Flojo are not applicable to the cases at bar. In these earlier cases, the Commissioner already rendered an assessment of the tax liabilities of the delinquent taxpayers, for which reason the Court ruled that the filing of the civil suit for collection of the taxes due was a final denial of the taxpayers’ request for reconsideration of the tax assessment.
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An Import Entry and Internal Revenue Declaration (IEIRD) is akin to a preliminary assessment. Thus, it may not yet be appealed to the CTA.
While the IEIRD does constitute a formal declaration by the taxpayer, it also contains corrections and the recomputed amounts of the taxes and customs duties due on the imported articles as determined by agents or representatives of the BOC. In fact, it is the filing and acceptance of the IEIRD, accompanied by the payment of the amounts indicated therein, which constitute the official entry of imported articles in the country. Thus, the corrections and re-computations, if any, by the Collector, or his agents, on the IEIRD, at least in the context of this case, would be akin to a preliminary assessment which does not yet contain a formal demand to pay from the government.
In general, a preliminary assessment constitutes only an initial finding of the taxing authority of the liabilities of a taxpayer. If the taxpayer contests the same and initiates a formal protest in the form of a request for reconsideration or reinvestigation, then the assessment becomes disputed. If the IEIRD is considered as the preliminary assessment, any protest thereto should be filed with the Collector. As pointed out by public petitioners, the Collector’s ruling on the protest may then be reviewed by the COC, and then it is the latter’s decision which may be elevated to the CTA. It is also error to assume that the IEIRD can constitute the final assessment for the sole reason that the non-filing thereof and non-payment of the taxes and duties contained therein would result in the abandonment or forfeiture of the imported article. In fact, in one case, the Court had already clarified that an IEIRD cannot be considered as the Collector’s final assessment that could be the proper subject of review, and that in any case, such assessment must still be reviewed by the COC before it is brought to the CTA.
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Two separate causes of action may be joined in one petition; In whichever cause of action the taxpayer wishes to pursue, ancillary provisional remedies to effectively restrain tax collection may be availed of.
Since the Court, through Banco De Oro, has now recognized that petitions meant to question the constitutionality or validity of a tax statute or issuance should be filed before the CTA and not the regular courts, it may thus be possible for the said challenged to be concurrently instituted together with an appeal form an actual assessment (should there be one) proceeding from the implementation of the same assailed tax statute or issuance also before the tax court. Technically speaking, these are two separate causes of action which may, however, be joined in one petition due to the absence of a specific prohibition under the CTA’s own rules. On this score, it is apt to mention that the Rules of Court suppletorily apply to the Revised Rules of the CTA.
It goes without saying, however, that if a taxpayer has not yet been issued a tax assessment, he may – barring locus standi issues – directly challenge a tax issuance or statute before the CTA, as pronounced in Banco De Oro. In the same vein, a taxpayer may question a tax assessment against him without necessarily raising the validity or constitutionality of the tax statute or issuance from which the said tax assessment was predicated on.
That being said, in whichever cause of action the taxpayer wishes to pursue, it must be highlighted that provisional remedies to effectively restrain the collection of taxes may be availed of. These provisional remedies are ancillary to the tax court’s exercise of jurisdiction relative to the cause/s of action alleged by the taxpayer.
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An appeal to the CTA will not suspend the collection of tax; Exception.
Section 11 of RA No. 1125, as amended by RA No. 9282, embodies the rule that an appeal to the CTA from the decision of the CIR will not suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law. When, in the view of the CTA, the collection may jeopardize the interest of the Government and/or the taxpayer, it may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond.
The application of the exception to the rule is the crux of the subject controversy. Specifically, Section 11 provides:
SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. – Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein.
x x x x
No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer or the Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as the case may be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer, the Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court.
xxxx
[Emphasis Supplied]
Essentially, the petitioners ascribe grave abuse of discretion on the part of the CTA when it issued the subject resolutions requiring them to deposit-the amount of P3,298,514,894.35 or post a bond in the amount of P4,947,772,341.53 as a condition for its order enjoining the CIR from collecting the taxes from them. The petitioners anchor their contention on the premise that the assessment and collection processes employed by the CIR in exacting their tax liabilities were in patent violation of their constitutional right to due process of law. They, thus, posit that pursuant to Collector of Internal Revenue v. Avelino [100 Phil 327 (1956)] and Collector of Internal Revenue v. Zulueta [100 Phil. 872 (1957)], the tax court should have not only ordered the CIR to suspend the collection efforts it was pursuing in satisfaction of their tax liability, but also dispensed with the requirement of depositing a cash or filing a surety bond.
To recall, the Court in Avelino upheld the decision of the CTA to declare the warrants of garnishment, distraint and levy and the notice of sale of the properties of Jose Avelino null and void and ordered the CIR to desist from collecting the deficiency income taxes which were assessed for the years 1946 to 1948 through summary administrative methods. The Court therein found that the demand of the then CIR was made without authority of law because it was made five (5) years and thirty-five (35) days after the last two returns of Jose Avelino were filed – clearly beyond the three (3)-year prescriptive period provided under what was then Section 51(d) of the National Internal Revenue Code. Dismissing the contention of the CIR that the deposit of the amount claimed or the filing of a bond as required by law was a requisite before relief was granted, the Court therein concurred with the opinion of the CTA that the courts were clothed with authority to dispense with the requirement “if the method employed by the Collector of Internal Revenue in the collection of tax is not sanctioned by law.”
In Zulueta, the Court likewise dismissed the argument that the CTA erred in issuing the injunction without requiring the taxpayer either to deposit the amount claimed or to file a surety bond for an amount not more than double the tax sought to be collected. The Court cited Collector of Internal Revenue v. Aurelio P. Reyes and the Court of Tax Appeals [100 Phil. 822 (1957)] where it was written:
Xxx. At first blush it might be as contended by the Solicitor General, but a careful analysis of the second paragraph of said Section 11 will lead Us to the conclusion that the requirement of the bond as a condition precedent to the issuance of a writ of injunction applies only in cases where the processes by which the collection sought to be made by means thereof are carried out in consonance with law for such cases provided and not when said processes are obviously in violation of the law to the extreme that they have to be SUSPENDED for jeopardizing the interests of the taxpayer.
[Italics included]
The Court went on to explain the reason for empowering the courts to issue such injunctive writs. It wrote:
“Section 11 of Republic Act No. 1125 is therefore premised on the assumption that the collection by summary proceedings is by itself in accordance with existing laws; and then what is suspended is the act of collecting, whereas, in the case at bar what the respondent Court suspended was the use of the method employed to verify the collection which was evidently illegal after the lapse of the three-year limitation period. The respondent Court issued the injunction in question on the basis of its findings that the means intended to be used by petitioner in the collection of the alleged deficiency taxes were in violation of law. It would certainly be an absurdity on the part of the Court of Tax Appeals to declare that the collection by the summary methods of distraint and levy was violative of the law, and then, on the same breath require the petitioner to deposit or file a bond as a prerequisite of the issuance of a writ of injunction. Let us suppose, for the sake of argument, that the Court a quo would have required the petitioner to post the bond in question and that the taxpayer would refuse or fail to furnish said bond, would the Court a quo be obliged to authorize or allow the Collector of Internal Revenue to proceed with the collection from the petitioner of the taxes due by a means it previously declared to be contrary to law?“
[Italics included. Emphases and Underlining Supplied]
Thus, despite the amendments to the law, the Court still holds that the CTA has ample authority to issue injunctive writs to restrain the collection of tax and to even dispense with the deposit of the amount claimed or the filing of the required bond, whenever the method employed by the CIR in the collection of tax jeopardizes the interests of a taxpayer for being patently in violation of the law. Such authority emanates from the jurisdiction conferred to it not only by Section 11 of RA No. 1125, but also by Section 7 of the same law, which, as amended provides:
Sec. 7. Jurisdiction. – The Court of Tax Appeals shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue;
x x x x
[Emphasis Supplied]
From all the foregoing, it is clear that the authority of the courts to issue injunctive writs to restrain the collection of tax and to dispense with the deposit of the amount claimed or the filing of the required bond is not simply confined to cases where prescription has set in. As explained by the Court in those cases, whenever it is determined by the courts that the method employed by the Collector of Internal Revenue in the collection of tax is not sanctioned by law, the bond requirement under Section 11 of R.A. No. 1125 should be dispensed with. The purpose of the rule is not only to prevent jeopardizing the interest of the taxpayer, but more importantly, to prevent the absurd situation wherein the court would declare “that the collection by the summary methods of distraint and levy was violative of law, and then, in the same breath require the petitioner to deposit or file a bond as a prerequisite for the issuance of a writ of injunction.”
