G.R. Nos.

108135-36 September 30, 1999

POTENCIANA M. EVANGELISTA, petitioner,
vs.
THE PEOPLE OF THE PHILIPPINES and THE HONORABLE SANDIGANBAYAN (FIRST
DIVISION), respondents.

YNARES-SANTIAGO, J.:
Before us is a petition for review on certiorari assailing the decision of the Sandiganbayan dated
September 11, 1992 in Criminal Case Nos. 14208-14209 finding petitioner Potenciana M.
Evangelista guilty beyond reasonable doubt of violation of Section 268, paragraph 4 of the National
Internal Revenue Code (NIRC) and Section 3(e) of R.A. No. 3019, otherwise known as the Anti-Graft
and Corrupt Practices Act.
Tanduay Distillery Inc., is a company engaged in the manufacture and sale of rum, gin, vodka and
other spirits. On September 17, 1987, Tanduay filed with the Bureau of Internal Revenue (BIR) an
application for tax credit in the sum of P180,701,682.00 representing alleged erroneous payments
for ad valorem taxes covering the period January 1, 1986 to August 31, 1987. Attached to the
application was a schedule of ad valorem taxes 1 allegedly paid by Tanduay with supporting
confirmation receipts. The application was filed with the Specific Tax Office of the BIR headed by Aquilino
T. Larin.
Tanduay anchored its claim for tax credit on the ground that it is a rectifier which is liable for specific
taxes and notad valorem taxes, citing a BIR ruling in a case involving Distilleria Limtuaco and Co.
Inc. The ruling states that rectifiers are considered as extensions of distillers inasmuch as they
purchase alcohol from distillers without prepayment of the specific tax. Since specific tax should be
paid by the distiller before its removal from the place of production, the burden of payment therefor is
shifted to and assumed by the rectifier.
In its application for tax credit, Tanduay stated that it is a rectifier with Assessment No. A-1-8 and a
compounder with Assessment No. A-1-8-A, although compounding is only incidental to rectification
of its products. Consequently, before the tax credit being sought by Tanduay could be granted, the
BIR's Tax and Alcohol Division, headed by Teodoro D. Pareo, had to verify first whether Tanduay's
products are distilled spirits or compounded liquor based on how they are manufactured. To do this,
Justino Galban, Head of the Compounders, Rectifiers and Repackers Section under the Alcohol and
Tax Division, had to look into the technical process for the manufacture of rum, gin, vodka and other
intoxicating beverages of Tanduay. If it is determined that the products can be properly classified as
distilled spirits based on how they are manufactured, then Tanduay could properly claim for a tax
credit on its payments of ad valorem taxes in accordance with Section 121 of the NIRC and the
Limtuaco ruling that rectifiers, as an extension of distillers, are subject to specific and not ad
valorem taxes. Finally, it had to be verified by the Revenue Accounting Division (RAD) headed by
petitioner Potenciana M. Evangelista whether Tanduay actually paid the P180,701,682.00 as ad
valorem taxes to the BIR which it claims it paid.
1wphi1.nt

On September 23, 1987, Larin, in a marginal handwritten note, directed Pareo to prepare a request
to the Revenue Accounting Division (RAD) for the authentication of the confirmation receipts

