Tax Rev Cases 1

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 185115
February 18, 2015
NORTHERN MINDANAO POWER CORPORATION, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
SERENO, CJ:
This is a Petition for Review on Certiorari 1 under Rule 45 of the 1997 Rules of Civil
Procedure filed by Northern Mindanao Power Corporation (petitioner). The Petition
assails the Decision2 dated 18 July 2008 and Resolution3dated 27 October 2008
issued by the Court of Tax Appeals En Banc (CTA En Banc) in C.T.A. EB No. 312.
THE FACTS
Petitioner is engaged in the production sale of electricity as an independent power
producer and sells electricity to National Power Corporation (NPC). It allegedly
incurred input value-added tax (VAT) on its domestic purchases of goods and
services that were used in its production and sale of electricity to NPC. For the 3rd
and the 4th quarters of taxable year 1999, petitioners input VAT totaled
to P2,490,960.29, while that incurred for all the quarters of taxable year 2000
amounted to P3,920,932.55.4
Petitioner filed an administrative claim for a refund on 20 June 2000 for the 3rd and
the 4th quarters of taxable year 1999, and on 25 July 2001 for taxable year 2000 in
the sum of P6,411,892.84.5
Thereafter, alleging inaction of respondent on these administrative claims,
petitioner filed a Petition6 with the CTA on 28 September 2001.
The CTA First Division denied the Petition and the subsequent Motion for
Reconsideration for lack of merit. The Court in Division found that the term "zerorated" was not imprinted on the receipts or invoices presented by petitioner in
violation of Section 4.108-1 of Revenue Regulations No. 7-95. Petitioner failed to
substantiate its claim for a refund and to strictly comply with the invoicing
requirements of the law and tax regulations. 7 In his Concurring and Dissenting
Opinion, however, then Presiding Justice Ernesto D. Acosta opined that the Tax Code
does not require that the word "zero-rated" be imprinted on the face of the receipt
or invoice. He further pointed out that the absence of that term did not affect the
admissibility and competence of the receipt or invoice as evidence to support the
claim for a refund.8
On appeal to the CTA En Banc, the Petition was likewise denied. The court ruled that
for every sale of services, VAT shall be computed on the basis of gross receipts
indicated on the official receipt. Official receipts are proofs of sale of services and
cannot be interchanged with sales invoices as the latter are used for the sale of
goods. Further, the requirement of issuing duly registered VAT official receipts with
the term "zero-rated" imprinted is mandatory under the law and cannot be
substituted, especially for input VAT refund purposes. Then Presiding Justice Acosta
maintained his dissent.
Hence, this appeal before us.
ISSUES
Petitioners appeal is anchored on the following grounds:
Section 4.108-1 of Revenue Regulations (RR) No. 7-95 which expanded the statutory
requirements for the issuance of official receipts and invoices found in Section 113
of the 1997 Tax Code by providing for the additional requirement of the imprinting
of the terms "zero-rated" is unconstitutional.
Company invoices are sufficient to establish the actual amount of sale of electric
power services to the National Power Corporation and therefore sufficient to
substantiate Petitioners claim for refund.9
THE COURTS RULING
To start with, this Court finds it appropriate to first determine the timeliness of
petitioners judicial claim in order to determine whether the tax court properly
acquired jurisdiction, although the matter was never raised as an issue by the
parties. Well-settled is the rule that the issue of jurisdiction over the subject matter
may, at any time, be raised by the parties or considered by the Court motu
proprio.10 Therefore, the jurisdiction of the CTA over petitioners appeal may still be
considered and determined by this Court.
Section 112 of the National Internal Revenue Code (NIRC) of 1997 laid down the
manner in which the refund or credit of input tax may be made. For a VAT-registered
person whose sales are zero-rated or effectively zero-rated, Section 112(A)
specifically provides for a two-year prescriptive period after the close of the taxable
quarter when the sales were made within which such taxpayer may apply for the
issuance of a tax credit certificate or refund of creditable input tax. In the
consolidated tax cases Commissioner of Internal Revenue v. San Roque Power
Corporation, Taganito Mining Corporation v. Commissioner of Internal Revenue, and
Philex Mining Corporation v. Commissioner of Internal Revenue 11 (hereby collectively
referred to as San Roque), the Court clarified that the two-year period refers to the
filing of an administrative claim with the BIR.
In this case, petitioner had until 30 September 2001 and 31 December 2001 for the
claims covering the 3rd and the 4th quarters of taxable year 1999; and 31 March,
30 June, 30 September and 31 December in 2002 for the claims covering all four
quarters of taxable year 2000 or the close of the taxable quarter when the zerorated sales were made within which to file its administrative claim for a refund. On
this note, we find that petitioner had sufficiently complied with the two-year
prescriptive period when it filed its administrative claim for a refund on 20 June
2000 covering the 3rd and the 4th quarters of taxable year 1999 and on 25 July
2001covering all the quarters of taxable year 2000.
Pursuant to Section 112(D) of the NIRC of 1997, respondent had one hundred
twenty (120) days from the date of submission of complete documents in support of
the application within which to decide on the administrative claim. The burden of
proving entitlement to a tax refund is on the taxpayer. Absent any evidence to the
contrary, it is presumed that in order to discharge its burden, petitioner attached to
its applications complete supporting documents necessary to prove its entitlement
to a refund.12 Thus, the 120-day period for the CIR to act on the administrative claim
commenced on 20 June 2000 and 25 July 2001.
As laid down in San Roque, judicial claims filed from 1 January 1998 until the
present should strictly adhere to the 120+30-day period referred to in Section 112
of the NIRC of 1997.The only exception is the period 10 December 2003 until 6
October 2010. Within this period, BIR Ruling No. DA-489-03 is recognized as an
equitable estoppel, during which judicial claims may be filed even before the
expiration of the 120-day period granted to the CIR to decide on a claim for a
refund.
For the claims covering the 3rd and the 4th quarters of taxable year 1999 and all
the quarters of taxable year2000, petitioner filed a Petition with the CTA on 28
September 2001.
Both judicial claims must be disallowed.
a) Claim for a refund of input VAT
covering the 3rd and the 4th
quarters of taxable year 1999
Counting 120 days from 20 June 2000, the CIR had until 18 October 2000 within
which to decide on the claim of petitioner for an input VAT refund attributable to its
zero-rated sales for the period covering the 3rd and the 4th quarters of taxable year
1999. If after the expiration of that period respondent still failed to act on the
administrative claim, petitioner could elevate the matter to the court within 30 days
or until 17 November 2000.
Petitioner belatedly filed its judicial claim with the CTA on 28 September 2001. Just
like in Philex, this was a case of late filing. The Court explained thus:
Unlike San Roque and Taganito, Philexs case is not one of premature filing but of
late filing. Philex did not file any petition with the CTA within the 120-day period.
Philex did not also file any petition with the CTA within 30 days after the expiration
of the 120-day period. Philex filed its judicial claim long after the expiration of the
120-day period, in fact 426 days after the lapse of the 120-day period. In any event,
whether governed by jurisprudence before, during, or after the Atlas case, Philexs
judicial claim will have to be rejected because of late filing. Whether the two-year
prescriptive period is counted from the date of payment of the output VAT following
the Atlas doctrine, or from the close of the taxable quarter when the sales
attributable to the input VAT were made following the Mirant and Aichi doctrines,
Philexs judicial claim was indisputably filed late.
The Atlas doctrine cannot save Philex from the late filing of its judicial claim. The
inaction of the Commissioner on Philexs claim during the 120-day period is, by
express provision of law, "deemed a denial" of Philexs claim. Philex had 30 days
from the expiration of the 120-day period to file its judicial claim with the CTA.
Philexs failure to do so rendered the "deemed a denial" decision of the
Commissioner final and inappealable. The right to appeal to the CTA from a decision
or "deemed a denial" decision of the Commissioner is merely a statutory privilege,
not a constitutional right. The exercise of such statutory privilege requires strict
compliance with the conditions attached by the statute for its exercise. Philex failed
to comply with the statutory conditions and must thus bear the consequences.
xxxx
Philexs situation is not a case of premature filing of its judicial claim but of late
filing, indeed very late filing. BIR Ruling No. DA-489-03 allowed premature filing of a
judicial claim, which means non-exhaustion of the 120-day period for the
Commissioner to act on an administrative claim. Philex cannot claim the benefit of
BIR Ruling No. DA-489-03 because Philex did not file its judicial claim prematurely
but filed it long after the lapse of the 30-day period following the expiration of the
120-day period. In fact, Philex filed its judicial claim 426 days after the lapse of the
30-day period.13 (Emphasis in the original)
Petitioners claim for the 3rd and the 4th quarters of taxable year 1999 was filed
319 days after the expiration of the 30-day period. To reiterate, the right to appeal
is a mere statutory privilege that requires strict compliance with the conditions
attached by the statute for its exercise. Like Philex, petitioner failed to comply with
the statutory conditions and must therefore bear the consequences. It already lost
its right to claim a refund or credit of its alleged excess input VAT attributable to
zero-rated or effectively zero-rated sales for the 3rd and the 4th quarters of taxable
year 1999 by virtue of its own failure to observe the prescriptive periods.
b) Claim for the refund of input
VAT covering all quarters of
taxable year 2000
For the year 2000, petitioner timely filed its administrative claim on 25 July
2001within the two-year period from the close of the taxable quarter when the
zero-rated sales were made. Pursuant to Section 112(D) of the NIRC of 1997,
respondent had 120 days or until 22 November 2001 within which to act on
petitioners claim. It is only when respondent failed to act on the claim after the
expiration of that period that petitioner could elevate the matter to the tax court.
Records show, however, that petitioner filed its Petition with the CTA on 28
September 2001 without waiting for the expiration of the 120-day period. Barely 64
days had lapsed when the judicial claim was filed with the CTA. The Court in San
Roquehas already settled that failure of the petitioner to observe the mandatory
120-day period is fatal to its judicial claim and renders the CTA devoid of jurisdiction
over that claim. On 28 September 2001 the date on which petitioner filed its
judicial claim for the period covering taxable year 2000 the 120+30 day
mandatory period was already in the law and BIR Ruling No. DA-489-03 had not yet
been issued. Considering this fact, petitioner did not have an excuse for not
observing the 120+30 day period. Again, as enunciated in San Roque, it is only the
period between 10 December 2003 and 6 October 2010 that the 120-day period
may not be observed. While the ponente had disagreed with the majority ruling in
San Roque, the latter is now the judicial doctrine that will govern like cases.
The judicial claim was thus prematurely filed for failure of petitioner to observe the
120-day waiting period.1wphi1 The CTA therefore did not acquire jurisdiction over
the claim for a refund of input VAT for all the quarters of taxable year 2000.
In addition, the issue of the requirement of imprinting the word "zero-rated" has
already been settled by this Court in a number of cases. In Western Mindanao
Power Corporation v. CIR,14 we ruled:
RR 7-95, which took effect on 1 January 1996, proceeds from the rule-making
authority granted to the Secretary of Finance by the NIRC for the efficient
enforcement of the same Tax Code and its amendments. In Panasonic
Communications Imaging Corporation of the Philippines v. Commissioner of Internal
Revenue, we ruled that this provision is "reasonable and is in accord with the
efficient collection of VAT from the covered sales of goods and services." Moreover,
we have held in Kepco Philippines Corporation v. Commissioner of Internal Revenue
that the subsequent incorporation of Section 4.108-1 of RR 7-95 in Section 113 (B)
(2) (c) of R.A. 9337 actually confirmed the validity of the imprinting requirement on
VAT invoices or official receipts a case falling under the principle of legislative
approval of administrative interpretation by reenactment.
In fact, this Court has consistently held as fatal the failure to print the word "zerorated" on the VAT invoices or official receipts in claims for a refund or credit of input
VAT on zero-rated sales, even if the claims were made prior to the effectivity of R.A.
9337. Clearly then, the present Petition must be denied.
Finally, as regards the sufficiency of a company invoice to prove the sales of
services to NPC, we find this claim is without sufficient legal basis. Section 113 of
the NIRC of 1997 provides that a VAT invoice is necessary for every sale, barter or
exchange of goods or properties, while a VAT official receipt properly pertains to
every lease of goods or properties; as well as to every sale, barter or exchange of
services.
The Court has in fact distinguished an invoice from a receipt m Commissioner of
Internal Revenue v. Manila Mining Corporation: 15
A "sales or commercial invoice" is a written account of goods sold or services
rendered indicating the prices charged therefor or a list by whatever name it is
known which is used in the ordinary course of business evidencing sale and transfer
or agreement to sell or transfer goods and services.
A "receipt" on the other hand is a written acknowledgment of the fact of payment in

money or other settlement between seller and buyer of goods, debtor or creditor, or
person rendering services and client or customer.
A VAT invoice is the seller's best proof of the sale of goods or services to the buyer,
while a VAT receipt is the buyer's best evidence of the payment of goods or services
received from the seller. A VAT invoice and a VAT receipt should not be confused
and made to refer to one and the same thing. Certainly, neither does the law intend
the two to be used alternatively. 16 WHEREFORE, premises considered, the instant
Petition is DENIED.
SO ORDERED.
MARIA LOURDES P.A. SERENO
Chief Justice, Chairperson
WE CONCUR:
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
LUCAS P. BERSAMIN
Associate Justice
JOSE PORTUGAL PEREZ

Associate Justice
ESTELA M. PERLAS-BERNABE
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions
in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.
Chief Justice
Footnotes
1
Rollo, pp. 9-42.
Id. at 61-80; penned by Associate Justice Juanito C. Castaneda, Jr and concurred in

by Associate Justices Lovell R. Bautista, Caesar A. Casanova, Erlinda P. Uy and Olga
Palanca-Enriquez, with the Concurring and Dissenting Opinion of then Presiding
Justice Ernesto D. Acosta.
3
Id. at 45-60; penned by Associate Justice Juanito C. Castaneda Jr and concurred in

by Associate Justices Caesar A. Casanova, Erlinda P. Uy and Olga Palanca-Enriquez,
with then Presiding Justice Ernesto D. Acosta dissenting.
4
Id. at 62-63.
Id. at 63.
Docketed as C.T.A. Case No. 6337, raffled to the CTA First Division, id. at 85-90.
Id. at 139-151.
Id. at 152-157.
Petition for Review, id. at 18.
10
Namuhe v. Ombudsman, 358 Phil. 782 (1998), citing Section 1, Rule 9, 1997 Rules
of Civil Procedure (formerly Rule 9, Section 2); Fabian v. Desierto, 356 Phil. 787
(1998).
11
G.R. Nos. 187485, 196113, 197156, 12 February 2013, 690 SCRA 336.
12
Applied Food Ingredients Company, Inc. v. CIR, G.R. No. 184266, 11 November
2013.
13
Supra note 13, at 389-390 and 405-406.
14
G.R. No. 181136, 13 June 2012, 672 SCRA 350, 363.
15
505 Phil. 650, 665 (2005).
16
KEPCO Philippines Corporation v. CIR, G.R. No. 181858, 24 November 2010, 636
SCRA 166.
The Lawphil Project - Arellano Law Foundation

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 168950
January 14, 2015
ROHM APOLLO SEMICONDUCTOR PHILIPPINES, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondents.
DECISION
SERENO, CJ:
This Rule 45 Petition1 requires this Court to address the question of timeliness with
respect to petitioner's judicial claim for refund or credit of unutilized input ValueAdded Tax (VAT) under Sections 112(A) and 112(D) 2 of the 1997 Tax Code. Petitioner
Rohm Apollo Semiconductor Philippines., Inc. (Rohm Apollo) assails the
Decision3 and Resolution4 of the Court of Tax Appeals En Banc (CTA En Banc) in CTA
En Banc Case No. 59, affirming the Decision in CTA Case No. 6534 of the CTA First
Division.5 The latter denied the claim for the refund or issuance of a tax credit
certificate filed by petitioner Rohm Apollo in the amount of P30,359,615.40
representin& unutilized input VAT paid on capital goods purchased for the months of
July and August 2000.
FACTS
Petitioner Rohm Apollo is a domestic corporation registered with the Securities and
Exchange Commission.6 It is also registered with the Philippine Economic Zone
Authority as an Ecozone Export Enterprise.7 Rohm Apollo is in the business of
manufacturing semiconductor products, particularly microchip transistors and
tantalium capacitors at the Peoples Technology Complex Special Economic Zone,
Barangay Maduya, Carmona Cavite.8 Further, it is registered with the Bureau of
Internal Revenue (BIR) as a value-added taxpayer. 9
Sometime in June 2000, prior to the commencement of its operations on 1
September 2001, Rohm Apollo engaged the services of Shimizu Philippine
Contractors, Inc. (Shimizu) for the construction of a factory. 10 For services rendered
by Shimizu, petitioner made initial payments of P198,551,884.28 on 7 July 2000
andP132,367,923.58 on 3 August 2000.11
It should be noted at this point that Section 112(B), 12 in relation to Section
112(A)13 of the 1997 Tax Code, allows a taxpayer to file an application for the refund
or tax credit of unutilized input VAT when it comes to the purchase of capital goods.
The provision sets a time frame for the filing of the application at two years from the
close of the taxable quarter when the purchase was made.
Going back to the case, petitioner treated the payments as capital goods purchases
and thus filed with the BIR an administrative claim for the refund or credit of
accumulated unutilized creditable input taxes on 11 December 2000. 14 As the close
of the taxable quarter when the purchases were made was 30 September 2000, the
administrative claim was filed well within the two-year prescriptive period.
Pursuant to Section 112(D)15 of the 1997 Tax Code, the Commissioner of Internal
Revenue (CIR) had a period of 120 days from the filing of the application for a
refund or credit on 11 December 2000, or until 10 April 2001, to act on the claim.
The waiting period, however, lapsed without any action by the CIR on the claim.
Instead of filing a judicial claim within 30 days from the lapse of the 120-day period
on 10 April, or until 10 May 2001, Rohm Apollo filed a Petition for Review with the
CTA docketed as CTA Case No. 6534 on 11 September 2002. It was under the belief
that a judicial claim had to be filed within the two-year prescriptive period ending on
30 September 2002.16
On 27 May 2004, the CTA First Division rendered a Decision 17 denying the judicial
claim for a refund or tax credit. In support of its ruling, the CTA First Division held,
among others, that petitioner must have at least submitted its VAT return for the
third quarter of 2001, since it was in that period that it began its business
operations. The purpose was to verify if indeed petitioner did not carry over the
claimed input VAT to the third quarter or the succeeding quarters.
On 14 July 2004, petitioner RohmApollo filed a Motion for Reconsideration, but the
tax court stood by its Decision.18
On 18 January 2005, the taxpayer elevated the case to the CTA En Bancvia a
Petition for Review.19
On 22 June 2005, the CTA En Bancrendered its Decision denying Rohm Apollos
Petition for Review.20 The appellate tax court held that the failure to present the VAT
returns for the subsequent taxable year proved to be fatal to the claim for a
refund/tax credit, considering that it could not be determined whether the claimed
amount to be refunded remained unutilized. Petitioner filed a Motion for
Reconsideration of the Decision, but it was denied for lack of merit.
Persistent, the taxpayer filed this Rule 45 Petition, arguing that it has satisfied all
the legal requirements for a valid claim for refund or tax credit of unutilized input
VAT.
ISSUE
The threshold question to be resolved is whether the CTA acquired jurisdiction over
the claim for the refund or tax credit of unutilized input VAT.
THE COURTS RULING
We deny the Petition on the ground that the taxpayers judicial claim for a
refund/tax credit was filed beyond the prescriptive period.
The judicial claim was filed out of time.
Section 112(D) of the 1997 Tax Code states the time requirements for filing a
judicial claim for the refund or tax credit of input VAT. The legal provision speaks of
two periods: the period of 120 days, which serves as a waiting period to give time
for the CIR to act on the administrative claim for a refund or credit; and the period
of 30 days, which refers to the period for filing a judicial claim with the CTA. It is the
30-day period that is at issue in this case.
The landmark case of Commissioner of Internal Revenue v. San Roque Power
Corporation21 has interpreted Section 112 (D). The Court held that the taxpayer can
file an appeal in one of two ways: (1) file the judicial claim within 30 days after the
Commissioner denies the claim within the 120-day waiting period, or (2) file the
judicial claim within 30 days from the expiration of the 120-day period if the
Commissioner does not act within that period.
In this case, the facts are not up for debate. On 11 December 2000, petitioner filed
with the BIR an application for the refund or credit of accumulated unutilized
creditable input taxes. Thus, the CIR had a period of 120 days from 11 December
2000, or until 10 April 2001, to act on the claim. It failed to do so, however. Rohm
Apollo should then have treated the CIRs inaction as a denial of its claim. Petitioner
would then have had 30 days, or until 10 May 2001, to file a judicial claim withthe
CTA. But Rohm Apollo filed a Petition for Review with the CTA only on 11 September
2002. The judicial claim was thus filed late.
The error of the taxpayer lies in the fact that it had mistakenly believed that a
judicial claim need not be filed within 30 days from the lapse of the 120-day period.
It had believed that the only requirement is that the judicial claim must be filed
withinthe two-year period under Sections 112(A) and (B) of the 1997 Tax Code. In
other words, Rohm Apollo erroneously thought that the 30-day period does not
apply to cases of the CIRs inaction after the lapse of the 120-day waiting period,
and that a judicial claim is seasonably filed so long as it is done within the two year
period. Thus, it filed the Petition for Review with the CTA only on 11 September
2002.
These mistaken notions have already been dispelled by Commissioner of Internal
Revenue v. Aichi Forging Company of Asia, Inc. (Aichi) 22 and San Roque. Aichi
clarified that it is only the administrative claim that must be filed within the twoyear prescriptive period.23 San Roque, on the other hand, has ruled that the 30-day
period always applies, whether there is a denial or inaction on the part of the CIR. 24
Justice Antonio Carpio, writing for the Court in San Roque, explained that the 30-day
period is a 1997 Tax Code innovation that does away with the old rule where the
taxpayer could file a judicial claim when there is inaction on the part of the CIR and
the two-year statute of limitations is about to expire. Justice Carpio stated:
The old rule that the taxpayer may file the judicial claim, without waiting for the
Commissioner's decision if the two-year prescriptive period is about to expire,
cannot apply because that rule was adopted before the enactment of the 30-day
period. The 30-day period was adopted precisely to do away with the old rule, so
that under the VAT System the taxpayer will always have 30 days to file the judicial
claim even if the Commissioner acts only on the 120th day, or does not act at all
during the 120-day period.With the 30-day period always available to the taxpayer,
the taxpayer can no longer file a judicial claim for refund or credit of input VAT
without waiting for the Commissioner to decide until the expiration of the 120-day
period.25 (Emphases supplied) The 30-day period to appeal is mandatory and
jurisdictional.
As a general rule, the 30-day period to appeal is both mandatory and jurisdictional.
The only exception to the general rule is when BIR Ruling No. DA-489-03 was still in
force, thatis, between 10 December 2003 and 5 October 2010, The BIR Ruling
excused premature filing, declaring that the taxpayer-claimant need not wait for the
lapse of the 120-day period before it could seek judicial relief with the CTA by way
of Petition for Review. In San Roque, the High Court explained boththe general rule
and the exception:
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is
construed strictly against the taxpayer.1wphi1 One of the conditions for a judicial
claim of refund or credit under the VAT System is with the 120+30 day mandatory
and jurisdictional periods. Thus, strict compliance with the 120+30 day periods is
necessary for such a claim to prosper, whether before, during, or after the
effectivity of the Atlas doctrine, except for the period from the issuance of BIR
Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the
Aichidoctrine was adopted, which again reinstated the 120+30 day periods as
mandatory and jurisdictional.26 (Emphases supplied)
San Roque likewise ruled out the application of the BIR ruling to cases of late filing.
The Court held that the BIR ruling, as an exception to the mandatory and
jurisdictional nature of the 120+30 day periods, is limited to premature filing and
does not extend to the late filing of a judicial claim. 27
In sum, premature filing is allowed for cases falling during the time when BIR Ruling
No. DA-489-03 was in force; nevertheless, late filing is absolutely prohibited even for
cases falling within that period.
As mentioned above, the taxpayer filed its judicial claim with the CTA on 11
September 2002. This was before the issuance of BIR Ruling No. DA-489-03 on 10
December 2003. Thus, Rohm Apollo could not have benefited from the BIR Ruling.
Besides, its situation was not a case of premature filing of its judicial claim but one
of late filing. To repeat, its judicial claim was filed on 11 September 2002 long after
10 May 2001, the last day of the 30-day period for appeal. The case thus falls under
the general rule the 30-day period is mandatory and jurisdictional. CONCLUSION
In fine, our finding is that the judicial claim for the refund or credit of unutilized
input VAT was belatedly filed. Hence, the CTA lost jurisdiction over Rohm Apollos
claim for a refund or credit. The foregoing considered, there is no need to go into
the merits of this case.
A final note, the taxpayers are reminded that that when the 120-day period lapses
and there is inaction on the part of the CIR, they must no longer wait for it to come
up with a decision thereafter. The CIRs inaction is the decision itself. It is already a
denial of the refund claim. Thus, the taxpayer must file an appeal within 30 days
from the lapse of the 120-day waiting period.
WHEREFORE, the Petition is DENIEDfor lack of merit.
SO ORDERED.
Chief Justice, Chairperson
WE CONCUR:
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
LUCAS P. BERSAMIN
Associate Justice
ESTELA M. PERLAS-BERNABE
Associate Justice
CERTIFICATION
JOSE PORTUGAL PEREZ

Associate Justice
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions
in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.
Chief Justice
Footnotes
1
Rollo, pp. 10-51.
The section is numbered 112(0) under R.f.. 8424, but R.A. 9337 renumbered the
section to 112(C).
3
Id. at 252-258; CTA En Banc Decision dated 22 June 2005, penned by Presiding
Justice Ernesto D. Acosta, and concurred in by Associate justices Lovell R. Bautista,
Caesar A. Casanova, Juanito C. Castaneda, Jr., Olga Palanca-Enriquez, and Erlinda P.
Uy.
4
Id. at 274-275; CTA Resolution dated 28 July 2005.
Id. at 117-129; dated 27 May 2004, penned by Associate Justice Lovell R. Bautista,
and concurred in by Pcesiding Justice Ernesto D. Aoosta and Asjoeiote fostiee Juanito
C. Castaneda.
6
Rollo, p. 252.
Under the provisions of R. A. 7916.
Rollo, p. 253.
Id. at 252.
10
Id. at 253.
11
Id.
12
(B) Capital Goods. - A VAT-registered person may apply for the issuance of a tax
credit certificate or refund of input taxes paid on capital goods imported or locally
purchased, to the extent that such input taxes have not been applied against output
taxes. The application may be made only within two (2) years after the close of the
taxable quarter when the importation or purchase was made. (Emphases supplied)
13
Section 112(A) states:
SEC. 112. Refunds or Tax Credits of Input Tax.

(A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered person, whose
sales are zero-rated or effectively zero-rated may, within two (2) years after the
close of the taxable quarter when the sales were made, apply for the issuance of a
tax credit certificate or refund of creditable input tax due or paid attributable to
such sales, except transitional input tax, to the extent that such input tax has not
been applied against output tax: Provided, however, That in the case of zero-rated
sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108(B)(1) and (2), the
acceptable foreign currency exchange proceeds thereof had been duly accounted
for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP): Provided, further, That where the taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in taxable or exempt sale of goods of properties
or services, and the amount of creditable input tax due or paid cannot be directly
and entirely attributed to any one of the transactions, it shall be allocated
proportionately on the basis of the volume of sales. (Emphasis supplied)
14
Rollo, p. 118.
15
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. In
proper cases, the Commissioner shall grant a refund or issue the tax credit
certificate for creditable input taxes within one hundred twenty (120) days from the
date of submission of complete documents in support of the application filed in
accordance with Subsection (A) and (B) hereof. In case of full or partial denial of the
claim for tax refund or tax credit, or the failure on the part of the Commissioner to
act on the application within the period prescribed above, the taxpayer affected
may, within thirty (30) days from the receipt of the decision denying the claim or
after the expiration of the one hundred twenty day-period, appeal the decision or
the unacted claim with the Court of Tax Appeals.(Emphases supplied)
16
Rollo, p. 253.
17
Id.
18
Id. at 254.
19
Id. at 252.
20
Id.
21
G.R. No. 187485, 12 February 2013, 690 SCRA 336, 397.
22
G.R. No. 184823, 6 October 2010, 632 SCRA 422, 443-444.
23
Id.
24
Supra note 21, at 387-388.
25
Id.
26
Id. at 398-399.
27
Id. at 405-406.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 202789
June 22, 2015
COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
PUREGOLD DUTY FREE, INC., Respondent.
DISSENTING OPINION
VILLARAMA, JR., J.:
If this is not SMUGGLING I do not know what it is.
With all due respect, I DISSENT.
Before us is a petition for review under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the Decision1 dated May 9, 2012 and Resolution 2 dated July
18, 2012 of the Court of Tax Appeals (CTA) En Banc in CTA EB No. 723 (CTA Case No.
7812). The CTA En Banc upheld the Resolutions 3 dated November 25, 2010 and
January 20, 2011 of the Second Division which cancelled and set aside the
assessment for deficiency value-added tax (VAT) and excise tax against the
respondent.
The Antecedents
Puregold Duty Free, Inc. (respondent) is a domestic corporation registered with the
Securities and Exchange Commission (SEC) on June 13, 1994 and the Clark
Development Corporation (CDC) as a Clark Special Economic Zone (CSEZ)
Enterprise on July 20, 1994.4
On November 7, 2005, then Deputy Commissioner for Special Concerns/OIC-Large
Taxpayers Service (LTS) of the Bureau of Internal Revenue (BIR) Kim S. JacintoHenares issued a Preliminary Assessment Notice regarding unpaid VAT and excise
tax on wines, liquors and tobacco products imported by respondent from January
1998 to May 2004.
Respondent through counsel protested the assessment, citing the tax exemptions
granted to CSEZ pursuant to Executive Order No. (EO) 80. It noted that CSEZ enjoys
similar tax incentives granted by Republic Act No. (R.A.) 7227 to Subic Special
Economic and Freeport Zone (SSEFZ), and by analogy is thus also covered by the
exception mentioned in Section 131 (A) of R.A. 8424 (National Internal Revenue
Code of 1997). In a Supplementary Protest Letter and the Addendum thereto,
respondent further invoked the provisions of R.A. No. 7916, Proclamation No. 1035
issued by then President Gloria Macapagal-Arroyo, and BIR Ruling No. 046-95 issued
by then Commissioner Liwayway Vinzons-Chato.5
On October 26, 2007, respondent received the formal letter of demand for the
payment of deficiency VAT and excise taxes assessed against its importation of
alcohol and tobacco products for the taxable periods January 1998 to May 2004, in
the total amount of P2,780,610,174.51 inclusive of fees, charges and interest. In
reply, respondent's counsel wrote Elvira R. Vera, Head Revenue Executive Assistant,
LTS-Excise Large Taxpayers Division, requesting the cancellation of the assessment
on the ground that respondent has already availed of tax amnesty under R.A. No.
9399 which relieved it of any civil, criminal or administrative liabilities for the
applicable taxes and duties, inclusive of penalties, interests and other additions
thereto.6
A Final Decision on Disputed Assessment was sent to respondent on June 23, 2008
stating that availment of the tax amnesty under R.A. 9399 does not necessarily
relieve respondent of its deficiency VAT and excise tax liabilities, which arose from
its importation of tobacco and alcohol products, in accordance with Section 131 (A)
of the National Internal Revenue Code of 1997, as amended ( 1997 NIRC). 7
On July 22, 2008, respondent filed a petition for review before the CTA, arguing that
the subject assessment is void on grounds of prescription, the operative fact
doctrine, non-retroactivity of BIR rulings and availment of tax amnesty under R.A.
9399. Respondent posited that its entitlement to tax and duty-free importation of
capital goods, equipment, raw materials and supplies and household and personal
items, in accordance with EO 80 and Customs Administrative Order No. 6-94, which
interpreted R.A. 7227, and that special income tax regime or tax incentives granted
to enterprises registered within the secured area of Subic and Clark Special
Economic Zones remained despite the effectivity of R.A. 8424 (1997 NIRC) on
January 1, 1998. Thus, as a CSEZ enterprise affected by the ruling in the case of
Coconut Oil Refiners Association, Inc. v. Hon. Torres 8 which put into question the
aforesaid issuances, respondent duly complied with the requirements for the grant
of tax amnesty provided by R.A. 9399.
In its Answer, the Commissioner of Internal Revenue (petitioner), through the
Solicitor General, asserted that pursuant to Section 131 (A) of the 1997 NIRC, as
amended, tax and duty free exemptions on importation of alcohol and tobacco
products are limited only to Duty Free Philippines, Inc., a government-operated duty
free shop, as well as locators in the duly registered free port zones created under
special laws, namely: Subic, Cagayan and Zamboanga Free Port Zones.
Respondent filed a motion for early resolution of the issue of tax amnesty and was
allowed to present its evidence thereon, which was subsequently admitted by the
CTA First Division. Resolution of the tax amnesty issue as requested by respondent
was nevertheless deferred as the documents submitted by respondent failed to
prove its total accrued tax liabilities. The case was set for further reception of
evidence by both parties. Respondent's supplemental formal offer of evidence and
petitioner's formal offer of documentary evidence were both admitted by the CTA
First Division.9
On June 3, 2010, the CTA Second Division resolved that the issue of respondent's
compliance with the provisions of R.A. 9399 should be properly resolved together
with the other issues submitted by the parties after a full-blown trial. Respondent
filed a motion for reconsideration but resolution thereof was likewise held in
abeyance pending the submission of the notice of availment and tax amnesty
return.10
Ruling of the CTA Second Division
On November 25, 2010, the CTA Second Division granted respondent's motion for
reconsideration and forthwith resolved the issue of tax amnesty under R.A. 9399. 11
The CTA Second Division found that respondent complied with the requirements for
availing of the benefits under R.A. 9399 by filing a notice and return in such form as
prescribed by the Commissioner of Internal Revenue and the Commissioner of
Customs, and thereafter, paying the amnesty tax of P25,000.00 within six (6)
months from the effectivity of R.A. 9399.
On the question of whether respondent's tax liabilities are excluded under R.A.
9399, the CTA Second Division noted that what respondent sought to cancel was the
assessment of deficiency VAT and excise taxes on imported alcohol and tobacco
products, which clearly are not taxes on articles, raw materials, capital, goods and
consumer items removed from the Special Economic Zones and Freeport Zones and
entered into the customs territory of the Philippines for local or domestic sale.
Hence, it was concluded that the subject impositions are not excluded from the
coverage of amnesty as provided in Section 1 of R.A. 9399.
As to whether respondent is entitled to avail of the tax amnesty under R.A. 9399,
the CTA Second Division declared that liability for VAT and excise taxes on
importation of alcohol and cigars under Section 131 of the 1997 NIRC was obviously
contemplated by R.A. 9399 as can be gleaned from the phrase "all national and
local impositions under relevant tax laws, rules and regulations." Consequently, if
respondent is liable for VAT and excise taxes under Section 131 (A) of the 1997
NIRC, then such amount will be used in determining the difference mandated by
R.A. 9399.
The CTA Second Division thus ruled:
In the light of this Court's findings that petitioner has substantially complied with
the tax amnesty program, petitioner is thereby relieved of any civil, criminal and/or
administrative liabilities arising from or incident to the nonpayment of taxes, duties
and other charges covered by the tax amnesty. However, the applicable tax and
duty liabilities to be covered by the tax amnesty shall refer only to the difference
between: (i) all national and local impositions under relevant tax laws, rules and
regulations; and (ii) five percent (5%) tax on gross income earned by said registered
business enterprises as determined under relevant revenue regulations of the
Bureau of Internal Revenue and memorandum circulars of the Bureau of Customs
during the period covered. Accordingly, the amount covered by the tax amnesty
shall be the difference between the amount of P2,780,610,174.51, which comprises
petitioner's deficiency excise tax and VAT; and the amount of P38,700,200.55 which
is the equivalent of 5% tax on gross income earned by said registered business
enterprises for the calendar year 1998 to 2004; or a total of P2,741,909,973.96.

Details are as follows:
Deficiencv Excise Tax, VAT and Inspection Fees per Assessment
Less:
Excise Tax
P 923,418,902.25
VAT
1,857,037,916.57
Inspection Fees
153,355.70
P2,780,610,174.51
5% Income Tax Paid Per

Returns Filed
Exh
Year
5% Tax
1998
P 2,504,241.00
1999
11,357,233.00
2000
8,748,137.00
2001
3,419,044.00
2002
3,938,554.00
2003
4,295,522.00
2004
4,437,469.55
Taxes covered by the tax amnesty
38,700,200.55
2,741,909,973.96
WHEREFORE, premises considered, the instant Motion for Reconsideration is hereby

GRANTED. The Resolution of this Court promulgated on June 3, 2010 is hereby set
aside. Respondent's assessment against petitioner for deficiency VAT and excise tax
for the importation of alcohol and tobacco products covering the period January
1998 to May 2004 is hereby CANCELLED and SET ASIDE solely in view of petitioner's
availment of Tax Amnesty under Republic Act No. 9399. Accordingly, the instant
Petition for Review is hereby deemed WITHDRAWN and the case is considered
CLOSED and TERMINATED.
SO ORDERED.12
Petitioner moved to reconsider the foregoing ruling but the CTA Second Division
denied the motion in its January 20, 2011 Resolution.1wphi1
Ruling of the CTA En Banc