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In acting on motions to suspend tax collection, the CTA must preliminarily determine whether the CIR complied with the law and pertinent BIR issuances; Factors that should be taken into account, in resolving the issue of whether the taxpayer should be required to post the security bond.
Though it may be true that it would have been premature for the CTA to immediately determine whether the assessment made against the petitioners was valid or whether the warrants were properly issued and served, still, it behooved upon the CTA to properly determine, at least preliminarily, whether the CIR, in its assessment of the tax liability of the petitioners, and its effort of collecting the same, complied with the law and the pertinent issuances of the BIR itself. The CTA should have conducted a preliminary hearing and received evidence so it could have properly determined whether the requirement of providing the required security under Section 11, R.A. No. 1125 could be reduced or dispensed with pendente lite.
Absent any evidence and preliminary determination by the CTA, the Court cannot make any factual finding and settle the issue of whether the petitioners should comply with the security requirement under Section 11, RA No. 1125. The determination of whether the methods, employed by the CIR in its assessment, jeopardized the interests of a taxpayer for being patently in violation of the law is a question of fact that calls for the reception of evidencewhich would serve as basis. In this regard, the CTA is in a better position to initiate this given its time and resources. The remand of the case to the CTA on this question is, therefore, more sensible and proper.
For the Court to make any finding of fact on this point would be premature. As stated earlier, there is no evidentiary basis. All the arguments are mere allegations from both sides. Moreover, any finding by the Court would pre-empt the CTA from properly exercising its jurisdiction and settle the main issues presented before it, that is, whether the petitioners were afforded due process; whether the CIR has valid basis for its assessment; and whether the petitioners should be held liable for the deficiency taxes.
As the CTA is in a better, position to make such a preliminary determination, a remand to the CTA is in order. To resolve the issue of whether the petitioners should be required to post the security bond under Section 11 of RA No. 1125, and, if so, in what, amount, the CTA must take into account, among others, the following:
First. Whether the requirement of a Notice of Informal Conference was complied with – The petitioners contend that the BIR issued the PAN without first sending a NIC to petitioners. One of the first requirements of Section 3 of RR No. 12-99, the then prevailing regulation on the due process requirement in tax audits and/or investigation, is that a NIC be first accorded to the taxpayer. The use of the word “shall” in subsection 3.1.1 describes the mandatory nature of the service of a NIC. As with the other notices required under the regulation, the purpose of sending a NIC is but 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.
Second. Whether the 15-year period subject of the CIR’s investigation is arbitrary and excessive. – Section 203 of the Tax Code provides a 3-year limit for the assessment. of internal revenue taxes. While the prescriptive period to assess deficiency taxes may be extended to 10 years in cases where there is false, fraudulent, or non-filing of a tax return – the fraud contemplated by law must be actual. It must be intentional, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some right.
Third. Whether fraud was duly established. – In its letter, dated December 13, 2010, the NID had been conducting a fraud investigation against the petitioners under its RATE program and that it found that “fraud had been established in the instant case as determined by the Commissioner.” Under RMO No. 27-10, it is required that a preliminary investigation must first be conducted before a LA is issued.
Fourth. Whether the FLD issued against the petitioners was irregular. – The FLD issued against the petitioners allegedly stated that the amounts therein were “estimates based on best possible sources.” A taxpayer should be informed in writing of the law and the facts on which the assessment is made, otherwise, the assessment is void. An assessment, in order to stand judicial scrutiny, must be based on facts. The presumption of the correctness of an assessment, being a mere presumption, cannot be made to rest on another presumption.
To stress, the petitioners had asserted that the assessment of the CIR was not based on actual transactions but on “estimates based on best possible sources.” This assertion has not been satisfactorily addressed by the CIR in detail. Thus, there is a need for the CTA to conduct a preliminary hearing.
Fifth. Whether the FDDA, the PCL, the FNBS, and the Warrants of Distraint and/or Levy were validly issued. In its hearing, the CTA must also determine if the following allegations of the petitioners have merit:
a. The FDDA and PCL were issued against petitioner Pacquiao only. The Warrant of Distraint and/or Levy/Garnishment issued by the CIR, however, were made against the assets of both petitioners;
b. The warrants of garnishment had been served on the banks of both petitioners even before the petitioners received the FDDA and PCL;
c. The Warrant of Distraint and/or Levy/Garnishment against the petitioners was allegedly made prior to the expiration of the period allowed for the petitioners to pay the assessed deficiency taxes;
d. The Warrant of Distraint and/or Levy/Garnishment against petitioners failed to take into consideration that the deficiency VAT was already paid in full; and
e. Petitioners were not given a copy of the Warrants. Sections 207 and 208 of the Tax Code require the Warrant of Distraint and/or Levy/Garnishment be served upon the taxpayer.
Additional Factors
In case the CTA finds that the petitioners should provide the necessary security under Section 11 of RA 1125, a recomputation of the amount thereof is in order. If there would be a need for a bond or to reduce the same, the CTA should take note that the Court, in A.M. No. 15-92-01-CTA, resolved to approve the CTA En Banc Resolution No. 02-2015, where the phrase “amount claimed” stated in Section 11 of RA No. 1125 was construed to refer to the principal amount of the deficiency taxes, excluding penalties, interests and surcharges.
Moreover, the CTA should also consider the claim of the petitioners that they already paid a total of P32,196,534.40 deficiency VAT assessed against them. Despite said payment, the CIR still assessed them the total amount of P3,298,514,894.35, including the amount assessed as VAT deficiency, plus surcharges, penalties and interest. If so, these should also be deducted from the.amount of the bond to be computed and required.
In the conduct of its preliminary hearing, the CTA must balance the scale between the inherent power of the State to tax and its right to prosecute perceived transgressors of the law, on one side; and the constitutional rights of petitioners to due process of law and the equal protection of the laws, on the other. In case of doubt, the tax court must remember that as in all tax cases, such scale should favor the taxpayer, for a citizen’s right to due process and equal protection of the law is amply protected by the Bill of Rights under the Constitution.
In view of all the foregoing, the April 22, 2014 and July 11, 2014 Resolutions of the CTA, in so far as it required the petitioners to deposit first a cash bond in the amount of P3,298,514,894.35 or post a bond of P4,947,772,341.53, should be further enjoined until the issues aforementioned are settled in a preliminary hearing to be conducted by it. Thereafter, it should make a determination if the posting of a bond would still be required and, if so, compute it taking into account the CTA En Banc Resolution, which was approved by the Court in A.M. No. 15-02-01-CTA, and the claimed payment of P32,196,534.40, among others.
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Moreover, Section 11 of RA No. 1125, as amended, indicates that the requirement of the bond as a condition precedent to suspension of the collection applies only in cases where the processes by which the collection sought to be made by means thereof are carried out in consonance with the law, not when the processes are in plain violation of the law that they have to be suspended for jeopardizing the interests of the taxpayer.