covering the tax payments sought to be credited. Accordingly, a memorandum, signed by Larin, was
sent to the RAD headed by petitioner Evangelista requesting verification and authentication whether
the amounts reflected in the confirmation receipts submitted by Tanduay were actually paid to the
BIR as ad valorem taxes.
Larin's a Memorandum was received by the Records and Administrative Section (RAS), a unit under
RAD, on September 24, 1987. In due course, RAS made the necessary verification on the basis of
its records and prepared the corresponding verification 2 in the form of a 1st Indorsement to the
Specific Tax Office on September 25, 1987. The indorsement, which was signed by petitioner Evangelista,
contained a listing of two hundred thirty seven (237) confirmation receipts in various amounts under two
categories designated with Tax Numeric Code (TNC) 3011-0011 and TNC 0000-0000. A total of 149
confirmation receipts covering P102,519,100.00 were listed as tax payments under TNC 3011-0011 and a
total of 88 confirmation receipts covering P78,182,582.00 were listed as tax receipts under TNC 00000000.
A memorandum was thereafter prepared by Galban as Chief of the Compounders and Rectifier's
Section addressed to Pareo describing the technical aspects of Tanduay's manufacturing process.
Galban made no recommendation, however, as to the validity of Tanduay's claim. On October 13,
1987, Pareo sent a memorandum to Larin recommending that the request for tax credit of Tanduay
Distillery, Inc. be given due course on the ground that Tanduay as a rectifier is an extension of the
distiller and its products are subject of the payment of specific tax and not ad valorem tax. On same
date, Larin signed a memorandum for the Deputy Commissioner of the BIR recommending that the
claim of Tanduay Distillery Inc., for the alleged erroneous payment of ad valoremtaxes in the amount
of P180,701,682.00 be tax credited as in the case of Distilleria Limtuaco and Co. Inc.
On October 13, 1987, Eufracio D. Santos, Deputy Commissioner of the BIR, approved the
recommendation made by Larin in his memorandum and thereafter signed Tax Credit Memo No.
5177 in the amount of P180,701,682.00 in favor of Tanduay Distillery, Inc. The approval was based
on the following:
1. The memorandum of the Assistant Commissioner for Specific Tax
Office, Aquilino T. Larin;
2. The memorandum of the Chief of Alcohol Division, Teodoro D.
Pareo; and
3. The 1st indorsement/certification issued by Chief of Revenue
Accounting Division, herein petitioner Potenciano M. Evangelista. 3
Immediately after the approval of Tax Credit Memo No. 5177, Tanduay availed of the tax credit on
various dates covering the period from October 19, 1987 to June 20, 1988. 4 However, on June 22,
1988, a certain Ruperto Lim wrote a letter-complaint to BIR Commissioner Bienvenido Tan, Jr. alleging
that the grant of Tax Credit Memo No. 5177 in favor of Tanduay was irregular and anomalous. More
specifically, Lim pointed out that Tanduay had paid only P73,614,287.20 5 by way of ad valorem taxes to
the BIR from January 1, 1986 to August 31, 1987 and not P180,701,682.00 as claimed. Deputy
Commissioner Santos, in approving TCM No. 5177, failed to notice that petitioner's 1st indorsement
contained a listing of TNC indicating tax payments received from Tanduay under two categories, i.e., TNC
3011-0011 and TNC 0000-0000. As earlier mentioned, a total of 149 confirmation receipts were listed as
tax payments under TNC 3011-0011 while a total of 88 confirmation receipts were listed as tax payments

under TNC 0000-0000. Deputy Commissioner Santos admitted that while he knew that there was a tax
numeric code for the kind of tax paid, he did not know which particular numbers corresponded to a
particular tax revenue. These codes are contained in the "Handbook of Tax Numeric Code of the Revenue
Sources," wherein it is stated that TNC No. 3011-0011 stands for specific tax on domestic and distilled
spirits, TNC No. 3023-2001 for ad valorem on compounded liquors and TNC No. 0000-0000 for
unclassified taxes. Had Deputy Commissioner Santos looked these up in the Handbook, he would have
known that Tanduay was not entitled to the whole sum of P180,701,682.00. Santos, however, contended
that the practice of using numeric tax codes is for the purpose of checking remittances of payments by the
banks which properly falls under the jurisdiction of the RAD. He claimed that he merely relied on the
certification of his subordinates, inasmuch as his work was merely confirmational.