By Decision dated May 9, 2012, the CTA En Banc dismissed petitioner's appeal. The
CTA adopted in toto the findings and conclusions of the CTA Second Division on the
issues raised anew by petitioner concerning the applicability of Section 13 l(A) of
the 1997 NIRC to respondent's availment of the tax amnesty under R.A. 9939, and
the exclusion of respondent's deficiency VAT and excise taxes on its importation of
tobacco and alcohol products from the coverage of said amnesty.
Petitioner's motion for reconsideration was likewise denied under Resolution dated
July 18, 2012.
Issues/ Arguments
The petition sets forth the following grounds for reversal of the CTA En Banc ruling:
I
THE HONORABLE CTA EN BANC GRAVELY ERRED IN LIMITING THE REQUIREMENTS
UNDER REPUBLIC ACT NO. 9399 FOR THE AVAILMENT OF TAX AMNESTY OF (i) FILING
OF NOTICE AND RETURN FOR TAX AMNESTY WITHIN SIX (6) MONTHS FROM
EFFECTIVITY OF THE LAW AND (ii) PAYMENT OF THE AMNESTY TAX OF P25,000.00,
AND TOTALLY AND DELIBERATELY DISREGARDING THE MATERIAL AND SUBSTANTIAL
FACT THAT RESPONDENT'S PLACE OF BUSINESS IS IN METRO MANILA AND NOT
CLARK FIELD, PAMPANGA, AS STATED IN ITS ARTICLES OF INCORPORATION; THUS,
RESPONDENT IS NOT ENTITLED TO THE BENEFITS UNDER R.A. NO. 9399.
II
ASSUMING WITHOUT ADMITTING THAT RESPONDENT IS A DULY CSEZ REGISTERED
ENTERPRISE WITH PRINCIPAL PLACE OF BUSINESS IN CLARK FIELD, PAMPANGA,
STILL THE HONORABLE CTA EN BANC GRAVELY AND SERIOUSLY ERRED, AS ITS
RULING IS CONTRARY TO THE INTENT OF R.A. 9399 WHICH EXCLUDES DEFICIENCY
TAX; THUS, RESPONDENT REMAINS TO BE LIABLE FOR EXCISE TAXES ON ITS WINE,
LIQUOR AND TOBACCO IMPORTATIONS.13
In fine, the issues presented to us are: (1) whether respondent is qualified to avail of
the tax amnesty under R.A. 9399 considering that its principal place of business as
stated in its articles of incorporation is in Metro Manila; and (2) whether R.A. 9399
applies to those taxes, i.e., VAT and excise taxes, imposed on alcohol and tobacco
products described in R.A. 8424 and 9334, which are clearly and expressly
mandated to be paid by enterprises like the respondent.
Our Ruling
The petition is meritorious.
R.A. 7227, otherwise known as the "Bases Conversion and Development Act of
1992", provided for the conversion of the Clark and Subic military reservations and
their extension such as the Camp John Hay in Baguio City, into alternative
productive uses in order to promote economic and social development of the
country, particularly Central Luzon. It likewise created the Bases Conversion and
Development Authority (BCDA) which shall administer and implement a

comprehensive development plan for the former military reservations and their
extensions.
Section 12 of R.A. 7227 established the Subic Special Economic and Freeport Zone
(SSEFZ) which was granted incentives such as tax and duty-free importations and
exemption of businesses therein from local and national taxes, under a liberalized
financial and business climate.
Section 15 of R.A. 7227 authorized the President of the Philippines to create by
executive proclamation the CSEZ and other SEZs subject to the concurrence of the
local government units directly affected.
On April 3, 1993, President Fidel V. Ramos issued Proclamation No. 163 creating the
CSEZ with the BCDA as its governing body. EO 80 established the Clark
Development Corporation (CDC) as the operating and implementing arm of the
BCDA to manage the CSEZ. EO 80 also provided for tax incentives for CSEZ, viz:
SECTION 5. Investment Climate in the CSEZ. - Pursuant to Section 5(m) and Section
15 of RA 7227, the BCDA shall promulgate all necessary policies, rules and
regulations governing the CSEZ, including investment incentives, in consultation
with the local government units and pertinent government departments for
implementation by the CDC.
Among others, the CSEZ shall have all the applicable incentives in the Subic Special
Economic and Free Port Zone under RA 7227 and those applicable incentives
granted in the Export Processing Zones, the Omnibus Investments Code of 1987,
the Foreign Investments
Act of 1991 and new investments laws which may hereinafter be enacted.
x x x x (Emphasis supplied)
On July 5, 1994 President Ramos issued Proclamation No. 420, which established a
SEZ on a portion of Camp John Hay and contained a similar provision on the grant of
applicable incentives as in the above-cited provision of Proclamation No. 163.
On October 24, 2003, this Court ruled in John Hay Peoples Alternative Coalition v.
Lim14 that the same grant of privileges to the John Hay SEZ finds no support in R.A.
7227, the incentives under the latter law being exclusive only to the Subic SEZ.
Such grant by Proclamation No. 420 of tax exemption and other privileges is void as
it violates the Constitution's requirement that a law granting any tax exemption
must have the concurrence of a majority of all the members of Congress.
Almost two years later, in the case of Coconut Oil Refiners Association, Inc. v. Hon.
Torres 15 this Court held EO 80 as an invalid exercise of executive legislation. Thus:
In John Hay Peoples Alternative Coalition, et al. v. Victor Lim, et al., this Court
resolved an issue, very much like the one herein, concerning the legality of the tax
exemption benefits given to the John Hay Economic Zone under Presidential
Proclamation No. 420, Series of 1994, "CREATING AND DESIGNATING A PORTION OF
THE AREA COVERED BY THE FORMER CAMP JOHN AS THE JOHN HAY SPECIAL
ECONOMIC ZONE PURSUANT TO REPUBLIC ACT NO. 7227."
In that case, among the arguments raised was that the granting of tax exemptions
to John Hay was an invalid and illegal exercise by the President of the powers
granted only to the Legislature. Petitioners therein argued that Republic Act No.
7227 expressly granted tax exemption only to Subic and not to the other economic
zones yet to be established. Thus, the grant of tax exemption to John Hay by
Presidential Proclamation contravenes the constitutional mandate that "[n]o law
granting any tax exemption shall be passed without the concurrence of a majority of
all the members of Congress."
This Court sustained the argument and ruled that the incentives under Republic Act
No. 7227 are exclusive only to the SSEZ. The President, therefore, had no authority
to extend their application to John Hay. To quote from the Decision:
More importantly, the nature of most of the assailed privileges is one of tax
exemption. It is the legislature, unless limited by a provision of a state constitution,
that has full power to exempt any person or corporation or class of property from
taxation, its power to exempt being as broad as its power to tax. Other than
Congress, the Constitution may itself provide for specific tax exemptions, or local
governments may pass ordinances on exemption only from local taxes.
The challenged grant of tax exemption would circumvent the Constitution's
imposition that a law granting any tax exemption must have the concurrence of a
majority of all the members of Congress. In the same vein, the other kinds of
privileges extended to the John Hay SEZ are by tradition and usage for Congress to
legislate upon.
Contrary to public respondents' suggestions, the claimed statutory exemption of the
John Hay SEZ from taxation should be manifest and unmistakable from the
language of the law on which it is based; it must be expressly granted in a statute
stated in a language too clear to be mistaken. Tax exemption cannot be implied as it
must be categorically and unmistakably expressed.
If it were the intent of the legislature to grant to John Hay SEZ the same tax
exemption and incentives given to the Subic SEZ, it would have so expressly
provided in R.A. No. 7227.
In the present case, while Section 12 of Republic Act No. 7227 expressly provides for
the grant of incentives to the SSEZ, it fails to make any similar grant in favor of
other economic zones, including the CSEZ. Tax and duty-free incentives being in the
nature of tax exemptions, the basis thereof should be categorically and
unmistakably expressed from the language of the statute. Consequently, in the
absence of any express grant of tax and duty-free privileges to the CSEZ in Republic
Act No. 7227, there would be no legal basis to uphold [the] questioned portions of
two issuances: Section 5 of Executive Order No. 80 and Section 4 of BCDA Board
Resolution No. 93-05-034, which both pertain to the CSEZ. 16 (Emphasis supplied)
On March 20, 2007, President Gloria Macapagal-Arroyo signed into law R.A.
9399,17 Sections 1 and 2 of which state:
SECTION 1. Grant of Tax Amnesty. Registered business enterprises operating prior
to the effectivity of this Act within the special economic zones and freeports created
pursuant to Section 15 of Republic Act No. 7227, as amended, such as the Clark
Special Economic Zone created under Proclamation No. 163, series of 1993; Poro
Point Special Economic and Freeport Zone created under Proclamation No. 216,
series of 1993; John Hay Special Economic Zone created under Proclamation No.
420, series of 1994; and Morong Special Economic Zone created under Proclamation
No. 984, series of 1997, may avail themselves of the benefits of remedial tax
amnesty herein granted on all applicable tax and duty liabilities, inclusive of fines,
penalties, interests and other additions thereto, incurred by them or that might
have accrued to them due to the rulings of the Supreme Court in the cases of John
Hay People's Coalition v. Lim, et. al., G.R. No. 119775 dated 24 October 2003 and
Coconut Oil Refiners Association, Inc. v. Torres, et. al., G. R. No. 132527 dated 29
July 2005, by filing a notice and return in such form as shall be prescribed by the
Commissioner of Internal Revenue and the Commissioner of Customs and
thereafter, by paying an amnesty tax of Twenty-five thousand pesos (P25,000.00)
within six months from the effectivity of this Act: Provided, That the applicable tax
and duty liabilities to be covered by the tax amnesty shall refer only to the
difference between: (i) all national and local tax impositions under relevant tax laws,
rules and regulations; and (ii) the five percent (5%) tax on gross income earned by
said registered business enterprises as determined under relevant revenue
regulations of the Bureau of Internal Revenue and memorandum circulars of the
Bureau of Customs during the period covered: Provided, however, That the
coverage of the tax amnesty herein granted shall not include the applicable taxes
and duties on articles, raw materials, capital goods, equipment and consumer items
removed from the special economic zone and freeport and entered in the customs
territory of the Philippines for local or domestic sale, which shall be subject to the
usual taxes and duties prescribed in the National Internal Revenue Code (NIRC) of
1997, as amended, and the Tariff and Customs Code of the Philippines, as amended.
SEC. 2. Immunities and Privileges. - Those who have availed themselves of the tax
amnesty and have fully complied with all its conditions shall be relieved of any civil,
criminal and/or administrative liabilities arising from or incident to the nonpayment
of taxes, duties and other charges covered by the tax amnesty granted under
Section 1 herein.
Respondent's Actual Business
Operations is in Clark Field,
Pampanga
The Solicitor General argues that while respondent may have complied with the
required filing of notice and return, respondent is not qualified, in the first place, to
avail of the benefits under the above-cited tax amnesty law because its principal
place of business as stated in its articles of incorporation is Metro Manila and not
Clark Field, Pampanga.
Contending that this issue was raised for the first time on appeal, respondent noted
that petitioner CIR never made any allegation or evidence during the proceedings at
the BIR and before the CTA that the principal place of business is not in Clark Field,
Pampanga.
Ordinarily, a part(a cannot raise for the first time on appeal an issue not raised in
the trial court.18 The rule against raising new issues on appeal is not without
exceptions; it is a procedural rule that the Court may relax when compelling reasons
so warrant or when justice requires it. What constitutes good and sufficient cause
that would merit suspension of the rules is discretionary upon the courts. 19 In
Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing
Corporation,20 we took exception to an issue raised for the first time in the Supreme
Court, thus:
x x x As clearly ruled by Us "To allow a litigant to assume a different posture when
he comes before the court and challenges the position he had accepted at the
administrative level," would be to sanction a procedure whereby the Court - which is
supposed to review administrative determinations - would not review, but determine
and decide for the first time, a question not raised at the administrative forum. Thus
it is well settled that under the same underlying principle of prior exhaustion of
administrative remedies, on the judicial level, issues not raised in the lower court
cannot generally be raised for the first time on appeal. x x x
Nonetheless it is axiomatic that the State can never be in estoppel, and this is
particularly true in matters involving taxation. The errors of certain administrative
officers should never be allowed to jeopardize the government's financial
position.21 (Emphasis supplied; citation omitted) Since the issue raised by the
Solicitor General is crucial for determining the validity of the government's claim for
unpaid taxes, we now proceed to resolve it.
Respondent's articles of incorporation registered with the SEC on June 13, 1994
indicated Metro Manila as its principal office. 22 Attached to its Comment, however, is
a photocopy of Certificate of Filing of Amended Articles of Incorporation 23 issued by
the SEC on September 7, 1995 stating that its principal office is to be established or
is located at Clark Field, Pampanga.
The statement of the principal office in the articles of incorporation establishes the
residence of the corporation. This may prove important in determining venue in an
action by or against a corporation, or in determining the province where a chattel
mortgage of shares should be registered. 24 For jurisdictional purpose, the place of
business indicated in the articles of incorporation is binding. 25
R.A. 9399 requires that the taxpayer seeking amnesty be a registered business
enterprise of and operating within the special economic zones, in this case, the
CSEZ created pursuant to Proclamation No. 163. Respondent adduced substantial
evidence before the CTA that it is a duly registered CSEZ business enterprise and
actually conducts its business therein by operating a duty-free shop. Among the
documentary evidence submitted are the Certificate of Registration as a locator and
Certificates of Tax Exemption both issued by CDC and CSEZ, as well as BIR
Certificate of Registration, several BIR Permits to operate cash registers, and a BIR
Certification that respondent has no registered branch under Puregold Duty Free,
Inc. Respondent's Accounting Manager, Marissa I. delos Reyes, also submitted her
Judicial Affidavit and testified in court in support of the allegations in the petition for
review filed in the CTA.26 Proof of respondent's actual business operations within
CSEZ, rather than the place of principal office, is relevant for the availment of onetime tax amnesty under R.A. 9399. This is evident from Rule 2, Article 4 of the
Implementing Rules and Regulations of R.A. 9399, Department Order No. 33-07
issued on September 11, 2007, declaring the coverage of R.A. 9399 as follows:
ARTICLE 4. Coverage. - Business enterprises operating, authorized, duly registered
and granted with tax and duty incentives prior to the effectivity of RA 9399, within
the following Special Economic Zones and Freeport Zones may avail themselves of
the one-time remedial amnesty, to wit:
1. Clark Special Economic Zone (CSEZ) created under Proclamation No. 163, Series
of 1993;
x x x x (Emphasis supplied)
In fine, we hold that respondent satisfactorily established its actual business
operations within the CSEZ and hence is qualified, for purposes of Section 1, R.A.
9399 to apply for tax amnesty granted to duly registered business enterprises of
SEZs specifically mentioned therein. Respondent Liable to Pay Assessed
Deficiency Taxes
While petitioner's contention as to respondent's lack of qualification to apply for tax
amnesty is clearly without legal basis, we find its argument that the tax amnesty
granted under R.A. 9399 does not include those applicable taxes and duties on the
importation of alcohol and tobacco products tenable.
R.A. 8424, otherwise known as the Tax Code of 1997 (1997 NIRC), was passed into
law on December 11, 1997 and took effect on January 1, 1998. Thus, at the time
respondent started the subject importation of alcohol and tobacco products in the
year 1998, the governing law is Section 131 (A) which reads:
SEC. 131. Payment of Excise Taxes on Imported Articles.
(A) Persons Liable. x x x
xxxx
The provision of any special or general law to the contrary notwithstanding, the
importation of cigars and cigarettes, distilled spirits and wines into the Philippines,
even if destined for tax and duty free shops, shall be subject to all applicable taxes,
duties, charges, including excise taxes due thereon: Provided, however, That this
shall not apply to cigars and cigarettes, distilled spirits and wines brought directly
into the duly chartered or legislated freeports of the Subic Special Economic and
Freeport Zone, created under Republic Act No. 7227; the Cagayan Special Economic
Zone and Freeport, created under Republic Act No. 7922; and the Zamboanga City
Special Economic Zone, created under Republic Act No. 7903, and are not
transshipped to any other port in the Philippines: Provided, further, That
importations of cigars and cigarettes, distilled spirits and wines by a governmentowned and operated duty-free shop, like the Duty-Free Philippines (DFP), shall be
exempted from all applicable taxes, duties, charges, including excise tax due
thereon: Provided, still further, That such articles directly imported by a
government-owned and operated duty-free shop like the Duty-Free Philippines, shall
be labelled 'tax and duty-free' and 'not for resale': Provided, still further, That if such
articles brought into the duly chartered or legislated freeports under Republic Acts
No. 7227, 7922 and 7903 are subsequently introduced into the Philippine customs
territory, then such articles shall, upon such introduction, be deemed imported into
the Philippines and shall be subject to all imposts and excise taxes provided herein
and other statutes: Provided, .finally, That the removal and transfer of tax and dutyfree goods, products, machinery, equipment and other similar articles, from one
freeport to another freeport, shall not be deemed an introduction into the Philippine
customs territory.
xxxx
Considering that CSEZ was not a duly chartered or legislated SEZ, it is not exempt
from the applicable taxes on importation of alcohol and tobacco products. Section
15 of R.A. 7227 merely authorized the creation of CSEZ by executive proclamation.
And as we held in John Hay Peoples Alternative Coalition v. Lim 27 and Coconut Oil
Refiners Association, Inc. v. Hon. Torre, 28 the tax incentives being claimed by Clark
and other SEZs pursuant to EO 80 and related issuances cannot be sustained as
these contravenes the Constitution which requires the concurrence of Congress in
the grant of tax exemptions.
Respondent likewise cannot seek refuge from R.A. 9400, 29 which, while amending
Section 15 of R.A. 7227, still is not the charter or legislation establishing the CSEZ
and CFZ. While amending Section 15 of R.A. 7227, said law reproduced the provision
authorizing the President to create by executive proclamation the CSEZ and
inserted sub-sections on Poro Point Freeport Zone, Morong SEZ and John Hay SEZ,
all similarly created by previous Presidential Proclamations. Moreover, R.A. 9400
was approved on March 20, 2007, long after the subject importations and
assessment of deficiency taxes.
Significantly, Section 131 (A) of the 1997 NIRC was amended by R.A. 9334,
approved on December 31, 2004, which no longer exempted the SEZs from
applicable duties and taxes on imported alcohol and tobacco products, viz:
SEC. 131. Payment of Excise Taxes on Imported Articles
(A) Persons Liable. x x x
importation of cigars and cigarettes, distilled spirits, fermented liquors and wines
into the Philippines, even if destined for tax and duty-free shops, shall be subject to
all applicable taxes, duties, charges, including excise taxes due thereon. This shall
apply to cigars and cigarettes, distilled spirits, fermented liquors and wines brought
directly into the duly chartered or legislated freeports of the Subic Special Economic
and Freeport Zone, created under Republic Act No. 7227; the Cagayan Special
Economic Zone and Freeport, created under Republic Act No. 7922; and the
Zamboanga City Special Economic Zone, created under Republic Act No. 7903, and
such other freeports as may hereafter be established or created by law: Provided,
further, That importations of cigars and cigarettes, distilled spirits, fermented
liquors and wines made directly by a government-owned and operated duty-free
shop, like the Duty-Free Philippines (DFP), shall be exempted from all applicable
duties only: Provided, still further, That such articles directly imported by a
government-owned and operated duty-free shop, like the Duty-Free Philippines,
shall be labeled 'duty-free' and 'not for resale': Provided, finally, That the removal
and transfer of tax and duty-free goods, products, machinery, equipment and other
similar articles other than cigars and cigarettes, distilled spirits, fermented liquors
and wines, from one freeport to another freeport, shall not be deemed an
introduction into the Philippine customs territory.
Section 131 (A) was further amended by R.A. 10351 30 approved on December 19,
2012, which did not change the application of duties and charges even to chartered
and legislated SEZs and freeports.
In the light of the foregoing, the CTA clearly erred in holding that petitioner has no
rightful claim over the unpaid taxes assessed against respondent's importation of
alcohol and tobacco products for the taxable period January 1998 to May 2004. The
CTA's ruling stemmed from its narrow and erroneous interpretation of Section 1, R.A.
No. 9399 by citing Article 7 of Department Order No. 33-07 on exclusions:
ARTICLE 7. Exclusions. -The one-time remedial amnesty under RA 9399 shall not
include applicable taxes and duties on articles, raw materials, capital goods,
equipment and consumer items removed from Special Economic Zones and Freeport
Zones and entered into the customs territory of the Philippines for local or domestic
sale, which shall be subject to the usual taxes and duties, as prescribed in the
National Internal Revenue Code of 1997, as amended, and the Tariff and Customs
Code of the Philippines, as amended.
The CTA also erred in concluding that the applicable taxes and duties under Section
131 (A) of the 1997 NIRC were already contemplated by the legislature in enacting
R.A. 9399 by the phrase "all applicable tax and duty liabilities, inclusive of fines,
penalties, interests and other additions thereto" It failed to consider that said
phrase was further qualified by the succeeding phrase "incurred by them or that
might have accrued to them due to the rulings of the Supreme Court in the cases of
John Hay People's Coalition v. Lim, et. al., G.R. No. 119775 dated 23 October 2003
and Coconut Oil Refiners Association, Inc. v. Torres, et. al., G.R. No. 132527 dated 29
July 2005." The assessed deficiency taxes including the penalties, interests and
charges, were not incurred by respondent due to the aforesaid decisions of this
Court, but are clearly imposable taxes and duties on their importation of alcohol and
tobacco products under existing provisions of the Tax Code. In other words, even
without the aforesaid rulings, respondent as a non-chartered SEZ remains liable for
the payment of VAT and excise taxes on its importation of alcohol and tobacco
products from January 1998 to May 2004.
Respondent's reliance on BIR Ruling No. 149-99 is likewise misplaced. The CIR had
opined therein that while EO 80 and R.A. 7227 were approved and made effective
prior to January 1, 1998, the date of effectivity of R.A. No. 8424, they are not
covered by the repealing provision of the new Tax Code (Section 291). EO 80,
insofar as it granted similar tax incentives to CSEZ, is clearly inconsistent with
Section 131 (A) which then limited the tax exemption for importation of alcohol and
tobacco products those duly chartered and legislated SEZs and freeports.
In Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, lnc., 31 we held
that "the [Commissioner] cannot, in the exercise of [its interpretative] power, issue
administrative rulings or circulars not consistent with the law sought to be applied.
Indeed, administrative issuances must not override, supplant or modify the law, but
must remain consistent with the law they intend to carry out. Only Congress can
repeal or amend the law."
In the earlier case of Philippine Bank of Communications v. Commissioner of Internal
Revenue,32 we ruled that a memorandum-circular of a bureau head could not
operate to vest a taxpayer with a shield against judicial action. There could be no
vested rights to speak of respecting a wrong construction of the law by the
administrative officials and such wrong interpretation could not place the
Government in estoppel to correct or overrule the same. 33
A tax amnesty, much like a tax exemption, is never favored or presumed in law. The
grant of a tax amnesty, similar to a tax exemption, must be construed strictly
against the taxpayer and liberally in favor of the taxing authority. 34 Taxes being the
lifeblood of the nation through which the government agencies continue to operate
and with which the State effects its functions for the welfare of its constituents 35,
the present amnesty tax law must be strictly construed against herein respondent
which claims tax incentives granted to it by mere presidential proclamation. It is
likewise settled that taxes are the lifeblood of the government and their prompt and
certain availability is an imperious need.36
I therefore VOTE that - 1. The present petition be GRANTED;
2. The Decision dated May 9, 2012 and Resolution dated July 18, 2012 of the Court
of Tax Appeals En Banc in CTA EB No. 723 (CTA Case No. 7812) be REVERSED and
SET ASIDE;
3. Respondent Puregold Duty Free, Inc. be ORDERED to PAY P2,780,610,174.51
deficiency VAT and excise taxes inclusive of surcharge and interest, plus 20%
deficiency interest computed from June 23, 2008 until full payment thereof pursuant
to Section 249 (C) of the 1997 National Internal Revenue Code, as amended; and
4. Should any motion for reconsideration be filed, the same be referred to the Banc
as the subject matter herein may have a huge financial impact on businesses thus
affecting the country's welfare.37
MARTIN S. VILLARAMA, JR.
Associate Justice
Footnotes
1
Rollo, pp. 61-67. Penned by Associate Justice Amelia R. Cotangco-Manalastas.
Id. at 68-70.
CTA En Banc records, pp. 22-33.
CTA Division records, pp. 218-233.
BIR records, pp. 87-88, 91-105, 123-129 & 131-133.
CTA Division records, pp. 21, 26-27.
Id. at 89-90.
503 Phil. 42 (2003).
CTA Division records, pp. 167-182, 211-323, 329-330, 332-341, 394, 427-428.
10
Id. at 442-444, 492-494.
11
Supra note 3, at 22-29.
12
Id. at 28-29.
13
Rollo, pp. 30-31.
14
460 Phil. 530 (2003).
15
Supra note 8.
16
Id. at 60-61.
17
AN ACT DECLARING A ONE-TIME AMNESTY ON CERTAIN TAX AND DUTY

LIABILITIES, INCLUSIVE OF FEES, FINES, PENALTIES, INTERESTS AND OTHER
ADDITIONS THERETO, INCURRED BY CERTAIN BUSINESS ENTERPRISES OPERATING
WITHIN THE SPECIAL ECONOMIC ZONES AND FREEPORTS CREATED UNDER
PROCLAMATION No. 163, SERIES OF 1993; PROCLAMATION No. 216, SERIES OF
1993; PROCLAMATION No. 420, SERIES OF I 994; AND PROCLAMATION No. 984,
SERIES OF I 997' PURSUANT TO SECTION I 5 OF REPUBLIC ACT No. 7227' As
AMENDED, AND FOR OTHER PURPOSES.
18
Commissioner of Internal Revenue v. The Philippine American Accident Insurance

Company, Inc., 493 Phil. 785, 792 (2005), citing Lim v. Queensland Tokyo
Commodities, Inc., 424 Phil. 35, 47 (2002).
19
Commissioner of Internal Revenue v. Eastern Telecommunications Phils., Inc., 638

Phil. 334, 348 (2010), citing CIR v. Mirant Pagbilao Corporation, 535 Phil. 481, 491
(2006).
20
243 Phil. 703 (1988).
21
Id. at 709.
22
CTA Division records, pp. 218-229.
23
Rollo, pp. 551-555.
24
J. CAMPOS, JR. and M. C. L. CAMPOS, The Corporation Code: Comments, Notes and
Selected Cases, Vol. 1, 1990 Ed., p. 77.
25
C. L. VILLANUEVA, Philippine Corporate Law, 2001 Ed., p. 201.
26
CTA Division records, pp. 231-237 & 291-322.
27
Supra note 14.
28
Supra note 8.
29
AN ACT AMENDING REPUBLIC ACT No. 7227, As AMENDED, OTHERWISE KNOWN

As THE BASES CONVERSION AND DEVELOPMENT ACT OF 1992. AND FOR OTHER
PURPOSES.
30
AN ACT RESTRUCTURING THE EXCISE TAX ON ALCOHOL AND TOBACCO

PRODUCTS BY AMENDING SECTIONS 141, 142, 143, 144, 145, 8, 131 AND 288 OF
REPUBLIC ACT NO. 8424, OTHERWISE KNOWN As THE NATIONAL INTERNAL
REVENUE CODE OF 1997, As AMENDED BY REPUBLIC ACT NO. 9334, AND FOR
OTHER PURPOSES.
31
453 Phil. 1043, 1052 (2003).
32
361 Phil. 916 (1999).
33
Id. at 931.
34
Baas, Jr. v. Court of Appeals, 382 Phil. 144, 156 (2000). See also People v.
Castaneda, Jr., 247-A Phil. 420, 434 (1988), citing E. Rodriguez, Inc. v. The Collector
of Internal Revenue, 139 Phil. 354, 364 (1969); Commissioner of Internal Revenue v.
Guerrero, 128 Phil. 197, 201 (1967).
35
Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 106611, July 21,
1994, 234 SCRA 348, 356.
36
Province of Tarlac v. Alcantara, G .R. No. 65230, 23 December 1992, 216 SCRA
790, 798.
37
Internal Rules of the Supreme Court, AM. No. 10-4-20-SC, Part I, Rule 2, Section 3,
sub-paragraph k).
FIRST DIVISION
G.R. No. 192173, July 29, 2015
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. STANDARD

CHARTERED BANK, Respondent.
DECISION
PEREZ, J.:
For the Courts consideration is a Petition for Review on Certiorari which seeks to
reverse and set aside the 1 March 2010 Decision 1 and the 30 April 2010
Resolution2 of the Court of Tax Appeals (CTA) En Bancin CTA EB Case No. 522,
affirming in toto the Decision3 and Resolution4 dated 27 February 2009 and 29 July
2009, respectively, of the Second Division of the CTA (CTA in Division) in CTA Case
No. 7165. The court a quo cancelled and set aside the Formal Letter of Demand and
Assessment Notices dated 24 June 2004 issued by petitioner against respondent for
deficiency income tax, final income tax Foreign Currency Deposit Unit (FCDU), and
expanded withholding tax (EWT) in the aggregate amount of P33,076,944.18,
including increments covering taxable year 1998, for having been issued beyond
the reglementary period.
The Facts
As found by the CTA in Division and affirmed by the CTA En Banc, the factual
antecedents of the case and the proceedings conducted thereon were as follows:
chanRoblesvirtualLawlibrary
On July 14, 2004, [respondent] received [petitioners] Formal Letter of Demand
dated June 24, 2004, for alleged deficiency income tax, final income tax FCDU,
[withholding tax compensation (WTC)], EWT, [final withholding tax (FWT)], and
increments for taxable year 1998 in the aggregate amount of P33,326,211.37,
broken down as follows:
Tax
Basic Tax
Interest
Compromise
Penalty
Total
Income Tax
3,594,272.00
3,803,936.67
25,000.00
7,423,208.6
7
Final Income Tax

FCDU
11,748,483.99
12,433,808.31
25,000.00
24,207,292.
30
Withholding Tax Compensation
50,282.59
55,450.48
12,000.00
117,733.07
Expanded
Withholding Tax
678,361.62
748,081.59
20,000.00
1,446,443.2
1
Final Withholding
Tax
56,845.84
62,688.28
12,000.00
131,534.12
TOTAL
16,128,246.04 17,103,965.33 94,000.00
33,326,21
1.37
On August 12, 2004, [respondent] protested the said assessment by filing a letterprotest dated August 9, 2004 addressed to the BIR Deputy Commissioner for Large
Taxpayers Service stating the factual and legal bases of the assessment, and
requested that it be withdrawn and cancelled.
As of the date of filing of this Petition for Review, [petitioner] has not rendered a
decision on [respondents] protest.
In view of [petitioners] inaction on [respondents] protest, on March 9, 2005,
[respondent] filed the present Petition for Review.
xxxx
On October 14, 2005, [respondent] filed a Motion for Leave of Court to Serve
Supplemental Petition, with attached Supplemental Petition for Review, pursuant
to Rule 10 of the 1997 Rules of Civil Procedure, as amended, in view of the alleged
payments made by [respondent] through the BIRs Electronic Filing and Payment
System (eFPS) as regards its deficiency [WTC] and [FWT] assessments in the
amounts of P124,967.73 and P139,713.11, respectively. In its Supplemental Petition
for Review, (respondent) seeks to be fully credited of the payments it made to cover
the deficiency [WTC] and [FWT]. Thus, the remaining assessments cover only the
deficiency income tax, final income tax FCDU, and [EWT] in the modified total
amount of P33,076,944.18, computed as follows:
Tax
Basic Tax
Interest
Compromise
Penalty
Total
Income Tax
3,594,272.00
3,803,936.67
25,000.00
7,423,208.67
Final Income Tax

11,748,483.99
FCDU
12,433,808.31
25,000.00
24,207,292.30
Expanded
678,361.62
Withholding Tax
748,081.59
20,000.00
1,446,443.21
TOTAL
16,021,117.61 16,985,826.57 70,000.00
33,076,944.18
Finding merit in [respondents] motion, the same was granted and

the Supplemental Petition for Review was admitted in a Resolution dated December
12, 2005.
[Respondent] presented Chona G. Reyes, its Vice-President, as witness, and
documentary exhibits which were admitted by the Court in its Resolutions dated
October 1, 2007, and January 31, 2008.
On the other hand, [petitioner] presented Juan M. Luna, Jr., Revenue Officer II of the
BIR LTAID I, as witness, and documentary evidence marked as Exhibits 1 to 4.
Thereafter, the parties were ordered to file their simultaneous memoranda, within
thirty (30) days from notice, afterwhich the case shall be deemed submitted for
decision.
[Petitioners] Memorandum was filed on August 4, 2008, while
[respondents]Memorandum was filed on October 24, 2008 after a series of motions
for extension of time to file memorandum were granted by the [c]ourt. The case
was deemed submitted for decision on November 12, 2008. 5
chanroblesvirtuallawlibrary
The Ruling of the CTA in Division
In a Decision dated 27 February 2009,6 the CTA in Division granted respondents
petition for the cancellation and setting aside of the subject Formal Letter of
Demand and Assessment Notices dated 24 June 2004 on the ground that
petitioners right to assess respondent for the deficiency income tax, final income
tax FCDU, and EWT covering taxable year 1998 was already barred by
prescription. The court a quo explained that although petitioner offered in evidence
copies of the Waivers of Statute of Limitations executed by the parties, for the
purpose of justifying the extension of period to assess respondent, the subject
waivers, particularly the First and Second Waivers dated 20 July 2001 and 4 April
2002, respectively, failed to strictly comply and conform with the provisions of
Revenue Memorandum Order (RMO) No. 20-90, citing the case of Philippine
Journalists, Inc. v. CIR.7 It therefore concluded that since the aforesaid waivers were
invalid, it necessarily follows that the subsequent waivers did not in any way cure
these defects. Neither did it extend the prescriptive period to assess. Accordingly, it
ruled that the assailed Formal Letter of Demand and Assessment Notices are void
for having been issued beyond the reglementary period. 8 Having rendered such
ruling, the CTA in Division decided not to pass upon other incidental issues raised
before it for being moot.
On 29 July 2009, the CTA in Division denied petitioners Motion for Reconsideration
thereof for lack of merit.9ChanRoblesVirtualawlibrary
Aggrieved, petitioner appealed to the CTA En Banc by filing a Petition for Review
under Section 18 of Republic Act (R.A.) No. 1125, as amended by R.A. No. 9282, 10 on
3 September 2009, docketed as CTA EB No. 522.
The Ruling of the CTA En Banc
The CTA En Banc affirmed in toto both the aforesaid Decision and Resolution
rendered by the CTA in Division in CTA Case No. 7165, pronouncing that there was
no cogent justification to disturb the findings and conclusion spelled out therein,
since what petitioner merely prayed was for the appellate court to view and
appreciate the arguments/discussions raised by petitioner in her own perspective of

things, which unfortunately had already been considered and passed upon.
In other words, the CTA En Banc simply concurred with the ruling that petitioners
subject Formal Letter of Demand and Assessment Notices (insofar as to the
deficiency income tax, final income tax FCDU, and EWT) shall be cancelled
considering that the same was already barred by prescription for having been
issued beyond the three-year prescriptive period provided for in Section 203 of the
National Internal Revenue Code (NIRC) of 1997, as amended. The waivers of the
statute of limitations executed by the parties did not extend the aforesaid
prescriptive period because they were invalid for failure to comply with and conform
to the requirements set forth in RMO No. 20-90.
Upon denial of petitioners Motion for Reconsideration thereof, it filed the instant
Petition for Review onCertiorari before this Court seeking the reversal of the 1 March
2010 Decision11 and the 30 April 2010 Resolution12 rendered in CTA EB No. 522,
based on the sole ground, to wit: The CTA En Banc committed reversible error in not
holding that respondent is estopped from questioning the validity of the waivers of
the Statute of Limitations executed by its representatives in view of the partial
payments it made on the deficiency taxes sought to be collected in petitioners
Formal Letter of Demand and Assessment Notices dated 24 June 2004.
The Issues
The primary issue presented before this Court is whether or not petitioners right to
assess respondent for deficiency income tax, final income tax FCDU, and EWT
covering taxable year 1998 has already prescribed under Section 203 of the NIRC of
1997, as amended, for failure to comply with the requirements set forth in RMO No.
20-90 dated 4 April 1990, pertaining to the proper and valid execution of a waiver of
the Statute of Limitations, and in accordance with existing jurisprudential
pronouncements.
Subsequently, even assuming that petitioners right to assess had indeed
prescribed, another issue was submitted for our consideration, to wit: whether or
not respondent is estopped from questioning the validity of the waivers of the
Statute of Limitations executed by its representatives in view of the partial
payments it made on the deficiency taxes (i.e. WTC and FWT) sought to be collected
in petitioners Formal Letter of Demand and Assessment Notices dated 24 June
2004.
Our Ruling
We find no merit in the petition.
At the outset, the period for petitioner to assess and collect an internal revenue tax
is limited only to three years by Section 203 of the NIRC of 1997, as amended,
quoted hereunder as follows:

SEC. 203. Period of Limitation Upon Assessment and Collection. Except as
provided in Section 222, internal revenue taxes shall be assessed within
three years after the last day prescribed by law for the filing of the return,
and no proceeding in court without assessment for the collection of such taxes shall
be begun after the expiration of such period: Provided, That in a case where a
return is filed beyond the period prescribed by law, the three (3)-year
period shall be counted from the day the return was filed.
For purposes of this Section, a return filed before the last day prescribed by
law for the filing thereof shall be considered as filed on such last day.
(Emphasis supplied)
This mandate governs the question of prescription of the governments right to
assess internal revenue taxes primarily to safeguard the interests of taxpayers from
unreasonable investigation by not indefinitely extending the period of assessment
and depriving the taxpayer of the assurance that it will no longer be subjected to
further investigation for taxes after the expiration of reasonable period of
time.13ChanRoblesVirtualawlibrary
Thus, in the present case, petitioner only had three years, counted from the date of
actual filing of the return or from the last date prescribed by law for the filing of
such return, whichever comes later, to assess a national internal revenue tax or to
begin a court proceeding for the collection thereof without an assessment. However,
one of the exceptions to the three-year prescriptive period on the assessment of
taxes is that provided for under Section 222(b) of the NIRC of 1997, as amended,
which states:
SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of
Taxes.
xxxx
(b) If before the expiration of the time prescribed in Section 203 for the assessment
of the tax, both the Commissioner and the taxpayer have agreed in writing
to its assessment after such time, the tax may be assessed within the
period agreed upon.
The period so agreed upon may be extended by subsequent written
agreement made before the expiration of the period previously agreed
upon. (Emphasis supplied)
From the foregoing, the above provision authorizes the extension of the original
three-year prescriptive period by the execution of a valid waiver, where the
taxpayer and the Commissioner of Internal Revenue (CIR) may stipulate to extend
the period of assessment by a written agreement executed prior to the lapse of the
period prescribed by law, and by subsequent written agreements before the
expiration of the period previously agreed upon. It must be kept in mind that the
very reason why the law provided for prescription is to give taxpayers peace of
mind, that is, to safeguard them from unreasonable examination, investigation, or
assessment. The law on prescription, being a remedial measure, should be liberally
construed in order to afford such protection. As a corollary, the exceptions to the
law on prescription should perforce be strictly
construed.14ChanRoblesVirtualawlibrary
In the landmark case of Philippine Journalists, Inc. v. CIR (PJI case),15 we pronounced
that a waiver is not automatically a renunciation of the right to invoke the defense
of prescription. A waiver of the Statute of Limitations is nothing more than an
agreement between the taxpayer and the Bureau of Internal Revenue (BIR) that the
period to issue an assessment and collect the taxes due is extended to a date
certain. It is a bilateral agreement, thus necessitating the very signatures of both
the CIR and the taxpayer to give birth to a valid agreement. Furthermore, indicating
in the waiver the date of acceptance by the BIR is necessary in order to determine
whether the parties (the taxpayer and the government) had entered into a waiver
before the expiration of the time prescribed in Section 203 (the three-year
prescriptive period) for the assessment of the tax. When the period of prescription
has expired, there will be no more need to execute a waiver as there will be nothing
more to extend. Hence, no implied consent can be presumed, nor can it be
contended that the concurrence to such waiver is a mere formality.
In delineation of the same sense about the waiver of the Statute of Limitations, RMO
No. 20-90 and Revenue Delegation Authority Order (RDAO) No. 05-01 were issued
on 4 April 1990 and 2 August 2001, respectively. The said revenue orders outline
the procedure for the proper execution of a waiver,viz.:16cralawlawlibrary
1. The waiver must be in the proper form prescribed by RMO 20-90. The
phrase but not after ____ 19 __, which indicates the expiry date of the period
agreed upon to assess/collect the tax after the regular three-year period of
prescription, should be filled up.
2. The waiver must be signed by the taxpayer himself or his duly authorized
representative. In the case of a corporation, the waiver must be signed by any of its
responsible officials. In case the authority is delegated by the taxpayer to a
representative, such delegation should be in writing and duly notarized.
3. The waiver should be duly notarized.
4. The CIR or the revenue official authorized by him must sign the waiver
indicating that the BIR has accepted and agreed to the waiver. The date of
such acceptance by the BIR should be indicated. However, before signing the
waiver, the CIR or the revenue official authorized by him must make sure that the
waiver is in the prescribed form, duly notarized, and executed by the taxpayer or his
duly authorized representative.
5. Both the date of execution by the taxpayer and date of acceptance by
the Bureau should be before the expiration of the period of prescription or
before the lapse of the period agreed upon in case a subsequent
agreement is executed.
6. The waiver must be executed in three copies, the original copy to be attached to
the docket of the case, the second copy for the taxpayer and the third copy for the
Office accepting the waiver. The fact of receipt by the taxpayer of his/her file
copy must be indicated in the original copy to show that the taxpayer was
notified of the acceptance of the BIR and the perfection of the
agreement. (Emphases supplied)
The provisions of the RMO and RDAO explicitly show their mandatory nature,
requiring strict compliance. Hence, failure to comply with any of the requisites
renders a waiver defective and ineffectual. It is worth mentioning that strict
compliance with the requirements set forth in RMO No. 20-90 has been upheld in
thePJI case.17 In reversing the decision of the Court of Appeals promulgated on 5
August 2003, this Court ruled that:
The NIRC, under Sections 203 and 222, provides for a statute of limitations on the
assessment and collection of internal revenue taxes in order to safeguard the
interest of the taxpayer against unreasonable investigation. Unreasonable
investigation contemplates cases where the period of assessment extends
indefinitely because this deprives the taxpayer of the assurance that it will no
longer be subjected to further investigation for taxes after the expiration of a
reasonable period of time x x x
xxxx
RMO No. 20-90 implements these provisions of the NIRC relating to the period of
prescription for the assessment and collection of taxes. A cursory reading of the
Order supports petitioners argument that the RMO must be strictly
followed, x x x18(Emphasis supplied)
Applying the rules and rulings, the waivers in question were defective and did not
validly extend the original three-year prescriptive period. As correctly found by the
CTA in Division, and affirmed in toto by the CTA En Banc, the subject waivers of the
Statute of Limitations were in clear violation of RMO No. 20-90:
1)
This case involves assessment amounting to more than P1,000,000.00. For

this, RMO No. 20-90 requires the Commissioner of Internal Revenue to sign for
the BIR. A perusal of the First and Second Waivers of the Statute of Limitations
shows that they were signed by Assistant Commissioner-Large Taxpayers

Service Virginia L. Trinidad and Assistant Commissioner-Large Taxpayers Service
Edwin R. Abella respectively, and not by the Commissioner of Internal Revenue;
2)
The date of acceptance by the Assistant Commissioner-Large Taxpayers Service

Virginia L. Trinidad of the First Waiver was not indicated therein;
3)
The date of acceptance by the Assistant Commissioner-Large Taxpayers Service