The petitioner submits that the patent illegality of the assessment was sufficient ground to dispense with the bond requirement because the CIR was essentially taxing its sales revenues without allowing the deduction of the cost of goods sold by virtue of the CIR refusing to consider evidence showing that it had really incurred costs. However, the Court is not in the position to rule on the correctness of the deficiency assessment, which is a matter still pending in the CTA. Conformably with the pronouncement in Pacquiao v. Court of Tax Appeals, First Division, and the Commissioner of Internal Revenue, a ruling that has precedential value herein, the Court deems it best to remand the matter involving the petitioner’s plea against the correctness of the deficiency assessment to the CTA for the conduct of a preliminary hearing in order to determine whether the required surety bond should be dispensed with or reduced.
In Pacquiao, the petitioners were issued deficiency IT and VAT assessments for 2008 and 2009 in the aggregate amount of P2,261,217,439.92, which amount was above their net worth of P1,185,984,697.00 as reported in their joint Statement of Assets, Liabilities and Net Worth (SALN). They had paid the VAT assessments but appealed to the CTA the IT assessments. Notwithstanding their appeal, the CIR still initiated collection proceedings against them by issuing warrants of distraint or levy against their properties, and warrants of garnishment against their bank accounts. As a consequence, they went to the CTA through an urgent motion to lift the warrants and to suspend the collection of taxes. The CTA in Division found the motion to suspend tax collection meritorious, and lifted the warrant of distraint or levy and garnishment on the condition that they post a cash bond of P3,298,514,894.35, or surety bond of P4,947,772,341.53. They thus came to the Court to challenge the order to post the cash or surety bond as a condition for the suspension of collection of their deficiency taxes. In resolving their petition, the Court held and disposed:
Absent any evidence and preliminary determination by the CTA, the Court cannot make any factual finding and settle the issue of whether the petitioners should comply with the security requirement under Section 11, R.A. No. 1125. The determination of whether the methods, employed by the CIR in its assessment, jeopardized the interests of a taxpayer for being patently in violation of the law is a question of fact that calls for the reception of evidence which would serve as basis. In this regard, the CTA is in a better position to initiate this given its time and resources. The remand of the case to the CTA on this question is, therefore, more sensible and proper.
For the Court to make any finding of fact on this point would be premature. As stated earlier, there is no evidentiary basis. All the arguments are mere allegations from both sides. Moreover, any finding by the Court would pre-empt the CTA from properly exercising its jurisdiction and settle the main issues presented before it, that is, whether the petitioners were afforded due process; whether the CIR has valid basis for its assessment; and whether the petitioners should be held liable for the deficiency taxes.
x x x x
In the conduct of its preliminary hearing, the CTA must balance the scale between the inherent power of the State to tax and its right to prosecute perceived transgressors of the law, on one side; and the constitutional rights of petitioners to due process of law and the equal protection of the laws, on the other. In case of doubt, the tax court must remember that as in all tax cases, such scale should favor the taxpayer, for a citizen’s right to due process and equal protection of the law is amply protected by the Bill of Rights under the Constitution.
Consequently, to prevent undue and irreparable damage to the normal business operations of the petitioner, the remand to the CTA of the questions involving the suspension of collection and the correct amount of the bond is the proper course of action.
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In acting on motions to suspend tax collection, the CTA must consider other factors recognized by the law itself towards suspending the collection of the assessment.
Section 11 of RA No. 1125, as amended by RA No. 9282, it is stated that:
Sec. 11. Who may appeal; effect of appeal. — x x x
x x x x
No appeal taken to the Court of Tax Appeals from the decision of the Collector of Internal Revenue or the Collector of Customs shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the Bureau of Internal Revenue or the Commissioner of Customs may jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court. (bold emphasis supplied.)
Clearly, the CTA may order the suspension of the collection of taxes provided that the taxpayer either: (1) deposits the amount claimed; or (2) files a surety bond for not more than double the amount.
The petitioner argues that the surety bond amounting to P4,467,391,881.76 greatly exceeds its net worth and makes it legally impossible to procure the bond from bonding companies that are limited in their risk assumptions. As shown in its audited financial statements for the year ending December 31, 2013, its net worth only amounted to P916,768,767.00, making the amount of P4,467,391,881.76 fixed for the bond nearly five times greater than such net worth.
The surety bond amounting to P4,467,391,881.76 imposed by the CTA was within the parameters delineated in Section 11 of RA No. 1125, as amended. The Court holds, however, that the CTA in Division gravely abused its discretion under Section 11 because it fixed the amount of the bond at nearly five times the net worth of the petitioner without conducting a preliminary hearing to ascertain whether there were grounds to suspend the collection of the deficiency assessment on the ground that such collection would jeopardize the interests of the taxpayer. Although the amount of P4,467,391,881.76 was itself the amount of the assessment, it behoved the CTA in Division to consider other factors recognized by the law itself towards suspending the collection of the assessment, like whether or not the assessment would jeopardize the interest of the taxpayer, or whether the means adopted by the CIR in determining the liability of the taxpayer was legal and valid. Simply prescribing such high amount of the bond like the initial 150% of the deficiency assessment of P4,467,391,881.76 (or P6,701,087,822.64), or later on even reducing the amount of the bond to equal the deficiency assessment would practically deny to the petitioner the meaningful opportunity to contest the validity of the assessments, and would likely even impoverish it as to force it out of business.
At this juncture, it becomes imperative to reiterate the principle that the power to tax is not the power to destroy. In Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue, the Court has stressed that:
As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who is to pay it. So potent indeed is the power that it was once opined that the power to tax involves the power to destroy.
Petitioner claims that the assessed DST to date which amounts to P376 million is way beyond its net worth of P259 million. Respondent never disputed these assertions. Given the realities on the ground, imposing the DST on petitioner would be highly oppressive. It is not the purpose of the government to throttle private business. On the contrary, the government ought to encourage private enterprise. Petitioner, just like any concern organized for a lawful economic activity, has a right to maintain a legitimate business. As aptly held in Roxas, et al. v. CTA, et al.:
The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector “kill the hen that lays the golden egg.”
Legitimate enterprises enjoy the constitutional protection not to be taxed out of existence. Incurring losses because of a tax imposition may be an acceptable consequence but killing the business of an entity is another matter and should not be allowed. It is counter-productive and ultimately subversive of the nation’s thrust towards a better economy which will ultimately benefit the majority of our people.
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Motion to suspend tax collection vs. Ordinary injunctive writs [Temporary Restraing Order (TRO) / Writ of Preliminary Injunction (WPI)].
A taxpayer may seek the following provisional remedies before the CTA: (a) a motion to suspend the direct enforcement of the tax assessment pursuant to the special provision of the CTA law; and/or (b) the ordinary injunctive writs (TRO/WPI) based on the suppletory application of the Rules of Court against the implementation of the tax statute or issuance assailed. To note, since the latter remedy (TRO/WPI) is meant to enjoin the implementation of a tax statute or issuance, a successful application thereof will indirectly result in the suspended implementation of a tax assessment or demand for payment of taxes, if any, springing from the tax statute or issuance.
The first provisional remedy mentioned finds basis in Section 11 of the CTA Law.
As can be gleaned from this provision, the provisional remedy of a Suspension Order contemplates the existence of – and thus, has for its object – a “tax liability;” as such, for the said order to issue, it is required that a tax assessment or an adverse decision, ruling, or inaction effectively mandating the payment of taxes had already been issued against the taxpayer. Conversely, without any such tax assessment, decision, ruling or inaction, an order to suspend the collection of taxes under Section 11 of the CTA Law should not be issued since there is effectively no “tax liability” as of yet. In fact, the necessity of an existing “tax liability” in order to avail of a Section 11 Suspension Order is bolstered by the requirement of a surety bond which must be “double the amount.” Without such“tax liability”, there is no definite amount to which the required surety bond would be based on as equally required by Section 11.
Aside from the requisite tax liability, Section 11, as worded, further requires the taxpayer to prove that the “collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer.” It is only when all of these requirements are satisfied that the CTA may issue a Suspension Order, which remedy is ancillary to the CTA’s exercise of its appellate jurisdiction to review “any decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Court” as provided under the first paragraph of Section 11.