On January 3, 1990, two informations were filed with the Sandiganbayan against Aquilino T. Larin,
Teodoro D. Pareo, Justino E. Galban, Jr. and petitioner Potenciana M. Evangelista for violation of
Section 268, Par. 4 of the National Internal Revenue Code (NIRC), docketed as Criminal Case No.
14208, and for violation of Section 3(e) of R.A. No. 3019 of the Anti-Graft and Corrupt Practices Act,
docketed as Criminal Case No. 14209.
Sec. 268, par. 4 of the NIRC reads:
Sec. 268. Violations committed by government enforcement officers Every official
agent or employee of the Bureau of Internal Revenue or any other agency of the
government charged with the enforcement of the provisions of this Code, who is
guilty of any of the offenses herein below specified, shall upon conviction for each act
or omission, be fined in the sum of not less than five thousand pesos but not more
than fifty thousand pesos or imprisoned for a term of not less than one year but not
more than ten years or both;
xxx xxx xxx
4. Those who conspire or collude with one another or others to defraud the revenues
or otherwise violate the provisions of this Code.
On the other hand, Section 3 (e) of R.A. No. 3019 of the Anti-Graft and Corrupt Practices Act states:
Sec. 3. Corrupt Practices of Public Officers in addition to acts or omissions of
public officers already penalized by existing law, the following shall constitute corrupt
practices of any public officer and are hereby declared to be unlawful;
xxx xxx xxx
e. Causing any undue injury to any party including the government, or giving any
private party any unwarranted benefit, advantage or preference in the discharge of
his official administrative or judicial functions through manifest partiality, evident bad
faith or gross inexcusable negligence.
Upon arraignment, all the accused including petitioner Evangelista pleaded not guilty. They raised
the defense that no undue injury had been caused to the government and no unwarranted benefits
had been accorded to Tanduay inasmuch as Tanduay had already fully reimbursed the BIR of the

availments found to have been unjustified or improper in the amount of P73,000,000.00 and had,
additionally paid P11,000,000.00 by way of penalties, or a total of P84,000,000.00.
Petitioner Evangelista, for her part, did not deny having issued the 1st indorsement. However,
instead of taking the witness stand, she, like her three co-accused, refused to testify and opted to
present as evidence in her behalf the following paragraphs from her letter of explanation dated
November 21, 1988 to BIR Commissioner Bienvenido Tan which read as follows:
Confirmation receipts do not contain any information as to the kind of tax or TNC.
Thus, there can never be any verification and certification as to kind of tax. What can
only be verified/certified by this Division as required in existing orders is the fact that
the total amount of each CR were remitted to the BIR by the collecting bank on the
given date.
xxx xxx xxx
In the case of Tanduay Distillery. I did not know at the time I signed the indorsement
what the TNC therein stand for because I was informing (sic) was that payments
were received by BIR. I just became curious to know its meaning and verify the same
from the Handbook of Tax Numeric Codes of Revenue Sources, 1985 when a certain
Atty. Villavicencio called me up to his Office at the Internal Security Division some
two weeks ago to ask questions on the subject indorsement.
In her letter, petitioner also categorically stated that, "Upon signing of this indorsement/certification I
or whoever is head of this Division, for that matter, do not know what TNC stands for." 6
On September 18, 1992, Aquilino T. Larin, Teodoro D. Pareo and petitioner Potenciana M.
Evangelista were convicted and sentenced to suffer the penalty of imprisonment for an
indeterminate period of 4 years, 8 months and 1 day by way of minimum to 6 years and 8 months by
way of maximum, and a fine of Twenty Thousand Pesos (P20,000.00) each in Criminal Case No.
14208; while in Criminal Case No. 124209, Aquilino T. Larin, Teodoro D. Pareo and petitioner
Potenciana M. Evangelista were convicted and sentenced to suffer imprisonment for an
indeterminate period ranging from a minimum of 9 years and 1 month to a maximum of 12 years.
The penalty of perpetual disqualification from public office was likewise imposed upon the three
accused. Justino Galban was acquitted inasmuch as his only participation was the preparation of the
memorandum describing Tanduay's manufacturing process as rectifier and compounder of liquors.
Petitioner Evangelista was convicted on the basis of the 1st indorsement issued by her which the
Sandiganbayan condemned as a "studied non-response" to Larin's query as to how much the BIR
actually received as payment for ad valorem taxes from Tanduay. The Sandiganbayan held that
Evangelista's indorsement could have been explicitly and directly responsive because Larin's memo
was clear and the purpose for his query was specific: How much was paid by Tanduay to the BIR by
way of ad valorem taxes for the purpose of computing the amount properly creditable to Tanduay for
refund? However, Evangelista's response merely enumerated a set of confirmation receipts with the
corresponding TNC numbers despite the fact that several employees of the Bureau were not well
acquainted with the use and meaning of TNCs. Petitioner's ambiguous reply, according to the
Sandiganbayan, permitted her superiors to equivocate as to its meaning which resulted in the
improper grant of tax credits to Tanduay. The Sandiganbayan thus concluded that the gross
negligence of the petitioner and its confluence with the acts of accused Larin and Pareo in