Edwin R. Abella of the Second Waiver was not indicated therein;
4)
The First and Second Waivers of Statute of Limitations did not specify the kind
and amount of the tax due; and
5)
The tenor of the Waiver of the Statute of Limitations signed by petitioners

authorized representative failed to comply with the prescribed requirements of
RMO No. 20-90. The subject waiver speaks of a request for extension of time
within which to present additional documents, whereas the waiver provided
under RMO No. 20-90 pertains to the approval by the Commissioner of Internal
Revenue of the taxpayers request for re-investigation and/or reconsideration of
his/its pending internal revenue case.19
Taking into consideration the foregoing defects in the First and Second Waivers
presented and admitted in evidence before the court a quo, the period to assess the
tax liabilities of respondent for taxable year 1998 was never extended.
Consequently, when the succeeding waivers of Statute of Limitations were
subsequently executed covering the same tax liabilities of respondent, and there
being no assessment having been issued as of that time, prescription has already
set in. We therefore hold that the subject waivers did not extend the period to
assess the subject deficiency tax liabilities of respondent for taxable year 1998. The
aforesaid waivers cannot be considered as subsequent written agreement(s) made
before the expiration of the period previously agreed upon referred to in the
second sentence of the earlier quoted Section 222(b) of the NIRC of 1997, as
amended, since there is no period previously agreed upon to speak of.
As regards petitioners insistence that respondent is already estopped from
impugning the validity of the subject waivers considering that it made partial
payments on the deficiency taxes being collected, particularly as to the payment of
its deficiency WTC and FWT assessments in the amounts of P124,967.73 and
P139,713.11, respectively, we find this argument bereft of merit.
As aptly found in the 29 July 2009 Resolution of the CTA in Division, although
respondent paid the deficiency WTC and FWT assessments, it did not waive the
defense of prescription as regards the remaining tax deficiencies, it being on record
that respondent continued to raise the issue of prescription in its Pre-Trial Brief filed
on 15 August 2005, Joint Stipulations of Facts and Issues filed on 1 September 2005,
direct testimonies of its witness, and Memorandum filed on 24 October 2008. More
so, even petitioner did not consider such payment of respondent as a waiver of the
defense of prescription, but merely raised the issue of estoppel in her Motion for
Reconsideration of the aforesaid decision. From the conduct of both parties, there
can be no estoppel in this case.20ChanRoblesVirtualawlibrary
Upon payment of the assessed deficiency in the WTC in the amount of P124,967.73
and in the FWT in the amount of P139,713.11, respondent filed a Motion for Leave
of Court to Serve Supplemental Petition, with attached Supplemental Petition for
Review. As stated in the CTA En Banc affirmed decision of the CTA in Division, [i]n
its Supplemental Petition for Review, respondent seeks to be fully credited of the
payments it made to cover the deficiency WTC and FWT. Thus, the remaining
assessments cover only the deficiency income tax, final income tax FCDU, and
(EWT) in the modified total amount of P33,076,944.18, x x x. 21The aforesaid motion
was granted and the supplemental petition was admitted by the CTA in Division.
Undeniably, the acceptance of said payments was never questioned by petitioner.
Indeed, the decision of the CTA in Division, which decision was affirmed by the
CTA En Banc, covered only the remaining questioned assessment, namely: income
tax, final income tax FCDU, and EWT. Clearly, the payment of the deficiency WTC
and FWT was made together with the reiteration in the petition for the cancellation
of the assessment notices on the alleged deficiency income tax, final income tax
FCDU, and EWT.
When respondent paid the deficiency WTC and FWT assessments, petitioner
accepted said payment without any opposition. This effectively extinguished
respondents obligation to pay the subject taxes. It bears emphasis that, obligations
are extinguished, among others, by payment or performance. 22 Under Article 1232
of the Civil Code, payment means not only the delivery of money but also the
performance, in any other manner, of an obligation. As intended, which intention
was recognized by the CTA in Division and CTA En Banc, the question regarding the
income tax, final income tax FCDU, and EWT, was kept unaffected by the payment
of the deficiency WTC and FWT assessments.
By way of reiteration, taking into consideration the foregoing flaws found in the
subject waivers, the same are void, and the supposed suspensions of the
prescriptive periods within which to issue the subject assessments were not legally
effected. And the facts of this case do not call for the application of the doctrine of
estoppel.
It must be remembered that the execution of a Waiver of Statute of Limitations may
be beneficial to the taxpayer or to the BIR, or to both. Considering however, that it
results to a derogation of some of the rights of the taxpayer, the same must be
executed in accordance with pre-set guidelines and procedural requirements.
Otherwise, it does not serve its purpose, and the taxpayer has all the right to invoke
its nullity. For that reason, this Court cannot turn blind on the importance of the
Statute of Limitations upon the assessment and collection of internal revenue taxes
provided for under the NIRC. The law prescribing a limitation of actions for the
collection of the income tax is beneficial both to the Government and to its citizens;
to the Government because tax officers would be obliged to act properly in the
making of the assessment, and to citizens because after the lapse of the period of
prescription, citizens would have a feeling of security against unscrupulous tax
agents who may find an excuse to inspect the books of taxpayers, not to determine
the latters real liability, but to take advantage of every opportunity to molest
peaceful, law-abiding citizens. Without such a legal defense, taxpayers would
furthermore be under obligation to always keep their books and keep them open for
inspection subject to harassment by unscrupulous tax agents. The law on
prescription being a remedial measure should be interpreted in a way conducive to
bringing about the beneficent purpose of affording protection to the taxpayer within
the contemplation of the Commission which recommends the approval of the
law.23ChanRoblesVirtualawlibrary
In fine, considering the defects in the First and Second Waivers, the period to assess
or collect deficiency taxes for the taxable year 1998 was never extended.
Consequently, the Formal Letter of Demand and Assessment Notices dated 24 June
2004 for deficiency income tax, FCDU, and EWT in the aggregate amount of
P33,076,944.18, including increments, were issued by the BIR beyond the threeyear prescriptive period and are therefore void. 24ChanRoblesVirtualawlibrary
WHEREFORE, the petition is DENIED for lack of merit. No costs.
SO ORDERED.cralawlawlibrary
Leonardo-De Castro,*(Acting Chairperson), Peralta,**Bersamin, and Perlas-Bernabe,
JJ., concur.chanrobleslaw
SECOND DIVISION
G.R. No. 192024, July 01, 2015
FORTUNE TOBACCO ORPORATION, Petitioner, v. COMMISSIONER OF
INTERNAL REVENUE,Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by
Fortune Tobacco Corporation (petitioner), assailing the March 12, 2010 Decision 1 of
the Court of Tax Appeals En Banc(CTA En Banc) and its April 26, 2010 Resolution2 in
CTA EB Case No. 533, which affirmed in toto the April 30, 2009 Decision3 and the
August 18, 2009 Resolution4 of the Former First Division of the Court of Tax Appeals
(CTA Division) in CTA Case No. 7367.
The facts of this case are akin to those obtaining in G.R. Nos. 167274-75 and GR.
No. 180006. In G.R. No. 167274-275, the Court eventually sustained petitioner's
claim for refund of overpaid excise taxes for the period covering January 1, 2002 to
December 31, 2002. In G.R. No. 180006, the Court likewise sustained petitioner's
claim for refund of overpaid excise tax paid in 2003 and the period covering January
1 to May 31, 2004. The subject claim for refund involves the amount of excise taxes
allegedly overpaid during the period beginning June 1, 2004 up to December 31,
2004.
For a better understanding of the controversy, a recapitulation of the factual and
procedural antecedents is in order. Thus, as stated in the following portions of the
CTA En Banc decision:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Petitioner is the manufacturer/producer of, among others, the following cigarette
brands, with tax rate classification based on net retail price prescribed by Annex "D"
to Republic Act (R.A.) No. 4280, to wit:LawlibraryofCRAlaw
Brand
Tax Rate
Champion M 100
P1.00
Camel F King
P1.00
Camel Lights Box 20's
P1.00
Camel Filters Box 20's
P1.00
Winston F King
P5.00
Winston Lights
P5.00
Immediately prior to January 1, 1997, the above-mentioned cigarette brands were

subject to ad valorem tax pursuant to then Section 142 of the Tax Code of 1977, as
amended. However, on January 1, 1997, R.A. No. 8240 took effect causing a shift
from the ad valorem tax (AVT) system to the specific tax system. As a result of such
shift, the aforesaid cigarette brands were subjected to specific tax under Section
142 thereof, now renumbered as Section 145 of the Tax Code of 1997. Section 145
is quoted thus:LawlibraryofCRAlaw
'Section 145. Cigars and Cigarettes - (A) Cigars. - There shall be levied, assessed
and collected on cigars a tax of One peso (P1.00) per cigar.
(B) Cigarettes Packed by Hand. - There shall be levied, assessed and collected on
cigarettes packed by hand a tax of Forty centavos (P0.40) per pack.
(C) Cigarettes Packed by Machine. - There shall be levied, assessed and collected on
cigarettes packed by machine a tax at the rates prescribed
below:LawlibraryofCRAlaw
[1] If the net retail price (excluding the excise tax and the value-added tax) is above
Ten pesos (P10.00) per pack, the tax shall be Twelve (P12.00) per
pack:LawlibraryofCRAlaw
[2] If the net retail price (excluding the excise tax and the value added tax) exceeds
Six pesos and Fifty centavos (P6.50) but does not exceed Ten pesos (P10.00) per
pack, the tax shall be Eight Pesos (P8.00) per pack.
[3] If the net retail price (excluding the excise tax and the value-added tax) is Five
pesos (P5.00) but does not exceed Six Pesos and fifty centavos (P6.50) per pack,
the tax shall be Five pesos (P5.00) per pack;
[4] If the net retail price (excluding the excise tax and the value-added tax] is below
Five pesos (P5.00) per pack, the tax shall be One peso (P1.00) per pack;
Variants of existing brands of cigarettes which are introduced in the domestic
market after the effectivity of R.A. No. 8240 shall be taxed under the highest
classification of any variant of that brand.
The excise tax from any brand of cigarettes within the next three (3) years from the
effectivity of R.A. No. 8240 shall not be lower than the tax, which is due from each
brand on October 1, 1996. Provided, however, that in cases where the excise tax
rate imposed in paragraphs (1), (2), (3) and (4) hereinabove will result in an
increase in excise tax of more than seventy percent (70%), for a brand of cigarette,
the increase shall take effect in two tranches: fifty percent (50%) of the increase
shall be effective in 1997 and one hundred percent (100%) of the increase shall be
effective in 1998.
Duly registered or existing brands of cigarettes or new brands thereof packed by
machine shall only be packed in twenties.
The rates of excise tax on cigars and cigarettes under paragraphs (1), (2), (3) and
(4) hereof, shall be increased by twelve percent (12%) on January 1, 2000.
New brands shall be classified according to their current net retail price.
For the above purpose, 'net retail price' shall mean the price at which the cigarette
is sold on retail in twenty (20) major supermarkets in Metro Manila (for brands of
cigarettes marketed nationally), excluding the amount intended to cover the
applicable excise tax and value-added tax. For brands which are marketed only
outside Metro Manila, the 'net retail price' shall mean the price at which the
cigarette is sold in five (5) major supermarkets in the region excluding the amount
intended to cover the applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its average net retail price as
of October 1, 1996, as set forth in Annex "D," shall remain in force until revised by
Congress.
'Variant of a brand' shall refer to a brand on which a modifier is prefixed and/or
suffixed to the root name of the brand and/or a different brand which carries the
same logo or design of the existing brand.
To implement the provisions for a twelve percent (12%) increase of excise tax on
cigars and cigarettes packed by machines by January 1, 2000, the Secretary of
Finance, upon recommendation of the respondent Commissioner of Internal
Revenue, issued Revenue Regulations No. 17-99, dated December 16, 1999, xxx
RR No. 17-99 likewise provides in the last paragraph of Section 1 thereof, "that the
new specific tax rate for any existing brand of cigars, cigarettes packed by machine,
distilled spirits, wines and fermented liquor shall not be lower than the excise tax
that is actually being paid prior to January 1, 2000."
On 31 March 2005, petitioner filed a claim for tax credit or refund under Section 229
of the National Internal Revenue Code of 1997 (1997 NIRC) for erroneously or
illegally collected specific taxes covering the period June to December 31, 2004 in
the total amount of Php219,566,450.00.
On November 14, 2005, petitioner filed a Petition for Review which was raffled to
the Former First Division of this Court.
Respondent in his Answer raised among others, as a Special and Affirmative
Defense, that the amount of TWO HUNDRED NINETEEN MILLION FIVE HUNDRED
SIXTY SIX THOUSAND FOUR HUNDRED FIFTY PESOS (Php219,566,450.00) being
claimed by petitioner as alleged overpaid excise tax for the period covering 1 June
to 31 December 2004, is not properly documented.
After trial on the merits, the Former First Division of this Court rendered the assailed
Decision, dated April 30, 2009, which consistently ruled that RR 17-99 is contrary to
law and that there is insufficiency of evidence on the claim for refund.
Petitioner filed its motion for reconsideration therefrom, and which was denied by
the Former First Division on August 18, 2009.
Petitioner elevated its claim to the CTA En Banc, but was rebuffed after the tax
tribunal found no cause to reverse the findings and conclusions of the CTA Division.
Hence, this petition.
Essentially, petitioner claims that it paid a total amount of P219,566,450.00 in
overpaid excise taxes. For petitioner, considering that the CTA found Revenue
Regulation No. 17-99 (RR 17-99) to be contrary to law, there should be no obstacle
to the refund of the total amount excess excise taxes it had paid. 5redarclaw
In a nutshell, the sole issue for the resolution of the Court is: whether or not there is
sufficient evidence to warrant the grant of petitioner's claim for tax refund.
The petition lacks merit.
The question of sufficiency of petitioner's evidence to support its claim for tax
refund is a question of fact
Unlike in the proceeding had in G.R. Nos. 167274-75 and G.R. No. 180006, the
denial of petitioner's claim for tax refund in this case is based on the ground that
petitioner failed to provide sufficient evidence to prove its claim and the amount
thereof. As a result, petitioner seeks that the Court re-examine the probative value
of its evidence and determine whether it should be refunded the amount of excise
taxes it allegedly overpaid.
This cannot be done.
The settled rule is that only questions of law may be raised in a petition under Rule
45 of the Rules of Court. It is not this Court's function to analyze or weigh all over
again the evidence already considered in the proceedings below, the Court's
jurisdiction being limited to reviewing only errors of law that may have been
committed by the lower court. The resolution of factual issues is the function of the
lower courts, whose findings on these matters are received with respect. A question
of law which the Court may pass upon must not involve an examination of the
probative value of the evidence presented by the litigants. 6 This is in accordance
with Section 1, Rule 45 of the Rules of Court, as amended, which
reads:LawlibraryofCRAlaw
Section 1. Filing of petition with Supreme Court. - A party desiring to appeal
bycertiorari from a judgment, final order or resolution of the Court of Appeals, the
Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court or other courts,
whenever authorized by law, may file with the Supreme Court a verified petition for
review on certiorari. The petition may include an application for a writ of
preliminary injunction or other provisional remedies and shall
raise only questions of law, which must be distinctly set forth. The
petitioner may seek the same provisional remedies by verified motion filed in the
same action or proceeding at any time during its pendency.
[Emphasis and Underlining Supplied]
In fact, the rule finds greater significance with respect to the findings of specialized
courts such as the CTA, the conclusions of which are not lightly set aside because of
the very nature of its functions which 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. 7redarclaw
Moreover, it has been said that the proper interpretation of the provisions on tax
refund that does notcall for an examination of the probative value of the evidence
presented by the parties-litigants is a question of law.8 Conversely, it may be said
that if the appeal essentially calls for the re-examination of the probative value of
the evidence presented by the appellant, the same raises a question of fact. Often
repeated is the distinction that there is a question of law in a given case when doubt
or difference arises as to what the law is on a certain state of facts; there is a
question of fact when doubt or difference arises as to the truth or falsehood of
alleged facts.9redarclaw
Verily, the sufficiency of a claimant's evidence and the determination of the amount
of refund, as called for in this case, are questions of fact,10 which are for the
judicious determination by the CTA of the evidence on record.
Significantly, it bears noting that Section 5, Rule 45 of the Rules of Court provides
that the failure of petitioner to comply with the requirements on the contents of the
petition shall be sufficient ground for its dismissal. While jurisprudence provides
exceptions to these rules, the subject petition does not fall under any of those so
excepted. Thus, for this reason alone, the petition must fail.
The CTA committed no reversible error in denying petitioner's claim for tax refund
for insufficient evidence.
A. Petitioner relied heavily on photocopied documents to prove its claim.
Granting that the Court could take a second look and review petitioner's evidence,
the result would be the same.
The claim for refund hinges on the admissibility and the probative value of the
following photocopied documents that allegedly contain a recording of petitioner's
excise payments for the period covering June 1, 2004 up to December 31,
2004:LawlibraryofCRAlaw
(1) Production, Removals and Payments for All FTC Brands; 11 and
(2) Excise Tax Refund Computation Summary. 12redarclaw
Although both the CTA Division and the CTA En Banc provisionally admitted
petitioner's Exhibit "C,"13the above-mentioned documents, as well as the other
documentary evidence submitted by petitioner were refused admission for being
merely photocopies.14redarclaw
Section 3 of Administrative Matter (A.M.) No. 05-11-07 CTA, the Revised Rules of the
Court of Tax Appeals, provides that the Rules of Court shall apply suppletorily in the
proceeding before the tax tribunal.
In this connection, Section 3 of Rule 130 of the Rules of Court lays down the Best
Evidence Rule with respect to the presentation of documentary evidence.
Thus:LawlibraryofCRAlaw
Section 3. Original document must be produced; exceptions. When the subject of
inquiry is the contents of a document, no evidence shall be admissible other than
the original document itself, except in the following cases:LawlibraryofCRAlaw
(a) When the original has been lost or destroyed, or cannot be produced in court,
without bad faith on the part of the offerer;
(b) When the original is in the custody or under the control of the party against
whom the evidence is offered, and the latter fails to produce it after reasonable
notice;
(c) When the original consists of numerous accounts or other documents which
cannot be examined in court without great loss of time and the fact sought to be
established from them is only the general result of the whole; and
(d) When the original is a public record in the custody of a public officer or is
recorded in a public office. (2a)
In this case, petitioner did not even attempt to provide a plausible reason as to why
the original copies of the documents presented could not be produced before the
CTA or any reason that the application of any of the foregoing exceptions could be
justified. Although petitioner presented one (1) witness to prove its claim, it appears
that this witness was not even a signatory to any of the disputed documentary
evidence.
As correctly pointed out by the CTA Division, petitioner knew all along that it had
committed the foregoing procedural lapses when it filed its Formal Offer of
Evidence. Although petitioner orally manifested that it was going to seek
reconsideration of the CTA Division order excluding its evidence, in the
end, petitioner did not even bother to file any such motion for reconsideration at all.
B. Petitioner failed to offer any proof or tender of excluded evidence.
At any rate, even if the Court should find fault in the ruling of the CTA Division in
denying the admission of petitioner's evidence, the result would be the same
because petitioner failed to offer any proof or tender of excluded evidence. As aptly
discussed by the CTA En Banc:LawlibraryofCRAlaw
Petitioner posits that if their exhibits, specifically Exhibits "G", "G-1" to "G-7" and
Exhibit "H", are admitted together with the testimony of their witness, the same
would sufficiently prove their claim. A closer scrutiny of the records shows that
petitioner did not file any offer of proof or tender of excluded evidence.
Section 40, Rule 132 of the Rules of Court provides:LawlibraryofCRAlaw

Sec. 40. Tender of excluded evidence. - If documents or things offered in evidence
are excluded by the court, the offeror may have the same attached to or made part
of the record. If the evidence excluded is oral, the offeror may state for the record
the name and other personal circumstances of the witness and the substance of the
proposed testimony.
The rule is that evidence formally offered by a party may be admitted or excluded
by the court. If a party's offered documentary or object evidence is excluded, he
may move or request that it be attached to form part of the records of the case. If
the excluded evidence is oral, he may state for the record the name and other
personal circumstances of the witness and the substance of the proposed testimony.
These procedures are known as offer of proof or tender of excluded evidence and
are made for purposes of appeal. If an adverse judgment is eventually rendered
against the offeror, he may in his appeal assign as error the rejection of the
excluded evidence.
It is of record that the denial of the excluded evidence was never assigned as an
error in this appeal. Thus, this Court cannot pass upon nor consider the propriety of
their denial. Moreover, this Court cannot and should not consider the documentary
and oral evidence presented which are not considered to be part of the records in
the first place. Thus, Exhibits "G", "G- 1" to "G-7" and Exhibit "H", together with the
testimony of petitioner's witness thereon, cannot be admitted and be given
probative valuer.15
It has been repeatedly ruled that where documentary evidence was rejected by the
lower court and the offeror did not move that the same be attached to the record,
the same cannot be considered by the appellate court, 16 as documents forming no
part of proofs before the appellate court cannot be considered in disposing the
case.17 For the appellate court to consider as evidence, which was not offered by
one party at all during the proceedings below, would infringe the constitutional right
of the adverse party - in this case, the CIR, to due process of law.
It also bears pointing out that at no point during the proceedings before the CTA En
Banc and before this Court has petitioner offered any plausible explanation as to
why it failed to properly make an offer of proof or tender of excluded evidence.
Instead, petitioner harps on the fact that respondent CIR simply refused its claim for
refund on the ground that RR 17-99 was a valid issuance. Thus, for its failure to
seasonably avail of the proper remedy provided under Section 40, Rule 132 of the
Rules of Court, petitioner is precluded from doing so at this late stage of the case.
Clearly, estoppel has already stepped in.
Although it may be suggested that the CTA should have been more liberal in the
application of technical rules of evidence, it should be stressed that a liberal
application, or suspension of the application of procedural rules, must remain as the
exception to the well-settled principle that rules must be complied with for the
orderly administration of justice. As pointed out in Marohomsalic v. Cole,18

While procedural rules may be relaxed in the interest of justice, it is well-settled that
these are tools designed to facilitate the adjudication of cases. The relaxation of
procedural rules in the interest of justice was never intended to be a
license for erring litigants to violate the rules with impunity. Liberality in the
interpretation and application of the rules can be invoked only in proper cases and
under justifiable causes and circumstances. While litigation is not a game of
technicalities, every case must be prosecuted in accordance with the prescribed
procedure to ensure an orderly and speedy administration of justice. 19redarclaw
[Emphases Supplied]
And, as stressed in the case of Daikoku Electronics Phils., Inc. v. Raza:20
To be sure, the relaxation of procedural rules cannot be made without any
valid reasons proffered for or underpinning it. To merit liberality, petitioner
must show reasonable cause justifying its non-compliance with the rules and must
convince the Court that the outright dismissal of the petition would defeat the
administration of substantive justice, x x x The desired leniency cannot be accorded
absent valid and compelling reasons for such a procedural lapse, xxx
We must stress that the bare invocation of "the interest of substantial
justice" line is not some magic wand that will automatically compel this
Court to suspend procedural rules. Procedural rules are not to be belittled, let
alone dismissed simply because their non-observance may have resulted in
prejudice to a party's substantial rights. Utter disregard of the rules cannot be justly
rationalized by harping on the policy of liberal construction. 21redarclaw
[Emphases Supplied]
In this case, as explained above, petitioner utterly failed to not only comply with the
basic procedural requirement of presenting only the original copies of its
documentary evidence, but also to adhere to the requirement to properly make its
offer of proof or tender of excluded evidence for the proper consideration of the
appellate tribunal.
Indeed, to apply technical rules strictly against the CIR because it simply relied on
the validity of RR 17-99 - but not be strict with respect to petitioner's shortcomings,
would be unfair. For this would go against the principle that taxation is the rule,
exemption/refund, the exception.
C. Petitioner's evidence, even if considered, fails to prove that it is
entitled to its claim for refund.
Finally, as correctly held by the CTA En Banc, even if the Court would consider
petitioner's otherwise excluded evidence, the same would still fail to sufficiently
prove the petitioner's entitlement to its claim for refund. The disquisition of the CTA
Division, as quoted in the CTA En Banc decision, is hereby reiterated with

approval:LawlibraryofCRAlaw
xxx, the documentary exhibits are not sufficient to prove the amounts being
claimed by petitioner as refund. Looking at Exhibit 'G,' the same is a mere summary
of excise taxes paid by petitioner for ALL of its cigarette brands. This Court
cannot verify the amounts of excise taxes paid for the brands in issue which are
Champion M-100s, Camel Filter Kings, Winston Filter Kings, and Winston Lights.
This Court cannot likewise rely solely on petitioner's Excise Tax Refund Computation
Summary. The figures therein must be verified through other documentary
evidence which this Court must look into and which petitioner failed to properly
provide.22redarclaw
[Emphases Supplied]
Clearly, it is petitioner's burden to prove the allegations made in its claim for refund.
For a claim for refund to be granted, the manner in proving it must be in accordance
with the prescribed rules of evidence. It would have been erroneous had the CTA En
Banc relied on petitioner's own Excise Tax Refund Computation Summary or the
unsatisfactory explanation of its lone witness to justify its claim for tax refund.
Indeed, while it is true that litigation is not a game of technicalities is equally true,
however, that every case must be established in accordance with the prescribed
procedure to ensure an orderly and speedy administration of justice. In all, the Court
finds that the failure of petitioner to prove its claim in accordance with the settled
evidentiary rules merits its dismissal.
Lest it be misunderstood, this Court is not reversing, directly or indirectly, its
pronouncements in G.R. Nos. 167274-75 and G.R. No. 180006 that RR 17-99 is
invalid. This Court is simply pointing to the rule that claims for refunds are the
exception, rather than the rule, and that each claim for refund, in order to be
granted, must be clearly set forth and established in accordance with the rules of
evidence.
As it has been said, time and again, that claims for tax refunds are in the nature of
tax exemptions which result in loss of revenue for the government. Upon the person
claiming an exemption from tax payments rests the burden of justifying the
exemption by words too plain to be mistaken and too categorical to be
misinterpreted; it is never presumed nor be allowed solely on the ground of
equity.23 In addition, one who claims that he is entitled to a tax refund must not only
claim that the transaction subject of tax is clearly and unequivocally not subject to
tax - the amount of the claim must still be proven in the normal course, 24 in
accordance with the prescribed rules on evidence.
After all, taxes are the lifeblood of the nation. 25redarclaw
WHEREFORE, the petition is DENIED.

Bersamin,*Del Castillo, (Acting Chairperson), Villarama, Jr., ** and Leonen, JJ., concur.
EN BANC
G.R. No. 210836, September 01, 2015
CHEVRON PHILIPPINES INC., Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE,Respondent.
RESOLUTION
BERSAMIN, J.:
Excise tax on petroleum products is essentially a tax on property, the direct liability
for which pertains to the statutory taxpayer (i.e., manufacturer, producer or
importer). Any excise tax paid by the statutory taxpayer on petroleum products sold
to any of the entities or agencies named in Section 135 of the National Internal
Revenue Code (NIRC) exempt from excise tax is deemed illegal or erroneous, and
should be credited or refunded to the payor pursuant to Section 204 of the NIRC.
This is because the exemption granted under Section 135 of the NIRC must be
construed in favor of the property itself, that is, the petroleum products.
The Case
Before the Court is the Motion for Reconsideration filed by petitioner Chevron
Philippines, Inc. (Chevron)1 vis-a-vis the resolution promulgated on March 19,
2014,2 whereby the Court's Second Division denied its petition for review
on certiorari for failure to show any reversible error on the part of the Court of Tax
Appeals (CTA) En Banc. The CTA En Banc had denied Chevron's claim for tax refund
or tax credit for the excise taxes paid on its importation of petroleum products that
it had sold to the Clark Development Corporation (CDC), an entity exempt from
direct and indirect taxes.
The Motion for Reconsideration was later on referred to the Court En Banc after the
Second Division noted that the CTA En Banc had denied Chevron's claim for the tax
refund or tax credit based on the ruling promulgated in Commissioner of Internal
Revenue v. Pilipinas Shell Petroleum Corporation (Pilipinas Shell) on April 25,
2012,3 but which ruling was meanwhile reversed upon reconsideration by the First
Division through the resolution promulgated on February 19, 2014. 4 The Court En
Bancaccepted the referral last June 16, 2015.
Antecedents
Chevron sold and delivered petroleum products to CDC in the period from August
2007 to December 2007.5Chevron did not pass on to CDC the excise taxes
paid on the importation of the petroleum products sold to CDC in taxable

year 2007;6 hence, on June 26, 2009, it filed an administrative claim for tax refund
or issuance of tax credit certificate in the amount of P6,542,400.00. 7 Considering
that respondent Commissioner of Internal Revenue (CIR) did not act on the
administrative claim for tax refund or tax credit, Chevron elevated its claim to the
CTA by petition for review on June 29, 2009. 8 The case, docketed as CTA Case No.
7939, was raffled to the CTA's First Division.
The CTA First Division denied Chevron's judicial claim for tax refund or tax credit
through its decision dated July 31, 2012,9 and later on also denied Chevron's Motion
for Reconsideration on November 20, 2012.10
In due course, Chevron appealed to the CTA En Banc (CTA EB No. 964), which, in the
decision dated September 30, 2013,11 affirmed the ruling of the CTA First Division,
stating that there was nothing in Section 135(c) of the NIRC that explicitly exempted
Chevron as the seller of the imported petroleum products from the payment of the
excise taxes; and holding that because it did not fall under any of the categories
exempted from paying excise tax, Chevron was not entitled to the tax refund or tax
credit.
The CTA En Banc noted that:ChanRoblesvirtualLawlibrary
Considering that an excise tax is in the nature of an indirect tax where the tax
burden can be shifted, Section 135(c) of the NIRC of 1997, as amended, should be
construed as prohibiting the shifting of the burden of the excise tax to tax-exempt
entities who buys petroleum products from the manufacturer/seller by incorporating
the excise tax component as an added cost in the price fixed by the
manufacturer/seller.
xxxx
The above discussion is in line with the pronouncement made by the Supreme Court
in the case of Commissioner of Internal Revenue v. Pilipinas Shell Petroleum
Corporation(Shell case), involving Shell's claim for excise tax refund for petroleum
products sold to international carriers. The Supreme Court held that the exemption
from excise tax payment on petroleum products under Section 135(a) of the NIRC of
1997, as amended, is conferred on international carriers who purchased the same
for their use or consumption outside the Philippines. The oil companies which sold
such petroleum products to international carriers are not entitled to a refund of
excise taxes previously paid on the petroleum products sold, x x x
xxxx
Accordingly, petitioner is not entitled to any refund or issuance of tax credit
certificate on excise taxes paid on its importation of petroleum products sold to CDC
pursuant to the doctrine laid down by the Supreme Court in the Shell case.12
Chevron sought reconsideration, but the CTA En Banc denied its motion for that
purpose in the resolution dated January 7, 2014. 13cralawrednad
Chevron appealed to the Court,14 but the Court (Second Division) denied the petition
for review oncertiorari through the resolution promulgated on March 19, 2014 for
failure to show any reversible error on the part of the CTA En Banc.
Hence, Chevron has filed the Motion for Reconsideration, submitting that it was
entitled to the tax refund or tax credit because ruling promulgated on April 25, 2012
in Pilipinas Shell,15 on which the CTA En Banc had based its denial of the claim of
Chevron, was meanwhile reconsidered by the Court's First Division on February 19,
2014.16cralawrednad
Issue
The lone issue for resolution is whether Chevron was entitled to the tax refund or
the tax credit for the excise taxes paid on the importation of petroleum products
that it had sold to CDC in 2007.
Ruling of the Court
Chevron's Motion for Reconsideration is meritorious.
Pilipinas Shell concerns the manufacturer's entitlement to refund or credit of the
excise taxes paid on the petroleum products sold to international carriers exempt
from excise taxes under Section 135(a) of the NIRC. However, the issue raised here
is whether the importer (i.e., Chevron) was entitled to the refund or credit of the
excise taxes it paid on petroleum products sold to CDC, a tax-exempt entity under
Section 135(c) of the NIRC. Notwithstanding that the claims for refund or credit of
excise taxes were premised on different subsections of Section 135 of the NIRC, the
basic tax principle applicable was the same in both cases - that excise tax is a tax
on property; hence, the exemption from the excise tax expressly granted under
Section 135 of the NIRC must be construed in favor of the petroleum products on
which the excise tax was initially imposed.
Accordingly, the excise taxes that Chevron paid on its importation of petroleum
products subsequently sold to CDC were illegal and erroneous, and should be
credited or refunded to Chevron in accordance with Section 204 of the NIRC.
We explain.
Under Section 12917 of the NIRC, as amended, excise taxes are imposed on two
kinds of goods, namely: (a) goods manufactured or produced in the Philippines for
domestic sales or consumption or for any other disposition; and (b) things imported.
Undoubtedly, the excise tax imposed under Section 129 of the NIRC is a tax on
property.18cralawrednad
With respect to imported things, Section 131 of the NIRC declares that excise taxes
on imported things shall be paid by the owner or importer to the Customs officers,
conformably with the regulations of the Department of Finance and before the
release of such articles from the customs house, unless the imported things are
exempt from excise taxes and the person found to be in possession of the same is
other than those legally entitled to such tax exemption. For this purpose, the
statutory taxpayer is the importer of the things subject to excise tax.
Chevron, being the statutory taxpayer, paid the excise taxes on its importation of
the petroleum products.19cralawrednad
Section 135 of the NIRC states:ChanRoblesvirtualLawlibrary
SEC. 135. Petroleum Products Sold to International Carriers and Exempt
Entities or Agencies. - Petroleum products sold to the following are exempt from
excise tax:ChanRoblesvirtualLawlibrary
(a) International carriers of Philippine or foreign registry on their use or consumption
outside the Philippines: Provided, That the petroleum products sold to these
international carriers shall be stored in a bonded storage tank and may be disposed
of only in accordance with the rules and regulations to be prescribed by the
Secretary of Finance, upon recommendation of the Commissioner;
(b) Exempt entities or agencies covered by tax treaties, conventions and other
international agreement for their use or consumption: Provided, however, That the
country of said foreign international carrier or exempt entities or agencies exempts
from similar taxes petroleum products sold to Philippine carriers, entities or
agencies; and
(c) Entities which are by law exempt from direct and indirect taxes.
(Emphasis supplied.)
Pursuant to Section 135(c), supra, petroleum products sold to entities that are by
law exempt from direct and indirect taxes are exempt from excise tax. The
phrase which are by law exempt from direct and indirect taxes describes the
entities to whom the petroleum products must be sold in order to render the
exemption operative. Section 135(c) should thus be construed as an exemption in
favor of the petroleum products on which the excise tax was levied in the first place.
The exemption cannot be granted to the buyers - that is, the entities that are by law
exempt from direct and indirect taxes - because they are not under any legal duty
to pay the excise tax.
CDC was created to be the implementing and operating arm of the Bases
Conversion and Development Authority to manage the Clark Special Economic Zone
(CSEZ).20 As a duly-registered enterprise in the CSEZ, CDC has been exempt from
paying direct and indirect taxes pursuant to Section 24 21 of Republic Act No. 7916
(The Special Economic Zone Act of 1995), in relation to Section 15 of Republic Act
No. 9400 (Amending Republic Act No. 7227, otherwise known as the Bases
Conversion Development Act of 1992).22cralawrednad
Inasmuch as its liability for the payment of the excise taxes accrued immediately
upon importation and prior to the removal of the petroleum products from the
customshouse, Chevron was bound to pay, and actually paid such taxes. But the
status of the petroleum products as exempt from the excise taxes would be
confirmed only upon their sale to CDC in 2007 (or, for that matter, to any of the
other entities or agencies listed in Section 135 of the NIRC). Before then, Chevron
did not have any legal basis to claim the tax refund or the tax credit as to the
petroleum products.
Consequently, the payment of the excise taxes by Chevron upon its importation of
petroleum products was deemed illegal and erroneous upon the sale of the
petroleum products to CDC. Section 204 of the NIRC explicitly allowed Chevron as
the statutory taxpayer to claim the refund or the credit of the excise taxes thereby
paid, viz.:ChanRoblesvirtualLawlibrary
SEC 204. Authority of the Commissioner to Compromise, Abate and Refund
or Credit Taxes. - The Commissioner may xxxx
(C) Credit or refund taxes erroneously or illegally received or penalties
imposed without authority, refund the value of internal revenue stamps
when they are returned in good condition by the purchaser, and, in his
discretion, redeem or change unused stamps that have been rendered
unfit for use and refund their value upon proof of destruction. No credit or
refund of taxes or penalties shall be allowed unless the taxpayer files in
writing with the Commissioner a claim for credit or refund within two (2)
years after payment of the tax or penalty: Provided, however, That a
return filed showing an overpayment shall be considered as a written
claim for credit or refund.
It is noteworthy that excise taxes are considered as a kind of indirect tax, the
liability for the payment of which may fall on a person other than whoever actually
bears the burden of the tax. 23Simply put, the statutory taxpayer may shift the
economic burden of the excise tax payment to another - usually the buyer.
In cases involving excise tax exemptions on petroleum products under Section 135
of the NIRC, the Court has consistently held that it is the statutory taxpayer, not the
party who only bears the economic burden, who is entitled to claim the tax refund
or tax credit.24 But the Court has also made clear that this rule does not apply where
the law grants the party to whom the economic burden of the tax is shifted by
virtue of an exemption from both direct and indirect taxes. In which case, such party
must be allowed to claim the tax refund or tax credit even if it is not considered as
the statutory taxpayer under the law.25cralawredcralawrednad

The general rule applies here because Chevron did not pass on to CDC the excise
taxes paid on the importation of the petroleum products, the latter being exempt
from indirect taxes by virtue of Section 24 of Republic Act No. 7916, in relation to
Section 15 of Republic Act No. 9400, not because Section 135(c) of the NIRC
exempted CDC from the payment of excise tax.
Accordingly, conformably with Section 204(C) of the NIRC, supra, and pertinent
jurisprudence, Chevron was entitled to the refund or credit of the excise taxes
erroneously paid on the importation of the petroleum products sold to CDC.
WHEREFORE, the Court GRANTS petitioner Chevron Philippines, Inc.'s Motion for
Reconsideration;DIRECTS respondent Commissioner of Internal Revenue to refund
the excise taxes in the amount of P6,542,400.00 paid on the petroleum products
sold to Clark Development Corporation in the period from August 2007 to December
2007, or to issue a tax credit certificate of that amount to Chevron Philippines, Inc.
No pronouncement on costs of suit.
Velasco, Jr., Leonardo-De Castro, Brion, Peralta, and Perez, JJ.,
concur.ChanRoblesVirtualawlibrary
Sereno, C.J., Carpio, Mendoza, Perlas-Bernabe, and Leonen, JJ., joins the dissent of J.
Del Castillo.
Del Castillo, J., please see dissenting opinion.
Villarama, Jr., J., pls. see separate concurring opinion.
Reyes, J., on leave.
Jardeleza, J., no part.
FIRST DIVISION
G.R. Nos. 193383-84, January 14, 2015
CBK POWER COMPANY LIMITED, Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE,Respondent.
[G.R. NOS. 193407-08]
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. CBK POWER COMPANY
LIMITED,Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in these consolidated petitions for review on certiorari1 are the
Decision2 dated March 29, 2010 and the Resolution 3 dated August 16, 2010 of the
Court of Tax Appeals (CTA) En Banc in C.T.A. E.B. Nos. 469 and 494, which affirmed
the Decision4 dated August 28, 2008, the Amended Decision 5dated February 12,
2009, and the Resolution6 dated May 7, 2009 of the CTA First Division in CTA Case
Nos. 6699, 6884, and 7166 granting CBK Power Company Limited (CBK Power) a
refund of its excess final withholding tax for the taxable years 2001 to
2003.cralawred
The Facts
CBK Power is a limited partnership duly organized and existing under the laws of the
Philippines, and primarily engaged in the development and operation of the
Caliraya, Botocan, and Kalayaan hydroelectric power generating plants in Laguna
(CBK Project). It is registered with the Board of Investments (BOI) as engaged in a
preferred pioneer area of investment under the Omnibus Investment Code of
1987.7chanRoblesvirtualLawlibrary
To finance the CBK Project, CBK Power obtained in August 2000 a syndicated loan
from several foreign banks,8 i.e., BNP Paribas, Dai-ichi Kangyo Bank, Limited,
Industrial Bank of Japan, Limited, and Societe General (original lenders), acting
through an Inter-Creditor Agent, Dai-ichi Kangyo Bank, a Japanese bank that
subsequently merged with the Industrial Bank of Japan, Limited (Industrial Bank of
Japan) and the Fuji Bank, Limited (Fuji Bank), with the merged entity being named
as Mizuho Corporate Bank (Mizuho Bank). One of the merged banks, Fuji Bank, had
a branch in the Philippines, which became a branch of Mizuho Bank as a result of
the merger. The Industrial Bank of Japan and Mizuho Bank are residents of Japan for
purposes of income taxation, and recognized as such under the relevant provisions
of the income tax treaties between the Philippines and
Japan.9chanRoblesvirtualLawlibrary
Certain portions of the loan were subsequently assigned by the original lenders to
various other banks, including Fortis Bank (Nederland) N.V. (Fortis-Netherlands) and
Raiffesen Zentral Bank Osterreich AG (Raiffesen Bank). Fortis-Netherlands, in turn,
assigned its portion of the loan to Fortis Bank S.A./N.V. (Fortis-Belgium), a resident of
Belgium. Fortis-Netherlands and Raiffesen Bank, on the other hand, are residents of
Netherlands and Austria, respectively.10chanRoblesvirtualLawlibrary
In February 2001, CBK Power borrowed money from Industrial Bank of Japan, FortisNetherlands, Raiffesen Bank, Fortis-Belgium, and Mizuho Bank for which it remitted
interest payments from May 2001 to May 2003.11 It allegedly withheld final taxes
from said payments based on the following rates, and paid the same to the Revenue
District Office No. 55 of the Bureau of Internal Revenue (BIR): (a) fifteen percent
(15%) for Fortis-Belgium, Fortis-Netherlands, and Raiffesen Bank; and (b) twenty
percent (20%) for Industrial Bank of Japan and Mizuho
Bank.12chanRoblesvirtualLawlibrary
However, according to CBK Power, under the relevant tax treaties between the
Philippines and the respective countries in which each of the banks is a resident, the
interest income derived by the aforementioned banks are subject only to
a preferential tax rate of 10%, viz.:13chanRoblesvirtualLawlibrary
BANK
COUNTRY OF
RESIDENCE
PREFERENTIAL RATE
UNDER THE RELEVANT TAX TREATY
Fortis Bank S.A./N.V.
Belgium
10% (Article 111, RP-Belgium Tax Treaty)
Industrial Bank of Japan Japan
10% (Article 113, RP-Japan Tax Treaty)
Raiffesen Zentral Bank

Osterreich AG
Austria
10% (Article 113, RP-Austria Tax Treaty)
Mizuho Corporate Bank
Japan
10% (Article 113, RP-Japan Tax Treaty)
Accordingly, on April 14, 2003, CBK Power filed a claim for refund of its excess final
withholding taxes allegedly erroneously withheld and collected for the years 2001
and 2002 with the BIR Revenue Region No. 9. The claim for refund of excess final
withholding taxes in 2003 was subsequently filed onMarch 4,
The Commissioner of Internal Revenues (Commissioner) inaction on said claims
prompted CBK Power to file petitions for review before the
CTA, viz.:15chanRoblesvirtualLawlibrary
(1) CTA Case No. 6699 was filed by CBK Power on June 6, 2003 seeking the refund
of excess final withholding tax in the total amount of P6,393,267.20 covering the
year 2001 with respect to interest income derived by [Fortis-Belgium], Industrial
Bank of Japan, and [Raiffesen Bank]. An Answer was filed by the Commissioner on
July 25, 2003.
(2) CTA Case No. 6884 was filed by CBK Power on March 5, 2004 seeking for the
refund of the amount of P8,136,174.31 covering [the] year 2002 with respect to
interest income derived by [Fortis-Belgium], Industrial Bank of Japan, [Mizuho Bank],
and [Raiffesen Bank]. The Commissioner filed his Answer on May 7, 2004.
xxxx
(3) CTA Case No. 7166 was filed by CBK [Power] on March 9, 2005 seeking for the
refund of [the amount of] P1,143,517.21 covering [the] year 2003 with respect to
interest income derived by [Fortis-Belgium], and [Raiffesen Bank]. The
Commissioner filed his Answer on May 9, 2005. (Emphases supplied)
CTA Case Nos. 6699 and 6884 were consolidated first on June 18, 2004.
Subsequently, however, all three cases CTA Case Nos. 6699, 6884, and 7166
were consolidated in a Resolution dated August 3,
The CTA First Division Rulings
In a Decision17 dated August 28, 2008, the CTA First Division granted the petitions
and ordered the refund of the amount of P15,672,958.42 upon a finding that the
relevant tax treaties were applicable to the case. 18 It cited DA-ITAD Ruling No. 0990319 dated July 16, 2003, issued by the BIR, confirming CBK Powers claim that the
interest payments it made to Industrial Bank of Japan and Raiffesen Bank were
subject to a final withholding tax rate of only 10% of the gross amount of interest,
pursuant to Article 11 of the Republic of the Philippines (RP)-Austria and RP-Japan
tax treaties. However, in DA-ITAD Ruling No. 126-0320 dated August 18, 2003, also
issued by the BIR, interest payments to Fortis-Belgium were likewise subjected to
the same rate pursuant to the Protocol Amending the RP-Belgium Tax Treaty, the
provisions of which apply on income derived or which accrued beginning January 1,
2000. With respect to interest payments made to Fortis-Netherlands before it
assigned its portion of the loan to Fortis-Belgium, the CTA First Division likewise
granted the preferential rate.21chanRoblesvirtualLawlibrary
The CTA First Division categorically declared in the August 28, 2008 Decision that
the required International Tax Affairs Division (ITAD) ruling was not a condition sine
qua non for the entitlement of the tax relief sought by CBK Power, 22 however, upon
motion for reconsideration23 filed by the Commissioner, the CTA First
Division amended its earlier decision by reducing the amount of the refund from
P15,672,958.42 to P14,835,720.39 on the ground that CBK Power failed to obtain
an ITAD ruling with respect to its transactions with Fortis-Netherlands. 24 In its
Amended Decision25 datedFebruary 12, 2009, the CTA First Division adopted26 the
ruling in the case of Mirant (Philippines) Operations Corporation (formerly:
Southern Energy Asia-Pacific Operations [Phils.], Inc.) v. Commissioner of Internal
Revenue (Mirant),27 cited by the Commissioner in his motion for reconsideration,
where the Court categorically pronounced in its Resolution dated February 18, 2008
that an ITAD ruling must be obtained prior to availing a preferential tax rate.
CBK Power moved for the reconsideration28 of the Amended Decision dated February
12, 2009, arguing in the main that the Mirant case, which was resolved in a minute
resolution, did not establish a legal precedent. The motion was denied, however, in
a Resolution29 dated May 7, 2009 for lack of merit.
Undaunted, CBK Power elevated the matter to the CTA En Banc on petition for
review,30 docketed as C.T.A E.B. No. 494. The Commissioner likewise filed his own
petition for review,31 which was docketed as C.T.A. E.B. No. 469. Said petitions were
subsequently consolidated.32chanRoblesvirtualLawlibrary
CBK Power raised the lone issue of whether or not an ITAD ruling is required before
it can avail of the preferential tax rate. On the other hand, the Commissioner
claimed that CBK Power failed to exhaust administrative remedies when it filed its
petitions before the CTA First Division, and that said petitions were not filed within
the two-year prescriptive period for initiating judicial claims for
refund.33chanRoblesvirtualLawlibrary
The CTA En Banc Ruling
In a Decision34 dated March 29, 2010, the CTA En Banc affirmed the ruling of the
CTA First Division that a prior application with the ITAD is indeed required by
Revenue Memorandum Order (RMO) 1-2000,35 which administrative issuance has
the force and effect of law and is just as binding as a tax treaty. The CTA En
Banc declared the Mirant case as without any binding effect on CBK Power, having
been resolved by this Court merely through minute resolutions, and relied instead
on the mandatory wording of RMO 1-2000, as follows: 36chanRoblesvirtualLawlibrary
III. Policies:
xxxx
2. Any availment of the tax treaty relief shall be preceded by an application by
filing BIR Form No. 0901 (Application for Relief from Double Taxation) with
ITAD at least 15 days before the transaction i.e. payment of dividends,
royalties, etc.,accompanied by supporting documents justifying the relief. x x
x.
The CTA En Banc further held that CBK Powers petitions for review were filed within
the two-year prescriptive period provided under Section 229 37 of the National
Internal Revenue Code of 199738(NIRC), and that it was proper for CBK Power to
have filed said petitions without awaiting the final resolution of its administrative
claims for refund before the BIR; otherwise, it would have completely lost its right to
seek judicial recourse if the two-year prescriptive period lapsed with no judicial
claim filed.
CBK Powers motion for partial reconsideration and the Commissioners motion for
reconsideration of the foregoing Decision were both denied in a Resolution39 dated
August 16, 2010 for lack of merit; hence, the present consolidated petitions.
The Issues Before the Court
In G.R. Nos. 193383-84, CBK Power submits the sole legal issue of whether the
BIR may add a requirement prior application for an ITAD ruling that is not found
in the income tax treaties signed by the Philippines before a taxpayer can avail of
preferential tax rates under said treaties. 40chanRoblesvirtualLawlibrary
On the other hand, in G.R. Nos. 193407-08, the Commissioner maintains that CBK
Power is not entitled to a refund in the amount of P1,143,517.21 for the period
covering taxable year 2003 as it allegedly failed to exhaust administrative remedies
before seeking judicial redress.41chanRoblesvirtualLawlibrary
The Courts Ruling
The Court resolves the foregoing in seriatim.
A. G.R. Nos. 193383-84