However, the remedy of a Suspension Order under Section 11 of the CTA Law must be differentiated from the ordinary injunctive writs (i.e., TRO/WPI), which are, on the other hand, ancillary to the CTA’s jurisdiction to rule upon the constitutionality or validity of tax statutes and issuances and thus, has for its object the enjoinment of the same tax statute or issuance. Aside from being traditionally recognized as general auxiliary writs which are necessary for a court to carry out its jurisdiction, these provisional remedies find procedural anchorage from the suppletory application of the Rules of Court pursuant to Rule 1, Section 3 of the Revised CTA Rules. Accordingly, in view of its suppletory application, Rule 58 of the Rules of Court and its governing principles may be resorted to when a taxpayer seeks to temporarily enjoin the implementation of a tax statute or issuance pending resolution of the main action challenging the constitutionality or validity of the same.
It is well-settled that for a TRO/WPI to issue, the following must be proven: (1) there exists a clear and unmistakable right to be protected; (2) this right is directly threatened by an act sought to be enjoined; (3) the invasion of the right is material and substantial; and (4) there is an urgent and paramount necessity for the writ to prevent serious and irreparable damage. However, when the injunctive relief sought is to forestall the implementation of a statute or issuance, the applicant “bears the added burden of overcoming the presumption of validity inhering in such laws or issuances.”
It is apt to mention that the availability of a TRO/WPI to affected taxpayers was explicitly recognized in Banco De Oro, wherein it was held that the CTA’s jurisdiction includes the power to “prohibit or restrain the performance of any act which might interfere with the proper exercise of its rightful jurisdiction in cases pending before it.” Consequently, part and parcel of the CTA’s jurisdiction to resolve controversies involving the constitutionality or validity of a tax statute or issuance is the power to issue provisional remedies such as TROs and WPIs.
As earlier intimated, the effect of a TRO/WPI in such cases is to enjoin the implementation of a tax statute or issuance. Thus, once the implementation of a tax statute or issuance is enjoined, the practical consequence is that any tax assessment or demand for collection of taxes which finds legal basis from the enjoined tax statute or issuance, should likewise be suspended. As a result, while the TRO/WPI subsists, there can be no enforcement of any tax liability springing from the enjoined tax statute or issuance.
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When a Suspension Order and a TRO/WPI may be issued by the CTA.
As above discussed, the wording of Section 11 of the CTA Law is clear in requiring the existence of a “tax liability” before a Suspension Order may be availed of. However, more than just proof of an issued assessment, the said assessment must be properly assailed and elevated to the CTA for it to acquire jurisdiction to issue any and all kind of ancillary remedies in favor of the taxpayer, e.g., a Suspension Order. This is a necessary consequence of the CTA’s jurisdiction as outlined in Section 7 of the CTA Law. The CTA only has appellate jurisdiction over the CIR or COC’s decision or inaction on disputed assessments, or original and appellate jurisdiction in tax collection cases for final and executory assessments. In other words, the object of the CTA’s appellate jurisdiction should be a final assessment coupled with a formal demand to pay the taxes by the government and not a mere preliminary assessment, or worse, an inchoate future assessment. With no such final assessment and formal demand, there is no proper object of an appeal and, hence, there is nothing to trigger the CTA’s appellate jurisdiction. In this case, the tax liabilities anent the subsequent alkylate importations were not covered by disputed assessments nor a final and executory assessment, but at most, only preliminary assessments. Considering that a Suspension Order is a mere ancillary remedy to the CTA’s appellate jurisdiction, the tax court could not have validly issued the said order over PSPC’s subsequent alkylate importations which are either covered by preliminary assessments that were not properly elevated to the CTA or future assessments based on an anticipation of a similar demand by the tax authority in this case.
The peculiar remedy of a Suspension Order under Section 11 of the CTA Law is not the appropriate remedy to temporarily enjoin the implementation of a tax statute or issuance, but rather a TRO/WPI pursuant to the CTA’s jurisdiction over their validity as pronounced in the Banco De Oro case; likewise, a Suspension Order is issued only relative to an existing tax liability based on a disputed tax assessment, decision, ruling or inaction mandating the payment of taxes, which is not present with respect to subsequent importations of alkylate asserted by PSPC.
This notwithstanding, it is observed that the CTA failed to rule on PSPC’s distinct prayer for a TRO/WPI intended to enjoin the implementation of Document No. M-059-2012. As above discussed, this provisional remedy is separate and distinct from the Suspension Orders provided under Section 11 of the CTA Law. To reiterate, when a taxpayer questions the constitutionality or validity of a tax statute or issuance – as PSPC in this case – it may also seek the issuance of a TRO/WPI in order to restrain its implementation in the interim. Concurrently, when in the same petition, the taxpayer appeals a tax assessment, decision, ruling or inaction mandating the payment of taxes – which PSOC likewise did in this case – it may also file a motion for a Suspension Order in order to suspend the collection of the specific amount of taxes stated in such assessment or demand for the collection of taxes.
At the risk of belaboring the point, the subject matters of these two remedies are separate and distinct; hence, the issuance of one does not necessarily result into or preclude the other. However, when a TRO/WPI is issued enjoining the implementation of a tax statute or issuance, the practical effect is to suspend the assessment or collection of all taxes stemming from the same. In this regard, the TRO/WPI may thus be considered as a broader relief which renders unnecessary further Suspension Orders covering future assessments/collection of taxes stemming from such tax statute or issuance.
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The CTA is not bound to rule solely on the basis of the laws cited by a litigant.
In issuing the assessments, the CIR had stated the material facts and the law upon which they were based. In the petition for review filed by PMFC before the CTA, it was the former’s burden to properly invoke the applicable legal provisions in pursuit of its goal to reduce its tax liabilities. The CTA, on the other hand, is not bound to rule solely on the basis of the laws cited by the CIR. Were it otherwise, the tax court’s appellate power of review shall be rendered useless. An absurd situation would arise leaving the CTA with only two options, to wit: (a) affirming the CIR’s legal findings; or (b) altogether absolving the taxpayer from liability if the CIR relied on misplaced legal provisions. The foregoing is not what the law intends.
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CTA En Banc’s jurisdiction
It is already settled that the CTA En Banc has jurisdiction over final order or judgment but not over interlocutory orders issued by the CTA in division.
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Motions for extension
Motions for extension are normally granted without prejudice to the court’s subsequent determination that the petition to be filed should be denied due course.
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Effect of the ruling on the main upon ancillary interim reliefs
Given the Court’s final disposition herein, the Motion for the Issuance of a Status Quo Ante Order and the Motion to Lift the Temporary Restraining Order have already been rendered moot and academic. The said motions are ancillary interim reliefs which were rendered functus officio by the ruling on the main. As case law states, when injunction is sought as mere ancillary remedy, it “cannot exist except only as part or an incident of an independent action or proceeding” and exists only “until it is dissolved or until termination of the action without the court issuing a final injunction.” Upon the promulgation of this Decision, the main action is deemed terminated. Necessarily, the ancillary remedy issued by the Court likewise ceases to have effect.
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A second motion for reconsideration is prohibited.
The denial of a motion for reconsideration is final. It means that the Court will no longer entertain and consider further arguments or submissions from the parties respecting the correctness of its decision or resolution. It signifies that, in the Court’s considered view, nothing more is left to be discussed, clarified or done in the case since all issues raised have been passed upon and definitely resolved. Any other issue which could and should have been raised is deemed waived and is no longer available as ground for a second motion. A denial with finality underscores that the case is considered closed. Thus, as a rule, a second motion for reconsideration is a prohibited pleading.
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Decisions of the Court of Appeals (CA) are not binding on the CTA, nor on the SC.