recommending the approval of Tanduay's application for tax credit adequately proved conspiracy
among them.
Her motion for reconsideration having been denied by the Sandiganbayan, Evangelista filed the
instant petition contending that the 1st indorsement was issued after proper verification of the data
given to the RAD against available records of the division. Petitioner claims the certification issued
was patterned after the prescribed format as a routine response to an official request of the Assistant
Commissioner for Excise Tax Office. Petitioner insists that she could not be held liable because there
was no mention in the 1st indorsement that the payments made by Tanduay Distillery Inc. were
actually for ad valorem taxes for which it could claim tax credit in the sum of P180,701,682.00.
On November 29, 1993, the Office of the Solicitor General filed a manifestation and motion in lieu of
comment recommending the acquittal of petitioner. The Manifestation stated that: "Although
petitioner herself may not have known the exact kind of taxes covered by the TNC reflected in her
1st Indorsement, this does not in any way make her guilty of gross negligence. Her duty was purely
ministerial in nature, that is, to report all data pertinent to Tanduay's tax payments on file with RAD.
She was not duty-bound to report her personal perception, understanding or conclusion regarding
the significance or meaning of the data she had reported. It was Larin and Pareo's duty to do so." 7
In view of the position taken by the Office of the Solicitor General, the Ombudsman and the Office of
the Special Prosecutor filed a motion for leave of court to file comment which was granted. In its
comment, the Office of the Ombudsman and the Office of the Special Prosecutor sought petitioner's
conviction on the ground that the decision of the Sandiganbayan on the two cases filed against her
is in accord with applicable jurisprudence and supported by factual evidence.
We find no reason to overturn petitioner's conviction for gross negligence.
Before 1969, internal revenue taxes were designated by descriptive words. This, however, proved to
be unsatisfactory inasmuch as tax data could not easily be stored and processed by the computer,
resulting in delayed compilation and retrieval of the data.
To facilitate the preparation of statistical and other management reports, the BIR adopted the Tax
Numeric Code System under which a numeric code stands for kinds or classes of tax and their
applicable rate. For this purpose, a "Handbook on Tax Numeric Codes of the Revenue Sources,"
was issued for BIR use. 8 Under this system, TNC No. 3011-0011 was made to stand for "specific tax on
domestic distilled spirits," 9 TNC No. 3023-2001 for ad valorem on compounded liquors, 10 and TNC No.
0000-0000 for unclassified taxes. Under various BIR Revenue Memorandum Orders and Circulars, the
use of TNC instead of word descriptions to identify and record tax payments was made mandatory. 11 It
may not be amiss to note at this point however that despite the fact that the use of TNC to identify and
record tax payments was made mandatory, it had become obvious during trial that not all employees of
the BIR were well acquainted with the meanings of the TNC. Even Deputy Commissioner Santos who
approved the Tax Credit Memo and the BIR Commissioner himself, Bienvenido Tan, were not familiar with
the corresponding TNC numbers for a particular revenue. Not surprisingly, petitioner and the three other
accused claimed they too were unaware of the meaning of TNC.
In the case at bar, petitioner is the head of the Revenue Accounting Division (RAD). Under Revenue
Administrative Order No. 5-84, one of the functions of the said division is to "Confirm and certify as
to the correctness of payment and other informations verified from accounting records and
documents." As head of the RAD, petitioner holds an extremely sensitive position, whose