The Philippine Constitution provides for adherence to the general principles of
international law as part of the law of the land. The time-honored international
principle of pacta sunt servanda demands the performance in good faith of treaty
obligations on the part of the states that enter into the agreement. In this
jurisdiction, treaties have the force and effect of law. 42chanRoblesvirtualLawlibrary
The issue of whether the failure to strictly comply with RMO No. 1-2000 will deprive
persons or corporations of the benefit of a tax treaty was squarely addressed in the
recent case of Deutsche Bank AG Manila Branch v. Commissioner of Internal
Revenue43 (Deutsche Bank), where the Court emphasized that the obligation to
comply with a tax treaty must take precedence over the objective of RMO
No. 1-2000, viz.:chanroblesvirtuallawlibrary
We recognize the clear intention of the BIR in implementing RMO No. 1-2000, but
the CTAs outright denial of a tax treaty relief for failure to strictly comply with the
prescribed period is not in harmony with the objectives of the contracting state to
ensure that the benefits granted under tax treaties are enjoyed by duly entitled
persons or corporations.
Bearing in mind the rationale of tax treaties, the period of application for the
availment of tax treaty relief as required by RMO No. 1-2000 should not operate
to divest entitlement to the relief as it would constitute a violation of the
duty required by good faith in complying with a tax treaty. The denial of the
availment of tax relief for the failure of a taxpayer to apply within the prescribed
period under the administrative issuance would impair the value of the tax treaty.
At most, the application for a tax treaty relief from the BIR should merely operate
to confirm the entitlement of the taxpayer to the relief.
The obligation to comply with a tax treaty must take precedence over the
objective of RMO No. 1-2000. Logically, noncompliance with tax treaties has
negative implications on international relations, and unduly discourages foreign
investors. While the consequences sought to be prevented by RMO No. 1-2000
involve an administrative procedure, these may be remedied through other system
management processes, e.g., the imposition of a fine or penalty. But we cannot
totally deprive those who are entitled to the benefit of a treaty for failure
to strictly comply with an administrative issuance requiring prior
application for tax treaty relief.44(Emphases and underscoring supplied)
The objective of RMO No. 1-2000 in requiring the application for treaty relief with
the ITAD before a partys availment of the preferential rate under a tax treaty is to
avert the consequences of any erroneous interpretation and/or application of treaty
provisions, such as claims for refund/credit for overpayment of taxes, or deficiency
tax liabilities for underpayment.45 However, as pointed out inDeutsche Bank, the
underlying principle of prior application with the BIR becomes moot in refund
cases as in the present case where the very basis of the claim is erroneous or
there is excessive payment arising from the non-availment of a tax treaty relief
at the first instance. Just as Deutsche Bank was not faulted by the Court for not
complying with RMO No. 1-2000 prior to the transaction, 46 so should CBK Power. In
parallel, CBK Power could not have applied for a tax treaty relief 15 days prior to its
payment of the final withholding tax on the interest paid to its lendersprecisely
because it erroneously paid said tax on the basis of the regular rate as
prescribed by the NIRC, and not on the preferential tax rate provided under the
different treaties. As stressed by the Court, the prior application requirement under
RMO No. 1-2000 then becomes illogical.47chanRoblesvirtualLawlibrary
Not only is the requirement illogical, but it is also an imposition that is not found at
all in the applicable tax treaties. In Deutsche Bank, the Court categorically held
that the BIR should not impose additional requirements that would negate the
availment of the reliefs provided for under international agreements, especially
since said tax treaties do not provide for any prerequisite at all for the availment of
the benefits under said agreements. 48chanRoblesvirtualLawlibrary
It bears reiterating that the application for a tax treaty relief from the BIR
should merely operate to confirm the entitlement of the taxpayer to the
relief.49 Since CBK Power had requested for confirmation from the ITAD on June 8,
2001 and October 28, 200250 before it filed on April 14, 2003 its administrative
claim for refund of its excess final withholding taxes, the same should be deemed
substantial compliance with RMO No. 1-2000, as in Deutsche Bank. To rule
otherwise would defeat the purpose of Section 229 of the NIRC in providing the
taxpayer a remedy for erroneously paid tax solely on the ground of failure to make
prior application for tax treaty relief.51 As the Court exhorted in Republic v. GST
Philippines, Inc.,52 while the taxpayer has an obligation to honestly pay the right
taxes, the government has a corollary duty to implement tax laws in good faith; to
discharge its duty to collect what is due to it; and to justly return what has been
erroneously and excessively given to it.53chanRoblesvirtualLawlibrary
In view of the foregoing, the Court holds that the CTA En Banc committed reversible
error in affirming the reduction of the amount of refund to CBK Power from
P15,672,958.42 to P14,835,720.39 to exclude its transactions with FortisNetherlands for which no ITAD ruling was obtained. 54 CBK Powers petition in G.R.
Nos. 193383-84 is therefore granted.
The opposite conclusion is, however, reached with respect to the Commissioners
petition in G.R. Nos. 193407-08.
B. G.R. Nos. 193407-08
The Commissioner laments55 that he was deprived of the opportunity to act on the
administrative claim for refund of excess final withholding taxes covering taxable
year 2003 which CBK Power filed on March 4, 2005, a Friday, then the following
Wednesday, March 9, 2005, the latter hastily elevated the case on petition for
review before the CTA. He argues56 that the failure on the part of CBK Power to give
him a reasonable time to act on said claim is violative of the doctrines of

exhaustion of administrative remedies and of primary jurisdiction.
For its part, CBK Power maintains57 that it would be prejudicial to wait for the
Commissioners ruling before it files its judicial claim since it only has 2 years from
the payment of the tax within which to file both its administrative and judicial
claims.
The Court rules for CBK Power.
Sections 204 and 229 of the NIRC pertain to the refund of erroneously or illegally
collected taxes. Section 204 applies to administrative claims for refund, while
Section 229 to judicial claims for refund. In both instances, the taxpayers claim
must be filed within two (2) years from the date of payment of the tax or penalty.
However, Section 229 of the NIRC further states the condition that a judicial claim
for refund may not be maintained until a claim for refund or credit has been duly
filed with the Commissioner. These provisions respectively
read:chanroblesvirtuallawlibrary
SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund
or Credit Taxes. The Commissioner may xxxx
(C) Credit or refund taxes erroneously or illegally received or penalties imposed
without authority, refund the value of internal revenue stamps when they are
returned in good condition by the purchaser, and, in his discretion, redeem or
change unused stamps that have been rendered unfit for use and refund their value
upon proof of destruction. No credit or refund of taxes or penalties shall be allowed
unless the taxpayer files in writing with the Commissioner a claim for credit or
refund within two (2) years after the payment of the tax or penalty: Provided,
however, That a return filed showing an overpayment shall be considered as a
written claim for credit or refund.
xxxx
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. No suit or proceeding
shall be maintained in any court for the recovery of any national internal revenue
tax hereafter alleged to have been erroneously or illegally assessed or collected, or
of any penalty claimed to have been collected without authority, of any sum alleged
to have been excessively or in any manner wrongfully collected without authority,
or of any sum alleged to have been excessively or in any manner wrongfully
collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such
tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2)
years from the date of payment of the tax or penalty regardless of any supervening
cause that may arise after payment: x x x. (Emphases and underscoring supplied)
Indubitably, CBK Powers administrative and judicial claims for refund of its excess
final withholding taxes covering taxable year 2003 were filed within the two-year
prescriptive period, as shown by the table below:58chanRoblesvirtualLawlibrary
WHEN FINAL
INCOME
TAXES WERE
WITHHELD
WHEN
REMITTANCE
RETURN
FILED
LAST DAY OF
THE 2-YEAR
WHEN
WHEN
PETITION
ADMINISTRATI FOR REVIEW
PRESCRIPTIVE VE
WAS FILED
PERIOD
CLAIM WAS
FILED
February 2003
03/10/03
03/10/05
March 4, 2005
03/09/05
May 2003
06/10/03
06/10/05
March 4, 2005
03/09/05
With respect to the remittance filed on March 10, 2003, the Court agrees with the
ratiocination of the CTA En Banc in debunking the alleged failure to exhaust
administrative remedies. Had CBK Power awaited the action of the Commissioner on
its claim for refund prior to taking court action knowing fully well that the
prescriptive period was about to end, it would have lost not only its right to seek
judicial recourse but its right to recover the final withholding taxes it erroneously
paid to the government thereby suffering irreparable
damage.59chanRoblesvirtualLawlibrary
Also, while it may be argued that, for the remittance filed on June 10, 2003 that was
to prescribe on June 10, 2005, CBK Power could have waited for, at the most, three
(3) months from the filing of the administrative claim on March 4, 2005 until the last
day of the two-year prescriptive period ending June 10, 2005, that is, if only to give
the BIR at the administrative level an opportunity to act on said claim, the Court
cannot, on that basis alone, deny a legitimate claim that was, for all intents and
purposes, timely filed in accordance with Section 229 of the NIRC. There was no
violation of Section 229 since the law, as worded, only requires that an
administrative claim be priorly filed.
In the foregoing instances, attention must be drawn to the Courts ruling in P.J.
Kiener Co., Ltd. v. David60 (Kiener), wherein it was held that in no wise does the
law, i.e., Section 306 of the old Tax Code (now, Section 229 of the NIRC), imply that
the Collector of Internal Revenue first act upon the taxpayers claim, and that the
taxpayer shall not go to court before he is notified of the Collectors action. In
Kiener, the Court went on to say that the claim with the Collector of Internal
Revenue was intended primarily as a notice of warning that unless the tax or
penalty alleged to have been collected erroneously or illegally is refunded, court
action will follow, viz.:chanroblesvirtuallawlibrary
The controversy centers on the construction of the aforementioned section of the

Tax Code which reads:ChanRoblesVirtualawlibrary
SEC. 306. Recovery of tax erroneously or illegally collected. No suit or proceeding
shall be maintained in any court for the recovery of any national internal revenue
tax hereafter alleged to have been erroneously or illegally assessed or collected, or
of any penalty claimed to have been collected without authority, or of any sum
alleged to have been excessive or in any manner wrongfully collected, until a claim
for refund or credit has been duly filed with the Collector of Internal Revenue; but
such suit or proceeding may be maintained, whether or not such tax, penalty, or
sum has been paid under protest or duress. In any case, no such suit or proceeding
shall be begun after the expiration of two years from the date of payment of the tax
or penalty.
The preceding provisions seem at first blush conflicting. It will be noticed that,
whereas the first sentence requires a claim to be filed with the Collector of Internal
Revenue before any suit is commenced, the last makes imperative the bringing of
such suit within two years from the date of collection. But the conflict is only
apparent and the two provisions easily yield to reconciliation, which it is the office of
statutory construction to effectuate, where possible, to give effect to the entire
enactment.
To this end, and bearing in mind that the Legislature is presumed to have
understood the language it used and to have acted with full idea of what it wanted
to accomplish, it is fair and reasonable to say without doing violence to the context
or either of the two provisions, that by the first is meant simply that the Collector of
Internal Revenue shall be given an opportunity to consider his mistake, if mistake
has been committed, before he is sued, but not, as the appellant contends that
pending consideration of the claim, the period of two years provided in the last
clause shall be deemed interrupted.Nowhere and in no wise does the law
imply that the Collector of Internal Revenue must act upon the claim, or
that the taxpayer shall not go to court before he is notified of the
Collectors action. x x x. We understand the filing of the claim with the
Collector of Internal Revenue to be intended primarily as a notice of
warning that unless the tax or penalty alleged to have been collected
erroneously or illegally is refunded, court action will follow. x x
x.61 (Emphases supplied)
That being said, the foregoing refund claims of CBK Power should all be granted,
and, the petition of the Commissioner in G.R. Nos. 193407-08 be denied for lack of
merit.chanrobleslaw
WHEREFORE, the petition in G.R. Nos. 193383-84 is GRANTED. The Decision
dated March 29, 2010 and the Resolution dated August 16, 2010 of the Court of Tax
Appeals (CTA) En Banc in C.T.A. E.B. Nos. 469 and 494 are
hereby REVERSED and SET ASIDE and a new one entered REINSTATING the
Decision of the CTA First Division dated August 28, 2008 ordering the refund in favor
of CBK Power Company Limited the amount of P15,672,958.42 representing its

excess final withholding taxes for the taxable years 2001 to 2003. On the other
hand, the petition in G.R. Nos. 193407-08 is DENIED for lack of merit.
Sereno, C.J., (Chairperson), Leonardo-De Castro, Bersamin, and Perez, JJ., concur.
THIRD DIVISION
G.R. No. 206019, March 18, 2015
PHILIPPINE NATIONAL BANK, Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE,Respondent.
DECISION
VELASCO JR., J.:
Nature of the Case
This is an appeal via a Petition for Review on Certiorari under Rule 45 of the Rules of
Court seeking to reverse and set aside the Court of Tax Appeals (CTA) En
Banc September 12, 2012 Decision, as reiterated in a Resolution of February 12,
2013 in CTA EB Case No. 762, affirming the earlier decision of its First Division
denying petitioners claim for there fund of excess creditable withholding tax which
it allegedly erroneously paid the Bureau of Internal Revenue (BIR) in the amount of
Twelve Million Four Hundred Thousand and Four Pesos and Seventy-One Centavos
(P12,400,004.71).
The Facts
GotescoTyan Ming Development, Inc. (Gotesco), a Filipino corporation engaged in
the real estate business,1 entered on April 7, 1995 into a syndicated loan agreement
with petitioner Philippine National Bank (PNB) and three (3) other banks. To secure
the loan, Gotesco mortgaged a six-hectare expanse known as the Ever Ortigas
Commercial Complex, under a mortgage trust indenture agreement in favor of PNB,
through its Trust Banking Group, as trustee. 2chanroblesvirtuallawlibrary
Gotesco subsequently defaulted on its loan obligations. Thus, PNB foreclosed the
mortgaged property through a notarial foreclosure sale on July 30, 1999. On August
4, 1999, a certificate of sale was issued in favor of PNB, subject to Gotescos right,
as debtor and mortgagor, to redeem the property within one (1) year from the date
of inscription of the certificate of sale with the Register of Deeds of Pasig City on
November 9, 1999.3chanroblesvirtuallawlibrary
On October 20, 2000, Gotesco filed a civil case against PNB before the Regional Trial
Court of Pasig, Branch 168 (RTC) for the annulment of the foreclosure proceedings,
specific performance and damages with prayer for temporary restraining order
(TRO) and/or preliminary injunction.4chanroblesvirtuallawlibrary

On November 9, 2000, the RTC issued a TRO enjoining PNB from consolidating
ownership over the mortgaged property, then on December 21, 2000, a writ of
preliminary injunction. PNBs motion for reconsideration was subsequently
denied.5chanroblesvirtuallawlibrary
PNB went to the Court of Appeals (CA) via a Petition for Certiorari. The CA ruled in
favor of PNB and issued an Order reversing and setting aside the writ of preliminary
injunction issued by the RTC. Gotescos Motion for Reconsideration was denied on
December 22, 2003.6 As Gotesco did not challenge the CA ruling, the setting aside
of the writ of preliminary injunction became final and executory.
As it prepared for the consolidation of its ownership over the foreclosed property,
PNB paid the BIR Eighteen Million Six Hundred Fifteen Thousand Pesos
(P18,615,000) as documentary stamp tax (DST) on October 31, 2003. PNB also
withheld and remitted to the BIR withholding taxes equivalent to six percent (6%) of
the bid price of One Billion Two Hundred Forty Million Four Hundred Sixty-Nine Pesos
and Eighty-Two Centavos (P1,240,000,469.82) or Seventy-Four Million Four Hundred
Thousand and Twenty-Eight Pesos and Forty-Nine Centavos(P74,400,028.49) on
October 31, 2003 and November 11, 2003.7chanroblesvirtuallawlibrary
Pending the issuance of the Certificate Authorizing Registration (CAR), the BIR
informed PNB that it is imposing interests, penalties and surcharges of Sixty-One
Million Six Hundred Seventy-Eight Thousand Four Hundred Ninety Pesos and TwentyEight Centavos(Php61,678,490.28) on captialgains tax and Fifteen Million Four
Hundred Ninety-Four Thousand and Sixty-Five Pesos (Php15,494,065) on DST. To
facilitate the release of the CAR, petitioner paid all the surcharges, interests and
penalties assessed against it in the total amount of Seventy-Seven Million One
Hundred Seventy-Two Thousand Five Hundred Fifty-Five Pesos and Twenty-Eight
Centavos (Php77,172,555.28) on April 5, 2005.8chanroblesvirtuallawlibrary
On the claim that what it paid the BIR was not entirely due, PNB lost no time in
instituting the necessary actions. Thus, on October 27, 2005, it filed an
administrative claim for the refund of excess withholding taxes with the BIR. A day
after, or on October 28, 2005, it filed its petition for review before the tax
court,docketed thereat as CTA Case No. 7355.9chanroblesvirtuallawlibrary
In its claim for refund, PNB explained that it inadvertently applied the six percent
(6%) creditable withholding tax rate on the sale of real property classified as
ordinary asset, when it should have applied the five percent (5%) creditable
withholding tax rate on the sale of ordinary asset, as provided in Section 2.57.2 (J)
(B) of Revenue Regulation (RR) No. 2-98 as amended by RR No. 6-01, considering
that Gotesco is primarily engaged in the real estate business.The applicable
creditable withholding tax rate of five percent (5%) of the bid price is equivalent to
the amount of Sixty-Two Million Twenty-Three Pesos and Forty-Nine Centavos
(Php62,000,023.49). Therefore, PNB claimed that it erroneously withheld and
remitted to the BIR excess taxes of Twelve Million Four Hundred Thousand and Four
Pesos and Seventy-One Centavos (Php12,400,004.71). 10chanroblesvirtuallawlibrary
On March 22, 2007, PNB filed another claim for refund claiming erroneous
assessment and payment of the surcharges, penalties and interests. Petitioner filed
its corresponding Petition for Review on March 30, 2007, docketed as CTA Case No.
7588.11chanroblesvirtuallawlibrary
Upon motion of petitioner, CTA Case Nos. 7355 and 7588 were consolidated. The
consolidated cases were set for pre-trial conference which CIR failed to attend
despite several resetting. On September 21, 2007, CIR was declared to be in
default.12chanroblesvirtuallawlibrary
CTA Decision
In its July 12, 2010 consolidated Decision,13 the CTA Special First Division (First
Division), in CTA Case No. 7588, ordered the CIR to refund to PNB P77,172,555.28
representing its claim for refund of interests, surcharges and penalties on capital
gains taxes and documentary stamp taxes for the year
2003.14chanroblesvirtuallawlibrary
In CTA Case No. 7355, however, the First Division denied PNBs claim for the refund
of excess creditable withholding taxes for insufficiency of evidence. The tax court
agreed with PNB that the applicable withholding rate was indeed five percent (5%)
and not six percent (6%).15 Nevertheless, it held that PNB, while able to establish
the fact of tax withholding and the remittance thereof to the BIR, failed to present
evidence to prove that Gotesco did not utilize the withheld taxes to settle its tax
liabilities. The First Division further stated that PNB should have offered as evidence
the 2003 Income Tax Return (2003 ITR) of Gotesco to show that the excess
withholding tax payments were not used by Gotesco to settle its tax liabilities for
2003. The First Division elucidated:chanRoblesvirtualLawlibrary
With the above proof of payments, this Court finds that the fact of withholding and
payment of the withholding tax due were properly established by petitioner. xxx
However, it must be noted that although petitioner duly paid the withholding taxes,
there was no evidence presented to this Court showing that GOTESCO utilized the
taxes withheld to settle its own tax liability for the year 2003. Being creditable in
nature, petitioner should have likewise offered as evidence the 2003 Income Tax
Return of GOTESCO to convince the court that indeed the excess withholding tax
payments were not used by GOTESCO. The absence of such relevant evidence is
fatal to petitioners action preventing this Court from granting its claim. To allow
petitioner its claim may cause jeopardy to the Government if it be required to
refund the claim already utilized.16
On July 30, 2010, PNB filed a Motion for Reconsideration (MR), attaching therewith,
among others, Gotescos 2003 ITR and the latters Schedule of Prepaid Tax, which
the First Division admitted as part of the records.
On April 5, 2011, the First Division issued a Resolution 17 denying PNBs MR mainly
because there were no documents or schedules to support the figures reported in
Gotescos 2003 ITR to show that no part of the creditable withholding tax sought to
be refunded was used, in part, for the settlement of Gotescos tax liabilities for the
same year. It stated that PNB should have likewise presented the Certificate of
Creditable Tax Withheld at Source (BIR Form No. 2307) issued to Gotesco in relation
to the creditable taxes withheld reported in its 2003 ITR. BIR Form No. 2307, so
declared in the Resolution, will confirm whether or not that the amount being
claimed by PNB was indeed not utilized by Gotesco to offset its taxes. In denying
the MR, the First Division explained:chanRoblesvirtualLawlibrary
Petitioner attached to its Motion, income tax returns of GOTESCO for the taxable
year 2003, to prove that the latter did not utilize the taxes withheld by petitioner.
The returns were submitted without any attachment regarding its creditable taxes
withheld. Except for GOTESCOs Unadjusted Schedule of Prepaid Tax for the taxable
year 2003, there were no other documents or schedules presented before this Court
to support the figures reported in the tax returns of GOTESCO for the same year
under Lines 27 (C), (D) and (G) of the Creditable Taxes Withheld.
We note that the amounts reported by GOTESCO as creditable taxes withheld for
the year 2003 were just P6,014,433.00 in total, which is less than P74,400,028.49,
the creditable taxes withheld from it by the petitioner. In fact, it is less than the
P12,400,004.70 creditable taxes withheld being claimed by petitioner in its present
motion. However, this Court deemed that such observation alone, without any
supporting document or schedule, is not enough to convince us that no part of the
creditable withholding tax sought to be refunded is included in the total tax credits
reported by GOTESCO in its tax returns for the taxable year 2003 which was used, in
part, for the settlement of its tax liabilities for the same year.
To sufficiently prove that GOTESCO did not utilize the creditable taxes withheld,
petitioner should have likewise presented BIR Forms No. 2307 issued to GOTESCO in
relation to the creditable taxes withheld reported in its 2003 tax returns. Doing so
will dispel any doubt as to the composition of GOTESCOs creditable taxes withheld
for 2003. This will settle once and for all that the amount being claimed by
petitioner was not utilized by GOTESCO, and thus the claim should be granted. Until
then, this Court will stand by its decision and deny the claim. 18
In due time, PNB filed an appeal before the CTA En Banc by way of a Petition for
Review, docketed as CTA EB Case No. 762. 19 PNB argued that its evidence confirms
that Gotescos Six Million Fourteen Thousand and Four Hundred Thirty-Three Pesos
(P6,014,433) worth of tax credits, as reported and claimed in its 2003 ITR, did not
form part of the P74,400,028.49 equivalent to six percent (6%) creditable tax
withheld. To support the foregoing position, PNB highlighted the
following:chanRoblesvirtualLawlibrary
1. Gotesco continues to recognize the foreclosed property as its own asset in its
2003 audited financial statements. It did not recognize the foreclosure sale
and has not claimed the corresponding creditable withholding taxes withheld
by petitioner on the foreclosure sale.
2. Gotesco testified that the P6,014,4333.00 tax credits claimed in the year
2003 does not include the P74,400,028.49 withholding taxes withheld and
paid by petitioner in the year 2003.
3. PNB presented BIR Form No. 1606, the withholding tax remittance return filed
by PNB as withholding agent, which clearly shows that the amount of P
P74,400,028.49 was withheld and paid upon PNBs foreclosure of Gotescos
asset.20
Finally, in its July 12, 2010 Decision, the First Division expressly provided that
Gotescos2003 ITR was the only evidence it needed to show that the excess
withholding taxes paid and remitted to the BIR were not utilized by Gotesco.
On September 12, 2012, the CTA En Banc, in the first assailed Decision,21 denied
PNBs Petition for Review and held:chanRoblesvirtualLawlibrary
In this case, petitioner is counting on the Income Tax Returns of GOTESCO for the
taxable year 2003 and on a certain Unadjusted Schedule of Prepaid Tax for the
same year to support its argument that GOTESCO did not utilize the taxes withheld
by petitioner; however, We are not persuaded.
To reiterate, since the claim for refund involves creditable taxes withheld from
GOTESCO, it is necessary to prove that these creditable taxes were not utilized by
GOTESCO to pay for its liabilities. The income tax returns alone are not enough to
fully support petitioners contention that no part of the creditable withholding tax
sought to be refunded by petitioner was utilized by GOTESCO; first, there were no
other relevant supporting documents or schedules presented to delineate the
figures constituting the creditable taxes withheld that was reported in GOTESCOs
2003 tax returns; and second, this Court cannot give credence to the Unadjusted
Schedule of Prepaid Tax for the taxable year 2003 being referred to by petitioner as
the same pertains merely to a list of GOTESCOs creditable tax withheld for taxable
year 2003 and was not accompanied by any attachment to support its contents;
also it is manifest from the records that petitioner failed to have this Schedule of
Prepaid Tax offered in evidence, and thus, was not admitted as part of the records of
this case.22
After the denial of PNBs Motion for Reconsideration on February 12, 2013, 23the bank
filed this instant petition.
Issue
Whether or not PNB is entitled to the refund of creditable withholding taxes
erroneously paid to the BIR. Subsumed in this main issue is the evidentiary value
under the premises of BIR Form No. 2307.
The Courts Ruling
The petition is impressed with merit. As PNB insists at every turn, it has presented
sufficient evidence showing its entitlement to the refund of the excess creditable
taxes it erroneously withheld and paid to the BIR.
As earlier stated, the CTA predicated its denial action on the postulate that even if
PNBs withholding and remittance of taxes were undisputed, it was not able to prove
that Gotesco did not utilize the taxes thuswithheld to pay for its tax liabilities for the
year 2003.
In its Decision, the First Division categorically stated, [P]etitioner should have
likewise offered as evidence the 2003 Income Tax Return of GOTESCO to convince
this Court that indeed the excess withholding tax payments were not used by
GOTESCO. The absence of such relevant evidence is fatal to petitioners action
preventing this Court from granting its claim. 24chanroblesvirtuallawlibrary
Thus, apprised on what to do, and following the First Divisions advice, PNB
presented Gotescos 2003 ITRs as an attachment to its MR, which was subsequently
denied however. In ruling on the MR, the First Division again virtually required PNB
to present additional evidence, specifically, Gotescos Certificates of Creditable
Taxes Withheld (BIR Form No. 2307) covering P6,014,433 tax credits claimed for
year 2003, purportedly to show non-utilization by Gotesco of the P74,400,028.49
withholding tax payments.
Although PNB was not able to submit Gotescos BIR Form No. 2307, the Court is
persuaded and so declares that PNB submitted evidence sufficiently showing
Gotescos non-utilization of the taxes withheld subject of the refund.
First,Gotescos Audited Financial Statements for year 2003, 25 which it subsequently
filed with the BIR in 2004, still included the foreclosed Ever Ortigas Commercial
Complex, in the Asset account Property and Equipment. This was explained on
page 8, Note 5 of Gotescos 2003 Audited Financial
Statements:chanRoblesvirtualLawlibrary
Commercial complex and improvements pertain to the Ever Pasig Mall. As discussed
in Notes 1 and 7, the land and the mall, which were used as collaterals for the
Companys bank loans, were foreclosed by the lender banks in 1999. However, the
lender banks have not been able to consolidate the ownership and take possession
of these properties pending decision of the case by the Court of Appeals.
Accordingly, the properties are still carried in the books of the Company. As of April
21, 2004, the Company continues to operate the said mall. Based on the December
11, 2003 report of an independent appraiser, the fair market value of the land,
improvements and machinery and equipment would amount to about P2.9 billion.
Land pertains to the Companys properties in Pasig City where the Ever Pasig Mall is
situated.26
It is clear that as of year-end 2003, Gotesco had continued to assert ownership over
the Ever Ortigas Commercial Complex as evidenced by the following: (a) it
persistently challenged the validity of the foreclosure sale which was the transaction
subject to the P74,400,028.49 creditable withholding tax; and (b) its 2003 Audited
Financial Statements declared said complex as one of its properties. Thus, it is
reasonable to conclude that since Gotesco vehemently refused to recognize the
validity of the foreclosure sale, it stands to reason that it also refused to recognize
the payment of the creditable withholding tax that was due on the sale and most
especially, claim the same as a tax credit.
Certainly, Gotescos relentless refusal to transfer registered ownership of the Ever
Ortigas Commercial Complex to PNB constitutes proof enough that Gotesco will not
do any act inconsistent with its claim of ownership over the foreclosed asset,
including claiming the creditable tax imposed on the foreclosure sale as tax credit
and utilizing such amount to offset its tax liabilities. To do such would run roughshod
over Gotescos firm stance that PNBs foreclosure on the mortgage was invalid and
that it remained the owner of the subject property.
Several pieces of evidence likewise point to Gotescos non-utilization of the claimed
creditable withholding tax.As advised by the First Division, Gotesco presented its
2003 ITR27along with its 2003 Schedule of Prepaid Tax 28 which itemized in detail the
withholding taxes claimed by Gotesco for the year 2003 amounting to P6,014,433.
The aforesaid schedule shows that the creditable withholding taxes Gotesco utilized
to pay for its 2003 tax liabilities came from the rental payments of its tenants in the
Ever Ortigas Commercial Complex, not from the foreclosure sale.
Further, Gotescos former accountant, Ma.Analene T. Roxas,stated in her Judicial
Affidavit29 that the tax credits claimed for year 2003 did not include any portion of
the amount subject to the claim for refund. First, she explained that Gotesco could
not have possibly utilized the amount claimed for refund as it was not even aware
that PNB paid the six percent (6%) creditable withholding tax since no documents
came to its attention which showed such payment by PNB. As she also explained,
had Gotesco claimed the entire or even any portion of P74,400,028.49,
corresponding to the six percent (6%) tax withheld by PNB, the amount appearing in
Items 27D30 and 27C31 of Gotescos 2003 ITR should have reflected the additional
amount of P74,400,028.49. The pertinent portions of Roxas Judicial Affidavit
read:chanRoblesvirtualLawlibrary
Q:
In GOTESCOs 2003 ITRs, both Tentative and amended, the total tax
credits/payments amounted to Php6,014,433.00. Are you familiar with the
composition or breakdown of this Php6,014,433.00?
A:
Yes.
Q:
May we know, for the record, if any part of this Php6,014,433.00 of GOTESCOs
tax credits for year 2003 pertains to the 6% Creditable Tax Withheld by PNB
amounting to Php74,400,028.49? To be more specific, does any part of the
Php6,014,433.00 of GOTESCOs tax credits for year 2003 pertain to the
Php12,400,004.70 amount subject to the present claim for refund before the
Honorable Court of Tax Appeals?
A:
For the record and based on the ITRs of GOTESCO, the amount of
Php6,014,433.00 tax credits for year 2003 did not encompass any portion of
the Php74,400,028.49 representing 6% Creditable Tax Withheld, or to be more
specific, said Php6,014,433.00 tax credits of GOTESCO for year 2003 did not
include any portion of the Php12,400,004.70 amount subject to the present
claim for refund.
Q:
Why is this so, Ms.Analene? In theory, the Php74 million creditable withholding
tax should have benefited GOTESCO, right?
A:
In theory, it is only proper for GOTESCO to claim and utilize the Php74 million
creditable withholding tax.
However, GOTESCO was not aware that PNB paid 6% creditable withholding tax
on behalf of GOTESCO. There were no documents that came to GOTESCOs
attention which showed such Php74 million creditable tax was paid to the BIR
on behalf of GOTESCO.
Q:
Considering that you mentioned earlier that you helped prepare GOTESCOs
2003 ITR, do you have documents to support your statement?
A:
Yes. I have with me a document containing GOTESCOs Schedule of Prepaid Tax.

However, this Schedule of Prepaid Tax is still unadjusted. The final figure is
properly reflected in GOTESCOS 2003 ITR in the column of Total Tax
Credits/Payments.
Q:
How can this unadjusted Schedule of Prepaid Tax support your statement that
GOTESCO did not utilize any portion of the Php74,400,028.49 representing 6%
creditable tax withheld by herein Petitioner PNB?
A:
As you can see, based on this Schedule of Prepaid Tax, there is a

comprehensive list of GOTESCO tenants and breakdown of their prepaid tax or
creditable tax withheld.
Although PNB was listed as a tenant of GOTESCO, the withholding tax of PNB
for year 2003 (as reflected in GOTESCOs Schedule of Prepaid Tax) only
amounted to Php65,985.44 due to the lease contract between PNB and
GOTESCO. This amount is too small if you compare it with the Php74 million
creditable tax withheld by PNB based on their foreclosure of GOTESCOs Ortigas
Mall Complex.
Q:
Are you aware of any other document which would likewise confirm your
conclusion that GOTESCO did not utilize any portion of the Php74,400,004.70
subject of the present claim for refund?

A:
Yes. The 2003 Tentative and Amended ITRs of GOTESCO would prove that
GOTESCO did not utilize any portion of the Php74,400,028.49 representing 6%
creditable tax withheld by herein Petitioner PNB.
Had GOTESCO claimed the entire or even any portion of Php74,400,028.49,

corresponding to the 6% tax withheld by PNB, the amount appearing in Item
27D-Creditable Tax Withheld per BIR Form 2307 for the Fourth Quarter should
not only be Php1,362,965.00, but should have reflected the additional amount
of Php74,400,028.49.
The same observation can be applied in Item 27C Creditable Tax Withheld for
the First Three Quarters, such that the amount reflected should not only be
Php4,651,568.00 but Php74,400,028.49 more.32
All in all, the evidence presented by petitioner sufficiently proved its entitlement to
the claimed refund. There is no need for PNB to present Gotescos BIR Form No.
2307,as insisted by the First Division, because the information contained in the said
form may be very well gathered from other documents already presented by PNB.
Thus, the presentation of BIR Form No. 2307 would be in the final analysis a
superfluity, of little or no value.
In claims for excess and unutilized creditable withholding tax, the submission of BIR
Forms 2307 is to prove the fact of withholding of the excess creditable withholding
tax being claimed for refund. This is clear in the provision of Section 58.3, RR 2-98,
as amended, and in various rulings of the Court. 33 In the words of Section 2.58.3, RR
2-98, That the fact of withholding is established by a copy of a statement duly
issued by the payor (withholding agent) to the payee showing the amount paid and
the amount of tax withheld therefrom.
Hence, the probative value of BIR Form 2307, which is basically a statement
showing the amount paid for the subject transaction and the amount of tax withheld
therefrom, is to establish only the fact of withholding of the claimed creditable
withholding tax. There is nothing in BIR Form No. 2307 which would establish either
utilization or non-utilization, as the case may be, of the creditable withholding tax.
It must be noted that PNB had already presented the Withholding Tax Remittance
Returns (BIR Form No. 1606) relevant to the transaction. The said forms show that
the amount of P74,400,028.49 was withheld and paid by PNB in the year 2003. It
contains, among other data, the name of the payor and the payee, the description
of the property subject of the transaction, and the determination of the taxable
base, and the tax rate applied. These are the very same key information that would
be gathered from BIR Form No. 2307.
While perhaps it may be necessary to prove that the taxpayer did not use the
claimed creditable withholding tax to pay for his/its tax liabilities, there is no basis in
law or jurisprudence to say that BIR Form No. 2307 is the only evidence that may be
adduced to prove such non-use.
In this case, PNB was able to establish, through the evidence it presented, that
Gotesco did not in fact use the claimed creditable withholding taxes to settle its tax
liabilities, to reiterate: (1) Gotescos 2003 Audited Financial Statements, which still
included the mortgaged property in the asset account Properties and Equipment,
proving that Gotesco did not recognize the foreclosure sale and therefore, the
payment by PNB of the creditable withholding taxes corresponding to the same; (2)
Gotescos 2003 ITRs, which the CTA Special First Division required to show that the
excess creditable withholding tax claimed for refund was not used by Gotesco,
along with the 2003 Schedule of Prepaid Tax which itemized in detail the
withholding taxes claimed by Gotesco for the year 2003 amounting to
P6,014,433.00; (3) the testimony of Gotescos former accountant, proving that the
amount subject of PNBs claim for refund was not included among the creditable
withholding taxes stated in Gotescos 2003 ITR; and(4) the Withholding Tax
Remittance Returns (BIR Form 1606) proving that the amount of P74,400,028.49
was withheld and paid by PNB in the year 2003.
Ergo, theevidence on record sufficiently proves that the claimed creditable
withholding tax was withheld and remitted to the BIR, that such withholding and
remittance was erroneous, and that the claimed creditable withholding tax was not
used by Gotesco to settle its tax liabilities.
WHEREFORE, the Court resolves to GRANT the petition. The Decision of the Court
of Tax Appeals En Banc dated September 12, 2012 and its Resolution dated
February 12, 2013 in CTA EB Case No. 762 are hereby REVERSED and SET ASIDE,
and a new one entered DIRECTING respondent Commissioner of Internal Revenue
to refund to petitioner Philippine National Bank, within thirty (30) days from the
finality of this Decision, the amount of Twelve Million Four Hundred Thousand and
Four Pesos and Seventy-One Centavos(Php12,400,004.71), representing excess
creditable withholding taxes withheld and paid for the year 2003.
SO ORDERED.
Peralta, Del Castillo,*Villarama, Jr., and Reyes, JJ., concur.cralawlawlibrary
BUREAU OF CUSTOMS,
Petitioner,
- versus EN BANC
THE HONORABLE AGNES VST
DEVANADERA, ACTING
SECRETARY, DEPARTMENT OF
JUSTICE; HONORABLE
JOVENCITO R. ZUNO, PEDRITO L.
RANCES, ARMAN A. DE ANDRES,
PAUL CHI TING CO, KENNETH
PUNDANERA, MANUEL T. CO,
SALLY L. CO,, STANLEY L. TAN,
ROCHELLE E. VICENCIO, LIZA R.
MAGAWAY, JANICE L. CO,
VIVENCIO ABANO, GREG YU,
EDWIN AGUSTIN, VICTOR D.
PIAMONTE, UNIOIL PETROLEUM
PHILIPPINES, INC., and OILINK,
INTERNATIONAL, INC.,
Respondents.
G.R. No. 193253
Present:
SERENO, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION, .
PERALTA,
BERSAMIN,
DEL CASTILLO,
VILLARAMA, JR.
PEREZ,
MENDOZA,
REYES, *
PERLAS-BERNABE,
LEONEN, and
J ARDELEZA, JJ.
Promulgated:
x---------------------------------~;~~~~~
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45
of the Rules of Court, seeking to reverse and set aside the Court of Appeals
On leave.
ti
r
r
Decision - 2 - G.R. No. 193253
(CA) Resolutions dated March 26, 20101 and August 4, 2010,2
and to
reinstate the petition for certiorari in CA-G.R. SP No. 113069, or in the
alternative, to issue a decision finding probable cause to prosecute the
private respondents for violation of Sections 3601 and 3602, in relation to
Sections 2503 and 2530, paragraphs f and l (3), (4) and (5) of the Tariff and
Customs Code of the Philippines (TCCP), as amended.
The antecedents are as follows:
Private respondent UNIOIL Petroleum Philippines, Inc. is engaged in
marketing, distribution, and sale of petroleum, oil and other products, while
its co-respondent OILINK International, Inc. is engaged in manufacturing,
importing, exporting, buying, selling, or otherwise dealing in at wholesale
and retails of petroleum, oil, gas and of any and all refinements and byproducts
thereof. Except for respondent Victor D. Piamonte who is a
Licensed Customs Broker, the following private respondents are either
officers or directors of UNIOIL or OILINK:
1. Paul Chi Ting Co Chairman of UNIOIL and OILINK

2. Kenneth Pundanera President/Director of UNIOIL
3. Manuel T. Co Officer/Director of UNIOIL
4. Sally L. Co Officer/Director of UNIOIL
5. Stanley L. Tan Officer/Director of UNIOIL
6. Rochelle E. Vicencio Corporate Administrative Supervisor of UNIOIL
7. Liza R. Magaway President of OILINK
8. Janice L. Co Director of OILINK
9. Vivencio Abao Director of OILINK
10. Greg Yu Director of OILINK
11. Edwin Agustin Corporate Secretary of OILINK
On January 30, 2007, Commissioner Napoleon L. Morales of
petitioner Bureau of Customs (BOC) issued Audit Notification Letter (ANL)
No. 0701246,3
informing the President of OILINK that the Post Entry Audit
Group (PEAG) of the BOC will be conducting a compliance audit, including
the examination, inspection, verification and/or investigation of all pertinent
records of OILINK's import transactions for the past three (3)-year period
counted from the said date.
On March 2, 2007, a pre-audit conference was held between the BOC
Audit Team4 and the representatives of OILINK.5 During the conference, the
1
Penned by Associate Justice Pampio A. Abarintos, with Associate Justices Isaias P.
Dicdican and
Florito S. Macalino, concurring; rollo, p. 273. 2 Penned by Associate Justice Isaias P.
Dicdican with Associate Justices Michael P. Elbinias and
Florito S. Macalino, concurring; id. at 306-308.
3
Rollo, p. 130. 4
Composed of Atty. Balmyrson M. Valdez (Team Leader), Ma. Elenita A. Salcedo