Petitioner can neither properly nor successfully rely on the decisions of the CA in the Bank of the Philippine Islands and Raytheon Ebasco Overseas Ltd. Philippine Branch cases. First, the CA and the CTA are now of the same level pursuant to RA 9282. Decisions of the CA are thus no longer superior to nor reversive of those of the CTA. Second, a decision of the CA in an action in personam binds only the parties in that case. A third party in an action in personam cannot claim any right arising from a decision therein. Finally and most importantly, while a ruling of the CA on any question of law is not conclusive on this Court, all rulings of this Court on questions of law are conclusive and binding on all courts including the CA. All courts must take their bearings from the decisions of this Court.
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Res judicata: Bar by prior judgment
Res judicata applies in the concept of “bar by prior judgment” if the following requisites concur: (1) the former judgment or order must be final; (2) the judgment or order must be on the merits; (3) the decision must have been rendered by a court having jurisdiction over the subject matter and the parties; and (4) there must be, between the first and the second action, identity of parties, of subject matter, and of causes of action.
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In the instant petitions, petitioner asserts his right to collect as excise tax deficiencies the excise tax liabilities which respondents had previously settled using the transferred TCCs, impugning the TCCs’ validity on account of fraud as well as respondents’ qualifications as transferees of said TCCs. However, respondents already raised the same arguments and the Court definitively ruled thereon in its final and executory decisions in the 2007 Shell Case and 2010 Petron Case.
The re-litigation of these issues in the present petitions, when said issues had already been settled with finality in the 2007 Shell Case and 2010 Petron Case, is precluded by res judicata in the concept of “conclusiveness of judgment.”
In Ocho v. Calos [399 Phil. 205 (2000)], the Court extensively explained the doctrine of res judicata in the concept of “conclusiveness of judgment,” thus:
The doctrine of res judicata as embodied in Section 47, Rule 39 of the Rules of Court states:
SECTION 47. Effect of judgments or final orders. – The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronom:tce the judgment or final order, may be as follows:
x x x x
(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors-in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity; and
(c) In any other litigation between the same parties or their successors-in-interest, that only is deemed to have been adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto.
It must be pointed out at this point that, contrary to the insistence of the Caloses, the doctrine of res judicata applies to both judicial and quasi-judiCial proceedings. The doctrine actually embraces two (2) concepts: the first is “bar by prior judgment” under paragraph (b) of Rule 39, Section 47, and the second is “conclusiveness of judgment” under paragraph (c) thereof. In the present case, the second concept – conclusiveness of judgment- applies. The said concept is explained in this manner:
[A] fact or question which was in issue in a former suit and was there judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and persons in privity with them are concerned and cannot be again litigated in any future action between such parties or their privies, in the same court or any other court of concurrent jurisdiction on either the same or different cause of action, while the judgment remains unreversed by proper authority. It has been held that in order. that a judgment in one action can be conclusive as to a particular matter in another action between the same parties or their privies, it is essential that the issue be identical. If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit. x x x.
Although the action instituted by the Caloses in Adm. Case No. 006-90 (Anomalies/Irregularities in OLT Transfer Action and Other Related Activities) is different from the action in Adm. Case No. (X)-014 (Annulment of Deeds of Assignment, Emancipation Patents and Transfer Certificate of Titles, Retention and Recovery of Possession and Ownership), the concept of conclusiveness of judgment still applies because under this principle “the identity of causes of action is not required but merely identity of issues.”
[Simply] put, conclusiveness of judgment bars the relitigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action. In Lopez vs. Reyes, we expounded on the concept of conclusiveness of judgment as follows:
The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated in former action are commonly applied to all matters essentially connected with the subject matter of litigation. Thus it extends to questions necessarily involved in an issue, and necessarily adjudicated, or necessarily implied in the final judgment, although no specific finding may have been made in reference thereto, and although such matters were directly referred to in the pleadings and were not actually or formally presented. Under this rule, if the record of the former trial shows that the judgment could not have been rendered without deciding the particular matter, it will be considered as having settled that matter as to all future actions between the parties, and if a judgment necessarily presupposes certain premises, they are as conclusive as the judgment itself. Reasons for the rule are that a judgment is an adjudication on all the matters which are essential to support it, and that every proposition assumed or decided by the court leading up to the final conclusion upon which such conclusion is based is as effectually passed upon as the ultimate question which is solved.
x x x x
As held in Legarda vs. Savellano:
x x x It is a general rule common to all civilized system of jurisprudence, that the solemn and deliberate sentence of the law, pronounced by its appointed organs, upon a disputed fact or a state of facts, should be regarded as a final and conclusive determination of the question litigated, and should forever set the controversy at rest. Indeed, it has been well said that this maxim is more than a mere rule of law; more even than an important principle of public policy; and that it is not too much to say that it is a fundamental concept in the organization of every jural system. Public policy and sound practice demand that, at the risk of occasional errors, judgments of courts should become final at some definite date fixed by law. The very object for which courts were constituted was to put an end to controversies.
The findings of the Hearing Officer in Adm. Case No. 006-90, which had long attained finality, that petitioner is not the owner of other agricultural lands foreclosed any inquiry on the same issue involving the same parties and property. The CA thus erred in still making a finding that petitioner is not qualified to be a farmer-beneficiary because he owns other agricultural lands. (Emphases supplied, citations omitted.)
In the 2007 Shell Case, the Court affirmed the validity of the TCCs, the transfer of the TCCs to respondent Shell, and the use of the transfe ed TCCs by respondent Shell to partly pay for its excise tax liabilities for the Covered Years. The Court ratiocinated as follows: First, the results of postaudit procedures conducted in connection with the TCCs should not operate as a suspensive condition to the TCCs’ validity. Second, while it was one of the conditions appearing on the face of the TCCs, the post-audit contemplated therein did not pertain to the TCCs’ genuineness or validity, but to computational discrepancies that might have resulted from their utilization and transfer. Third, the DOF Center or DOF could not compel respondent Shell to submit sales documents for the purported post-audit. As a BOI-registered enterprise, respondent Shell was a qualified transferee of the subject TCCs, pursuant to existing rules and regulations. Fourth, respondent Shell was a transferee in good faith and for value as it secured the necessary approvals from various government agencies before it used and applied the transferred TCCs against its tax liabilities and it did not participate in the perpetuation of fraudulent acts in the procurement of the said TCCs. As a transferee in good faith, respondent Shell could not be prejudiced with a re-assessment of excise tax liabilities it had already settled when due using the subject TCCs nor by any fraud attending the procurement of the subject TCCs. Fifth, while the DOF Center was authorized to cancel TCCs it might have erroneously issued, it could no longer exercise such authority after the subject TCCs have already been utilized and accepted as payment for respondent Shell’s excise tax liabilities. What had been used up, debited, and cancelled could no longer be voided and cancelled anew. While the State was not estopped by the neglect or omission of its agents, this principle could not be applied to the prejudice of an innocent transferee in good faith and for value.
And finally, the Court found in the 2007 Shell Case that respondent Shell’s right to due process was violated. Petitioner did not issue a NIC and PAN to respondent Shell, in violation of the formal assessment procedure required by RR No. 12-99. Petitioner merely relied on the DOF Center’s findings supporting the cancellation of respondent Shell’s TCCs. Thus, the Court voided the assessment dated November 15, 1999 issued by the CIR against herein respondent Shell.
On the other hand, the Court resolved the 2010 Petron Case in accordance with its ruling in the 2007 Shell Case, reiterating that: First, the subject TCCs’ validity and effectivity should be immediate and should not be dependent on the outcome of a post-audit as a suspensive condition. Second, respondent Petron could not be prejudiced by fraud alleged to have attended such issuance as it was not privy to the issuance of the subject TCCs and it had already used said TCCs in settling its tax liabilities. Third, respondent Petron was also an innocent transferee in good faith and for value because it was a qualified transferee of the TCCs based on existing rules and regulations and the TCCs’ transfers were approved by the appropriate government agencies. And fourth, while the government cannot be estopped from collecting taxes by the mistake, negligence, or omission of its agents, the rights of a transferee in good faith and for value should be protected.