certification to the payments received by the Bureau from taxpayers determines whether the
taxpayer is entitled to a refund or a tax credit. Despite her sensitive position, however, and despite
her own admission from the pleadings that the use of TNC instead of word descriptions to identify
and record tax payments were made mandatory since 1969, petitioner claims that she practically
had no idea what the TNC meant until a year after having issued the 1st indorsement, when
investigation regarding the tax credits given to Tanduay was well under way. Petitioner further claims
that there was no way she could have verified whether the payments made by Tanduay were for ad
valorem taxes because the confirmation receipts do not contain any information as to the kind of tax
paid by the taxpayer nor the requisite TNC.
We are not impressed.
A payment order, which contains the particular kind of tax to be paid and the corresponding TNC, is
issued to a taxpayer to be presented by him to the bank where he pays his taxes. When the
payment order is presented, a confirmation receipt is issued by the bank evidencing payment of the
tax. Although it is not stated in the confirmation receipts what kind of tax is being paid by the
taxpayer nor the TNC, the BIR's copy of the confirmation receipt is usually attached to the original
copy of the Payment Order (PO) which in turn specifies the kind of tax paid and the TNC. Since
petitioner's division is the repository of all accounting records of the Bureau, it should have copies of
the payment orders for the corresponding confirmation receipts and therefore petitioner could have
easily verified what kind of taxes were covered by the payments made by Tanduay from January 1,
1986 to August 31, 1987. Moreover, petitioner's claim that there were no pertinent records, codes
and references that could be used to distinguish the confirmation receipts as either for ad valorem or
specific tax is belied by the denial of her immediate superior, Melchor Ramos, who stated that the
RAD has in its possession the monthly Alpha List of Taxpayers issued in 1986 as well as the
collection report by agent banks (Abstract of Collection thru Banks) for the same year which were
prepared by the Revenue Information System Service, Inc. (RISSI) based on the confirmation
receipts transmitted to them by the field offices and the PO/CR Monitoring Division. Petitioner's
immediate superior added that these records contain the TNC of every receipt listed therein and thus
it would be very easy to identify the kind of tax paid by the taxpayer by simply referring to the
Handbook on Numeric Tax Code. 12
Clearly, petitioner's alleged lack of knowledge as to what TNC meant was grossly inexcusable if not
improbable considering that the use of TNC to record tax payments received by the Bureau is
directly connected with the duties of her office. If there is anyone in the. Bureau who was expected to
have a working knowledge of the TNC, it should have been petitioner because the use of TNC was
precisely meant to facilitate the recording of the tax payments received by the Bureau for verification
purposes. Petitioner as head of the Revenue Accounting Division was called upon to verify whether
the schedule of payments submitted by Tanduay in support of its application for tax credit were
payments for ad valorem taxes. Petitioner had submitted a list of payments made by Tanduay with
the corresponding bank account nos., amounts and TNC Nos., as required by the Memorandum
Circular. But, as admitted by petitioner herself, she had not the slightest idea what TNC meant,
despite the fact that they are mandated by the Bureau to use it accordingly in identifying and
recording tax payments.
We have a situation where the Head of the Division, which is in charge of recording tax payments
received by the Bureau and whose certification is relied upon by the Bureau in the granting of tax
credits, does not even know or care to know what are the kind of tax payments received by the
Bureau. For all intents and purposes, petitioner issued an indorsement certifying a whole schedule of