(Team Head),
Henry D. Angeles and Deo Augustus Y. Yalong.
Audit Team explained to OILINK representatives the purpose of the postentry
audit and the manner by which it would be conducted, and advised it
as to the import documents required for such audit.
On March 14, 2007, OILINK submitted to the Audit Team the
following documents: Post-Entry Audit Group General Customs
Questionnaire, General Information Sheet for the year 2006, SEC
Registration, Articles of Incorporation, Company By-laws, and Audited
Financial Report for the year 2005.
On April 20, 2007, the Audit Team requested OILINK to submit the
other documents stated in the List of Initial Requirements for Submission,
namely: 2004 Audited Financial Report, 2004-2006 Quarterly VAT Returns
with the accompanying schedule of importations, Organizational
chart/structure, and List of foreign suppliers with details on the products
imported and the total amount, on a yearly basis.
On May 7, 2007, OILINK expressed its willingness to comply with
the request for the production of the said documents, but claimed that it was
hampered by the resignation of its employees from the Accounting and
Supply Department. OILINK also averred that it would refer the matter to
the Commissioner of Customs in view of the independent investigation
being conducted by the latter.
On June 4, 2007, OILINK sent a letter stating that the documents
which the Audit Team previously requested were available with the Special
Committee of the BOC, and that it could not open in the meantime its
Bureau of Internal Revenue (BIR) registered books of accounts for
validation and review purposes.
In a letter dated July 11, 2007, the Audit Team informed OILINK of
the adverse effects of its request for the postponement of the exit conference
and its continuous refusal to furnish it the required documents. It advised
OILINK that such acts constitute as waiver on its part to be informed of the
audit findings and an administrative case would be filed against it, without
prejudice to the filing of a criminal action.
On July 24, 2007, Commissioner Morales approved the filing of an
administrative case against OILINK for failure to comply with the
requirements of Customs Administrative Order (CAO) No. 4-2004.6
Such
case was filed on July 30, 2007.
5
Composed of Liza Magaway and Atty. Raymond Zorilla, OILINK's Executive VicePresident and
Corporate Counsel, respectively.
6
CA rollo, p. 63.
On September 20, 2007, an Order was issued by the Legal Service of
the BOC, submitting the case for resolution in view of OILINK's failure to
file its Answer within the prescribed period.
On December 14, 2007, the Legal Service of the BOC rendered a
Decision finding that OILINK violated Section IV.A.2(c) and (e) of CAO 420047
when it refused to furnish the Audit Team copies of the required
documents, despite repeated demands. The dispositive portion of the
Decision states:
WHEREFORE, in view of the foregoing, this Office finds herein
respondent liable for violating Sections IV.A.2 (c) and (e) of Customs
Administrative Order No. 4-2004, and a DECISION is hereby rendered:
1. Ordering OILINK INTERNATIONAL
CORPORATION to pay the equivalent of twenty percent

(20%) ad valorem on the article/s subject of the Importation
7
SEC. IV. RECORDKEEPING AND COMPLIANCE AUDIT
a. Recordkeeping
xxxx
2. The following records are required to be kept by importers:
xxxx
c. Shipping, importation, exportation, and transportation documentation including
the following to
the extent that they are relevant for the verification of the accuracy of the
transaction value declared on the
import entry and necessary for the purpose of collecting the proper duties and taxes
on imports, as the case
may be:
1. Import and/or export entry;
2. Invoice and or consignment notes;
3. Import and export licenses/permit;
4. Ocean bill of lading, and/or master air waybill, and/or house air waybill, and/or
consolidator bill of lading;
5. Shipping instructions and/or freight forwarders instructions;
6. Certificates of Origin, and/or Certificates of Eligibility, and/or Certificate of
Inspection
and/or Loading;
7. Freight and insurance contracts;
8. Packing Lists;
9. Transhipment permits, and/or boatnotes, and/or special permits to transfer;
10. Quota Allocation and/or Certificates;
11. Customs brokerage agreements, and/or billings, and/or statement of accounts,
and/or
receipts,
12. Receipts for arrester charges, cargo handling and storage fees;
13. Short shipped/bad order reports, if applicable;
14. Goods tally records, if applicable;
15. Letter of credits, application for letter of credit banks details;
16. Remittance advice;
17. Credit Card Transactions;
18. Telegraphic money transfers;
19. Offshore monetary transactions; and
20. Evidence of payments by any other means, including information detailing noncash
compensation transactions.
xxxx
e. The following bank documents, financial statements, and other accounting
information to the
extent that they are relevant for the verification of the accuracy of the transaction
value declared on the
import entry and necessary for the purpose of collecting proper duties and taxes on
imports;
1. Receipts, cashbooks;
2. Schedules of accounts payables and accounts receivables and
3. Cheque records.
xxxx
for which no records were kept and maintained as
prescribed in Section 2504 of the Customs Code in the
amount of Pesos: Two Billion Seven Hundred Sixty-Four
Million Eight Hundred Fifty-Nine Thousand Three
Hundred Four and 80/100 (Php 2,764,859,304.80);
2. Ordering the Bureau of Customs to hold the delivery
or release of subsequent imported articles to answer for the
fine, any revised assessment, and/or as a penalty for failure
to keep records.
This is without prejudice to the filing of a criminal case or any
appropriate legal action against the importer in order to protect the interest
of the government and deter other importers from committing the same
offense.
SO ORDERED.8
Pursuant to the Decision dated December 14, 2007, Commissioner
Morales, in a letter9 of even date, directed the President of OILINK to pay
the BOC the administrative fine of 2,764,859,304.80 for violation of CAO
No. 4-2004, in relation to Section 2504 of the TCCP. Copy of the said
Decision and letter were served to OILINK through personal service on
December 28, 2007.10
On March 13, 2008, Atty. Noemi B. Alcala, Officer-in-Charge,
Collection Service, Revenue and Monitoring Group, sent a final demand
letter for OILINK to settle the administrative fine, otherwise, the BOC will
be compelled to file the necessary legal action and put in force Section
150811 of the TCCP against its succeeding shipments to protect the
government's interest.12
On April 23, 2008, a Hold Order13 was issued by Horacio P. Suansing,
Jr., District Collector, Port of Manila, against all shipments of OILINK for
failure to settle its outstanding account with the BOC and to protect the
interest of the government pursuant to Section 1508 of the TCCP.
8 Rollo, pp. 137-138. (Emphasis added) 9

Id. at 139. 10 CA rollo, p. 9. 11 SEC. 1508. Authority of the Collector of Customs to
Hold the Delivery or Release of Imported
Articles. - Whenever any importer, except the government, has an outstanding and
demandable account
with the Bureau of Customs, the Collector shall hold the delivery of any article
imported or consigned to
such importer unless subsequently authorized by the Commissioner of Customs,

and upon notice as in
seizure cases, he may sell such importation or any portion thereof to cover the
outstanding account of such
importer; Provided, however, That at any time prior to the sale, the delinquent
importer may settle his
obligations with the Bureau of Customs, in which case the aforesaid articles may be
delivered upon
payment of the corresponding duties and taxes and compliance with all other legal
requirements.
12 Rollo, p. 140. 13 Id. at 141.

On May 2, 2008, Rochelle E. Vicencio, Corporate Administrative
Supervisor of UNIOIL, citing the existing Terminalling Agreement dated
January 2, 2008 with OILINK for the Storage of UNIOIL's aromatic process
oil and industrial lubricating oils (collectively, base oils), requested
District Collector Suansing Jr. to allow it to withdraw base oils from
OILINK's temporarily closed Terminal.
On May 6, 2008, Commissioner Morales granted the request of
UNIOIL to withdraw its base oils stored at OILINK's terminal/depot based
on the Terminalling Agreement between the two companies, subject to the
following conditions:
1. Only Unioil products shall be withdrawn subject to proper
inventory by the BIR and BOC.
2. Appropriate duties and taxes due on the products to be withdrawn
are fully paid or settled.
3. The company should allow the operation/withdrawal to be closely
monitored and continuously underguarded by assigned Customs
personnel.14
On May 9, 2008, a Warrant of Seizure and Detention (WSD), docketed
as Seizure Identification (S.I.) No. 2008-082, was issued by District
Collector Suansing Jr., directing the BOC officials to seal and padlock the
oil tanks/depots of OILINK located in Bataan.
On May 12, 2008, Kenneth C. Pundanera, Operations Manager of
UNIOIL, requested Zaldy E. Almoradie, District Collector of Mariveles,
Bataan, for permission to release UNIOIL-owned products from OILINK's
storage terminal. Pertinent portion of the request letter reads:
Unioil is a licensed importer of various Petroleum Products by virtue of its
import license LTAD-0-021-2002 issued on March 26, 2002 which was
revised to include all other petroleum products in 2007 through LTAMII
(P) 001-10-07-13639. To pursue its line of business, Unioil has an existing
Terminalling Agreement with Oilink for the storage of various Unioil
products at the Oilink terminal located at Lucanin Pt., Mariveles, Bataan.
In view of the said temporary closure of Oilink's terminal, Unioil is
currently unable to fully utilize its leased tanks as well as make use of the
products contained therein. We understand that there is still an unresolved
issue between Oilink and the Bureau of Customs. However, with all due
respect, said issue should not affect Unioil because it is not a party to the
same, furthermore there is a legal and binding terminalling agreement
between Oilink and Unioil which should be honored.
14 Id. at 145.
Last May 8, 2008, an asphalt importation for Unioil Petroleum Philippines,
Inc. arrived in Mariveles, Bataan. This was issued the corresponding
discharging permit by the Bureau of Customs. All duties, excise taxes and
value added taxes for this product have already been settled. However, we
are still unable to withdraw these products in order to serve our customers
who are using the product to supply major government infrastructure
projects in the country.
In line with the endorsement coming from the Bureau of Customs
Commissioner Napoleon D. Morales issued last May 6, 2008, Unioil has

complied with the conditions stipulated therein which are:
1. Only Unioil products shall be withdrawn subject to proper inventory by
the BIR and BOC.
2. Appropriate duties and taxes due on the products to be withdrawn are
fully paid or settled.
3. The company (Unioil) should allow the operation/withdrawal to be
closely monitored and continuously underguarded by assigned Customs
personnel.
In this regard, may we respectfully request your good office to please
allow Unioil to withdraw from Oilink's terminal its products which are
stored in the following tanks[:]15
TANK PROD CONTENTS (Liters)
2 diesel 2,171,670.00
6 rexo 1,862,846.00
10 asphalt 4,573.14
13 gasoline 809,345.00
14 gasoline 746,629.00
17 diesel 360,097.00
19 sn 500 203,659.00
20 sn 500 643,236.00
In the same request letter, District Collector Almoradie approved the
release of the above petroleum products through a handwritten note dated
May 12, 2008: All concerned: Pls. allow the release of the Unioil-owned
products from the Oilink Storage Terminal per this request. Thanks.16
On May 15, 2008, Pundanera wrote a clarificatory letter pursuant to
the verbal instruction of District Collector Almoradie to explain the
withdrawal of products from the Terminal of OILINK, to wit:
15 Id. at 156-157. 16 Id. at 157.

As far as Unioil is concerned, we affirm to your good office that the
products withdrawn/loaded at the Terminal are entirely Unioil products.
Unioil owns these products pursuant to its supply and terminalling
agreements with Oilink. (We shall be submitting to you copies of these
documents as soon as they arrive from our office in Manila.) In addition,
due to the issue involving Oilink and the Bureau of Customs, Unioil was
forced to secure its petroleum products from local sources in order to
comply with its valid contractual commitments.
Unioil intended to withdraw these products because it believed in good
faith and based on documents in its possession that it is allowed to do so.
Unioil based its intention pursuant to the Indorsements of the Collector of
the Port of Manila as well as the Office of the Commissioner that allowed
the withdrawal of Unioil products subject to compliance with the three (3)
conditions specified in the abovementioned Indorsements.
This being the precedent, we believe in good faith that, since Unioil owns
the products, and it is considered a stranger to the issue between Oilink
and the Bureau, then Unioil is allowed to withdraw the products it owns
subject to the compliance with the three (3) stated conditions. Besides, any
withdrawal is covered by an appropriate delivery receipt, which would
clearly indicate that Unioil owns the products being withdrawn.17
In a complaint-affidavit dated December 15, 2008, Atty. Balmyrson
M. Valdez, a member of the petitioner BOC's Anti-Oil Smuggling
Coordinating Committee that investigated the illegal withdrawal by UNIOIL
of oil products consigned to OILINK, valued at 181,988,627.00 with
corresponding duties and taxes in the amount of 35,507,597.00, accused
the private respondents of violation of Sections 360118 and 3602,19 in
17 Id. at 159. 18 Sec. 3601. Unlawful Importation. Any person who shall
fraudulently import or bring into the
Philippines, or assist in so doing, any article, contrary to law, or shall receive,

conceal, buy, sell, or in any
manner facilitate the transportation, concealment, or sale of such article after
importation, knowing the
same to have been imported contrary to law, shall be guilty of smuggling and shall
be punished with:
1. A fine of not less than fifty pesos nor more than two hundred pesos and
imprisonment of not less
than five days nor more than twenty days, if the appraised value, to be determined
in the manner prescribed
under the Tariff and Customs Code, including duties and taxes, of the article
unlawfully imported does not
exceed twenty-five pesos;
2. A fine of not less than eight hundred pesos nor more than five thousand pesos
and imprisonment
of not less than six months and one day nor more than four years, if the appraised
value, to be determined
in the manner prescribed under the Tariff and Customs Code, including duties and
taxes, of the article
unlawfully imported exceeds twenty-five pesos but does not exceed fifty thousand
pesos;
3. A fine of not less than six thousand pesos nor more than eight thousand pesos
and imprisonment
of not less than five years and one day nor more than eight years, if the appraised
value, to be determined in
the manner prescribed under the Tariff and Customs Code, including duties and
taxes, of the article
unlawfully imported is more than fifty thousand pesos but does not exceed one
hundred thousand pesos.
4. A fine of not less than eight thousand pesos nor more than ten thousand pesos
and imprisonment
of not less than eight years and one day nor more than twelve years, if the
appraised value, to be
determined in the manner prescribed under the Tariff and Customs Code, including
duties and taxes, of the
article unlawfully imported exceeds one hundred fifty thousand pesos.
5. The penalty of prision mayor shall be imposed when the crime of serious
physical injuries shall
have been committed and the penalty of reclusion perpetua to death shall be
imposed when the crime of
homicide shall have been committed by reason or on the occasion of the unlawful
importation.
In applying the above scale of penalties, if the offender is an alien and the
prescribed penalty is not
death, he shall be deported after serving the sentence without further proceeding
for deportation. If the
offender is a government official or employee, the penalty shall be the maximum as
hereinabove prescribed
relation to Sections 250320 and 2530,21 paragraphs f and l (3), (4) and (5), of
the TCCP.
In a letter22 dated December 15, 2008, Commissioner Morales referred
to the Office of Chief State Prosecutor Jovencito R. Zuo the said complaintaffidavit,
together with its annexes, for preliminary investigation. During
the said investigation, BOC's counsel appeared and all of the private
and the offender shall suffer an additional penalty of perpetual disqualification from
public office, to vote
and to participate in any public election.
When, upon trial for a violation of this section, the defendant is shown to have had
possession of
the article in question, possession shall be deemed sufficient evidence to authorize
conviction, unless the
defendant shall explain the possession to the satisfaction of the court: Provided,
however, That payment of
the tax due after apprehension shall not constitute a valid defense in any
prosecution under this section.
(R.A. No. 4712, June 18, 1966).
19 Sec. 3602. Various Fraudulent Practices Against Customs Revenue. Any person
who makes or
attempts to make any entry of imported or exported article by means of any false or
fraudulent invoice,
declaration, affidavit, letter, paper, or by any means of any false statement, written
or verbal, or by any
means of any false or fraudulent practice whatsoever, or knowingly effects any
entry of goods, wares or
merchandise, at less than true weight or measures thereof or upon a false
classification as to quality or
value, or by the payment of less than the amount legally due, or knowingly and
willfully files any false or
fraudulent entry or claim for the payment of drawback or refund of duties upon the
exportation of
merchandise, or makes or files any affidavit, abstract, record, certificate or other
document, with a view to
securing the payment to himself or others of any drawback, allowance, or refund of
duties on the
exportation of merchandise, greater than that legally due thereon, or who shall be
guilty of any willful act
or omission, shall, for each offense, be punished in accordance with the penalties
prescribed in the
preceding section. (R.A. No. 4712, June 18, 1966)
20 Sec. 2503. Undervaluation, Misclassification and Misdeclaration in Entry. When
the dutiable
value of the imported articles shall be so declared and entered that the duties,
based on the declaration of
the importer on the face of the entry, would be less by ten percent (10%) than
should be legally collected, or
when the imported articles shall be so described and entered that the duties based
on the importer's
description on the face of the entry would be less by ten percent (10%) than should
be legally collected
based on the tariff classification, or when the dutiable weight, measurement or
quantity of imported articles
is found upon examination to exceed by ten percent (10%) or more than the
entered weight, measurement
or quantity, a surcharge shall be collected from the importer in an amount of not
less than the difference
between the full duty and the estimated duty based upon the declaration of the
importer, nor more than
twice of such difference:
Provided, That an undervaluation, misdeclaration in weight, measurement or
quantity of more than
thirty percent (30%) between the value, weight, measurement, or quantity declared
in the entry, and the
actual value, weight, quantity, or measurement shall constitute a prima facie
evidence of fraud penalized
under Section 2530 of this Code: Provided, further, That any misdeclared or
undeclared imported
articles/items found upon examination shall ipso facto be forfeited in favor of the
Government to be
disposed of pursuant to the provisions of this Code.
When the undervaluation, misdescription, misclassification or misdeclaration in the
import entry is
intentional, the importer shall be subject to the penal provision under Section 3602
of this Code. (R.A. No.
7651, June 04, 1993).
21 Sec. 2530. Property Subject to Forfeiture Under Tariff and Customs Laws. Any
vessel or aircraft,
cargo, articles and other objects shall, under the following conditions, be subject to
forfeiture:
xxxx
f. Any article of prohibited importation or exportation, the importation or
exportation of which is
effected or attempted contrary to law, and all other articles which, in the opinion of
the Collector, have
been used, are or were intended to be used as instrument in the importation or
exportation of the former.
xxxx
m.. Any article sought to be imported or exported
xxxx
(3) On the strength of a false declaration or affidavit executed by the owner,
importer, exporter or
consignee concerning the importation or exportation of such article.

(4) On the strength of a false invoice or other document executed by the owner,
importer, exporter
or consignee concerning the importation or exportation of such article.
(5) Through any other fraudulent practice or device by means of which such articles
was entered
through a customhouse to the prejudice of the government.
22 Rollo, pp. 454-458.
Decision - 10 - G.R. No. 193253
respondents submitted their respective counter-affidavits.
In a Resolution23 dated May 29, 2009, public respondent Arman A. De
Andres, State Prosecutor of the Department of Justice (DOJ), recommended
the dismissal of the complaint-affidavit for lack of probable cause. The
Resolution was approved by public respondents Assistant Chief State
Prosecutor Pedrito L. Rances and Chief State Prosecutor Zuo. On automatic
review, the Resolution was affirmed by then Secretary of Justice Raul M.
Gonzales.24
Dissatisfied, the BOC filed a motion for reconsideration which was
denied by the public respondent, the Acting Secretary of Justice Agnes VST
Devanadera, in a Resolution25 dated December 28, 2009.
On March 11, 2010, the BOC filed a petition for certiorari with the
CA.
In the Resolution dated March 26, 2010, the CA dismissed outright the
petition due to procedural defects:
The instant petition (i) contains no explanation why service thereof
was not done personally (Sec. 11, Rule 13, 1997 Rules of Civil
Procedure); (ii) shows that it has no proper verification and certification
against forum shopping and (iii) the docket and other lawful fees payment
is short by P1,530.00.26
In the Resolution dated August 4, 2010, the CA denied the private
respondents' motion for reconsideration of the March 26, 2010 Resolution,
as follows:
We made a cursory examination of the petition filed in this case as
well as the whole rollo of the case. It is our finding that, up to the date
hereof, the petitioner has not duly submitted to this Court another set of
petition with a certification against forum shopping embodied therein or
appended thereto. Thus, the petition really suffers from a fatal defect until
now, and so, the petitioner has to bear the consequence thereof.27
The CA stressed that procedural rules are not to be belittled or

dismissed simply because their non-observance may have resulted in
prejudice to 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 an injustice not commensurate with the
23 Id. at 118-127. 24 Id. at113-114. 25 Id. at 96-99. 26 Id. at 273. 27 Id. at 306-307.
Decision - 11 - G.R. No. 193253
degree of thoughtlessness in not complying with the procedure prescribed.
While it is true that litigation is not a game of technicalities, this does not
mean that Rules of Court may be ignored at will and at random to the
prejudice of the orderly presentation and assessment of the issues and their
just resolution.
Aggrieved, the BOC filed the instant petition for review on certiorari,
raising the following issues:
WHETHER THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED WHEN IT DENIED PETITIONER'S MOTION FOR
RECONSIDERATION SOLELY ON THE GROUND THAT,
ALLEGEDLY, IT DID NOT RECEIVE THE SECOND AND
COMPLETE COPY OF THE PETITION, CONTAINING THE
VERIFICATION AND CERTIFICATION AGAINST FORUM
SHOPPING.
WHETHER THE HONORABLE COURT OF APPEALS GRIEVOUSLY

ERRED IN LAW AND JURISPRUDENCE WHEN IT AFFIRMED ITS
26 MARCH 2010 RESOLUTION, DISMISSING THE PETITION ON
ACCOUNT OF MERE TECHNICALITIES.
WHETHER THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS ERROR WHEN IT DID NOT LOOK INTO THE MERITS OF
THE CASE, WHERE IT WAS CLEARLY ESTABLISHED THAT
THERE IS PROBABLE CAUSE TO INDICT RESPONDENTS FOR
TRIAL FOR VIOLATION OF SECTION 3601 AND 3602 IN
RELATION TO SECTION 2530, PARAGRAPHS (E), AND SECTION
3604 (D), (E), (F), AND (H) OF THE TCCP, AS AMENDED.28
The petition is partly meritorious.
Although the question of jurisdiction over the subject matter was not
raised at bench by either of the parties, the Court will first address such
question before delving into the procedural and substantive issues of the
instant petition. After all, it is the duty of the courts to consider the question
of jurisdiction before they look into other matters involved in the case, even
though such question is not raised by any of the parties.29 Courts are bound
to take notice of the limits of their authority and, even if such question is
neither raised by the pleadings nor suggested by counsel, they may recognize
the want of jurisdiction and act accordingly by staying pleadings, dismissing
the action, or otherwise noticing the defect, at any stage of the proceedings.30
Besides, issues or errors not raised by the parties may be resolved by the
Court where, as in this case, the issue is one of jurisdiction; it is necessary in
28 Id. at 33. 29 20 Am. Jur. 2d, Courts, 92, 1965.

30 Ace Publications, Inc. v. Commissioner of Customs, 120 Phil. 143, 149 (1964),
citing 15 C.J. 852.
Decision - 12 - G.R. No. 193253
arriving at a just decision; and the resolution of the issues raised by the
parties depend upon the determination of the unassigned issue or error, or is

necessary to give justice to the parties.31
On the issue of whether or not the CA has certiorari jurisdiction over
the resolution of the Acting Secretary of Justice, affirming the dismissal of
the complaint-affidavit for violation of provisions of the TCCP due to lack
of probable cause, the Court rules in negative.
The elementary rule is that the CA has jurisdiction to review the
resolution of the DOJ through a petition for certiorari under Rule 65 of the
Rules of Court on the ground that the Secretary of Justice committed grave
abuse of his discretion amounting to excess or lack of jurisdiction.32
However, with the enactment33 of Republic Act (R.A.) No. 9282, amending
R.A. No. 112534 by expanding the jurisdiction of the CTA, enlarging its
membership and elevating its rank to the level of a collegiate court with
special jurisdiction, it is no longer clear which between the CA and the CTA
has jurisdiction to review through a petition for certiorari the DOJ resolution
in preliminary investigations involving tax and tariff offenses.
Apropos is City of Manila v. Hon. Grecia-Cuerdo35 where the Court en
banc declared that the CTA has appellate jurisdiction over a special civil
action for certiorari assailing an interlocutory order issued by the RTC in a
local tax case, despite the fact that there is no categorical statement to that
effect under R.A. No. 1125, as well as the amendatory R.A. No. 9282. Thus:
x x x Section 5 (1), Article VIII of the 1987 Constitution grants power to
the Supreme Court, in the exercise of its original jurisdiction, to issue
writs of certiorari, prohibition and mandamus. With respect to the Court
of Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the
appellate court, also in the exercise of its original jurisdiction, the power
to issue, among others, a writ of certiorari, whether or not in aid of its
appellate jurisdiction. As to Regional Trial Courts, the power to issue a
writ of certiorari, in the exercise of their original jurisdiction, is provided
under Section 21 of BP 129.
The foregoing notwithstanding, while there is no express grant of

such power, with respect to the CTA, Section 1, Article VIII of the 1987
Constitution provides, nonetheless, that judicial power shall be vested in
one Supreme Court and in such lower courts as may be established by law
and that judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and
31 Villaflores v. Ram System Services, Inc., 530 Phil. 749, 763 (2006). 32 Hasegawa
v. Giron, G.R. No. 184536, August 14, 2013, 703 SCRA 549, 558. 33 Passed into law
on March 30, 2004.
34 An Act Creating the Court of Tax Appeals.
35 G.R. No. 175723, February 4, 2014, 715 SCRA 182.
Decision - 13 - G.R. No. 193253
enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the Government.
On the strength of the above constitutional provisions, it can be
fairly interpreted that the power of the CTA includes that of determining
whether or not there has been grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of the RTC in issuing an interlocutory
order in cases falling within the exclusive appellate jurisdiction of the tax
court. It, thus, follows that the CTA, by constitutional mandate, is vested
with jurisdiction to issue writs of certiorari in these cases.
Indeed, in order for any appellate court to effectively exercise its
appellate jurisdiction, it must have the authority to issue, among others, a
writ of certiorari. In transferring exclusive jurisdiction over appealed tax
cases to the CTA, it can reasonably be assumed that the law intended to
transfer also such power as is deemed necessary, if not indispensable, in
aid of such appellate jurisdiction. There is no perceivable reason why the
transfer should only be considered as partial, not total.
xxxx
Furthermore, Section 6, Rule 135 of the present Rules of Court

provides that when by law, jurisdiction is conferred on a court or judicial
officer, all auxiliary writs, processes and other means necessary to carry it
into effect may be employed by such court or officer.
If this Court were to sustain petitioners' contention that jurisdiction
over their certiorari petition lies with the CA, this Court would be
confirming the exercise by two judicial bodies, the CA and the CTA, of
jurisdiction over basically the same subject matter precisely the splitjurisdiction
situation which is anathema to the orderly administration of
justice. The Court cannot accept that such was the legislative motive,
especially considering that the law expressly confers on the CTA, the
tribunal with the specialized competence over tax and tariff matters, the
role of judicial review over local tax cases without mention of any other
court that may exercise such power. Thus, the Court agrees with the ruling
of the CA that since appellate jurisdiction over private respondents'
complaint for tax refund is vested in the CTA, it follows that a petition for
certiorari seeking nullification of an interlocutory order issued in the said
case should, likewise, be filed with the same court. To rule otherwise
would lead to an absurd situation where one court decides an appeal in the
main case while another court rules on an incident in the very same case.
Stated differently, it would be somewhat incongruent with the
pronounced judicial abhorrence to split jurisdiction to conclude that the
intention of the law is to divide the authority over a local tax case filed
with the RTC by giving to the CA or this Court jurisdiction to issue a writ
of certiorari against interlocutory orders of the RTC but giving to the CTA
the jurisdiction over the appeal from the decision of the trial court in the
same case. It is more in consonance with logic and legal soundness to
conclude that the grant of appellate jurisdiction to the CTA over tax cases
filed in and decided by the RTC carries with it the power to issue a writ of
certiorari when necessary in aid of such appellate jurisdiction. The
supervisory power or jurisdiction of the CTA to issue a writ of certiorari

Decision - 14 - G.R. No. 193253
in aid of its appellate jurisdiction should co-exist with, and be a
complement to, its appellate jurisdiction to review, by appeal, the final
orders and decisions of the RTC, in order to have complete supervision
over the acts of the latter.
A grant of appellate jurisdiction implies that there is included in it
the power necessary to exercise it effectively, to make all orders that will
preserve the subject of the action, and to give effect to the final
determination of the appeal. It carries with it the power to protect that
jurisdiction and to make the decisions of the court thereunder effective.
The court, in aid of its appellate jurisdiction, has authority to control all
auxiliary and incidental matters necessary to the efficient and proper
exercise of that jurisdiction. For this purpose, it may, when necessary,
prohibit or restrain the performance of any act which might interfere with
the proper exercise of its rightful jurisdiction in cases pending before it.
Lastly, it would not be amiss to point out that a court which is
endowed with a particular jurisdiction should have powers which are
necessary to enable it to act effectively within such jurisdiction. These
should be regarded as powers which are inherent in its jurisdiction and the
court must possess them in order to enforce its rules of practice and to
suppress any abuses of its process and to defeat any attempted thwarting
of such process.
In this regard, Section 1 of RA 9282 states that the CTA shall be of
the same level as the CA and shall possess all the inherent powers of a
court of justice.
Indeed, courts possess certain inherent powers which may be said
to be implied from a general grant of jurisdiction, in addition to those
expressly conferred on them. These inherent powers are such powers as
are necessary for the ordinary and efficient exercise of jurisdiction; or are
essential to the existence, dignity and functions of the courts, as well as to

the due administration of justice; or are directly appropriate, convenient
and suitable to the execution of their granted powers; and include the
power to maintain the court's jurisdiction and render it effective in behalf
of the litigants.
Thus, this Court has held that "while a court may be expressly
granted the incidental powers necessary to effectuate its jurisdiction, a
grant of jurisdiction, in the absence of prohibitive legislation, implies the
necessary and usual incidental powers essential to effectuate it, and,
subject to existing laws and constitutional provisions, every regularly
constituted court has power to do all things that are reasonably necessary
for the administration of justice within the scope of its jurisdiction and for
the enforcement of its judgments and mandates." Hence, demands, matters
or questions ancillary or incidental to, or growing out of, the main action,
and coming within the above principles, may be taken cognizance of by
the court and determined, since such jurisdiction is in aid of its authority
over the principal matter, even though the court may thus be called on to
consider and decide matters which, as original causes of action, would not
be within its cognizance.
Based on the foregoing disquisitions, it can be reasonably
Decision - 15 - G.R. No. 193253
concluded that the authority of the CTA to take cognizance of petitions for
certiorari questioning interlocutory orders issued by the RTC in a local
tax case is included in the powers granted by the Constitution as well as
inherent in the exercise of its appellate jurisdiction.36
Since the Court ruled in City of Manila v. Hon. Grecia-Cuerdo37 that

the CTA has jurisdiction over a special civil action for certiorari questioning
an interlocutory order of the RTC in a local tax case via express
constitutional mandate and for being inherent in the exercise of its appellate
jurisdiction, it can also be reasonably concluded based on the same premise

that the CTA has original jurisdiction over a petition for certiorari assailing
the DOJ resolution in a preliminary investigation involving tax and tariff
offenses.
If the Court were to rule that jurisdiction over a petition for certiorari
assailing such DOJ resolution lies with the CA, it would be confirming the
exercise by two judicial bodies, the CA and the CTA, of jurisdiction over
basically the same subject matter precisely the split-jurisdiction situation
which is anathema to the orderly administration of justice. The Court cannot
accept that such was the legislative intent, especially considering that R.A.
No. 9282 expressly confers on the CTA, the tribunal with the specialized
competence over tax and tariff matters, the role of judicial review over local
tax cases without mention of any other court that may exercise such power.38
Concededly, there is no clear statement under R.A. No. 1125, the
amendatory R.A. No. 9282, let alone in the Constitution, that the CTA has
original jurisdiction over a petition for certiorari. By virtue of Section 1,
Article VIII of the 1987 Constitution, vesting judicial power in the Supreme
Court and such lower courts as may be established by law, to determine
whether or not there has been a grave abuse of discretion on the part of any
branch or instrumentality of the Government, in relation to Section 5(5),
Article VIII thereof, vesting upon it the power to promulgate rules
concerning practice and procedure in all courts, the Court thus declares that
the CA's original jurisdiction39 over a petition for certiorari assailing the
DOJ resolution in a preliminary investigation involving tax and tariff
offenses was necessarily transferred to the CTA pursuant to Section 7 of
R.A. No. 9282,40 and that such petition shall be governed by Rule 65 of the
36 City of Manila v. Hon. Grecia-Cuerdo, supra, at 201-206. (Emphasis in the

original; citation
omitted)
37 Supra note 35. 38 Id. 39 Section 9 (1), BP Blg. 129 The Court of Appeals shall
exercise: (1) Original jurisdiction to issue
writs of mandamus, prohibition, habeas corpus, and quo warranto and auxiliary
writs or processes,
whether or not in aid of its appellate jurisdiction. 40 Sec. 7. Jurisdiction. - The CTA
shall exercise:
xxxx
b. Jurisdiction over cases involving criminal offenses as herein provided:
1. Exclusive original jurisdiction over all criminal offenses arising from violations of
the
Decision - 16 - G.R. No. 193253
Rules of Court, as amended. Accordingly, it is the CTA, not the CA, which
has jurisdiction over the petition for certiorari assailing the DOJ resolution
of dismissal of the BOC's complaint-affidavit against private respondents for
violation of the TCCP.
On the procedural issue of whether the CA erred in dismissing the
petition for certiorari on the sole ground of lack of verification and
certification against forum shopping, the Court rules in the affirmative,
despite the above discussion that such petition should have been filed with
the CTA.
In Traveo, et al. v. Bobongon Banana Growers Multi-Purpose
Cooperative, et al.,41 the Court restated the jurisprudence on non-compliance
with the requirements on, or submission of defective, verification and
certification against forum shopping:
1) A distinction must be made between non-compliance with the
requirement on or submission of defective verification, and noncompliance
with the requirement on or submission of defective
certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does
not necessarily render the pleading fatally defective. The court may order
its submission or correction or act on the pleading if the attending
circumstances are such that strict compliance with the Rule may be
dispensed with in order that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has
ample knowledge to swear to the truth of the allegations in the complaint
or petition signs the verification, and when matters alleged in the petition
have been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith
or a defect therein, unlike in verification, is generally not curable by its
subsequent submission or correction thereof, unless there is a need to
relax the Rule on the ground of substantial compliance or presence of
special circumstances or compelling reasons.
5) The certification against forum shopping must be signed by all the
plaintiffs or petitioners in a case; otherwise, those who did not sign will be
dropped as parties to the case. Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or petitioners share a
common interest and invoke a common cause of action or defense, the
signature of only one of them in the certification against forum shopping
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. (Emphasis
added)
41 614 Phil. 222 (2009).
Decision - 17 - G.R. No. 193253
substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by
the party-pleader, not by his counsel. If, however, for reasonable or
justifiable reasons, the party-pleader is unable to sign, he must execute a
Special Power of Attorney designating his counsel of record to sign on his
behalf.42
While it admittedly filed a petition for certiorari without a
certification against forum shopping on March 11, 2010, the BOC claimed to
have subsequently complied with such requirement by filing through
registered mail a complete set of such petition, the following day which was
also the last day of the reglementary period. The problem arose when the CA
failed to receive such complete set of the petition for certiorari with the
verification and certification against forum shopping. In support of the
motion for reconsideration of the CA's March 26, 2010 resolution which
dismissed outright the petition, the BOC asserted that it filed a complete set
of petition by registered mail. It also submitted an affidavit of the person
who did the mailing as required by Section 12,43 Rule 13 of the Rules of
Court, including the registry receipt numbers, but not the receipts themselves
which were allegedly attached to the original copy mailed to the CA. Instead
of ordering the BOC to secure a certification from the postmaster to verify if
a complete set of the petition was indeed filed by registered mail, the CA
after examining the whole case rollo and finding that no other set of petition
with a certification against forum shopping was duly submitted denied the
motion for reconsideration.
Faced with the issue of whether or not there is a need to relax the strict
compliance with procedural rules in order that the ends of justice may be
served thereby and whether special circumstances or compelling reasons
are present to warrant a liberal interpretation of such rules, the Court rules
after a careful review of the merits of the case in the affirmative.
Despite the BOC's failed attempt to comply with the requirement of
verification and certification against forum shopping, the Court cannot
simply ignore the CA's perfunctory dismissal of the petition on such sole
procedural ground vis--vis the paramount public interest in the subject
matter and the substantial amount involved, i.e., the alleged illegal
withdrawal of oil products worth 181,988,627.00 with corresponding
duties and taxes worth 35,507,597.00. Due to the presence of such special
42 Traveo, et al. v. Bobongon Banana Growers Multi-Purpose Cooperative, et al.,

supra, at 231232, citing Vda. De Formoso, et al. v. Philippine National Bank, et al., 665 Phil. 184,
193-194 (2011). 43 Sec. 12. Proof of filing - The filing of a pleading or paper shall be
proved by its existence in the
record of the case. If it is not in the record, but is claimed to have been filed
personally, the filing shall be
proved by the written or stamped acknowledgment of its filing by the clerk of court
on a copy of the same;
if filed by registered mail, by the registry receipt and by the affidavit of the person
who did the
mailing, containing a full statement of the date and place of depositing the mail in
the post office in a
sealed envelope addressed to the court, with postage fully prepaid, and with
instructions to the
postmaster to return the mail to sender after ten (10) days if not delivered.
(Emphasis added)
Decision - 18 - G.R. No. 193253
circumstances and in the interest of justice, the CA should have at least

passed upon the substantive issue raised in the petition, instead of dismissing
it on such procedural ground. Although it does not condone the failure of
BOC to comply with the said basic requirement, the Court is constrained to
exercise the inherent power to suspend its own rules in order to do justice in
this particular case.
Given that the petition for certiorari should have been filed with the
CTA, the mistake committed by the BOC in filing such petition before the
CA may be excused. In this regard, Court takes note that nothing in R.A. No.
1125, as amended by R.A. No. 9282, indicates that a petition for certiorari
under Rule 65 may be filed with the CTA. Despite the enactment of R.A.
No. 9282 on March 30, 2004, it was only about ten (10) years later in the
case of City of Manila v. Hon. Grecia-Cuerdo44 that the Court ruled that the
authority of the CTA to take cognizance of such petitions is included in the
powers granted by the Constitution, as well as inherent in the exercise of its
appellate jurisdiction. While the rule on perfection of appeals cannot be
classified as a difficult question of law,45 mistake in the construction or
application of a doubtful question of law, as in this case, may be considered
as a mistake of fact, excusing the BOC from the consequences of the
erroneous filing of its petition with the CA.
As the CA dismissed the petition for certiorari solely due to a
procedural defect without resolving the issue of whether or not the Acting
Secretary of Justice gravely abused her discretion in affirming the dismissal
of the BOC's complaint-affidavit for lack of probable cause, the Court ought
to reinstate the petition and refer it to the CTA for proper disposition. For
one, as a highly specialized court specifically created for the purpose of
reviewing tax and customs cases,46 the CTA is dedicated exclusively to the
study and consideration of revenue-related problems, and has necessarily
developed an expertise on the subject.47 For another, the referral of the
petition to the CTA is in line with the policy of hierarchy of courts in order
to prevent inordinate demands upon the Court's time and attention which are
better devoted to those matters within its exclusive jurisdiction, and to
prevent further overcrowding of its docket.48
Be that as it may, the Court stressed in The Diocese of Bacolod v.
Commission on Elections49 that the doctrine of hierarchy of courts is not an
iron-clad rule, and that it has full discretionary power to take cognizance and
44 Supra note 35. 45 Santos v. Velarde, 450 Phil. 381 (2003) 46 Chevron Phils., Inc.
v. Commissioner of the Bureau of Customs, 583 Phil. 706, 737 (2008). 47 Western
Mindanao Power Corporation v. Commissioner of Internal Revenue, G.R. No. 181136,
June 13, 2012, 672 SCRA 350.
48 Cabarles v. Hon. Maceda, 545 Phil. 210, 223 (2007). 49 G.R. No. 205728, January
21, 2015. (Citations omitted).
Decision - 19 - G.R. No. 193253
assume jurisdiction over special civil actions for certiorari filed directly with
it for exceptionally compelling reasons or if warranted by the nature of the
issues clearly and specifically raised in the petition. Recognized exceptions
to the said doctrine are as follows: (a) when there are genuine issues of
constitutionality that must be addressed at the most immediate time; (b)
when the issues involved are of transcendental importance; (c) cases of first
impression where no jurisprudence yet exists that will guide the lower courts
on the matter; (d) the constitutional issues raised are better decided by the
Court; (e) where exigency in certain situations necessitate urgency in the
resolution of the cases; (f) the filed petition reviews the act of a
constitutional organ; (g) when petitioners rightly claim that they had no other
plain, speedy, and adequate remedy in the ordinary course of law that could
free them from the injurious effects of respondents acts in violation of their
right to freedom of expression; and (h) the petition includes questions that
are dictated by public welfare and the advancement of public policy, or
demanded by the broader interest of justice, or the orders complained of
were found to be patent nullities, or the appeal was considered as clearly an
inappropriate remedy.50 Since the present case includes questions that are
dictated by public welfare and the advancement of public policy, or
demanded by the broader interest of justice, as well as to avoid multiplicity
of suits and further delay in its disposition, the Court shall directly resolve
the petition for certiorari, instead of referring it to the CTA.
On the substantive issue of whether the Acting Secretary of Justice
gravely abused her discretion in affirming the dismissal of the BOC's
complaint-affidavit for lack of probable cause, the settled policy of noninterference
in the prosecutors exercise of discretion requires the courts to
leave to the prosecutor and to the DOJ the determination of what constitutes
sufficient evidence to establish probable cause. As the Court explained in
Unilever Philippines, Inc. v. Tan:
51
The determination of probable cause for purposes of filing of
information in court is essentially an executive function that is lodged, at
the first instance, with the public prosecutor and, ultimately, to the
Secretary of Justice. The prosecutor and the Secretary of Justice have
wide latitude of discretion in the conduct of preliminary investigation; and
their findings with respect to the existence or non-existence of probable
cause are generally not subject to review by the Court.
Consistent with this rule, the settled policy of non-interference in

the prosecutors exercise of discretion requires the courts to leave to the
prosecutor and to the DOJ the determination of what constitutes sufficient
evidence to establish probable cause. Courts can neither override their
determination nor substitute their own judgment for that of the latter. They
cannot likewise order the prosecution of the accused when the prosecutor
has not found a prima facie case.
50 Diocese of Bacolod v. Commission on Elections, supra. 51 G.R. No. 179367,