The Court’s aforementioned findings in the 2007 Shell Case and 2010 Petron Case are conclusive and binding upon this Court in the petitions at bar. Res judicata by conclusiveness of judgment bars the Court from relitigating the issues on the TCCs’ validity and respondents’ qualifications as transferees in these cases. As a result of such findings in the 2007 Shell Case and 2010 Petron Case, then respondents could not have had excise tax deficiencies for the Covered Years as they had validly paid for and settled their excise tax liabilities using the transferred TCCs.
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A petition for declaratory relief is not the proper remedy to seek the invalidation of RR 15-2013; The petition is treated as one for prohibition.
To begin with, the trial court dismissed the case below, among others, for lack of jurisdiction pursuant to Section 1 of CA 55.
In CJH Development Corp. v. BIR, this Court clarified that CA 55 is still good law.
CIR v. Standard Insurance, Co., Inc. further reinforced the rule that regional trial courts have no jurisdiction over petitions for declaratory relief against the imposition of tax liability or validity of tax assessments.
Verily, since there is no actual case involved in a petition for declaratory relief, it cannot be the proper vehicle to invoke the power of judicial review to declare a statute as invalid or unconstitutional. The proper remedy is certiorari or prohibition.
In Diaz et at v. Secretary of Finance, et al., the Court, nonetheless, held that a petition for declaratory relief may be treated as one for prohibition if the case has far-reaching implications and raises questions that need to be resolved for the public good; or if the assailed act or acts of executive officials are alleged to have usurped legislative authority.
Here, RR 15-2013 greatly impacts the Philippine maritime industry since it is considered “as more of the ‘backbone’ of the Philippines’ burgeoning economy due to its significance both for trade and transportation.” For this reason and the fact that the issue at hand has already pended since 2013 or for more than six (6) years now, first with the trial court and now with this Court, we resolve to treat the present case as one for certiorari or prohibition and settle the controversy once and for all.
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Certiorari is not a substitute for a lost appeal or remedy.
The objections to the assessments should have been raised, considering the ample remedies afforded the taxpayer by the Tax Code, with the BIR and the CTA, as described earlier, and cannot be raised now via Petition for Certiorari, under the pretext of grave abuse of discretion. The course of action taken by the petitioner reflects his disregard or even repugnance of the established institutions for governance in the scheme of a well-ordered society. The subject tax assessments having become final, executory and enforceable, the same can no longer be contested by means of a disguised protest. In the main, Certiorari may not be used as a substitute for a lost appeal or remedy. This judicial policy becomes more pronounced in view of the absence of sufficient attack against the actuations of government.
~~~Marcos II vs. Court of Appeals, et al. (G.R. No. 120880, 5 June 1997, 2nd Div., J. Torres, Jr.)
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As a rule, it is not the province of an appeal by petition for review on certiorari to determine factual matters.
It must be emphasized that generally, it is not the province of an appeal by petition for review on certiorari to determine factual matters. Although there are exceptions to this general rule, none of these exist in the instant case. With that being said, the issue of whether a claimant has actually presented the necessary documents that would prove its entitlement to a tax refund or tax credit, is indubitably a question of fact.
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A criminal complaint need not be preceded by an assessment.
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 (97 SCRA 877, 30 May 1980), 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.
Private respondents insist that Section 222 should be read in relation to Section 255 of the NIRC, which penalizes failure to file a return. They add that a tax assessment should precede a criminal indictment. We disagree. To reiterate, said Section 222 states that an assessment is not necessary before a criminal charge can be filed. This is the general rule. Private respondents failed to show that they are entitled to an exception. Moreover, the criminal charge need only be supported by a prima facie showing of failure to file a required return. This fact need not be proven by an assessment.
The issuance of an assessment must be distinguished from the filing of a complaint. Before an assessment is issued, there is, by practice, a pre-assessment notice sent to the taxpayer. The taxpayer is then given a chance to submit position papers and documents to prove that the assessment is unwarranted. If the commissioner is unsatisfied, an assessment signed by him or her is then sent to the taxpayer informing the latter specifically and clearly that an assessment has been made against him or her. In contrast, the criminal charge need not go through all these. The criminal charge is filed directly with the DOJ. Thereafter, the taxpayer is notified that a criminal case had been filed against him, not that the commissioner has issued an assessment. It must be stressed that a criminal complaint is instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code.
*******
[Section 269(a) of the NIRC (now Section 222(a), NIRC of 1997)] is clear. 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.
Thus, the applicability of Ungab v. Cusi (Nos. L-41919-24, 30 May 1980) is evident to the cases at bar. In this seminal case, this Court ruled that there was no need for precise computation and formal assessment in order for criminal complaints to be filed against him. It quoted Merten’s Law of Federal Income Taxation, Vol. 10, Sec. 55A.05, p. 21, thus:
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 government’s failure to discover the error and promptly to assess has no connections with the commission of the crime.
This hoary principle still underlies Section 269 (now Section 222, NIRC of 1997) and related provisions of the present Tax Code.
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Double jeopardy; A judgment of acquittal bars an appeal by the prosecution.
A judgment of acquittal made by a competent court on a valid information after the accused has entered a plea bars an appeal by the prosecution. Only a clear showing of grave abuse of discretion or denial of due process to the State can justify a review (through a petition for certiorari) of such decision by this Court.
Basic is the rule that no person shall be twice put in jeopardy of punishment for the same offense. It is a constitutional guarantee repeated in Section 7 of Rule 117 of the Rules of Court. A judgment of acquittal cannot be reopened, absent a grave abuse of discretion or a denial of due process to the State. In this light, pertinent is the following excerpt, showing how a similar attempt was made by the prosecution to overturn an acquittal through a Petition for Certiorari in this Court:
“The rule against double jeopardy proscribes an appeal from a judgment of acquittal. If said judgment is assailed in a petition for certiorari under Rule 65 of the Rules of Court, xxx the petitioner must prove that the lower court, in acquitting the accused, committed not merely reversible errors, but grave abuse of discretion amounting to lack or excess of jurisdiction. A judgment rendered with grave abuse of discretion or without due process is void, does not exist in legal contemplation and, thus, cannot be the source of an acquittal. However, where the petition demonstrate[s] mere errors in judgment not amounting to grave abuse of discretion or deprivation of due process, the writ of certiorari cannot issue. A review of the alleged errors of judgment cannot be made without trampling upon the right of the accused against double jeopardy.” (People v. CA, 368 Phil. 169, 21 June 1999)
As aptly put by private respondent, error in the exercise of jurisdiction is not the same as error in judgment. The latter is not reviewable by certiorari, since evidence has been duly considered and passed upon by the SB.
Under the Constitution, no person shall be twice put in jeopardy of punishment for the same offense. To implement this constitutional mandate, the Rules of Court bars an appeal by the State from a judgment of acquittal, provided the following requisites are present: (1) a valid complaint or information was filed; (2) before a competent court; (3) the defendant pleaded to the charge; and (4) the accused was acquitted.
Petitioner alleges, however, that in acquitting the accused, the SB acted in a “capricious, whimsical, arbitrary or despotic manner” equivalent to lack or excess of jurisdiction.
Indeed, the double jeopardy principle will not protect the accused, if the prosecution can show that the court gravely abused its discretion in rendering the judgment of acquittal. The prosecution’s burden is heavy: to show grave — not just ordinary — abuse of discretion equivalent to lack or excess of jurisdiction.
This Court notes the tenacity of the Ombudsman and the Office the Special Prosecutor in doggedly pursuing what they believe is the public weal. But after a careful review of the assailed judgment and the relevant facts and laws, this Court cannot ascribe capricious or whimsical conduct on the part of the SB. The SB Resolution assessed the facts and applied the governing laws and jurisprudence. It analyzed the arguments of both the prosecution and the defense. It then concluded that the elements of the crime charged had not been sufficiently proven. Hence, it acquitted the accused.
Because of the importance of this case and the need to assist the government in collecting the correct amount of taxes, this Court even went further by inquiring whether private respondent (not just the SB) acted within the confines of his duties and prerogatives.
As can be seen from the foregoing discussions, Commissioner Bienvenido A. Tan Jr. acted fairly, honestly and in good faith in discharging his functions. To compromise a tax liability of more than P300 million for only P10 million may appear to be an arbitrary action grossly disadvantageous to the government. The fact remains, however, that the initial tax assessment of P300 million was correctly found by the SB to be overly excessive and erroneous. Under the circumstances, the abatement of the excessive and erroneous taxes was not only within the discretion of respondent; it was just and fair to all concerned. After all, the purpose of tax assessment is to collect only what is legally and justly due the government; not to overburden, much less harass, the taxpayers.
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When there is already double jeopardy.
The reinstatement of the information would expose her to double jeopardy. An accused is placed in double jeopardy if he is again tried for an offense for which he has been convicted, acquitted or in another manner in which the indictment against him was dismissed without his consent. In the instant case, there was a valid complaint filed against petitioner to which she pleaded not guilty. The court dismissed the case at the instance of the prosecution, without asking for accused-petitioner’s consent. This consent cannot be implied or presumed. Such consent must be expressed as to have no doubt as to the accused’s conformity. As petitioner’s consent was not expressly given, the dismissal of the case must be regarded as final and with prejudice to the re-filing of the case. Consequently, the trial court committed grave abuse of discretion in reinstating the information against petitioner in violation of her constitutionally protected right against double jeopardy.
~~~Tupaz vs. Ulep, et al. (G.R. No. 127777, 1 October 1999, 1st Div., J. Pardo)
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Due respect to findings of fact in administrative decisions; Opinions and rulings command respect and weight.
In reviewing administrative decisions, the reviewing court cannot re-examine the factual basis and sufficiency of the evidence. The findings of fact must be respected, so long as they are supported by substantial evidence.
The opinions and rulings of officials of the government called upon to execute or implement administrative laws, command respect and weight.
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On points of law, theories, issues and arguments not raised in the lower court.
It is only in the instant motion for reconsideration that petitioner raised the issue of prescription which is not allowed. 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, 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. This last ditch effort to shift to a new theory and raise a new matter in the hope of a favorable result is a pernicious practice that has consistently been rejected.
*******
In CIR v. Puregold Duty Free, Inc., the Court is emphatic that:
It is well settled that matters that were neither alleged in the pleadings nor raised during the proceedings below cannot be ventilated for the first time on appeal and are barred by estoppel. To allow the contrary would constitute a violation of the other party’s right to due process, and is contrary to the principle of fair play. x x x
x x x Points of law, theories, issues, and arguments not brought to the attention of the trial court ought not to be considered by a reviewing court, as these cannot be raised for the first time on appeal. To consider the alleged facts and arguments belatedly raised would amount to trampling on the basic principles of fair play, justice, and due process. (Citations omitted)
In the case at bar, the CIR issued assessment notices against PMFC for deficiency income, VAT and withholding tax for the year 1996. PMFC assailed the assessments before the BIR and later, before the CTA.
In the Joint Stipulation of Facts, dated March 7, 2001, filed before CTA First Division, the CIR and PMFC both agreed that among the issues for resolution was “whether or not the P5,895,694.66 purchases of raw materials are unsupported.” Estoppel, thus, operates against PMFC anent its argument that the issue of lack or inadequacy of documents to justify the costs of purchase of raw materials as deductions from the gross income had not been presented in the proceedings below, hence, barred for being belatedly raised only on appeal.
Further, in issuing the assessments, the CIR had stated the material facts and the law upon which they were based. In the petition for review filed by PMFC before the CTA, it was the former’s burden to properly invoke the applicable legal provisions in pursuit of its goal to reduce its tax liabilities. The CTA, on the other hand, is not bound to rule solely on the basis of the laws cited by the CIR. Were it otherwise, the tax court’s appellate power of review shall be rendered useless. An absurd situation would arise leaving the CTA with only two options, to wit: (a) affirming the CIR’s legal findings; or (b) altogether absolving the taxpayer from liability if the CIR relied on misplaced legal provisions. The foregoing is not what the law intends.
To reiterate, PMFC was at the outset aware that the lack or inadequacy of supporting documents to justify the deductions claimed from the gross income was among the issues raised for resolution before the CTA. With PMFC’s acquiescence to the Joint Stipulation of Facts filed before the CTA and thenceforth, the former’s participation in the proceedings with all opportunities it was afforded to ventilate its claims, the alleged deprivation of due process is bereft of basis.
*******
It is a settled rule that issues not raised below cannot be pleaded for the first time on appeal because a party is not allowed to change his theory on appeal; to do so would be unfair to the other party and offensive to rules of fair play, justice and due process.
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The CTA is not bound by the issues specifically raised by the parties.
On whether the CTA can resolve an issue which was not raised by the parties, we rule in the affirmative.
Under Section 1, Rule 14 of A.M. No. 05-11-07-CTA, or the Revised Rules of the Court of Tax Appeals, the CTA is not bound by the issues specifically raised by the parties but may also rule upon related issues necessary to achieve an orderly disposition of the case. The text of the provision reads:
SECTION 1. Rendition of judgment. – x x x
In deciding the case, the Court may not limit itself to the issues stipulated by the parties but may also rule upon related issues necessary to achieve an orderly disposition of the case.
The above section is clearly worded. On the basis thereof, the CTA Division was, therefore, well within its authority to consider in its decision the question on the scope of authority of the revenue officers who were named in the LOA even though the parties had not raised the same in their pleadings or memoranda. The CTA En Banc was likewise correct in sustaining the CTA Division’s view concerning such matter.
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The Court is not prevented to resolve the issue of jurisdiction, even when the same is not raised.
Even if not raised in the present petition, the Court is not prevented from considering the issue on the court’s jurisdiction consistent with the well-settled principle that when a case is on appeal, the Court has the authority to review matters not specifically raised or assigned as error if their consideration is necessary in reaching a just conclusion of the case. The matter of jurisdiction cannot be waived because it is conferred by law and is not dependent on the consent or objection or the acts or omissions of the parties or any one of them. Besides, courts have the power to motu proprio dismiss an action over which it has no jurisdiction pursuant to Section 1, Rule 9 of the Revised Rules of Court.
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When the presumption of regularity in the performance of official duty is erroneously applied.
The CTA erroneously applied the “presumption of regularity” in sustaining the Commissioner’s assessments.
The presumption that official duty has been regularly performed is a disputable presumption under Rule 131, Section 3(m) of the Rules of Court. As a disputable presumption —
[I]t may be accepted and acted on where there is no other evidence to uphold the contention for which it stands, or one which may be overcome by other evidence …
The presumption of regularity of official acts may be rebutted by affirmative evidence of irregularity or failure to perform a duty. (Citation omitted)
In Sevilla v. Cardenas [529 Phil. 419 (2006)], this Court refused to apply the “presumption of regularity” when it noted that there was documentary and testimonial evidence that the civil registrar did not exert utmost efforts before certifying that no marriage license was issued in favor of one of the parties.
This Court also refused to apply the presumption of regularity in Bank of the Philippine Islands v. Evangelista [441 Phil. 445 (2002)],where the process server failed to show that he followed the required procedures:
We cannot sustain petitioner’s argument, which is anchored on the presumption of regularity in the process server’s performance of duty. The Court already had occasion to rule that “[c]ertainly, it was never intended that the presumption of regularity in the performance of official duty will be applied even in cases where there is no showing of substantial compliance with the requirements of the rules of procedure.” Such presumption does not apply where it is patent that the sheriff’s or server’s return is defective. Under this circumstance, respondents are not duty-bound to adduce further evidence to overcome the presumption, which no longer holds. (Citations omitted)
Here, contrary to the ruling of the C[T]A, the presumption of regularity in the performance of the Commissioner’s official duties cannot stand in the face of positive evidence of irregularity or failure to perform a duty.
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The jurisdiction of the RTC over an action for collection of custom duties (before RA No. 9282); There must be no needless delay in the collection of customs duties.