January 29, 2014, 715 SCRA 36.
Decision - 20 - G.R. No. 193253
Nevertheless, this policy of non-interference is not without
exception. The Constitution itself allows (and even directs) court action
where executive discretion has been gravely abused. In other words, the
court may intervene in the executive determination of probable cause,
review the findings and conclusions, and ultimately resolve the existence
or non-existence of probable cause by examining the records of the
preliminary investigation when necessary for the orderly administration of
justice.52
Probable cause for purposes of filing a criminal information is defined
as such facts as are sufficient to engender a well-founded belief that a crime
has been committed and the respondent is probably guilty thereof, and
should be held for trial.53 As explained in Sy v. Secretary of Justice,54 citing
Villanueva v. Secretary of Justice:
55
x x x [Probable cause] is such a state of facts in the mind of the prosecutor
as would lead a person of ordinary caution and prudence to believe or
entertain an honest or strong suspicion that a thing is so. The term does not
mean actual or positive cause; nor does it import absolute certainty. It is
merely based on opinion and reasonable belief. Thus, a finding of probable
cause does not require an inquiry into whether there is sufficient evidence
to procure a conviction. It is enough that it is believed that the act or
omission complained of constitutes the offense charged. Precisely, there
is a trial for the reception of evidence of the prosecution in support of the
charge.56
To find out if there is a reasonable ground to believe that acts or

ommissions complained of constitute the offenses charged, the Court must
first examine whether or not the allegations against private respondents in

the BOC's complaint-affidavit constitute the offenses of unlawful
importation under Section 3601 and various fraudulent practices against
customs revenue under Section 3602 of the TCCP.
In Jardeleza v. People,57 the Court discussed the concepts of unlawful
importation under Section 3601 of the TCCP, and various fraudulent
practices against customs revenue under Section 3602 thereof, thus:
Section 3601 of the TCC was designed to supplement the existing
provisions of the TCC against the means leading up to smuggling, which
might render it beneficial by a substantive and criminal statement
separately providing for the punishment of smuggling. The law was
intended not to merge into one and the same offense all the many acts
52 Unilever Philippines, Inc. v. Tan, supra, at 44-45. 53 Alejandro, et al. v. Atty. Jose
A. Bernas, et al., 672 Phil. 698, 707 (2011). 54 540 Phil. 111, 117 (2006).
55 512 Phil. 145 (2005).
56 Villanueva v. Secretary of Justice, supra, at 159. (Emphasis added) 57 517 Phil.
179 (2006).
Decision - 21 - G.R. No. 193253
which are classified and punished by different penalties, penal or
administrative, but to legislate against the overt act of smuggling itself.
This is manifested by the use of the words fraudulently and contrary to
law in the law.
Smuggling is committed by any person who: (1) fraudulently
imports or brings into the Philippines any article contrary to law; (2)
assists in so doing any article contrary to law; or (3) receives, conceals,
buys, sells or in any manner facilitate the transportation, concealment or
sale of such goods after importation, knowing the same to have been
imported contrary to law.
The phrase contrary to law in Section 3601 qualifies the phrases
imports or brings into the Philippines and assists in so doing, and not
the word article. The law penalizes the importation of any merchandise
in any manner contrary to law.
The word law includes regulations having the force and effect of
law, meaning substantive or legislative type rules as opposed to general
statements of policy or rules of agency, organization, procedures or
positions. An inherent characteristic of a substantive rule is one affecting
individual rights and obligations; the regulation must have been
promulgated pursuant to a congressional grant of quasi-legislative
authority; the regulation must have been promulgated in conformity to
with congressionally-imposed procedural requisites.
xxxx
Section 3602 of the TCC, on the other hand, provides:
Sec. 3602. Various Fraudulent Practices Against
Customs Revenue. Any person who makes or attempts to
make any entry of imported or exported article by means of
any false or fraudulent invoice, declaration, affidavit, letter,
paper or by any means of any false statement, written or
verbal, or by any means of any false or fraudulent practice
whatsoever, or knowingly effects any entry of goods, wares
or merchandise, at less than the true weight or measures
thereof or upon a false classification as to quality or value,
or by the payment of less than the amount legally due, or
knowingly and wilfully files any false or fraudulent entry or
claim for the payment of drawback or refund of duties upon
the exportation of merchandise, or makes or files any
affidavit, abstract, record, certificate or other document,
with a view to securing the payment to himself or others of
any drawback, allowance or refund of duties on the
exportation of merchandise, greater than that legally due
thereon, or who shall be guilty of any wilful act or omission
shall, for each offense, be punished in accordance with the

penalties prescribed in the preceding section.
The provision enumerates the various fraudulent practices against
customs revenue, such as the entry of imported or exported articles by
means of any false or fraudulent invoice, statement or practice; the entry
of goods at less than the true weight or measure; or the filing of any false
Decision - 22 - G.R. No. 193253
or fraudulent entry for the payment of drawback or refund of duties.
The fraud contemplated by law must be intentional fraud,
consisting of deception, willfully and deliberately dared or resorted to in
order to give up some right. The offender must have acted knowingly and
with the specific intent to deceive for the purpose of causing financial loss
to another; even false representations or statements or omissions of
material facts come within fraudulent intent. The fraud envisaged in the
law includes the suppression of a material fact which a party is bound in
good faith to disclose. Fraudulent nondisclosure and fraudulent
concealment are of the same genre.
Fraudulent concealment presupposes a duty to disclose the truth
and that disclosure was not made when opportunity to speak and inform
was present, and that the party to whom the duty of disclosure as to a
material fact was due was thereby induced to act to his injury. Fraud is not
confined to words or positive assertions; it may consist as well of deeds,
acts or artifice of a nature calculated to mislead another and thus allow one
to obtain an undue advantage.58
In unlawful importation, also known as outright smuggling, goods and
articles of commerce are brought into the country without the required
importation documents, or are disposed of in the local market without
having been cleared by the BOC or other authorized government agencies,
to evade the payment of correct taxes, duties and other charges. Such goods
and articles do not undergo the processing and clearing procedures at the
BOC, and are not declared through submission of import documents, such as
the import entry and internal revenue declaration.
In various fraudulent practices against customs revenue, also known
as technical smuggling, on the other hand, the goods and articles are brought
into the country through fraudulent, falsified or erroneous declarations, to
substantially reduce, if not totally avoid, the payment of correct taxes, duties
and other charges. Such goods and articles pass through the BOC, but the
processing and clearing procedures are attended by fraudulent acts in order
to evade the payment of correct taxes, duties, and other charges. Often
committed by means of misclassification of the nature, quality or value of
goods and articles, undervaluation in terms of their price, quality or weight,
and misdeclaration of their kind, such form of smuggling is made possible
through the involvement of the importers, the brokers and even some
customs officials and personnel.
In light of the foregoing discussion, the Court holds that private
respondents cannot be charged with unlawful importation under Section
3601 of the TCCP because there is no allegation in the BOC's complaintaffidavit
to the effect that they committed any of the following acts: (1)
fraudulently imported or brought into the Philippines the subject petroleum
58 Jardeleza v. People, supra, at 201-203.

Decision - 23 - G.R. No. 193253
products, contrary to law; (2) assisted in so doing; or (3) received,
concealed, bought, sold or in any manner facilitated the transportation,
concealment or sale of such goods after importation, knowing the same to
have been imported contrary to law.
The said acts constituting unlawful importation under Section 3601 of
the TCCP can hardly be gathered from the following allegations in the
BOC's complaint-affidavit:
19.1 From May 23, 2007 to February 10, 2008, UNIOIL is not an
accredited importer of the BOC;

19.2 From the time UNIOIL was accredited on February 11, 2008 until
the time of its request to withdraw its oil products on 02 May 2008, they
did not import Gasoil (diesel) and Mogas Gasoline;
19.3 The Terminalling Agreement allegedly executed between OILINK
and UNIOIL was obviously for the purpose of circumventing the Warrant
of Seizure and Detention issued against the shipments of OILINK aside
from the fact that it was only executed on 02 January 2008 after the
decision of the Commissioner finding OILINK liable to pay an
administrative fine of Two Billion Seven Hundred Sixty-Four Million
Eight Hundred Fifty-Nine Thousand Three Hundred Four Pesos and
80/100 (Php2,764,859,304.80);
19.4 Only base oil should have been withdrawn by UNIOIL since it is
the only product subject of its request and approved by the Commissioner;
19.5 UNIOIL withdrew Gasoil (Diesel) and Mogas which were not
covered by importations;
19.6 Finally, the illegal release/withdrawal of the oil products deprived
the government of the supposed partial payment on the Php2.7 billion
liability of OILINK in the approximate amount of Php181,988,627
representing the customs value of the released/withdrawn oil products and
estimated duties and taxes of Php35,507,597 due thereon or the total
amount of Php217,496,224.00.
59
xxxx
21.1 When UNIOIL withdrew Gasoil (Diesel) and Mogas without filing
the corresponding Import Entry, the shipment becomes unlawful per se
and thus falls under unlawful importation under Section 3601 of the Tariff
and Customs Code of the Philippines, as amended;
21.2 The fact that UNIOIL and OILINK executed a belated
Terminalling Agreement after the issuance of the Warrant of Seizure and
Detention showed the fraudulent intent of the respondents whereby

UNIOIL can still withdraw the oil products stored at OILINK's depot
likewise in clear violation of section 3601 and 3602 of the Tariff and
Customs Code of the Philippines, as amended;
21.3 The fact that the UNIOIL make [sic] it appear that they are the
owner of Gasoil (Diesel) and Mogas when in truth and in fact they did not
import said products make them liable for [violation of] Section 3602 of
59 Rollo, pp. 168-169.

Decision - 24 - G.R. No. 193253
the Tariff and Customs Code of the Philippines, as amended and
falsification;60
Since the foregoing allegations do not constitute the crime of unlawful
importation under Section 3601 of the TCCP, the Acting Secretary of Justice
did not commit grave abuse of discretion when she affirmed the State
Prosecutor's dismissal the BOC's complaint-affidavit for lack of probable
cause.
Neither could private respondents be charged with various fraudulent
practices against customs revenue under Section 3602 of the TCCP as the
above allegations do not fall under any of the following acts or omissions
constituting such crime/s: (1) making or attempting to make any entry of
imported or exported article: (a) by means of any false or fraudulent invoice,
declaration, affidavit, letter, paper or by any means of any false statement,
written or verbal; or (b) by any means of any false or fraudulent practice
whatsoever; or (2) knowingly effecting any entry of goods, wares or
merchandise, at less than the true weight or measures thereof or upon a false
classification as to quality or value, or by the payment of less than the
amount legally due; or (3) knowingly and wilfully filing any false or
fraudulent entry or claim for the payment of drawback or refund of duties
upon the exportation of merchandise; or (4) making or filing any affidavit,
abstract, record, certificate or other document, with a view to securing the

payment to himself or others of any drawback, allowance or refund of duties
on the exportation of merchandise, greater than that legally due thereon.
Related to various fraudulent practices against customs revenue by
means of undervaluation, misclassification and misdeclaration in the import
entry is the following provision of R.A. No. 7651 - An Act to Revitalize and
Strengthen the Bureau of Customs, Amending for the Purpose Certain
Sections of the Tariff and Customs Code of the Philippines, as amended:61
Sec. 2503. Undervaluation, Misclassification and Misdeclaration
in Entry. When the dutiable value of the imported articles shall be so
declared and entered that the duties, based on the declaration of the
importer on the face of the entry, would be less by ten percent (10%) than
should be legally collected, or when the imported articles shall be so
described and entered that the duties based on the importer's description
on the face of the entry would be less by ten percent (10%) than should be
legally collected based on the tariff classification, or when the dutiable
weight, measurement or quantity of imported articles is found upon
examination to exceed by ten percent (10%) or more than the entered
weight, measurement or quantity, a surcharge shall be collected from the
importer in an amount of not less than the difference between the full duty
and the estimated duty based upon the declaration of the importer, nor
60 Id. at 171-172. 61 Approved June 4, 1993.

Decision - 25 - G.R. No. 193253
more than twice of such difference: Provided, that an undervaluation,
misdeclaration in weight, measurement or quantity of more than
thirty percent (30%) between the value, weight, measurement, or
quantity declared in the entry, and the actual value, weight, quantity,
or measurement shall constitute a prima facie evidence of fraud
penalized under Sec. 2530 of this Code: Provided, further, that any
misdeclared or undeclared imported articles/items found upon examination

shall ipso facto be forfeited in favor of the Government to be disposed of
pursuant to the provisions of this Code.
When the undervaluation, misdescription, misclassification or
misdeclaration in the import entry is intentional, the importer shall be
subject to the penal provision under Sec. 3602 of this Code.
62
A careful reading of the BOC's complaint-affidavit would show that
there is no allegation to the effect that private respondents committed
undervaluation, misdeclaration in weight, measurement or quantity of more
than thirty percent (30%) between the value, weight, measurement, or
quantity declared in the entry, and the actual value, weight, quantity, or
measurement which constitute prima facie evidence of fraud. Nor is there an
allegation that they intentionally committed undervaluation, misdescription,
misclassification or misdeclaration in the import entry. Since the allegations
in the BOC's complaint-affidavit fall short of the acts or omissions
constituting the various fraudulent acts against customs revenue under
Section 3602 of the TCCP, the Acting Secretary of Justice correctly ruled
that there was no probable cause to believe that they committed such
crime/s.
While it is true that the sole office of the writ of certiorari is the
correction of errors of jurisdiction, including the commission of grave abuse
of discretion amounting to lack of jurisdiction, and does not include a
correction of the public respondents' evaluation of the evidence and factual
findings thereon, it is sometimes necessary to delve into factual issues in
order to resolve the allegations of grave abuse of discretion as a ground for
the special civil action of certiorari.63 In light of this principle, the Court
reviews the following findings of the Acting Secretary of Justice in affirming
the State Prosecutor's dismissal of the BOC's complaint-affidavit for lack of
probable cause:
Respondents are being charged for unlawful importation under

Section 3601, and fraudulent practices against customs revenues under
Section 3602, of the TCCP, as amended. For these charges to prosper,
complainant must prove, first and foremost, that the subject articles were
imported. On this score alone, complainant has miserably failed.
62 Emphasis added.
63 United Coconut Planters Bank v. Looyuko, 560 Phil. 581 (2007).
Decision - 26 - G.R. No. 193253
Indeed, except for complainant's sweeping allegation, no clear and
convincing proof was presented to show that the subject petroleum
products (gasoil and mogas) withdrawn by Unioil from the oil
depot/terminal of Oilink were imported. For, only when the articles are
imported that the importer/consignee is required to file an import entry
declaration and pay the corresponding customs duties and taxes. The fact
that complainant's record fails to show that an import entry was filed for
the subject articles does not altogether make out a case of unlawful
importation under Section 3601, or fraudulent practices against customs
revenue under Section 3602, of the TCCP, without having first determined
whether the subject articles are indeed imported. Thus, in this case,
complainant still bears the burden of proof to show that the subject
petroleum products are imported, by means of documents other than the
import entry declaration, such as but not limited to, the transport
documents consisting of the inward foreign manifest, bill of lading,
commercial invoice and packing list, all indicating that the goods were
bought from a supplier/seller in a foreign country and imported or
transported to the Philippines. Instead[,] complainant merely surmised that
since the subject products were placed under warrant of seizure and
detention[,] they must necessarily be imported. Regrettably, speculation
and surmises do not constitute evidence and should not, therefore, be taken
against the respondents. x x x Taken in this light, we find more weight and
credence in respondent Unioil's claim that the subject petroleum products
were not imported by them, but were locally purchased, more so since it
was able to present local sales invoices covering the same.
Even assuming gratia argumenti that the subject petroleum
products were imported, it still behooves the complainant to present clear
and convincing proof that the importation was unlawful or that it was
carried out through any fraudulent means, practice or device to prejudice
the government. But again, complainant failed to discharge this burden.
As can be culled from the records, the warrant of seizure and
detention docketed as Seizure Identification No. 2008-082, which covers
various gas tanks already stored at Oilink's depot/terminal located at
Lucanin Pt., Mariveles, Bataan, was issued pursuant to Section 2536, in
relation to Section 1508, of the TCCP because of Oilink's failure to pay the
administrative fine of P2,764,859,304.80 that was previously meted
against the company for its failure/refusal to submit to a post entry audit.
In fact, the delivery of all shipments consigned to or handled directly or
indirectly by Oilink was put on hold as per order of the Customs
Commissioner dated April 23, 2008 pursuant to Section 1508 of the TCCP,
also for the same reason. There was nothing on record which shows, or
from which it could be inferred, that the warrant of seizure and detention
or hold order were imposed pursuant to Section 2530 of the same Code
which relates, among others, to unlawfully imported articles or those
imported through any fraudulent practice or device to prejudice the
government, much less due to non-payment of the corresponding customs
duties and taxes due on the shipments/articles covered by the warrant of
seizure and detention. Again, what complainant's evidence clearly shows is
that Oilink's failure to pay the administrative fine precipitated the issuance
of the warrant of seizure and detention and hold order.64
64 Rollo, pp. 97-98. (Citation omitted)

Decision - 27 - G.R. No. 193253
After a careful review of records, the Court affirms the dismissal of
the BOC's complaint-affidavit for lack of probable cause, but partly
digresses from the reasoning of the Acting Secretary of Justice in arriving at
such conclusion. While the Acting Secretary of Justice correctly stated that
the act of fraudulent importation of articles must be first proven in order to
be charged for violation of Section 3601 of the TCCP, the Court disagrees
that proof of such importation is also required for various fraudulent
practices against customs revenue under Section 3602 thereof.
As held in Jardeleza v. People,
65 the crime of unlawful importation
under Section 3601 of the TCCP is complete, in the absence of a bona fide
intent to make entry and pay duties when the prohibited article enters
Philippine territory. Importation, which consists of bringing an article into
the country from the outside, is complete when the taxable, dutiable
commodity is brought within the limits of the port of entry.66 Entry through a
customs house is not the essence of the act.67 On the other hand, as regards
Section 3602 of the TCCP which particularly deals with the making or
attempting to make a fraudulent entry of imported or exported articles, the
term entry in customs law has a triple meaning, namely: (1) the documents
filed at the customs house; (2) the submission and acceptance of the
documents; and (3) the procedure of passing goods through the customs
house.68 In view thereof, it is only for charges for unlawful importation
under Section 3601 that the BOC must first prove that the subject articles
were imported. For violation of Section 3602, in contrast, what must be
proved is the act of making or attempting to make such entry of articles.
The Court likewise disagrees with the finding of the Acting Secretary
of Justice that the BOC failed to prove that the products subject of the WSD
were imported. No such proof was necessary because private respondents
themselves presented in support of their counter-affidavits copies of import

entries69 which can be considered as prima facie evidence that OILINK
imported the subject petroleum products. At any rate, the Acting Secretary of
Justice aptly gave credence to their twenty (20) sales invoices70 covering the
dates October 1, 2007 until April 30, 2008 which tend to prove that UNIOIL
locally purchased such products from OILINK even before the BOC
rendered the Decision dated December 14, 2007 imposing a
2,764,859,304.80 administrative fine, and holding the delivery or release
of its subsequently imported articles to answer for the fine, any revised
assessment and/or penalty for failure to keep records.
65 Supra note 57, at 202. 66 Id.

67 Id., citing Tomplain v. United States, 42 F. 2d 203 (1930). 68 Id. at 203. 69 Rollo,
pp. 236-240; CA rollo, pp. 171-175. 70 Id. at 216-235; id. at 150-170.
Decision - 28 - G.R. No. 193253
The Court also finds as misplaced the BOC's reliance on the
Terminalling Agreement dated January 2, 2008 and the Certification71 that
UNIOIL made no importation of Gasoil (diesel) and Mogas gasoline from
January 2007 up to June 2008 in order to prove that it illegally imported the
said products. Such documentary evidence tend to prove only that UNIOIL
was engaged in the importation of petroleum products and that it did not
import the said products during the said period. Such documents, however,
do not negate the evidence on record which tend to show that OILINK was
the one that filed the import entries,72 and that UNIOIL locally purchased
from OILINK such products as indicated in the sales invoices.73 Not being
the importer of such products, UNIOIL, its directors and officers, are not
required to file their corresponding import entries. Hence, contrary to the
BOC's allegation, UNIOIL's withdrawal of the Gasoil (Diesel) and Mogas
gasoline without filing the corresponding import entries can neither be
considered as unlawful importation under Section 3601 of the TCCP nor as a
fraudulent practice against customs revenue under Section 3602 thereof.

Moreover, the fact that private respondent Paul Chi Ting Co is both
the Chairman of UNIOIL and OILINK is not enough to justify the
application of the doctrine of piercing the corporate veil. In fact, mere
ownership by a single stockholder or by another corporation of a substantial
block of shares of a corporation does not, standing alone, provide sufficient
justification for disregarding the separate corporate personality.74 In Kukan
International Corporation v. Hon. Judge Reyes, et al.,75 the Court explained
the application of the said doctrine in this wise:
In fine, to justify the piercing of the veil of corporate fiction, it
must be shown by clear and convincing proof that the separate and distinct
personality of the corporation was purposefully employed to evade a
legitimate and binding commitment and perpetuate a fraud or like
wrongdoings. To be sure, the Court has, on numerous occasions, applied
the principle where a corporation is dissolved and its assets are transferred
to another to avoid a financial liability of the first corporation with the
result that the second corporation should be considered a continuation and
successor of the first entity.
In those instances when the Court pierced the veil of corporate
fiction of two corporations, there was a confluence of the following
factors:
1. A first corporation is dissolved;
71 Rollo, p. 161; CA rollo, p. 93. 72 Id. at 236-240; id. at 171-175. 73 Id. at 216-235;
id. at 150-170. 74 Kukan International Corp. v. Hon. Judge Reyes, et al., 646 Phil.
210, 239 (2010), citing Francisco
v. Mejia, 415 Phil. 153 (2001). 75 Supra.
Decision - 29 - G.R. No. 193253
2. The assets of the first corporation is transferred to a
second corporation to avoid a financial liability of the first
corporation; and
3. Both corporations are owned and controlled by the

same persons such that the second corporation should be
considered as a continuation and successor of the first
corporation.76
Granted that the principle of piercing the veil of corporate entity
comes into play only during the trial of the case for the purpose of
determining liability,77 it is noteworthy that even the BOC itself virtually
recognized that OILINK and UNIOIL are separate and distinct entities when
it alleged that only the base oil products should have been withdrawn by
UNIOIL, since they were the only products subject of its request and
approved by the Customs Commissioner. As discussed above, however,
private respondents were able to present sales invoices which tend to show
that UNIOIL locally purchased Gasoil (diesel) and Mogas gasoline products
from OILINK. Hence, the BOC cannot invoke the doctrine of piercing the
veil of corporate entity in this case.
On a final note, the Court stresses that OILINK, its directors or
officers, and Victor D. Piamonte, the Licensed Customs Broker, may still be
held liable for various fraudulent practices against customs revenue under
Section 3602 of the TCCP, if the final results of the post-entry audit and
examination would show that they committed any of the following acts or
omissions: (1) making or attempting to make any entry of imported or
exported article: (a) by means of any false or fraudulent invoice, declaration,
affidavit, letter, paper or by any means of any false statement, written or
verbal; or (b) by any means of any false or fraudulent practice; or (2)
intentional undervaluation, misdescription, misclassification or
misdeclaration in the import entries; or (3) undervaluation, misdeclaration in
weight, measurement or quantity of more than thirty percent (30%) between
the value, weight, measurement, or quantity declared in the entries, and the
actual value, weight, quantity, or measurement. This is consistent with
Section 230178 (Warrant for Detention of Property-Cash Bond) of the TCCP
which states that nothing therein shall be construed as relieving the owner or
importer from any criminal liability which may arise from any violation of
76 Id. at 237-238. 77 Id. at 234. 78 SEC. 2301. Warrant for Detention of PropertyCash Bond. - Upon making any, seizure, the
Collector shall issue a warrant for the detention of the property; and if the owner or
importer desires to
secure the release of the property for legitimate use, the Collector shall, with the
approval of the
Commissioner of Customs, surrender it upon the filing of a cash bond, in an amount
to be fixed by him,
conditioned upon the payment of the appraised value of the article and/or any fine,
expenses and costs
which may be adjudged in the case: Provided, That such importation shall not be
released under any bond
when there is prima facie evidence of fraud in the importation of the article:
Provided, further, That articles
the importation of which is prohibited by law shall not be released under any
circumstance whomsoever,
Provided, finally, That nothing in this section shall be construed as relieving the
owner or importer from
any criminal liability which may arise from any violation of law committed in
connection with the
importation of the article.
Decision - 30 - G.R. No. 193253
law committed in connection with the importation of articles, which in this
case were placed under a WSD for failure of the importer, OILINK, to
submit the required post-entry audit documents under CAO No. 4-2004.
In addition, OILINK and its directors or officers may be held liable
under Section 16 of R.A. No. 9135:79
SEC. 16. A new section to be known as Section 3611 is hereby
inserted in Part 3, Title VII of the Tariff and Customs Code of the
Philippines, as amended, which shall read as follows:
SEC. 3611. Failure to Pay Correct Duties and Taxes
on Imported Goods. - Any person who, after being

subjected to post-entry audit and examination as
provided in Section 3515 of Part 2, Title VII hereof, is
found to have incurred deficiencies in duties and taxes
paid for imported goods, shall be penalized according to
three (3) degrees of culpability subject to any
mitigating, aggravating or extraordinary factors that
are clearly established by the available evidence:
(a) Negligence - When the deficiency results from an
offenders failure, through an act or acts of omission or
commission, to exercise reasonable care and competence to
ensure that a statement made is correct, it shall be
determined to be negligent and punishable by a fine
equivalent to not less than one-half (1/2) but not more than
two (2) times the revenue loss.
(b) Gross Negligence - When a deficiency results from an
act or acts of omission or commission done with actual
knowledge or wanton disregard for the relevant facts and
with indifference to or disregard for the offenders
obligation under the statute, it shall be determined to be
grossly negligent and punishable by a fine equivalent to not
less than two and a half (2 ) but not more than four (4)
times the revenue loss.
(c) Fraud - When the material false statement or act in
connection with the transaction was committed or omitted
knowingly, voluntarily and intentionally, as established by
clear and convincing evidence, it shall be determined to be
fraudulent and be punishable by a fine equivalent to not
less than five (5) times but not more than eight (8) times the
revenue loss and imprisonment of not less than two (2)
years but not more than eight (8) years.

The decision of the Commissioner of Customs, upon proper
hearing, to impose penalties as prescribed in this Section may be appealed
in accordance with Section 2402 hereof.80
79 An Act Amending Certain Provisions of Presidential Decree No. 1464, Otherwise

Known as the
Tariff and Customs Code of the Philippines, As Amended, and For Other Purposes.
80 Emphasis added.
Decision - 31 - G.R. No. 193253
With respect to the directors or officers of OILINK, they may further
be held liable jointly and severally for all damages suffered by the
government on account of such violation of Sections 3602 and 3611 of the
TCCP, upon clear and convincing proof that they willfully and knowingly
voted for or assented to patently unlawful acts of the corporation or was
guilty of gross negligence or bad faith in directing its corporate affairs.81
WHEREFORE, the petition is PARTLY GRANTED. The Court of
Appeals Resolutions dated March 26, 2010 and August 4, 2010, in CA-G.R.
SP No. 113069, are REVERSED and SET ASIDE. The Resolution dated
December 28, 2009 of the Acting Secretary of Justice Agnes VST
Devanedera, which upheld the State Prosecutor's dismissal of the complaintaffidavit
filed by the Bureau of Customs for lack of probable cause, is
AFFIRMED. This is without prejudice to the filing of the appropriate
criminal and administrative charges under Sections 3602 and 3611 of the
Tariff and Customs Code of the Philippines, as amended, against private
respondents OILINK, its officers and directors, and Victor D. Piamonte, if
the final results of the post-entry audit and examination would show that
they violated the said provisions.
SO ORDERED.
WE CONCUR:
MARIA LOURDES P. A. SERENO

Chief Justice
~ .PERALTA
Justice
81 Corporation Code, Sec. 31. Liability of directors, trustees or officers. - Directors or
trustees who
willfully and knowingly vote for or assent to patently unlawful acts of the
corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire
any personal or pecuniary
interest in conflict with their duty as such directors or trustees shall be liable jointly
and severally for all
damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons.
When a director, trustee or officer attempts to acquire or acquires, in violation of his
duty, any
interest adverse to the corporation in respect of any matter which has been reposed
in him in confidence, as
to which equity imposes a disability upon him to deal in his own behalf, he shall be
liable as a trustee for
the cocporat;on and mu't ac<ount for the profiV; which otherw;,. would have
accrued to the corpora
FIRST DIVISION
G.R. Nos. 209353-54, July 06, 2015
REPUBLIC OF THE PHILIPPINES, REP. BY THE COMMISSIONER OF
CUSTOMS, Petitioner, v.PHILIPPINE AIRLINES, INC. (PAL), Respondent.
[G.R. Nos. 211733-34]
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. PHILIPPINE AIRLINES,
INC. (PAL),Respondent.
RESOLUTION
SERENO, C.J.:
Before the Court are consolidated Petitions for Review on eertiorari assailing the
Decision of the Court of Tax Appeals en banc (CTA en banc) dated 9 September
20131 in C.T.A. EB Nos. 920 and 922. Petitioner Commissioner of Internal Revenue
(CIR) also assailed the appellate court's Resolution dated 10 March 2014 2 in the
same consolidated cases.
The Facts
The case stemmed from a claim for a refund by respondent Philippine Airlines, Inc.
(PAL) of the amount of P4,469,199.98 representing the alleged erroneously paid
excise tax for the period covering July 2005 to February 2006. On 18 January 2007,
PAL filed written claims for a refund with the Bureau of Internal Revenue (BIR). For
failure of the BIR to act on the administrative claim, PAL filed two separate Petitions
for Review with the CTA on 30 July 2007 and 21 December 2007, docketed as C.T.A.
Case Nos. 7665 and 7713, respectively.
The CTA consolidated the two Petitions and tried them jointly. On 17 April 2012, the
CTA Second Division rendered a Decision granting the Petitions and ordered the CIR
and the Commissioner of Customs (COC) to refund PAL in the total amount of
P4,469,199.98.
On 23 April 2012 and 4 May 2012, the CIR and the COC filed their respective
Motions for Reconsideration, which were both denied in a Resolution dated 28 June
2012.
C.T.A. EB No. 920
The CIR, in its Petition for Review before the CTA en banc, raised the issue of
whether PAL is entitled to a tax refund of the alleged erroneously paid excise tax.
The CIR argued that Presidential Decree (P.D.) No. 1590, 3 particularly Section 13
thereof, had already been expressly amended by Republic Act (R.A.) No.
9334.4 Moreover, PAL failed to prove that the alleged commissary supplies were not
locally available in reasonable quantity, quality and price considering that no
independent credible evidence was presented but merely PAL's own employee
where testimony was self-serving and not comprehensive.
C.T.A. EB No. 922
A separate Petition for Review was filed before the CTA en banc by the COC. The
latter argued that the case should have been dismissed outright, as it stated no
cause of action against petitioner, which merely acted as a collecting agent for the
CIR. The COC further alleged that PAL had also failed to exhaust the latter's
administrative remedies with the former. Finally, like the CIR, the COC maintained
that Sections 6 and 10 of R.A. 9334 had repealed Sections 13 and 24 of P.D. 1590.
THE RULING OF THE CTA En Banc
The appeals were consolidated. The CTA en banc denied both Petitions and ruled
that R.A. 9334 was not expressly repealed by P.D. 1590. The tax court also
emphasized that P.D. 1590 is a special law that governs the franchise of PAL, while
R.A. 9334 is a general law, and therefore P.D. 1590 must prevail. The CTA held that
reliance by petitioners on Cagayan Electric Power Light Co. Inc. v. CIR5 is also
misplaced. In that case, there was an express repeal of R.A. 5431, as all corporate
taxpayers not expressly exempted under that law and under Section 27 of the Tax
Code were subjected to income tax.
The CTA ruled that respondent PAL was entitled to a refund of excise taxes paid on
the latter's commissary supplies. The appellate court explained that the exemption
granted to PAL under P.D. 1590 was not expressly repealed by R.A. 9334. The CTA
found that PAL had opted to pay the latter's basic corporate income tax for the fiscal
year ending 31 March 2006. The court also found that the articles imported were
intended for the operations of PAL and were not locally available in reasonable
quantity, quality or price. The latter is therefore entitled to a refund of erroneously
paid excise tax in the total amount of P4,469,199.98.
The Petitions
The COC, instead of filing a motion for reconsideration with the CTA, directly filed a
Petition before this Court. The COC assailed the Decision of the CTA en banc in
C.T.A. EB Nos. 920 and 922, herein docketed as G.R. Nos. 209353-54.
On the other hand, the CIR appealed the Decision dated 9 September 2013 and
Resolution dated 10 March 2014 on its Motion for Reconsideration herein docketed
as G.R. Nos. 211733-34.
Issue
Both Petitions raise similar issues, which boil down to the principal one of whether
Sections 6 and 10 of R.A. 9334 repealed Section 13 of P.D. 1590.
The Court's Ruling
We find no merit in the Petitions.
The controversy before the Court is not novel. In CIR v. PAL,6 the Court has already
passed upon the very same issues raised by the same petitioners. The only
differences are the taxable period involved and the amount of refundable tax.
We have held in that case that it is a basic principle in statutory construction that a
later law, general in terms and not expressly repealing or amending a prior special
law, will not ordinarily affect the special provisions of the earlier statute. A reading
of the pertinent provisions of P.D. 1590 and R.A. 9334 shows that there was no
express repeal of the grant of exemption:chanRoblesvirtualLawlibrary
PRESIDENTIAL DECREE NO. 15907
xxxx
SECTION 13. In consideration of the franchise and rights hereby granted, the
grantee shall pay to the Philippine Government during the life of this franchise
whichever of subsections (a) and (b) hereunder will result in a lower
tax:ChanRoblesVirtualawlibrary
(a) The basic corporate income tax based on the grantee's annual net taxable
income computed in accordance with the provisions of the National Internal
Revenue Code; or
b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantee
from all sources, without distinction as to transport or nontransport
operations;provided, that with respect to international airtransport service, only the
gross passenger, mail, and freight revenues from its outgoing flights shall be subject
to this tax.
The tax paid by the grantee under either of the above alternatives shall be
in lieu of all other taxes, duties, royalties, registration, license, and other
fees and charges of any kind, nature, or description, imposed, levied,
established, assessed, or collected by any municipal, city, provincial, or
national authority or government agency, now or in the future, including
but not limited to the following:
xxxx
(2) All taxes, including compensating taxes, duties, charges, royalties, or
fees due on all importations by the grantee of aircraft, engines, equipment,
machinery, spare parts, accessories, commissary and catering supplies,
aviation gas, fuel, and oil, whether refined or in crude form and other articles,
supplies, or materials;provided, that such articles or supplies or materials
are imported for the use of the grantee in its transport and nontransport
operations and other activities incidental thereto and are not locally
available in reasonable quantity, quality, or price;
xxxx
SECTION 24. This franchise, as amended, or any section or provision hereof may
only be modified, amended, or repealed expressly by a special law or decree that
shall specifically modify, amend, or repeal this franchise or any section or provision
thereof. (Emphasis supplied)
REPUBLIC ACT NO. 93348
xxxx
SECTION 6. Section 131 of the National Internal Revenue Code of 1997, is amended,
is hereby amended to read as follows:chanRoblesvirtualLawlibrary
SEC. 131. Payment of Excise Taxes on Imported Articles.
(A) Persons Liable. Excise taxes on imported articles shall be paid by the owner or
importer to the Customs Officers, conformably with the regulations of the
Department of Finance and before the release of such articles from the customs
house, or by the person who is found in possession of articles which are exempt
from excise taxes other than those legally entitled to exemption.
In the case of tax-free articles brought or imported into the Philippines by persons,
entities, or agencies exempt from tax which are subsequently sold, transferred or
exchanged in the Philippines to non-exempt persons or entities, the purchasers or
recipients shall be considered the importers thereof, and shall be liable for the duty
and internal revenue tax due on such importation.
importation of cigars and cigarettes, distilled spirits, fermented liquors
and wines into the Philippines, even if destined for tax and duty-free
shops, shall be subject to all applicable taxes, duties, charges, including
excise taxes due thereon. This shall apply to cigars and cigarettes, distilled
spirits, fermented liquors and wines brought directly into the duly chartered or
legislated freeports of the Subic Special Economic and Freeport Zone, created under
Republic Act No. 7227; the Cagayan Special Economic Zone and Freeport, created
under Republic Act No. 7922; and the Zamboanga City Special Economic Zone,
created under Republic Act No. 7903, and such other freeports as may hereafter be
established or created by law: Provided, further, That importations of cigars and
cigarettes, distilled spirits, fermented liquors and wines made directly by a
government-owned and operated duty-free shop, like the Duty-Free Philippines
(DFP), shall be exempted from all applicable duties only:Provided, still further, That
such articles directly imported by a government-owned and operated duty-free
shop, like the Duty-Free Philippines, shall be labeled 'duty-free' and 'not for
resale': Provided, finally, That the removal and transfer of tax and duty-free goods,
products, machinery, equipment and other similar articles other than cigars and
cigarettes, distilled spirits, fermented liquors and wines, from one freeport to
another freeport, shall not be deemed on introduction into the Philippine customs
territory.
xxxx
SECTION 10. Repealing Clause. All laws, decrees, ordinances, rules and
regulations, executive or administrative orders, and such other presidential
issuances as are inconsistent with any of the provisions of this Act are hereby
repealed, amended or otherwise modified accordingly. (Emphasis supplied)
The Court has exhaustively discussed all issues similar to those in the present case
in this wise:chanRoblesvirtualLawlibrary
Indeed, as things stand, PD 1590 has not been revoked by the NIRC of 1997, as
amended. Or to be more precise, the tax privilege of PAL provided in Sec. 13 of PD
1590 has not been revoked by Sec. 131 of the NIRC of 1997, as amended by Sec. 6
of RA 9334. We said as much in Commissioner of Internal Revenue v. Philippine Air
Lines, Inc.:9cralawred
That the Legislature chose not to amend or repeal [PD] 1590 even after PAL was
privatized reveals the intent of the Legislature to let PAL continue to enjoy, as a
private corporation, the very same rights and privileges under the terms and
conditions stated in said charter, x x x
To be sure, the manner to effectively repeal or at least modify any specific provision
of PAL's franchise under PD 1590, as decreed in the aforequoted Sec. 24, has not
been demonstrated. And as aptly held by the CTA en banc, borrowing from the
same Commissioner of Internal Revenue case:chanRoblesvirtualLawlibrary
While it is true that Sec. 6 of RA 9334 as previously quoted states that "the
provisions of any special or general law to the contrary notwithstanding," such
phrase left alone cannot be considered as an express repeal of the exemptions
granted under PAL's franchise because it fails . to specifically identify PD 1590 as
one of the acts intended to be repealed. . . . (Emphasis supplied)
Noteworthy is the fact that PD 1590 is a special law, which governs the franchise of
PAL. Between the provisions under PD 1590 as against the provisions under the
NIRC of 1997, as amended by 9334, which is a general law, the former necessary
prevails. This is in accordance with the rule that on a specific matter, the special law
shall prevail over the general law, which shall be resorted only to supply
deficiencies in the former. In addition, where there are two statutes, the earlier
special and the later general the terms of the general broad enough to include
the matter provided for in the special the fact that one is special and other
general creates a presumption that the special is considered as remaining an
exception to the general, one as a general law of the land and the other as the law
of a particular case.10
In other words, the franchise of PAL remains the governing law on its exemption
from taxes. Its payment of either basic corporate income tax or franchise tax whichever is lower - shall be in lieu of all other taxes, duties, royalties, registrations,
licenses, and other fees and charges, except only real property tax. The phrase "in
lieu of all other taxes" includes but is not limited to taxes, duties, charges, royalties,
or fees due on all importations by the grantee of the commissary and catering
supplies, provided that such articles or supplies or materials are imported for the
use of the grantee in its transport and nontransport operations and other activities
incidental thereto and are not locally available in reasonable quantity, quality, or
price.
However, upon the amendment of the 1997 NIRC, Section 22 11 of R.A.
933712 abolished the franchise tax and subjected PAL and similar entities to
corporate income tax and value-added tax (VAT). PAL nevertheless remains exempt
from taxes, duties, royalties, registrations, licenses, and other fees and charges,
provided it pays corporate income tax as granted in its franchise agreement.