The governing law at that time was RA 1125 or the old CTA Law. Section 7 thereof stated:
Section 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided ―
(1) Decision of the Commissioner of Internal Revenue in cases involving disputed assessment, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue;
(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges; seizure, detention or release of property affected; fines and forfeitures or other penalties imposed in relation thereto; or other matters arising under Customs Law or other laws or part of law administered by the Bureau of Customs; and
(3) Decisions of the provincial or city Boards of Assessment Appeals in cases involving the assessment and taxation of real property or other matters arising under the Assessment Law, including rules and regulations relative thereto. (emphasis supplied)
Inasmuch as the present case did not involve a decision of the COC in any of the instances enumerated in Section 7(2) of RA No. 1125, the CTA had no jurisdiction over the subject matter. It was the RTC that had jurisdiction under Section 19(6) of the Judiciary Reorganization Act of 1980, as amended:
Section 19. Jurisdiction in Civil Cases. – Regional Trial Courts shall exercise exclusive original jurisdiction:
xxx xxx xxx
(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising judicial or quasi-judicial functions, xxx.
In view of the foregoing, the RTC should forthwith proceed with Civil Case No. 02-103191 and determine the extent of petitioner’s liability.
We are not unmindful of petitioner’s pending petition for review in the CTA where it is questioning the validity of the cancellation of the TCCs. However, respondent cannot and should not await the resolution of that case before it collects petitioner’s outstanding customs duties and taxes for such delay will unduly restrain the performance of its functions. Moreover, if the ultimate outcome of the CTA case turns out to be favorable to petitioner, the law affords it the adequate remedy of seeking a refund.
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Effectivity of RA No. 9282.
RA No. 9282, amending RA No. 1125, expanding the jurisdiction of the CTA and enlarging its membership, became effective on April 23, 2004 after its due publication.
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When the BIR’s Answer to a Petition for Review could not qualify as a collection case.
The BIR’s Answer in the case filed before the CTA could not, by any means, have qualified as a collection case as required by law. Under the rule prevailing at the time the BIR filed its Answer, the regular courts, and not the CTA, had jurisdiction over judicial actions for collection of internal revenue taxes. It was only on 23 April 2004, when RA No. 9282 took effect, that the jurisdiction of the CTA was expanded to include, among others, original jurisdiction over collection cases in which the principal amount involved is one million pesos or more.
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What our system of laws and procedures abhors.
Our system of laws and procedures abhors ambiguity.
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Failure to indicate the number and date of issue of the counsel’s MCLE compliance will not result in the dismissal of the case.
Other than challenging the merits of the CIR’s petition, La Flor believes that the former’s petition for review on certiorari should be dismissed outright on procedural grounds. It points out that failure to include the date of issue of the MCLE compliance number of a counsel in a pleading is a ground for dismissal. Further, La Flor highlights that the paragraphs in the CIR’s petition for review on certiorari were not numbered.
In People v. Arrojado [772 Phil. 440 (2015)], the Court had already clarified that failure to indicate the number and date of issue of the counsel’s MCLE compliance will no longer result in the dismissal of the case, to wit:
In any event, to avoid inordinate delays in the disposition of cases brought about by a counsel’s failure to indicate in his or her pleadings the number and date of issue of his or her MCLE Certificate of Compliance, this Court issued an En Banc Resolution, dated January 14, 2014 which amended B.M. No. 1922 by repealing the phrase “Failure to disclose the required information would cause the dismissal of the case and the expunction of the pleadings from the records” and replacing it with “Failure to disclose the required information would subject the counsel to appropriate penalty and disciplinary action.” Thus, under the amendatory Resolution, the failure of a lawyer to indicate in his or her pleadings the number and date of issue of his or her MCLE Certificate of Compliance will no longer result in the dismissal of the case and expunction of the pleadings from the records. Nonetheless, such failure will subject the lawyer to the prescribed fine and/or disciplinary action.
On the other hand, even La Flor recognizes that Section 2, Rule 7 of the Rules of Court does not provide for any punishment for failure to number the paragraphs in a pleading. In short, the perceived procedural irregularities in the petition for review on certiorari do not justify its outright dismissal. Procedural rules are in place to facilitate the adjudication of cases and avoid delay in the resolution of rival claims. In addition, courts must strive to resolve cases on their merits, rather than summarily dismiss them on technicalities. This is especially true when the alleged procedural rules violated do not provide any sanction at all or when the transgression thereof does not result in a dismissal of the action.
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A lawyer’s responsibility.
A lawyer is indeed expected to champion the cause of his client with utmost zeal and competence. Such exuberance, however, must be tempered to meet the standards of civility and decorum. Rule 8.01 of the Code of Professional Responsibility mandates that “[a] lawyer shall not, in his professional dealings, use language which is abusive, offensive or otherwise improper.” In Noble v. Atty. Ailes (A.C. No. 10628, 1 July 2015), the Court cautioned lawyers to be careful in their choice of words as not to unduly malign the other party, to wit:
Though a lawyer’s language may be forceful and emphatic, it should always be dignified and respectful, befitting the dignity of the legal profession. The use of intemperate language and unkind ascriptions has no place in the dignity of the judicial forum. In Buatis Jr. v. People, the Court treated a lawyer’s use of the words “lousy,” “inutile,” “carabao English,” “stupidity,” and “satan” in a letter addressed to another colleague as defamatory and injurious which effectively maligned his integrity. Similarly, the hurling of insulting language to describe the opposing counsel is considered conduct unbecoming of the legal profession.
xxx
On this score, it must be emphasized that membership in the bar is a privilege burdened with conditions such that a lawyer’s words and actions directly affect the public’s opinion of the legal profession. Lawyers are expected to observe such conduct of nobility and uprightness which should remain with them, whether in their public or private lives, and may be disciplined in the event their conduct falls short of the standards imposed upon them. Thus, in this case, it is inconsequential that the statements were merely relayed to Orlando’s brother in private. As a member of the bar, Orlando should have been more circumspect in his words, being fully aware that they pertain to another lawyer to whom fairness as well as candor is owed. It was highly improper for Orlando to interfere and insult Maximino to his client.
Indulging in offensive personalities in the course of judicial proceedings, as in this case, constitutes unprofessional conduct which subjects a lawyer to disciplinary action. While a lawyer is entitled to present his case with vigor and courage, such enthusiasm does not justify the use of offensive and abusive language. The Court has consistently reminded the members of the bar to abstain from all offensive personality and to advance no fact prejudicial to the honor and reputation of a party. xxx [Emphases supplied]
While the Court recognizes and appreciates the passion of Asalus’ counsels in promoting and protecting its interest, they must still be reminded that they should be more circumspect in their choice of words to argue their client’s position. As much as possible, words which undermine the integrity, competence and ability of the opposing party, or are otherwise offensive, must be avoided especially if the message may be delivered in a respectful, yet equally emphatic manner. A counsel’s mettle will not be viewed any less should he choose to pursue his cause without denigrating the other party.
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Substantiation of sales under the VAT law.
In establishing the fact that taxable transactions like sale of goods or properties or sale of services were made, the law (Sections 113 and 237) provided for invoicing and accounting requirements.
The CTA En Banc held the view that while Sections 113 and 237 used the disjunctive term “or”, it must not be interpreted as giving a taxpayer an unconfined choice to select between issuing an invoice or an official receipt. To the court a quo, sales invoices must support sales of goods or properties while official receipts must support sales of services.
We agree.
Irrefutably, when a VAT-taxpayer claims to have zero-rated sales of services, it must substantiate the same through valid VAT official receipts, not any other document, not even a sales invoice which properly pertains to a sale of goods or properties.
In this case, the documentary proofs presented by Nippon Express to substantiate its zero-rated sales of services consisted of sales invoices and other secondary evidence like transfer slips, credit memos, cargo manifests, and credit notes. It is very clear that these are inadequate to support the petitioner’s sales of services.
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