Accordingly, PAL is left with no other option but to pay its basic corporate income
tax, the payment of which shall be in lieu of all other taxes, except VAT, and subject
to certain conditions provided in its charter.
In this case, the CTA found that PAL had paid basic corporate income tax for fiscal
year ending 31 March 2006.13 Consequently, PAL may now claim exemption from
taxes, duties, charges, royalties, or fees due on all importations of its commissary
and catering supplies, provided it shows that 1) such articles or supplies or
materials are imported for use in its transport and nontransport operations and
other activities incidental thereto; and 2) they are not locally available in reasonable
quantity, quality, or price.
As to the issue of PAL's noncompliance with the conditions set by Section 13 of P.D.
1509 for the imported supplies to be exempt from excise tax, it must be noted that
these are factual determinations that are best left to the CTA. The appellate court
found that PAL had complied with these conditions. 14 The CTA is a highly specialized
body that reviews tax cases and conducts trial de novo. Therefore, without any
showing that the findings of the CTA are unsupported by substantial evidence, its
findings are binding on this Court.15chanrobleslaw
In view thereof, we find no cogent reason to reverse or modify the findings of the
CTA en banc.
WHEREFORE, premises considered, both Petitions are DENIED for lack of merit.
Leonardo-De Castro, Bersamin, Perez, and Perlas-Bernabe, JJ., concur.
Endnotes:
Rollo (G.R. Nos. 209353-54), pp. 97-135; penned by Associate Justice Cielito N.
Mindaro-Grulla and concurred in by Associate Justices Juanito C. Castafieda, Jr.,
Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, and Esperanza R. FabonVictorino, with dissents by Presiding Justice Roman G. del Rosario and Associate
Justice Ma. Belen M. Ringpis-Liban.
2
Rollo (G.R. Nos. 211733-34), pp. 115-123.
An Act Granting A New Franchise To Philippine Airlines, Inc. To Establish, Operate,

and Maintain Air-Transport Services in the Philippines and Other Countries.
4
An Act Increasing the Excise Tax Rates Imposed On Alcohol and Tobacco Products,
Amending for the Purpose Sections 131, 141, 142, 143, 144, 145 and 288 of the
National Internal Revenue Code of 1997, as amended.
223 Phil. 211 (1985).
G.R. Nos. 212536-37, 27 August 2014.
Took effect on 11 June 1978.
Took effect on 1 January 2005 (Section 11 of R.A. 9334).
609 Phil. 695, 719 (2009).
10
Supra note 6.
11
SECTION 22. Franchises of Domestic Airlines. The provisions of P.D. No. 1590 on
the franchise tax of Philippine Airlines, Inc., R.A. No. 7151 on the franchise tax of
Cebu Air, Inc., R.A. No. 7583 on the franchise tax of Aboitiz Air Transport
Corporation, R.A. No. 7909 on the franchise tax of Pacific Airways Corporation, R.A.
No. 8339 on the franchise tax of Air Philippines, or any other franchise agreement or
law pertaining to a domestic airline to the contrary
notwithstanding:ChanRoblesVirtualawlibrary
(A) The franchise tax is abolished;
(B) The franchisee shall be liable to the corporate income tax;
(C) The franchisee shall register for value-added tax under Section 236, and to
account under Title IV of the National Internal Revenue Code of 1997, as amended,
for value-added tax on its sale of goods, property or services and its lease of
property; and
(D) The franchisee shall otherwise remain exempt from any taxes, duties, royalties,
registration, license, and other fees and charges, as may be provided by their
respective franchise agreement.
12
An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113,
114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of The National Internal
Revenue Code of 1997, as amended, and For Other Purposes.
13
Decision in C.T.A. Case Nos. 7665 and 7713, rollo, pp.299-300.
14
Id. at 300-302.
15
Commissioner of Internal Revenue v. United International Pictures, 597 Phil. 1, 4

(2009).chanroblesvirtuallawlibrary
FIRST DIVISION
G.R. No. 181756, June 15, 2015

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY
(MCIAA), Petitioner, v. CITY OF LAPU-LAPU AND ELENA T.
PACALDO, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This is a clear opportunity for this Court to clarify the effects of our two previous
decisions, issued a decade apart, on the power of local government units to collect
real property taxes from airport authorities located within their area, and the nature
or the juridical personality of said airport authorities.
Before us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of
Civil Procedure seeking to reverse and set aside the October 8, 2007 Decision1 of
the Court of Appeals (Cebu City) in CA-G.R. SP No. 01360 and the February 12,
2008 Resolution2 denying petitioners motion for reconsideration.
THE FACTS
Petitioner Mactan-Cebu International Airport Authority (MCIAA) was created by
Congress on July 31, 1990 under Republic Act No. 6958 3 to undertake the
economical, efficient and effective control, management and supervision of
the Mactan International Airport in the Province of Cebu and the Lahug Airport in
Cebu City x x x and such other airports as may be established in the Province of
Cebu. It is represented in this case by the Office of the Solicitor General.
Respondent City of Lapu-Lapu is a local government unit and political subdivision,
created and existing under its own charter with capacity to sue and be sued.
Respondent Elena T. Pacaldo was impleaded in her capacity as the City Treasurer of
respondent City.
Upon its creation, petitioner enjoyed exemption from realty taxes under the
following provision of Republic Act No. 6958:chanRoblesvirtualLawlibrary
Section 14. Tax Exemptions. The Authority shall be exempt from realty taxes
imposed by the National Government or any of its political subdivisions, agencies
and instrumentalities: Provided, That no tax exemption herein granted shall extend
to any subsidiary which may be organized by the
Authority.chanroblesvirtuallawlibrary
On September 11, 1996, however, this Court rendered a decision in Mactan-Cebu
International Airport Authority v. Marcos4 (the 1996 MCIAA case) declaring that upon
the effectivity of Republic Act No. 7160 (The Local Government Code of 1991),
petitioner was no longer exempt from real estate taxes. The Court
held:chanRoblesvirtualLawlibrary
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity
of the LGC, exemptions from payment of real property taxes granted to natural or
juridical persons, including government-owned or controlled corporations, except as
provided in the said section, and the petitioner is, undoubtedly, a governmentowned corporation, it necessarily follows that its exemption from such tax granted it
in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. x x
x.chanroblesvirtuallawlibrary
On January 7, 1997, respondent City issued to petitioner a Statement of Real Estate
Tax assessing the lots comprising the Mactan International Airport in the amount of
P162,058,959.52. Petitioner complained that there were discrepancies in said
Statement of Real Estate Tax as follows:chanRoblesvirtualLawlibrary
(a) [T]he statement included lots and buildings not found in the inventory of
petitioners real properties;
(b) [S]ome of the lots were covered by two separate tax declarations which resulted
in double assessment;
(c) [There were] double entries pertaining to the same lots; and
(d) [T]he statement included lots utilized exclusively for governmental purposes. 5
Respondent City amended its billing and sent a new Statement of Real Estate Tax to
petitioner in the amount of P151,376,134.66. Petitioner averred that this amount
covered real estate taxes on the lots utilized solely and exclusively for public or
governmental purposes such as the airfield, runway and taxiway, and the lots on
which they are situated.6chanrobleslaw
Petitioner paid respondent City the amount of four million pesos (P4,000,000.00)
monthly, which was later increased to six million pesos (P6,000,000.00) monthly. As
of December 2003, petitioner had paid respondent City a total of
P275,728,313.36.7chanrobleslaw
Upon request of petitioners General Manager, the Secretary of the Department of
Justice (DOJ) issued Opinion No. 50, Series of 1998, 8 and we quote the pertinent
portions of said Opinion below:chanRoblesvirtualLawlibrary
You further state that among the real properties deemed transferred to MCIAA are
the airfield, runway, taxiway and the lots on which the runway and taxiway are
situated, the tax declarations of which were transferred in the name of the MCIAA.
In 1997, the City of Lapu-Lapu imposed real estate taxes on these properties
invoking the provisions of the Local Government Code.
It is your view that these properties are not subject to real property tax because
they are exclusively used for airport purposes. You said that the runway and taxiway
are not only used by the commercial airlines but also by the Philippine Air Force and
other government agencies. As such and in conjunction with the above
interpretation of Section 15 of R.A. No. 6958, you believe that these properties are
considered owned by the Republic of the Philippines. Hence, this request for
opinion.
The query is resolved in the affirmative. The properties used for airport
purposes (i.e. airfield, runway, taxiway and the lots on which the runway
and taxiway are situated) are owned by the Republic of the Philippines.
xxxx
Under the Law on Public Corporations, the legislature has complete control over the
property which a municipal corporation has acquired in its public or governmental
capacity and which is devoted to public or governmental use. The municipality in
dealing with said property is subject to such restrictions and limitations as the
legislature may impose. On the other hand, property which a municipal corporation
acquired in its private or proprietary capacity, is held by it in the same character as
a private individual. Hence, the legislature in dealing with such property, is subject
to the constitutional restrictions concerning property (Martin, Public Corporations
[1997], p. 30; see also Province of Zamboanga del [Norte] v. City of
Zamboanga [131 Phil. 446]). The same may be said of properties transferred to the
MCIAA and used for airport purposes, such as those involved herein. Since such
properties are of public dominion, they are deemed held by the MCIAA in trust for
the Government and can be alienated only as may be provided by law.
Based on the foregoing, it is our considered opinion that the properties
used for airport purposes, such as the airfield, runway and taxiway and
the lots on which the runway and taxiway are located, are owned by the
State or by the Republic of the Philippines and are merely held in trust by
the MCIAA, notwithstanding that certificates of titles thereto may have
been issued in the name of the MCIAA. (Emphases added.)
Based on the above DOJ Opinion, the Department of Finance issued a
2nd Indorsement to the City Treasurer of Lapu-Lapu dated August 3, 1998, 9 which
reads:chanRoblesvirtualLawlibrary
The distinction as to which among the MCIAA properties are still considered owned
by the State or by the Republic of the Philippines, such as the resolution in the
above-cited DOJ Opinion No. 50, for purposes of real property tax exemption is
hereby deemed tenable considering that the subject airfield, runway, taxiway and
the lots on which the runway and taxiway are situated appears to be the subject of
real property tax assessment and collection of the city government of Lapu-Lapu,
hence, the same are definitely located within the jurisdiction of Lapu-Lapu City.
Moreover, then Undersecretary Antonio P. Belicena of the Department of
Finance, in his 1st Indorsement dated May 18, 1998, advanced that this
Department (DOF) interposes no objection to the request of Mactan Cebu
International Airport Authority for exemption from payment of real
property tax on the property used for airport purposes mentioned above.
The City Assessor, therefore, is hereby instructed to transfer the

assessment of the subject airfield, runway, taxiway and the lots on which
the runway and taxiway are situated, from the Taxable Roll to the
Exempt Roll of real properties.
The City Treasurer thereat should be informed on the action taken for his immediate
appropriate action. (Emphases added.)
Respondent City Treasurer Elena T. Pacaldo sent petitioner a Statement of Real
Property Tax Balances up to the year 2002 reflecting the amount of
P246,395,477.20. Petitioner claimed that the statement again included the lots
utilized solely and exclusively for public purpose such as the airfield, runway, and
taxiway and the lots on which these are built. Respondent Pacaldo then issued
Notices of Levy on 18 sets of real properties of petitioner. 10chanrobleslaw
Petitioner filed a petition for prohibition11 with the Regional Trial Court (RTC) of LapuLapu City with prayer for the issuance of a temporary restraining order (TRO) and/or
a writ of preliminary injunction, docketed as SCA No. 6056-L. Branch 53 of RTC LapuLapu City then issued a 72-hour TRO. The petition for prohibition sought to enjoin
respondent City from issuing a warrant of levy against petitioners properties and
from selling them at public auction for delinquency in realty tax obligations. The
petition likewise prayed for a declaration that the airport terminal building, the
airfield, runway, taxiway and the lots on which they are situated are exempted from
real estate taxes after due hearing. Petitioner based its claim of exemption on DOJ
Opinion No. 50.
The RTC issued an Order denying the motion for extension of the TRO. Thus, on
December 10, 2003, respondent City auctioned 27 of petitioners properties. As
there was no interested bidder who participated in the auction sale, respondent City
forfeited and purchased said properties. The corresponding Certificates of Sale of
Delinquent Property were issued to respondent City. 12chanrobleslaw
Petitioner claimed before the RTC that it had discovered that respondent City did not
pass any ordinance authorizing the collection of real property tax, a tax for the
special education fund (SEF), and a penalty interest for its nonpayment. Petitioner
argued that without the corresponding tax ordinances, respondent City could not
impose and collect real property tax, an additional tax for the SEF, and penalty
interest from petitioner.13chanrobleslaw
The RTC issued an Order14 on December 28, 2004 granting petitioners application
for a writ of preliminary injunction. The pertinent portions of the Order are quoted
below:chanRoblesvirtualLawlibrary
The supervening legal issue has rendered it imperative that the matter of the
consolidation of the ownership of the auctioned properties be placed on hold.
Furthermore, it is the view of the Court that great prejudice and damage will be
suffered by petitioner if it were to lose its dominion over these properties now when
the most important legal issue has still to be resolved by the Court. Besides, the
respondents and the intervenor have not sufficiently shown cause why petitioners
application should not be granted.
WHEREFORE, the foregoing considered, petitioners application for a writ of
preliminary injunction is granted. Consequently, upon the approval of a bond in the
amount of one million pesos (P1,000,000.00), let a writ of preliminary injunction
issue enjoining the respondents, the intervenor, their agents or persons acting in
[their] behalf, to desist from consolidating and exercising ownership over the
properties of the petitioner.chanroblesvirtuallawlibrary
However, upon motion of respondents, the RTC lifted the writ of preliminary
injunction in an Order15dated December 5, 2005. The RTC reasoned as
follows:chanRoblesvirtualLawlibrary
The respondent City, in the course of the hearing of its motion, presented to this
Court a certified copy of its Ordinance No. 44 (Omnibus Tax Ordinance of the City of
Lapu-Lapu), Section 25 whereof authorized the collection of a rate of one and onehalf (1 ) [per centum] from owners, executors or administrators of any real estate
lying within the jurisdiction of the City of Lapu-Lapu, based on the assessed value as
shown in the latest revision.
Though this ordinance was enacted prior to the effectivity of Republic Act No. 7160
(Local Government Code of 1991), to the mind of the Court this ordinance is still a
valid and effective ordinance in view of Sec. 529 of RA 7160 x x x [and the]
Implementing Rules and Regulations of RA 7160 x x x.
xxxx
The tax collected under Ordinance No. 44 is within the rates prescribed by RA 7160,
though the 25% penalty collected is higher than the 2% interest allowed under Sec.
255 of the said law which provides:chanRoblesvirtualLawlibrary
In case of failure to pay the basic real property tax or any other tax levied under this
Title upon the expiration of the periods as provided in Section 250, or when due, as
the case may be, shall subject the taxpayer to the payment of interest at the rate of
two percent (2%) per month on the unpaid amount or a fraction thereof, until the
delinquent tax shall have been fully paid: Provided, however, That in no case shall
the total interest on the unpaid tax or portion thereof exceed thirty-six (36)
months.chanroblesvirtuallawlibrary
This difference does not however detract from the essential enforceability and
effectivity of Ordinance No. 44 pursuant to Section 529 of RA 7160 and Article 278
of the Implementing Rules and Regulations. The outcome of this disparity is simply
that respondent City can only collect an interest of 2% per month on the unpaid tax.
Consequently, respondent City [has] to recompute the petitioners tax liability.
It is also the Courts perception that respondent City can still collect the additional
1% tax on real property without an ordinance to this effect. It may be recalled that
Republic Act No. 5447 has created the Special Education Fund which is constituted
from the proceeds of the additional tax on real property imposed by the law.
Respondent City has collected this tax as mandated by this law without any
ordinance for the purpose, as there is no need for it. Even when RA 5447 was
amended by PD 464 (Real Property Tax Code), respondent City had continued to
collect the tax, as it used to.
It is true that RA 7160 has repealed RA 5447, but what has been repealed are only
Section 3, a(3) and b(2) which concern the allocation of the additional tax,
considering that under RA 7160, the proceeds of the additional 1% tax on real
property accrue exclusively to the Special Education Fund. Nevertheless, RA 5447
has not been totally repealed; there is only a partial repeal.
It may be observed that there is no requirement in RA 7160 that an ordinance be
enacted to enable the collection of the additional 1% tax. This is so since RA 5447 is
still in force and effect, and the declared policy of the government in enacting the
law, which is to contribute to the financial support of the goals of education as
provided in the Constitution, necessitates the continued and uninterrupted
collection of the tax. Considering that this is a tax of far-reaching importance, to
require the passage of an ordinance in order that the tax may be collected would be
to place the collection of the tax at the option of the local legislature. This would run
counter to the declared policy of the government when the SEF was created and the
tax imposed.
As regards the allegation of respondents that this Court has no jurisdiction to
entertain the instant petition, the Court deems it proper, at this stage of the
proceedings, not to treat this issue, as it involves facts which are yet to be
established.
x x x [T]he Courts issuance of a writ of preliminary injunction may appear to be a
futile gesture in the light of Section 263 of RA 7160. x x x.
xxxx
It would seem from the foregoing provisions, that once the taxpayer fails to redeem
within the one-year period, ownership fully vests on the local government unit
concerned. Thus, when in the present case petitioner failed to redeem the parcels of
land acquired by respondent City, the ownership thereof became fully vested on
respondent City without the latter having to perform any other acts to perfect its
ownership. Corollary thereto, ownership on the part of respondent City has become
a fait accompli.
WHEREFORE, in the light of the foregoing considerations, respondents motion for
reconsideration is granted, and the order of this Court dated December 28, 2004 is
hereby reconsidered. Consequently, the writ of preliminary injunction issued by this
Court is hereby lifted.chanroblesvirtuallawlibrary
Aggrieved, petitioner filed a petition for certiorari16 with the Court of Appeals (Cebu
City), with urgent prayer for the issuance of a TRO and/or writ of preliminary
injunction, docketed as CA-G.R. SP No. 01360. The Court of Appeals (Cebu City)
issued a TRO17 on January 5, 2006 and shortly thereafter, issued a writ of
preliminary injunction18 on February 17, 2006.
RULING OF THE COURT OF APPEALS
The Court of Appeals (Cebu City) promulgated the questioned Decision on October
8, 2007, holding that petitioner is a government-owned or controlled corporation
and its properties are subject to realty tax. The dispositive portion of the questioned
Decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing, judgment is hereby rendered by us as
follows:
a. We DECLARE the airport terminal building, the airfield, runway, taxiway and
the lots on which they are situated NOT EXEMPT from the real estate tax
imposed by the respondent City of Lapu-Lapu;
b. We DECLARE the imposition and collection of the real estate tax, the
additional levy for the Special Education Fund and the penalty interest
as VALID andLEGAL. However, pursuant to Section 255 of the Local
Government Code, respondent city can only collect an interest of 2% per
month on the unpaid tax which total interest shall, in no case, exceed thirtysix (36) months;
c. We DECLARE the sale in public auction of the aforesaid properties and the
eventual forfeiture and purchase of the subject property by the respondent
City of Lapu-Lapu as NULL and VOID. However, petitioner MCIAAs property
is encumbered only by a limited lien possessed by the respondent City of
Lapu-Lapu in accord with Section 257 of the Local Government Code. 19
Petitioner filed a Motion for Partial Reconsideration 20 of the questioned Decision
covering only the portion of said decision declaring that petitioner is a GOCC and,
therefore, not exempt from the realty tax and special education fund imposed by
respondent City. Petitioner cited Manila International Airport Authority v. Court of
Appeals21 (the 2006 MIAA case) involving the City of Paraaque and the Manila
International Airport Authority. Petitioner claimed that it had been described by this
Court as a government instrumentality, and that it followed as a logical
consequence that petitioner is exempt from the taxing powers of respondent City of
Lapu-Lapu.22 Petitioner alleged that the 1996 MCIAAcase had been overturned by
the Court in the 2006 MIAA case. Petitioner thus prayed that it be declared exempt
from paying the realty tax, special education fund, and interest being collected by
respondent City.
On February 12, 2008, the Court of Appeals denied petitioners motion for partial
reconsideration in the questioned Resolution.
The Court of Appeals followed and applied the precedent established in the
1996 MCIAA case and refused to apply the 2006 MIAA case. The Court of Appeals
wrote in the questioned Decision: We find that our position is in line with the
coherent and cohesive interpretation of the relevant provisions of the Local
Government Code on local taxation enunciated in the [1996 MCIAA] case which to
our mind is more elegant and rational and provides intellectual clarity than the one
provided by the Supreme Court in the [2006] MIAA case.23chanrobleslaw
In the questioned Decision, the Court of Appeals held that petitioners airport
terminal building, airfield, runway, taxiway, and the lots on which they are situated
are not exempt from real estate tax reasoning as
Under the Local Government Code (LGC for brevity), enacted pursuant to the
constitutional mandate of local autonomy, all natural and juridical persons,
including government-owned or controlled corporations (GOCCs), instrumentalities
and agencies, are no longer exempt from local taxes even if previously granted an
exemption. The only exemptions from local taxes are those specifically provided
under the Code itself, or those enacted through subsequent legislation.
Thus, the LGC, enacted pursuant to Section 3, Article X of the Constitution, provides
for the exercise by local government units of their power to tax, the scope thereof
or its limitations, and the exemptions from local taxation.
Section 133 of the LGC prescribes the common limitations on the taxing powers of
local government units. x x x.
xxxx
The above-stated provision, however, qualified the exemption of the National
Government, its agencies and instrumentalities from local taxation with the phrase
unless otherwise provided herein.
Section 232 of the LGC provides for the power of the local government units (LGUs
for brevity) to levy real property tax. x x x.
xxxx
Section 234 of the LGC provides for the exemptions from payment of real property
taxes and withdraws previous exemptions granted to natural and juridical persons,
including government-owned and controlled corporations, except as provided
therein. x x x.
xxxx
Section 193 of the LGC is the general provision on withdrawal of tax exemption
privileges. x x x.24 (Citations omitted.)
The Court of Appeals went on to state that contrary to the ruling of the Supreme
Court in the 2006MIAA case, it finds and rules that:chanRoblesvirtualLawlibrary
a) Section 133 of the LGC is not an absolute prohibition on the power of the LGUs to
tax the National Government, its agencies and instrumentalities as the same is
qualified by Sections 193, 232 and 234 which otherwise provided; and
b) Petitioner MCIAA is a GOCC.25 (Emphasis ours.)
The Court of Appeals ratiocinated in the following
manner:chanRoblesvirtualLawlibrary
Pursuant to the explicit provision of Section 193 of the LGC, exemptions previously
enjoyed by persons, whether natural or juridical, like the petitioner MCIAA, are
deemed withdrawn upon the effectivity of the Code. Further, the last paragraph of
Section 234 of the Code also unequivocally withdrew, upon the Codes effectivity,
exemptions from payment of real property taxes previously granted to natural or
juridical persons, including government-owned or controlled corporations, except as
provided in the said section. Petitioner MCIAA, undoubtedly a juridical person, it
follows that its exemption from such tax granted under Section 14 of R.A. 6958 has
been withdrawn.
xxxx
From the [1996 MCIAA] ruling, it is acknowledged that, under Section 133 of the
LGC, instrumentalities were generally exempt from all forms of local government
taxation, unless otherwise provided in the Code. On the other hand, Section 232
otherwise provided insofar as it allowed local government units to levy an ad
valorem real property tax, irrespective of who owned the property. At the same
time, the imposition of real property taxes under Section 232 is, in turn, qualified by
the phrase not hereinafter specifically exempted. The exemptions from real
property taxes are enumerated in Section 234 of the Code which specifically states
that only real properties owned by the Republic of the Philippines or any of its
political subdivisions are exempted from the payment of the tax. Clearly,
instrumentalities or GOCCs do not fall within the exceptions under Section 234 of
the LGC.
Thus, as ruled in the [1996 MCIAA] case, the prohibition on taxing the national
government, its agencies and instrumentalities under Section 133 is qualified by
Sections 232 and 234, and accordingly, the only relevant exemption now applicable
to these bodies is what is now provided under Section 234(a) of the Code. It may be
noted that the express withdrawal of previously granted exemptions to persons
from the payment of real property tax by the LGC does not even make any
distinction as to whether the exempt person is a governmental entity or not. As
Sections 193 and 234 of the Code both state, the withdrawal applies to all persons,
including GOCCs, thus encompassing the two classes of persons recognized under
our laws, natural persons and juridical persons.
xxxx
The question of whether or not petitioner MCIAA is an instrumentality or a GOCC
has already been lengthily but soundly, cogently and lucidly answered in the
[1996 MCIAA] case x x x.
xxxx
Based on the foregoing, the claim of the majority of the Supreme Court in the
[2006MIAA] case that MIAA (and also petitioner MCIAA) is not a government-owned
or controlled corporation but an instrumentality based on Section 2(10) of the
Administrative Code of 1987 appears to be unsound. In the [2006 MIAA] case, the
majority justifies MIAAs purported exemption on Section 133(o) of the Local
Government Code which places agencies and instrumentalities: as generally exempt
from the taxation powers of the LGUs. It further went on to hold that By express
mandate of the Local Government Code, local governments cannot impose any kind
of tax on national government instrumentalities like the MIAA. x x x. 26 (Citations
omitted.)
The Court of Appeals further cited Justice Tingas dissent in the 2006 MIAA case as
well as provisions from petitioner MCIAAs charter to show that petitioner is a
GOCC.27 The Court of Appeals wrote:chanRoblesvirtualLawlibrary
These cited provisions establish the fitness of the petitioner MCIAA to be the subject
of legal relations. Under its charter, it has the power to acquire, possess and incur
obligations. It also has the power to contract in its own name and to acquire title to
movable or immovable property. More importantly, it may likewise exercise powers
of a corporation under the Corporation Code. Moreover, based on its own allegation,
it even recognized itself as a GOCC when it alleged in its petition for prohibition filed
before the lower court that it is a body corporate organized and existing under
Republic Act No. 6958 x x x.
We also find to be not meritorious the assertion of petitioner MCIAA that the
respondent city can no longer challenge the tax-exempt character of the properties
since it is estopped from doing so when respondent City of Lapu-Lapu, through its
former mayor, Ernest H. Weigel, Jr., had long ago conceded that petitioners
properties are exempt from real property tax.
It is not denied by the respondent city that it considered, through its former mayor,
Ernest H. Weigel, Jr., petitioners subject properties, specifically the runway and
taxiway, as exempt from taxes. However, as astutely pointed out by the respondent
city it can never be in estoppel, particularly in matters involving taxes. It is a wellknown rule that erroneous application and enforcement of the law by public officers
do not preclude subsequent correct application of the statute, and that the
Government is never estopped by mistake or error on the part of its
agents.28 (Citations omitted.)
The Court of Appeals established the following:chanRoblesvirtualLawlibrary
a) [R]espondent City was able to prove and establish that it has a valid and existing
ordinance for the imposition of realty tax against petitioner MCIAA;
b) [T]he imposition and collection of additional levy of 1% Special Education Fund
(SEF) is authorized by law, Republic Act No. 5447; and
c) [T]he collection of penalty interest for delinquent taxes is not only authorized by
law but is likewise [sanctioned] by respondent Citys ordinance. 29
The Court of Appeals likewise held that respondent City has a valid and existing
local tax ordinance, Ordinance No. 44, or the Omnibus Tax Ordinance of Lapu-Lapu
City, which provided for the imposition of real property tax. The relevant provision
Chapter 5 Tax on Real Property Ownership
Section 25. RATE OF TAX. - A rate of one and one-half (1 ) percentum shall be
collected from owners, executors or administrators of any real estate lying within
the territorial jurisdiction of the City of Lapu-Lapu, based on the assessed value as
shown in the latest revision.30
The Court of Appeals found that even if Ordinance No. 44 was enacted prior to the
effectivity of the LGC, it remained in force and effect, citing Section 529 of the LGC
and Article 278 of the LGCs Implementing Rules and Regulations. 31chanrobleslaw
As regards the Special Education Fund, the Court of Appeals held that respondent
City can still collect the additional 1% tax on real property even without an
ordinance to this effect, as this is authorized by Republic Act No. 5447, as amended
by Presidential Decree No. 464 (the Real Property Tax Code), which does not require
an enabling tax ordinance. The Court of Appeals affirmed the RTCs ruling that
Republic Act No. 5447 was still in force and effect notwithstanding the passing of
the LGC, as the latter only partially repealed the former law. What Section 534 of
the LGC repealed was Section 3 a(3) and b(2) of Republic Act No. 5447, and not the
entire law that created the Special Education Fund. 32 The repealed provisions
referred to allocation of taxes on Virginia type cigarettes and duties on imported leaf
tobacco and the percentage remittances to the taxing authority concerned. The
Court of Appeals, citing The Commission on Audit of the Province of Cebu v.
Province of Cebu,33 held that [t]he failure to add a specific repealing clause
particularly mentioning the statute to be repealed indicates that the intent was not
to repeal any existing law on the matter, unless an irreconcilable inconsistency and
repugnancy exists in the terms of the new and the old laws. 34 The Court of Appeals
quoted the RTCs discussion on this issue, which we reproduce
It may be observed that there is no requirement in RA 7160 that an ordinance be
enacted to enable the collection of the additional 1% tax. This is so since R.A. 5447
is still in force and effect, and the declared policy of the government in enacting the
law, which is to contribute to the financial support of the goals of education as
provided in the Constitution, necessitates the continued and uninterrupted
collection of the tax. Considering that this is a tax of far-reaching importance, to

require the passage of an ordinance in order that the tax may be collected would be
to place the collection of the tax at the option of the local legislature. This would run
counter to the declared policy of the government when the SEF was created and the
tax imposed.35
Regarding the penalty interest, the Court of Appeals found that Section 30 of
Ordinance No. 44 of respondent City provided for a penalty surcharge of 25% of the
tax due for a given year. Said provision reads:chanRoblesvirtualLawlibrary
Section 30. PENALTY FOR FAILURE TO PAY TAX. Failure to pay the tax provided for
under this Chapter within the time fixed in Section 27, shall subject the taxpayer to
a surcharge of twenty-five percent (25%), without interest. 36
The Court of Appeals however declared that after the effectivity of the Local
Government Code, the respondent City could only collect penalty surcharge up to
the extent of 72%, covering a period of three years or 36 months, for the entire
delinquent property.37 This was lower than the 25% per annum surcharge imposed
by Ordinance No. 44.38 The Court of Appeals affirmed the findings of the RTC in the
decision quoted below:chanRoblesvirtualLawlibrary
The tax collected under Ordinance No. 44 is within the rates prescribed by RA 7160,
though the 25% penalty collected is higher than the 2% allowed under Sec. 255 of
the said law which provides:ChanRoblesVirtualawlibrary
xxxx
This difference does not however detract from the essential enforceability and
effectivity of Ordinance No. 44 pursuant to Section 529 of RA No. 7160 and Article
278 of the Implementing Rules and Regulations. The outcome of this disparity is
simply that respondent City can only collect an interest of 2% per month on the
unpaid tax. Consequently, respondent city will have to [recompute] the petitioners
tax liability.39
It is worthy to note that the Court of Appeals nevertheless held that even
if it is clear that respondent City has the power to impose real property
taxes over petitioner, it is also evident and categorical that, under
Republic Act No. 6958, the properties of petitioner MCIAA may not be
conveyed or transferred to any person or entity except to the national
government.40 The relevant provisions of the said law are quoted
Section 4. Functions, Powers and Duties. The Authority shall have the
following functions, powers and duties:ChanRoblesVirtualawlibrary
xxxx
(e) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose
of any land, building, airport facility, or property of whatever kind and nature,
whether movable or immovable, or any interest therein: Provided, That any asset
located in theMactan International Airport important to national security shall not be

subject to alienation or mortgage by the Authority nor to transfer to any entity other
than the National Government[.]
Section 13. Borrowing Power. The Authority may, in accordance with Section
21, Article XII of the Constitution and other existing laws, rules and regulations on
local or foreign borrowing, raise funds, either from local or international sources, by
way of loans, credit or securities, and other borrowing instruments with the power to
create pledges, mortgages and other voluntary liens or encumbrances on any of its
assets or properties, subject to the prior approval of the President of the Philippines.
All loans contracted by the Authority under this section, together with all interests
and other sums payable in respect thereof, shall constitute a charge upon all the
revenues and assets of the Authority and shall rank equally with one another, but
shall have priority over any other claim or charge on the revenue and assets of the
Authority: Provided, That this provision shall not be construed as a prohibition or
restriction on the power of the Authority to create pledges, mortgages and other
voluntary liens or encumbrances on any asset or property of the Authority.
The payment of the loans or other indebtedness of the Authority may be
guaranteed by the National Government subject to the approval of the President of
the Philippines.chanroblesvirtuallawlibrary
The Court of Appeals concluded that it is clear that petitioner MCIAA is denied by
its charter the absolute right to dispose of its property to any person or entity
except to the national government and it is not empowered to obtain loans or
encumber its property without the approval of the President. 41 The questioned
Decision contained the following conclusion:chanRoblesvirtualLawlibrary
With the advent of RA 7160, the Local Government Code, the power to tax is no
longer vested exclusively on Congress. LGUs, through its local legislative bodies, are
now given direct authority to levy taxes, fees and other charges pursuant to Article
X, Section 5 of the 1987 Constitution. And one of the most significant provisions of
the LGC is the removal of the blanket inclusion of instrumentalities and agencies of
the national government from the coverage of local taxation. The express
withdrawal by the Code of previously granted exemptions from realty taxes applied
to instrumentalities and government-owned or controlled corporations (GOCCs)
such as the petitioner Mactan-Cebu International Airport Authority. Thus, petitioner
MCIAA became a taxable person in view of the withdrawal of the realty tax
exemption that it previously enjoyed under Section 14 of RA No. 6958 of its charter.
As expressed and categorically held in the Mactan case, the removal and withdrawal
of tax exemptions previously enjoyed by persons, natural or juridical, are consistent
with the State policy to ensure autonomy to local governments and the objective of
the Local Government Code that they enjoy genuine and meaningful local autonomy
to enable them to attain their fullest development as self-reliant communities and
make them effective partners in the attainment of national goals.
However, in the case at bench, petitioner MCIAAs charter expressly bars the
alienation or mortgage of its property to any person or entity except to the national
government. Therefore, while petitioner MCIAA is a taxable person for purposes of
real property taxation, respondent City of Lapu-Lapu is prohibited from seizing,
selling and owning these properties by and through a public auction in order to
satisfy petitioner MCIAAs tax liability.42 (Citations omitted.)
In the questioned Resolution that affirmed its questioned Decision, the Court of
Appeals denied petitioners motion for reconsideration based on the following
grounds:chanRoblesvirtualLawlibrary
First, the MCIAA case remains the controlling law on the matter as the
same is the established precedent; not the MIAA case but the MCIAA case
since the former, as keenly pointed out by the respondent City of LapuLapu, has not yet attained finality as there is still yet a pending motion for
reconsideration filed with the Supreme Court in the aforesaid case.
Second, and more importantly, the ruling of the Supreme Court in
the MIAAcase cannot be similarly invoked in the case at bench. The said
case cannot be considered as the law of the case. The law of the case
doctrine has been defined as that principle under which determinations of questions
of law will generally be held to govern a case throughout all its subsequent stages
where such determination has already been made on a prior appeal to a court of
last resort. It is merely a rule of procedure and does not go to the power of the
court, and will not be adhered to where its application will result in an unjust
decision. It relates entirely to questions of law, and is confined in its operation to
subsequent proceedings in the same case. According to said doctrine, whatever has
been irrevocably established constitutes the law of the case only as to the
same parties in the same case and not to different parties in an entirely different
case. Besides, pending resolution of the aforesaid motion for reconsideration in the
MIAA case, the latter case has not irrevocably established anything.
Thus, after a thorough and judicious review of the allegations in petitioners motion
for reconsideration, this Court resolves to deny the same as the matters raised
therein had already been exhaustively discussed in the decision sought to be
reconsidered, and that no new matters were raised which would warrant the
modification, much less reversal, thereof.43 (Emphasis added, citations omitted.)
PETITIONERS THEORY
Petitioner is before us now claiming that this Court, in the 2006 MIAA case, had
expressly declared that petitioner, while vested with corporate powers, is not
considered a government-owned or controlled corporation, but is a government
instrumentality like the Manila International Airport Authority (MIAA), Philippine
Ports Authority (PPA), University of the Philippines, and Bangko Sentral ng
Pilipinas (BSP). Petitioner alleges that as a government instrumentality, all its airport
lands and buildings are exempt from real estate taxes imposed by respondent
City.44chanrobleslaw
Petitioner alleges that Republic Act No. 6958 placed a limitation on petitioners
administration of its assets and properties as it provides under Section 4(e) that
any asset in the international airport important to national security cannot be
alienated or mortgaged by petitioner or transferred to any entity other than the
National Government.45chanrobleslaw
Thus, petitioner claims that the Court of Appeals (Cebu City) gravely erred in
disregarding the following:chanRoblesvirtualLawlibrary
I
PETITIONER IS A GOVERNMENT INSTRUMENTALITY AS EXPRESSLY DECLARED BY THE
HONORABLE COURT IN THE MIAA CASE. AS SUCH, IT IS EXEMPT FROM PAYING REAL
ESTATE TAXES IMPOSED BY RESPONDENT CITY OF LAPU-LAPU.
II
THE PROPERTIES OF PETITIONER CONSISTING OF THE AIRPORT TERMINAL BUILDING,
AIRFIELD, RUNWAY, TAXIWAY, INCLUDING THE LOTS ON WHICH THEY ARE SITUATED,
ARE EXEMPT FROM REAL PROPERTY TAXES.
III
RESPONDENT CITY OF LAPU-LAPU CANNOT IMPOSE REAL PROPERTY TAX WITHOUT
ANY APPROPRIATE ORDINANCE.
IV
RESPONDENT CITY OF LAPU-LAPU CANNOT IMPOSE AN ADDITIONAL 1% TAX FOR
THE SPECIAL EDUCATION FUND IN THE ABSENCE OF ANY CORRESPONDING
ORDINANCE.
V
RESPONDENT CITY OF LAPU-LAPU CANNOT IMPOSE ANY INTEREST SANS ANY
ORDINANCE MANDATING ITS IMPOSITION.46
Petitioner claims the following similarities with MIAA:
1. MCIAA belongs to the same class and performs identical functions as MIAA;
2. MCIAA is a public utility like MIAA;
3. MIAA was organized to operate the international and domestic airport in
Paranaque City for public use, while MCIAA was organized to operate the
international and domestic airport inMactan for public use.
4. Both are attached agencies of the Department of Transportation and

Communications.47
Petitioner compares its charter (Republic Act No. 6958) with that of MIAA (Executive
Order No. 903).
Section 3 of Executive Order No. 903 provides:chanRoblesvirtualLawlibrary
Sec. 3. Creation of the Manila International Airport Authority. There is hereby
established a body corporate to be known as the Manila International Airport
Authority which shall be attached to the Ministry of Transportation and
Communications. The principal office of the Authority shall be located at the New
Manila International Airport. The Authority may establish such offices, branches,
agencies or subsidiaries as it may deem proper and necessary; x x
Section 2 of Republic Act No. 6958 reads:chanRoblesvirtualLawlibrary
Section 2. Creation of the Mactan-Cebu International Airport Authority.
There is hereby established a body corporate to be known as the Mactan-Cebu
International Airport Authority which shall be attached to the Department of
Transportation and Communications. The principal office of the Authority shall be
located at the MactanInternational Airport, Province of Cebu.
The Authority may have such branches, agencies or subsidiaries as it may deem
proper and necessary.chanroblesvirtuallawlibrary
As to MIAAs purposes and objectives, Section 4 of Executive Order No. 903
Sec. 4. Purposes and Objectives. The Authority shall have the following purposes
and objectives:ChanRoblesVirtualawlibrary
(a) To help encourage and promote international and domestic air traffic in the
Philippines as a means of making the Philippines a center of international trade and
tourism and accelerating the development of the means of transportation and
communications in the country;
(b) To formulate and adopt for application in the Airport internationally acceptable
standards of airport accommodation and service; and
(c) To upgrade and provide safe, efficient, and reliable airport facilities for
international and domestic air travel.chanroblesvirtuallawlibrary
Petitioner claims that the above purposes and objectives are analogous to those
enumerated in its charter, specifically Section 3 of Republic Act No. 6958, which
Section 3. Primary Purposes and Objectives. The Authority shall principally
undertake the economical, efficient and effective control, management and
supervision of the Mactan International Airport in the Province of Cebu and the
Lahug Airport in Cebu City, hereinafter collectively referred to as the airports, and
such other airports as may be established in the Province of Cebu. In addition, it
shall have the following objectives:ChanRoblesVirtualawlibrary
(a) To encourage, promote and develop international and domestic air traffic in the
central Visayas and Mindanao regions as a means of making the regions centers of
international trade and tourism, and accelerating the development of the means of
transportation and communications in the country; and
(b) To upgrade the services and facilities of the airports and to formulate
internationally acceptable standards of airport accommodation and
service.chanroblesvirtuallawlibrary
The powers, functions and duties of MIAA under Section 5 of Executive Order No.
903 are:ChanRoblesVirtualawlibrary
Sec. 5. Functions, Powers and Duties. The Authority shall have the following
functions, powers and duties:chanRoblesvirtualLawlibrary
(a) To formulate, in coordination with the Bureau of Air Transportation and other
appropriate government agencies, a comprehensive and integrated policy and
program for the Airport and to implement, review and update such policy and
program periodically;
(b) To control, supervise, construct, maintain, operate and provide such facilities or
services as shall be necessary for the efficient functioning of the Airport;
(c) To promulgate rules and regulations governing the planning, development,

maintenance, operation and improvement of the Airport, and to control and/or
supervise as may be necessary the construction of any structure or the
rendition of any services within the Airport;
(d) To sue and be sued in its corporate name;
(e) To adopt and use a corporate seal;
(f) To succeed by its corporate name;
(g) To adopt its by-laws, and to amend or repeal the same from time to time;
(h) To execute or enter into contracts of any kind or nature;
(i)
To acquire, purchase, own, administer, lease, mortgage, sell or otherwise

dispose of any land, building, airport facility, or property of whatever kind and
nature, whether movable or immovable, or any interest therein;
(j)
To exercise the power of eminent domain in the pursuit of its purposes and
objectives;
(k) To levy, and collect dues, charges, fees or assessments for the use of the
Airport premises, works, appliances, facilities or concessions or for any service
provided by the Authority, subject to the approval of the Minister of
Transportation and Communications in consultation with the Minister of Finance,
and subject further to the provisions of Batas Pambansa Blg. 325 where
applicable;
(l)
To invest its idle funds, as it may deem proper, in government securities and
other evidences of indebtedness of the government;
(m) To provide services, whether on its own or otherwise, within the Airport and the
approaches thereof, which shall include but shall not be limited to, the
following:
(1) Aircraft movement and allocation of parking areas of aircraft on the ground;
(2) Loading or unloading of aircrafts;
(3) Passenger handling and other services directed towards the care,
convenience and security of passengers, visitors and other airport users;
and
(4) Sorting, weighing, measuring, warehousing or handling of baggage and

goods.
(n) To perform such other acts and transact such other business, directly or
indirectly necessary, incidental or conducive to the attainment of the purposes

and objectives of the Authority, including the adoption of necessary measures
to remedy congestion in the Airport; and
(o) To exercise all the powers of a corporation under the Corporation Law, insofar as
these powers are not inconsistent with the provisions of this Executive Order.
Petitioner claims that MCIAA has related functions, powers and duties under Section
4 of Republic Act No. 6958, as shown in the provision quoted
Section 4. Functions, Powers and Duties. The Authority shall have the
following functions, powers and duties:ChanRoblesVirtualawlibrary
(a) To formulate a comprehensive and integrated development policy and program
for the airports and to implement, review and update such policy and program
periodically;
(b) To control, supervise, construct, maintain, operate and provide such facilities or
services as shall be necessary for the efficient functioning of the airports;
(c) To promulgate rules and regulations governing the planning, development,
maintenance, operation and improvement of the airports, and to control and
supervise the construction of any structure or the rendition of any service within the
airports;
(d) To exercise all the powers of a corporation under the Corporation Code of the
Philippines, insofar as those powers are not inconsistent with the provisions of this
Act;
(e) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose
of any land, building, airport facility, or property of whatever kind and nature,
whether movable or immovable, or any interest therein: Provided, That any asset
located in theMactan International Airport important to national security shall not be
subject to alienation or mortgage by the Authority nor to transfer to any entity other
than the National Government;
(f) To exercise the power of eminent domain in the pursuit of its purposes and
objectives;
(g) To levy and collect dues, charges, fees or assessments for the use of airport
premises, works, appliances, facilities or concessions, or for any service provided by
the Authority;
(h) To retain and appropriate dues, fees and charges collected by the Authority
relative to the use of airport premises for such measures as may be necessary to
make the Authority more effective and efficient in the discharge of its assigned
tasks;
(i) To invest its idle funds, as it may deem proper, in government securities and
other evidences of indebtedness; and
(j) To provide services, whether on its own or otherwise, within the airports and the
approaches thereof as may be necessary or in connection with the maintenance and
operation of the airports and their facilities.chanroblesvirtuallawlibrary
Petitioner claims that like MIAA, it has police authority within its premises, as shown
in their respective charters quoted below:chanRoblesvirtualLawlibrary
EO 903, Sec. 6. Police Authority. The Authority shall have the power to
exercise such police authority as may be necessary within its premises to carry out
its functions and attain its purposes and objectives, without prejudice to the
exercise of functions within the same premises by the Ministry of National Defense
through the Aviation Security Command (AVSECOM) as provided in LOI 961:
Provided, That the Authority may request the assistance of law enforcement
agencies, including request for deputization as may be required. x x x.
R.A. No. 6958, Section 5. Police Authority. The Authority shall have the
power to exercise such police authority as may be necessary within its premises or
areas of operation to carry out its functions and attain its purposes and
objectives: Provided, That the Authority may request the assistance of law
enforcement agencies, including request for deputization as may be required. x x
Petitioner pointed out other similarities in the two charters, such
as:ChanRoblesVirtualawlibrary
1. Both MCIAA and MIAA are covered by the Civil Service Law, rules and regulations
(Section 15, Executive Order No. 903; Section 12, Republic Act No. 6958);
2. Both charters contain a proviso on tax exemptions (Section 21, Executive Order
No. 903; Section 14, Republic Act No. 6958);
3. Both MCIAA and MIAA are required to submit to the President an annual report
generally dealing with their activities and operations (Section 14, Executive Order
No. 903; Section 11, Republic Act No. 6958); and
4. Both have borrowing power subject to the approval of the President (Section 16,
Executive Order No. 903; Section 13, Republic Act No. 6958). 48chanrobleslaw
Petitioner suggests that it is because of its similarity with MIAA that this Court, in
the 2006 MIAA case, placed it in the same class as MIAA and considered it as a
government instrumentality.
Petitioner submits that since it is also a government instrumentality like MIAA, the
following conclusion arrived by the Court in the 2006 MIAA case is also applicable to
petitioner:chanRoblesvirtualLawlibrary
Under Section 2(10) and (13) of the Introductory Provisions of the
Administrative Code, which governs the legal relation and status of
government units, agencies and offices within the entire government
machinery, MIAA is a government instrumentality and not a governmentowned or controlled corporation. Under Section 133(o) of the Local
Government Code, MIAA as a government instrumentality is not a taxable
person because it is not subject to [t]axes, fees or charges of any kind
by local governments. The only exception is when MIAA leases its real
property to a taxable person as provided in Section 234(a) of the Local
Government Code, in which case the specific real property leased becomes
subject to real estate tax. Thus, only portions of the Airport Lands and
Buildings leased to taxable persons like private parties are subject to real
estate tax by the City of Paraaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of
MIAA, being devoted to public use, are properties of public dominion and
thus owned by the State or the Republic of the Philippines. Article 420
specifically mentions ports x x x constructed by the State, which includes public
airports and seaports, as properties of public dominion and owned by the
Republic. As properties of public dominion owned by the Republic, there is
no doubt whatsoever that the Airport Lands and Buildings are expressly
exempt from real estate tax under Section 234(a) of the Local Government
Code. This Court has also repeatedly ruled that properties of public
dominion are not subject to execution or foreclosure sale. 49(Emphases
added.)
Petitioner insists that its properties consisting of the airport terminal building,
airfield, runway, taxiway and the lots on which they are situated are not subject to
real property tax because they are actually, solely and exclusively used for public
purposes.50 They are indispensable to the operation of the Mactan International
Airport and by their very nature, these properties are exempt from tax. Said
properties belong to the State and are merely held by petitioner in trust. As earlier
mentioned, petitioner claims that these properties are important to national security
and cannot be alienated, mortgaged, or transferred to any entity except the
National Government.
Petitioner prays that judgment be rendered:chanRoblesvirtualLawlibrary
a)
Declaring petitioner exempt from paying real property taxes as it is a

government instrumentality;
b)
Declaring respondent City of Lapu-Lapu as bereft of any authority to levy and

collect the basic real property tax, the additional tax for the SEF and the penalty
interest for its failure to pass the corresponding tax ordinances; and
c)
Declaring, in the alternative, the airport lands and buildings of petitioner as

exempt from real property taxes as they are used solely and exclusively for
public purpose.51
In its Consolidated Reply filed through the OSG, petitioner claims that the
2006 MIAA ruling has overturned the 1996 MCIAA ruling. Petitioner cites Justice
Dante O. Tingas dissent in the MIAA ruling, as follows:chanRoblesvirtualLawlibrary
[The] ineluctable conclusion is that the majority rejects the rationale and ruling
inMactan. The majority provides for a wildly different interpretation of Section 133,
193 and 234 of the Local Government Code than that employed by the Court
in Mactan. Moreover, the parties in Mactan and in this case are similarly situated, as
can be obviously deducted from the fact that both petitioners are airport authorities
operating under similarly worded charters. And the fact that the majority cites
doctrines contrapuntal to the Local Government Code as
in Basco and Maceda evinces an intent to go against the Courts jurisprudential
trend adopting the philosophy of expanded local government rule under the Local
Government Code.
x x x The majority is obviously inconsistent with Mactan and there is no way these
two rulings can stand together. Following basic principles in statutory
construction, Mactanwill be deemed as giving way to this new ruling.
xxxx
There is no way the majority can be justified unless Mactan is overturned. The
MCIAA and the MIAA are similarly situated. They are both, as will be demonstrated,
GOCCs, commonly engaged in the business of operating an airport. They are the
owners of airport properties they respectively maintain and hold title over these
properties in their name. These entities are both owned by the State, and denied by
their respective charters the absolute right to dispose of their properties without
prior approval elsewhere. Both of them are not empowered to obtain loans or
encumber their properties without prior approval the prior approval of the
President.52 (Citations omitted.)
Petitioner likewise claims that the enactment of Ordinance No. 070-2007 is an
admission on respondent Citys part that it must have a tax measure to be able to
impose a tax or special assessment. Petitioner avers that assuming that it is a nonexempt entity or that its airport lands and buildings are not exempt, it was only
upon the effectivity of Ordinance No. 070-2007 on January 1, 2008 that respondent
City could properly impose the basic real property tax, the additional tax for the
SEF, and the interest in case of nonpayment. 53chanrobleslaw
Petitioner filed its Memorandum54 on June 17, 2009.
RESPONDENTS THEORY
In their Comment,55 respondents point out that petitioner partially moved for a
reconsideration of the questioned Decision only as to the issue of whether petitioner
is a GOCC or not. Thus, respondents declare that the other portions of the
questioned decision had already attained finality and ought not to be placed in issue
in this petition for certiorari. Thus, respondents discussed the other issues raised by
petitioner with reservation as to this objection.
Respondents summarized the issues and the grounds relied upon as
STATEMENT OF THE ISSUES
WHETHER OR NOT PETITIONER IS A GOVERNMENT INSTRUMENTALITY EXEMPT FROM
PAYING REAL PROPERTY TAXES
WHETHER OR NOT RESPONDENT CITY CAN [IMPOSE] REALTY TAX, SPECIAL
EDUCATION FUND AND PENALTY INTEREST
WHETHER OR NOT THE AIRPORT TERMINAL BUILDING, AIRFIELD, RUNWAY, TAXIWAY
INCLUDING THE LOTS ON WHICH THEY ARE SITUATED ARE EXEMPT FROM REALTY
TAXES
GROUNDS RELIED UPON
1. PETITIONER IS A GOCC HENCE NOT EXEMPT FROM REALTY TAXES
2. TERMINAL BUILDING, RUNWAY, TAXIWAY ARE NOT EXEMPT FROM REALTY
TAXES
3. ESTOPPEL DOES NOT LIE AGAINST GOVERNMENT
4. CITY CAN COLLECT REALTY TAX AND INTEREST
5. CITY CAN COLLECT SEF
6. MCIAA HAS NOT SHOWN ANY IRREPARABLE INJURY WARRANTING INJUNCTIVE
RELIEF
7. MCIAA HAS NOT COMPLIED WITH PROVISION OF THE LGC56
Respondents claim that the mere mention of MCIAA in the MIAA v. [Court of
Appeals] case does not make it the controlling case on the matter. 57 Respondents
further claim that the 1996 MCIAA case where this Court held that petitioner is a
GOCC is the controlling jurisprudence. Respondents point out that petitioner and
MIAA are two very different entities. Respondents argue that petitioner is a GOCC
contrary to its assertions, based on its Charter and on DOJ Opinion No. 50.
Respondents contend that if petitioner is not a GOCC but an instrumentality of the
government, still the following statement in the 1996 MCIAA case
applies:chanRoblesvirtualLawlibrary
Besides, nothing can prevent Congress from decreeing that even instrumentalities
or agencies of the Government performing governmental functions may be subject
to tax. Where it is done precisely to fulfill a constitutional mandate and national
policy, no one can doubt its wisdom. 58
Respondents argue that MCIAA properties such as the terminal building, taxiway
and runway are not exempt from real property taxation. As discussed in the
1996 MCIAA case, Section 234 of the LGC omitted GOCCs such as MCIAA from
entities enjoying tax exemptions. Said decision also provides that the transfer of
ownership of the land to petitioner was absolute and petitioner cannot evade
payment of taxes.59chanrobleslaw
Even if the following issues were not raised by petitioner in its motion for
reconsideration of the questioned Decision, and thus the ruling pertaining to these
issues in the questioned decision had become final, respondents still discussed its
side over its objections as to the propriety of bringing these up before this Court.
1. Estoppel does not lie against the government.
2. Respondent City can collect realty taxes and interest.
a. Based on the Local Government Code (Sections 232, 233, 255) and its IRR
(Sections 241, 247).
b. The City of Lapu-Lapu passed in 1980 Ordinance No. 44, or the Omnibus Tax
Ordinance, wherein the imposition of real property tax was made. This
Ordinance was in force and effect by virtue of Article 278 of the IRR of
Republic Act No. 7160.60chanrobleslaw
c. Ordinance No. 070-2007, known as the Revised Lapu-Lapu City Revenue
Code, imposed real property taxes, special education fund and further
provided for the payment of interest and surcharges. Thus, the issue is pass
and is moot and academic.
3. Respondent City can collect Special Education Fund.
a. The LGC does not require the enactment of an ordinance for the collection of
the SEF.
b. Congress did not entirely repeal the SEF law, hence, its levy, imposition and
collection need not be covered by ordinance. Besides, the City has enacted
the Revenue Code containing provisions for the levy and collection of the
SEF.61
Furthermore, respondents aver that:ChanRoblesVirtualawlibrary
1. Collection of taxes is beyond the ambit of injunction.
a. Respondents contend that the petition only questions the denial of the writ of
preliminary injunction by the RTC and the Court of Appeals. Petitioner failed
to show irreparable injury.
b. Comparing the alleged damage that may be caused petitioner and the direct
affront and challenge against the power to tax, which is an attribute of
sovereignty, it is but appropriate that injunctive relief should be denied.
2. Petitioner did not comply with LGC provisions on payment under protest.
a. Petitioner should have protested the tax imposition as provided in Article 285
of the IRR of Republic Act No. 7160. Section 252 of Republic Act No.
716062 requires that the taxpayers protest can only be entertained if the tax
is first paid under protest.63
Respondents submitted their Memorandum 64 on June 30, 2009, wherein they allege
that the 1996MCIAA case is still good law, as shown by the following cases wherein
it was quoted:
1. National Power Corporation v. Local Board of Assessment Appeals of
Batangas [545 Phil. 92 (2007)];
2. Mactan-Cebu International Airport Authority v. Urgello [549 Phil. 302 (2007)];
3. Quezon City v. ABS-CBN Broadcasting Corporation [588 Phil. 785 (2008)]; and
4. The City of Iloilo v. Smart Communications, Inc. [599 Phil. 492 (2009)].
Respondents assert that the constant reference to the 1996 MCIAA case could
hardly mean that the doctrine has breathed its last and that the 1996 MCIAA case
stands as precedent and is controlling on petitioner MCIAA. 65chanrobleslaw
Respondents allege that the issue for consideration is whether it is proper for
petitioner to raise the issue of whether it is not liable to pay real property taxes,
special education fund (SEF), interests and/or surcharges. 66 Respondents argue that
the Court of Appeals was correct in declaring petitioner liable for realty taxes, etc.,
on the terminal building, taxiway, and runway. Respondent City relies on the
following grounds:chanRoblesvirtualLawlibrary
1. The case of MCIAA v. Marcos, et al., is controlling on petitioner MCIAA;
2. MCIAA is a corporation;
3. Section 133 in relation to Sections 232 and 234 of the Local Government
Code of 1991 authorizes the collection of real property taxes (etc.) from
MCIAA;
4. Terminal Building, Runway & Taxiway are not of the Public Dominion and are
not exempt from realty taxes, special education fund and interest;
5. Respondent City can collect realty tax, interest/surcharge, and Special
Education Fund from MCIAA; [and]
6. Estoppel does not lie against the government. 67
THIS COURTS RULING
The petition has merit. The petitioner is an instrumentality of the government; thus,
its properties actually, solely and exclusively used for public purposes, consisting of
the airport terminal building, airfield, runway, taxiway and the lots on which they
are situated, are not subject to real property tax and respondent City is not justified
in collecting taxes from petitioner over said properties.
DISCUSSION
The Court of Appeals (Cebu City) erred in declaring that the 1996 MCIAA case still
controls and that petitioner is a GOCC. The 2006 MIAA case governs.
The Court of Appeals reliance on the 1996 MCIAA case is misplaced and its staunch
refusal to apply the 2006 MIAA case is patently erroneous. The Court of Appeals,
finding for respondents, refused to apply the ruling in the 2006 MIAA case on the
premise that the same had not yet reached finality, and that as far as MCIAA is
concerned, the 1996 MCIAA case is still good law.68chanrobleslaw
While it is true, as respondents allege, that the 1996 MCIAA case was cited in a long
line of cases,69still, in 2006, the Court en banc decided a case that in
effect reversed the 1996 Mactan ruling. The 2006 MIAA case had, since the
promulgation of the questioned Decision and Resolution, reached finality and had in
fact been either affirmed or cited in numerous cases by the Court. 70 The decision
became final and executory on November 3, 2006. 71 Furthermore, the
2006 MIAA case was decided by the Court en banc while the 1996 MCIAA case was
decided by a Division. Hence, the 1996 MCIAAcase should be read in light of the
subsequent and unequivocal ruling in the 2006 MIAA case.
To recall, in the 2006 MIAA case, we held that MIAAs airport lands and buildings are
exempt from real estate tax imposed by local governments; that it is not a GOCC
but an instrumentality of the national government, with its real properties being
owned by the Republic of the Philippines, and these are exempt from real estate
tax. Specifically referring to petitioner, we stated as
Many government instrumentalities are vested with corporate powers but
they do not become stock or non-stock corporations, which is a necessary
condition before an agency or instrumentality is deemed a governmentowned or controlled corporation. Examples are the Mactan International
Airport Authority, the Philippine Ports Authority, the University of the Philippines
and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise
corporate powers but they are not organized as stock or non-stock corporations as
required by Section 2(13) of the Introductory Provisions of the Administrative Code.
These government instrumentalities are sometimes loosely called government
corporate entities. However, they are not government-owned or controlled
corporations in the strict sense as understood under the Administrative Code, which
is the governing law defining the legal relationship and status of government
entities.72 (Emphases ours.)
In the 2006 MIAA case, the issue before the Court was whether the Airport Lands
and Buildings of MIAA are exempt from real estate tax under existing laws. 73 We
quote the extensive discussion of the Court that led to its finding that MIAAs lands
and buildings were exempt from real estate tax imposed by local
governments:chanRoblesvirtualLawlibrary
First, MIAA is not a government-owned or controlled corporation but an
instrumentality of the National Government and thus exempt from local
taxation. Second, the real properties of MIAA are owned by the Republic of the
Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
xxxx
There is no dispute that a government-owned or controlled corporation is not
exempt from real estate tax. However, MIAA is not a government-owned or
controlled corporation. Section 2(13) of the Introductory Provisions of the
Administrative Code of 1987 defines a government-owned or controlled corporation
as follows:chanRoblesvirtualLawlibrary
SEC. 2. General Terms Defined. - x x x
(13) Government-owned or controlled corporation refers to any agency organized as
a stock or non-stock corporation, vested with functions relating to public needs
whether governmental or proprietary in nature, and owned by the Government
directly or through its instrumentalities either wholly, or, where applicable as in the
case of stock corporations, to the extent of at least fifty-one (51) percent of its
capital stock: x x x.chanroblesvirtuallawlibrary
A government-owned or controlled corporation must be organized as a stock or
non-stock corporation. MIAA is not organized as a stock or non-stock corporation.
MIAA is not a stock corporation because it has no capital stock divided into shares.
MIAA has no stockholders or voting shares. x x x
xxxx
Clearly, under its Charter, MIAA does not have capital stock that is divided into
shares.
Section 3 of the Corporation Code defines a stock corporation as one whose capital
stock is divided into shares and x x x authorized to distribute to the holders of such
shares dividends x x x. MIAA has capital but it is not divided into shares of stock.
MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of
the Corporation Code defines a non-stock corporation as one where no part of its
income is distributable as dividends to its members, trustees or officers. A non-
stock corporation must have members. Even if we assume that the Government is
considered as the sole member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part of their income to
their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its
annual gross operating income to the National Treasury. This prevents MIAA from
qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are
organized for charitable, religious, educational, professional, cultural, recreational,
fraternal, literary, scientific, social, civil service, or similar purposes, like trade,
industry, agriculture and like chambers. MIAA is not organized for any of these
purposes. MIAA, a public utility, is organized to operate an international and
domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not
qualify as a government-owned or controlled corporation. What then is the
legal status of MIAA within the National Government?
MIAA is a government instrumentality vested with corporate powers to
perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested
with corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government instrumentality as
SEC. 2. General Terms Defined. - x x x
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through a charter. x x
When the law vests in a government instrumentality corporate powers,
the instrumentality does not become a corporation. Unless the
government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA exercises the
governmental powers of eminent domain, police authority and the levying
of fees and charges. At the same time, MIAA exercises all the powers of a
corporation under the Corporation Law, insofar as these powers are not
inconsistent with the provisions of this Executive Order.
Likewise, when the law makes a government instrumentality operationally
autonomous, the instrumentality remains part of the National Government
machinery although not integrated with the department framework. The MIAA
Charter expressly states that transforming MIAA into a separate and autonomous
body will make its operation more financially viable.
Many government instrumentalities are vested with corporate powers but

they do not become stock or non-stock corporations, which is a necessary
condition before an agency or instrumentality is deemed a governmentowned or controlled corporation. Examples are the Mactan International
Airport Authority,the Philippine Ports Authority, the University of the Philippines
and Bangko Sentral ng Pilipinas. All these government instrumentalities
exercise corporate powers but they are not organized as stock or nonstock corporations as required by Section 2(13) of the Introductory
Provisions of the Administrative Code. These government
instrumentalities are sometimes loosely called government corporate
entities. However, they are not government-owned or controlled
corporations in the strict sense as understood under the Administrative
Code, which is the governing law defining the legal relationship and status
of government entities.74 (Emphases ours, citations omitted.)
The Court in the 2006 MIAA case went on to discuss the limitation on the taxing
power of the local governments as against the national government or its
instrumentality:chanRoblesvirtualLawlibrary
A government instrumentality like MIAA falls under Section 133(o) of the Local
Government Code, which states:chanRoblesvirtualLawlibrary
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the levy of the
following:ChanRoblesVirtualawlibrary
xxxx
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and local government units. x x x.chanroblesvirtuallawlibrary
Section 133(o) recognizes the basic principle that local governments cannot tax the
national government, which historically merely delegated to local governments the
power to tax. While the 1987 Constitution now includes taxation as one of the
powers of local governments, local governments may only exercise such power
subject to such guidelines and limitations as the Congress may provide.
When local governments invoke the power to tax on national government
instrumentalities, such power is construed strictly against local
governments.The rule is that a tax is never presumed and there must be clear
language in the law imposing the tax. Any doubt whether a person, article or
activity is taxable is resolved against taxation. This rule applies with greater force
when local governments seek to tax national government instrumentalities.
Another rule is that a tax exemption is strictly construed against the taxpayer
claiming the exemption. However, when Congress grants an exemption to a national
government instrumentality from local taxation, such exemption is construed
liberally in favor of the national government instrumentality. x x x.

xxxx
There is, moreover, no point in national and local governments taxing each
other, unless a sound and compelling policy requires such transfer of
public funds from one government pocket to another.
There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of
local governments. The only exception is when the legislature clearly intended to
tax government instrumentalities for the delivery of essential public services for
sound and compelling policy considerations. There must be express language in the
law empowering local governments to tax national government instrumentalities.
Any doubt whether such power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that unless otherwise
provided in the Code, local governments cannot tax national government
instrumentalities. x x x.75 (Emphases ours, citations omitted.)
The Court emphasized that the airport lands and buildings of MIAA are owned by the
Republic and belong to the public domain. The Court
said:chanRoblesvirtualLawlibrary
The Airport Lands and Buildings of MIAA are property of public dominion and
therefore owned by the State or the Republic of the Philippines. x x x.
xxxx
No one can dispute that properties of public dominion mentioned in Article 420 of
the Civil Code, like roads, canals, rivers, torrents, ports and bridges constructed by
the State, are owned by the State. The term ports includes seaports and airports.
The MIAA Airport Lands and Buildings constitute a port constructed by the State.
Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are
properties of public dominion and thus owned by the State or the Republic of the
Philippines.
The Airport Lands and Buildings are devoted to public use because they
are used by the public for international and domestic travel and
transportation. The fact that the MIAA collects terminal fees and other
charges from the public does not remove the character of the Airport
Lands and Buildings as properties for public use. x x x.
xxxx
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA
charges to airlines, constitute the bulk of the income that maintains the operations
of MIAA. The collection of such fees does not change the character of MIAA as an
airport for public use. Such fees are often termed users tax. This means taxing
those among the public who actually use a public facility instead of taxing all the
public including those who never use the particular public facility. A users tax is
more equitable - a principle of taxation mandated in the 1987 Constitution.
The Airport Lands and Buildings of MIAA x x x are properties of public
dominion because they are intended for public use. As properties of public
dominion, they indisputably belong to the State or the Republic of the
Philippines.76 (Emphases supplied, citations omitted.)
The Court also held in the 2006 MIAA case that airport lands and buildings are
outside the commerce of man.
As properties of public dominion, the Airport Lands and Buildings are outside the
commerce of man. The Court has ruled repeatedly that properties of public
dominion are outside the commerce of man. As early as 1915, this Court already
ruled inMunicipality of Cavite v. Rojas that properties devoted to public use are
outside the commerce of man, thus:ChanRoblesVirtualawlibrary
xxxx
The Civil Code, Article 1271, prescribes that everything which is not outside the
commerce of man may be the object of a contract, x x x.
xxxx
The Court has also ruled that property of public dominion, being outside the
commerce of man, cannot be the subject of an auction sale.
Properties of public dominion, being for public use, are not subject to levy,
encumbrance or disposition through public or private sale. Any
encumbrance, levy on execution or auction sale of any property of public
dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to
encumbrances, foreclosures and auction sale.This will happen if the City of
Paraaque can foreclose and compel the auction sale of the 600-hectare runway of
the MIAA for non-payment of real estate tax.
Before MIAA can encumber the Airport Lands and Buildings, the President must first
withdraw from public use the Airport Lands and Buildings. x x x.
xxxx
Thus, unless the President issues a proclamation withdrawing the Airport
Lands and Buildings from public use, these properties remain properties
of public dominion and are inalienable. Since the Airport Lands and
Buildings are inalienable in their present status as properties of public
dominion, they are not subject to levy on execution or foreclosure sale. As
long as the Airport Lands and Buildings are reserved for public use, their
ownership remains with the State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for public use,
and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book
III of the Administrative Code of 1987, which states:chanRoblesvirtualLawlibrary
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the
Government. - (1) The President shall have the power to reserve for settlement or
public use, and for specific public purposes, any of the lands of the public domain,
the use of which is not otherwise directed by law. The reserved land shall thereafter
remain subject to the specific public purpose indicated until otherwise provided by
law or proclamation;
xxxx
There is no question, therefore, that unless the Airport Lands and Buildings are
withdrawn by law or presidential proclamation from public use, they are properties
of public dominion, owned by the Republic and outside the commerce of man. 77
Thus, the Court held that MIAA is merely holding title to the Airport Lands and
Buildings in trust for the Republic. [Under] Section 48, Chapter 12, Book I of the
Administrative Code [which] allows instrumentalities like MIAA to hold title to real
properties owned by the Republic.78chanrobleslaw
The Court in the 2006 MIAA case cited Section 234(a) of the Local Government Code
and held that said provision exempts from real estate tax any [r]eal property
owned by the Republic of the Philippines. 79 The Court emphasized, however, that
portions of the Airport Lands and Buildings that MIAA leases to private entities are
not exempt from real estate tax. The Court further
held:chanRoblesvirtualLawlibrary
This exemption should be read in relation with Section 133(o) of the same Code,
which prohibits local governments from imposing [t]axes, fees or charges of any
kind on the National Government, its agencies and instrumentalities x x x. The real
properties owned by the Republic are titled either in the name of the Republic itself
or in the name of agencies or instrumentalities of the National Government. The
Administrative Code allows real property owned by the Republic to be titled in the
name of agencies or instrumentalities of the national government. Such real
properties remain owned by the Republic and continue to be exempt from real
estate tax.
The Republic may grant the beneficial use of its real property to an agency or
instrumentality of the national government. This happens when title of the real
property is transferred to an agency or instrumentality even as the Republic
remains the owner of the real property. Such arrangement does not result in the loss
of the tax exemption. Section 234(a) of the Local Government Code states that real
property owned by the Republic loses its tax exemption only if the beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person.
MIAA, as a government instrumentality, is not a taxable person under Section

133(o) of the Local Government Code. Thus, even if we assume that the Republic
has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact
does not make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private
entities are not exempt from real estate tax. For example, the land area occupied by
hangars that MIAA leases to private corporations is subject to real estate tax. In
such a case, MIAA has granted the beneficial use of such land area for a
consideration to a taxable person and therefore such land area is subject to real
estate tax. x x x.80
Significantly, the Court reiterated the above ruling and applied the same reasoning
in Manila International Airport Authority v. City of
Pasay,81 thus:chanRoblesvirtualLawlibrary
The only difference between the 2006 MIAA case and this case is that the
2006 MIAA case involved airport lands and buildings located in Paraaque
City while this case involved airport lands and buildings located in Pasay
City. The 2006 MIAA case and this case raised the same threshold issue: whether
the local government can impose real property tax on the airport lands, consisting
mostly of the runways, as well as the airport buildings, of MIAA. x x x.
xxxx
The definition of instrumentality under Section 2(10) of the Introductory Provisions
of the Administrative Code of 1987 uses the phrase includes x x x governmentowned or controlled corporations which means that a government
instrumentality may or may not be a government-owned or controlled
corporation. Obviously, the term government instrumentality is broader than
the term government-owned or controlled corporation. x x x.
xxxx
The fact that two terms have separate definitions means that while a government
instrumentality may include a government-owned or controlled corporation,
there may be a government instrumentality that will not qualify as a
government-owned or controlled corporation.
A close scrutiny of the definition of government-owned or controlled corporation in
Section 2(13) will show that MIAA would not fall under such definition. MIAA is a
government instrumentality that does not qualify as a governmentowned or controlled corporation. x x x.
xxxx
Thus, MIAA is not a government-owned or controlled corporation but a government
instrumentality which is exempt from any kind of tax from the local governments.
Indeed, the exercise of the taxing power of local government units is subject to the
limitations enumerated in Section 133 of the Local Government Code. Under Section
133(o) of the Local Government Code, local government units have no power to tax
instrumentalities of the national government like the MIAA. Hence, MIAA is not liable
to pay real property tax for the NAIA Pasay properties.
Furthermore, the airport lands and buildings of MIAA are properties of public
dominion intended for public use, and as such are exempt from real property tax
under Section 234(a) of the Local Government Code. However, under the same
provision, if MIAA leases its real property to a taxable person, the specific property
leased becomes subject to real property tax. In this case, only those portions of the
NAIA Pasay properties which are leased to taxable persons like private parties are
subject to real property tax by the City of Pasay. (Emphases added, citations
omitted.)
The Court not only mentioned petitioner MCIAA as similarly situated as MIAA. It also
mentioned several other government instrumentalities, among which was the
Philippine Fisheries Development Authority. Thus, applying the 2006 MIAA ruling,
the Court, in Philippine Fisheries Development Authority v. Court of
Appeals,82 held:chanRoblesvirtualLawlibrary
On the basis of the parameters set in the MIAA case, the Authority should be
classified as an instrumentality of the national government. As such, it is generally
exempt from payment of real property tax, except those portions which have been
leased to private entities.
In the MIAA case, petitioner Philippine Fisheries Development Authority was cited as
among the instrumentalities of the national government. x x x.
xxxx
Indeed, the Authority is not a GOCC but an instrumentality of the government. The
Authority has a capital stock but it is not divided into shares of stocks. Also, it has
no stockholders or voting shares. Hence, it is not a stock corporation. Neither [is it]
a non-stock corporation because it has no members.
The Authority is actually a national government instrumentality which is defined as
an agency of the national government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some
if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. When the law vests in a government
instrumentality corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is organized as a stock or nonstock corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers.
Thus, the Authority which is tasked with the special public function to carry out the
governments policy to promote the development of the countrys fishing industry
and improve the efficiency in handling, preserving, marketing, and distribution of

fish and other aquatic products, exercises the governmental powers of eminent
domain, and the power to levy fees and charges. At the same time, the Authority
exercises the general corporate powers conferred by laws upon private and
government-owned or controlled corporations.
xxxx
In light of the foregoing, the Authority should be classified as an instrumentality of
the national government which is liable to pay taxes only with respect to the
portions of the property, the beneficial use of which were vested in private entities.
When local governments invoke the power to tax on national government
instrumentalities, such power is construed strictly against local governments. The
rule is that a tax is never presumed and there must be clear language in the law
imposing the tax. Any doubt whether a person, article or activity is taxable is
resolved against taxation. This rule applies with greater force when local
governments seek to tax national government instrumentalities.
Thus, the real property tax assessments issued by the City of Iloilo should be upheld
only with respect to the portions leased to private persons. In case the Authority
fails to pay the real property taxes due thereon, said portions cannot be sold at
public auction to satisfy the tax delinquency. x x x.
xxxx
In sum, the Court finds that the Authority is an instrumentality of the national
government, hence, it is liable to pay real property taxes assessed by the City of
Iloilo on the IFPC only with respect to those portions which are leased to private
entities. Notwithstanding said tax delinquency on the leased portions of the IFPC,
the latter or any part thereof, being a property of public domain, cannot be sold at
public auction. This means that the City of Iloilo has to satisfy the tax delinquency
through means other than the sale at public auction of the IFPC. (Citations omitted.)
Another government instrumentality specifically mentioned in the 2006 MIAA case
was the Philippine Ports Authority (PPA). Hence, in Curata v. Philippine Ports
Authority,83 the Court held that the PPA is similarly situated as MIAA, and ruled in
this wise:chanRoblesvirtualLawlibrary
This Courts disquisition in Manila International Airport Authority v. Court of
Appeals ruling that MIAA is not a government-owned and/or controlled corporation
(GOCC), but an instrumentality of the National Government and thus exempt from
local taxation, and that its real properties are owned by the Republic of the
Philippines is instructive. x x x. These findings are squarely applicable to PPA, as
it is similarly situated as MIAA. First, PPA is likewise not a GOCC for not having
shares of stocks or members. Second, the docks, piers and buildings it administers
are likewise owned by the Republic and, thus, outside the commerce of man. Third,
PPA is a mere trustee of these properties. Hence, like MIAA, PPA is clearly a
government instrumentality, an agency of the government vested with corporate
powers to perform efficiently its governmental functions.

Therefore, an undeniable conclusion is that the funds of PPA partake of government
funds, and such may not be garnished absent an allocation by its Board or by
statutory grant. If the PPA funds cannot be garnished and its properties, being
government properties, cannot be levied via a writ of execution pursuant to a final
judgment, then the trial court likewise cannot grant discretionary execution pending
appeal, as it would run afoul of the established jurisprudence that government
properties are exempt from execution. What cannot be done directly cannot be
done indirectly. (Citations omitted.)
In Government Service Insurance System v. City Treasurer and City Assessor of the
City of Manila84the Court found that the GSIS was also a government instrumentality
and not a GOCC, applying the 2006 MIAA case even though the GSIS was not among
those specifically mentioned by the Court as similarly situated as MIAA. The Court
said:chanRoblesvirtualLawlibrary
GSIS an instrumentality of the National Government
Apart from the foregoing consideration, the Courts fairly recent ruling in Manila
International Airport Authority v. Court of Appeals, a case likewise involving real
estate tax assessments by a Metro Manila city on the real properties administered
by MIAA, argues for the non-tax liability of GSIS for real estate taxes. x x x.
xxxx
While perhaps not of governing sway in all fours inasmuch as what were
involved in Manila International Airport Authority, e.g., airfields and
runways, are properties of the public dominion and, hence, outside the
commerce of man, the rationale underpinning the disposition in that case
is squarely applicable to GSIS, both MIAA and GSIS being similarly
situated. First, while created under CA 186 as a non-stock corporation, a status
that has remained unchanged even when it operated under PD 1146 and RA 8291,
GSIS is not, in the context of the aforequoted Sec. 193 of the LGC, a GOCC following
the teaching of Manila International Airport Authority, for, like MIAA, GSISs capital is
not divided into unit shares. Also, GSIS has no members to speak of. And by
members, the reference is to those who, under Sec. 87 of the Corporation Code,
make up the non-stock corporation, and not to the compulsory members of the
system who are government employees. Its management is entrusted to a Board of
Trustees whose members are appointed by the President.
Second, the subject properties under GSISs name are likewise owned by the
Republic. The GSIS is but a mere trustee of the subject properties which have either
been ceded to it by the Government or acquired for the enhancement of the
system. This particular property arrangement is clearly shown by the fact that the
disposal or conveyance of said subject properties are either done by or through the
authority of the President of the Philippines. x x x. (Emphasis added, citations
omitted.)
All the more do we find that petitioner MCIAA, with its many similarities to the MIAA,
should be classified as a government instrumentality, as its properties are being
used for public purposes, and should be exempt from real estate taxes. This is not
to derogate in any way the delegated authority of local government units to collect
realty taxes, but to uphold the fundamental doctrines of uniformity in taxation and
equal protection of the laws, by applying all the jurisprudence that have exempted
from said taxes similar authorities, agencies, and instrumentalities, whether
covered by the 2006 MIAA ruling or not.
To reiterate, petitioner MCIAA is vested with corporate powers but it is not a stock or
non-stock corporation, which is a necessary condition before an agency or
instrumentality is deemed a government-owned or controlled corporation. Like
MIAA, petitioner MCIAA has capital under its charter but it is not divided into shares
of stock. It also has no stockholders or voting shares. Republic Act No. 6958
provides:chanRoblesvirtualLawlibrary
Section 9. Capital. The [Mactan-Cebu International Airport] Authority shall have
an authorized capital stock equal to and consisting of:ChanRoblesVirtualawlibrary
(a) The value of fixed assets (including airport facilities, runways and equipment)
and such other properties, movable and immovable, currently administered by or
belonging to the airports as valued on the date of the effectivity of this Act;
(b) The value of such real estate owned and/or administered by the airports; and
(c) Government contribution in such amount as may be deemed an appropriate
initial balance. Such initial amount, as approved by the President of the Philippines,
which shall be more or less equivalent to six (6) months working capital requirement
of the Authority, is hereby authorized to be appropriated in the General
Appropriations Act of the year following its enactment into
law.chanroblesvirtuallawlibrary
Thereafter, the government contribution to the capital of the Authority shall be
provided for in the General Appropriations Act.
Like in MIAA, the airport lands and buildings of MCIAA are properties of public
dominion because they are intended for public use. As properties of public
dominion, they indisputably belong to the State or the Republic of the Philippines,
and are outside the commerce of man. This, unless petitioner leases its real
property to a taxable person, the specific property leased becomes subject to real
property tax; in which case, only those portions of petitioners properties which are
leased to taxable persons like private parties are subject to real property tax by the
City of Lapu-Lapu.
We hereby adopt and apply to petitioner MCIAA the findings and conclusions of the
Court in the 2006MIAA case, and we quote:chanRoblesvirtualLawlibrary
To summarize, MIAA is not a government-owned or controlled corporation under

Section 2(13) of the Introductory Provisions of the Administrative Code because it is
not organized as a stock or non-stock corporation. Neither is MIAA a governmentowned or controlled corporation under Section 16, Article XII of the 1987
Constitution because MIAA is not required to meet the test of economic viability.
MIAA is a government instrumentality vested with corporate powers and performing
essential public services pursuant to Section 2(10) of the Introductory Provisions of
the Administrative Code. As a government instrumentality, MIAA is not subject to
any kind of tax by local governments under Section 133(o) of the Local Government
Code. The exception to the exemption in Section 234(a) does not apply to MIAA
because MIAA is not a taxable entity under the Local Government Code. Such
exception applies only if the beneficial use of real property owned by the Republic is
given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use
and thus are properties of public dominion. Properties of public dominion are owned
by the State or the Republic. x x x.
xxxx
The term ports x x x constructed by the State includes airports and seaports. The
Airport Lands and Buildings of MIAA are intended for public use, and at
the very least intended for public service. Whether intended for public use
or public service, the Airport Lands and Buildings are properties of public
dominion. As properties of public dominion, the Airport Lands and
Buildings are owned by the Republic and thus exempt from real estate tax
under Section 234(a) of the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative
Code, which governs the legal relation and status of government units, agencies
and offices within the entire government machinery, MIAA is a government
instrumentality and not a government-owned or controlled corporation. Under
Section 133(o) of the Local Government Code, MIAA as a government
instrumentality is not a taxable person because it is not subject to [t]axes, fees or
charges of any kind by local governments. The only exception is when MIAA leases
its real property to a taxable person as provided in Section 234(a) of the Local
Government Code, in which case the specific real property leased becomes subject
to real estate tax. Thus, only portions of the Airport Lands and Buildings
leased to taxable persons like private parties are subject to real estate tax
by the City of Paraaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being
devoted to public use, are properties of public dominion and thus owned by the
State or the Republic of the Philippines. Article 420 specifically mentions ports x x x
constructed by the State, which includes public airports and seaports, as properties
of public dominion and owned by the Republic. As properties of public dominion

owned by the Republic, there is no doubt whatsoever that the Airport Lands and
Buildings are expressly exempt from real estate tax under Section 234(a) of the
Local Government Code. This Court has also repeatedly ruled that properties
of public dominion are not subject to execution or foreclosure
sale.85 (Emphases added.)
WHEREFORE, we hereby GRANT the petition. We REVERSE and SET
ASIDE the Decision datedOctober 8, 2007 and the Resolution dated February
12, 2008 of the Court of Appeals (Cebu City) in CA-G.R. SP No. 01360.
Accordingly, we DECLARE:
1. Petitioners properties that are actually, solely and exclusively used for public
purpose, consisting of the airport terminal building, airfield, runway, taxiway
and the lots on which they are situated, EXEMPT from real property tax
imposed by the City of Lapu-Lapu.
2. VOID all the real property tax assessments, including the additional tax for
the special education fund and the penalty interest, as well as the final
notices of real property tax delinquencies, issued by the City of Lapu-Lapu on
petitioners properties, except the assessment covering the portions that
petitioner has leased to private parties.
3. NULL and VOID the sale in public auction of 27 of petitioners properties and
the eventual forfeiture and purchase of the said properties by respondent City
of Lapu-Lapu. We likewise declare VOID the corresponding Certificates of
Sale of Delinquent Property issued to respondent City of Lapu-Lapu.
Sereno, C. J., (Chairperson), Bersamin, Perez, and Perlas-Bernabe, JJ., concur.

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Republic of the Philippines

February 18, 2015

NORTHERN MINDANAO POWER CORPORATION, Petitioner,

A "receipt" on the other hand is a written acknowledgment of the fact of payment in

JOSE PORTUGAL PEREZ

Rollo, pp. 9-42.

Id. at 61-80; penned by Associate Justice Juanito C. Castaneda, Jr and concurred in

Id. at 45-60; penned by Associate Justice Juanito C. Castaneda Jr and concurred in

Petition for Review, id. at 18.

Supra note 13, at 389-390 and 405-406.

G.R. No. 181136, 13 June 2012, 672 SCRA 350, 363.

505 Phil. 650, 665 (2005).

Republic of the Philippines

January 14, 2015

ROHM APOLLO SEMICONDUCTOR PHILIPPINES, Petitioner,

JOSE PORTUGAL PEREZ

Rollo, pp. 10-51.

Id. at 274-275; CTA Resolution dated 28 July 2005.

Under the provisions of R. A. 7916.

Section 112(A) states:

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

G.R. No. 187485, 12 February 2013, 690 SCRA 336, 397.

G.R. No. 184823, 6 October 2010, 632 SCRA 422, 443-444.

Supra note 21, at 387-388.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines

June 22, 2015

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

enterprises for the calendar year 1998 to 2004; or a total of P2,741,909,973.96.

5% Income Tax Paid Per

Taxes covered by the tax amnesty

WHEREFORE, premises considered, the instant Motion for Reconsideration is hereby

Ruling of the CTA En Banc

Development Authority (BCDA) which shall administer and implement a

Rollo, pp. 61-67. Penned by Associate Justice Amelia R. Cotangco-Manalastas.

CTA En Banc records, pp. 22-33.

CTA Division records, pp. 218-233.

BIR records, pp. 87-88, 91-105, 123-129 & 131-133.

CTA Division records, pp. 21, 26-27.

503 Phil. 42 (2003).

Id. at 442-444, 492-494.

Supra note 3, at 22-29.

Rollo, pp. 30-31.

460 Phil. 530 (2003).

AN ACT DECLARING A ONE-TIME AMNESTY ON CERTAIN TAX AND DUTY

Commissioner of Internal Revenue v. The Philippine American Accident Insurance

Commissioner of Internal Revenue v. Eastern Telecommunications Phils., Inc., 638

243 Phil. 703 (1988).

CTA Division records, pp. 218-229.

Rollo, pp. 551-555.

C. L. VILLANUEVA, Philippine Corporate Law, 2001 Ed., p. 201.

CTA Division records, pp. 231-237 & 291-322.

Supra note 14.

AN ACT AMENDING REPUBLIC ACT No. 7227, As AMENDED, OTHERWISE KNOWN

AN ACT RESTRUCTURING THE EXCISE TAX ON ALCOHOL AND TOBACCO

453 Phil. 1043, 1052 (2003).

361 Phil. 916 (1999).

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. STANDARD

Final Income Tax

Withholding Tax Compensation

16,128,246.04 17,103,965.33 94,000.00

Final Income Tax

16,021,117.61 16,985,826.57 70,000.00