payments made by the taxpayer without a specification of the kinds of taxes since she did not have
any idea what TNC meant. It could not even be said that petitioner made an error of judgment in
answering Larin's query with an enumeration of TNCs instead of opting for a more explicit response
since petitioner, not having any idea as to what the TNCs meant, could not have couched the
statement of her 1st Indorsement in any other way. She could not have made a more explicit answer
to the query of Larin inasmuch as she did not even know or care to find out whether the BIR actually
received payments for ad valoremtaxes from Tanduay. Clearly, there is no doubt that petitioner was
grossly negligent in discharging her duties. As defined in the case of Alejandro v. People, 13 gross
negligence is "negligence characterized by want of even slight care, acting or omitting to act in a situation
where there is a duty to act, not inadvertently but willfully and intentionally with a conscious indifference to
consequences insofar as other persons may be affected. It is the omission of that care which even
inattentive and thoughtless men never fail to take on their own property." The test to determine the
existence of negligence in a particular case may be stated in this wise: "Did the defendant in doing the
negligent act use that reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence. The law here in effect adopts the standard
supposed to be exercised by the discreet paterfamilias of Roman Law. The existence of negligence in a
given case is not determined by reference to the personal judgment of the actor in the situation before
him. The law considers what would be reckless, blameworthy or negligent in the man of ordinary
intelligence and prudence and determines liability by that." 14
Petitioner asserts that there was nothing untruthful in the certification she issued regarding the tax
payments received by the BIR from Tanduay. Petitioner further claims that the first endorsement was
patterned after the standard format used by the division whenever a request is made for verification
of payments and she could not be faulted for adhering to the mandate of the various memoranda
issued regarding the use of TNCs.
Admittedly, the use of TNCs to record tax payments is mandated by various memoranda issued by
the Bureau. Petitioner, however, as previously stated, never exerted any effort to find out what the
TNCs meant. Had she been more circumspect, she would have appreciated the significance of her
certification. She would have known that Tanduay was not entitled to the whole amount of
P180,701,682.00 it was claiming as tax credit. She would have been forewarned of the implied
consequences of her certification and could have accordingly informed her superiors and her coaccused whether Tanduay was really entitled to a tax credit at all or not. That her co-accused were
mandated to know what TNC meant is beside the point. Petitioner, by the position she occupies, is
mandated to know the kind of taxes for which payment is made by the taxpayer claiming a refund
before she issues a certification because it is on the basis of this certification that it is determined
whether tax credits should be granted at all. Certainly, the petitioner held a sensitive position with a
function that could hardly be classified as ministerial. As head of the division which is supposedly in
charge of encoding payment received by the Bureau from taxpayers and who is supposedly
expected more than anyone to know the meaning of the TNC, petitioner issued an indorsement
containing cryptic codes which she admittedly did not know the meaning of and expecting her
superiors, who were not even in charge of recording tax payments and who relied on her
certification, to be familiar with.
Petitioner cannot take refuge in the claim that the 1st indorsement was issued in the usual format as
a routine response to an official request of the Commissioner of Excise Tax after it has verified the
data given to them against available records of the division. We fully concur with the observation of
the Sandiganbayan that

to begin with, nobody has demonstrated that the text of the first indorsement of the
Tanduay matter and on the Limtuaco matter were the correct responses to the query
made by Larin. As aforesaid, nobody, whether for or from the accused, testified.
And since nobody actually testified on any of the documents of the accused not
even her boss, Assistant Commissioner Melchor S. Ramos so that a full
clarification could be had thereon, this court cannot be deemed to accept his written
statements unqualifiedly.
While petitioner was grossly negligent in her duties for which she could be held liable under R.A. No.
3019 (e), petitioner may not be held liable for violation of Section 268(4) of the National Internal
Revenue Code inasmuch as it has not been proven that there was an actual agreement between her
and her co-accused to grant unwarranted tax credits to Tanduay. What is punished in said Sec.
268(4) is the act of conspiring and colluding to defraud the government of revenues. It is well
entrenched in our jurisprudence that conspiracy must be shown to exist as clearly and as
convincingly as the commission of the offense itself. Absent any act or circumstance from which may
be logically inferred the existence of a common design among the accused to commit the crime, the
theory of conspiracy remains a speculation not a fact. 15
Significantly, in the separate appeal of petitioner's two other co-accused to this Court,
entitled Pareo vs.Sandiganbayan and the People of the Philippines, 16 we ruled that "the acts of
petitioners and that of Evangelista may be considered concerted only because they performed
interrelated functions but there is no actual proof that conspiracy existed between the parties."
WHEREFORE, the decision of the Sandiganbayan in Criminal Case No. 14208 convicting petitioner
Potenciana M. Evangelista of violation of Section 268 (4) of the National Internal Revenue Code is
REVERSED and petitioner is accordingly ACQUITTED. The decision of the Sandiganbayan in
Criminal Case No. 14209 convicting petitioner of violation of R.A. 3019 (e) of the Anti-Graft and
Corrupt Practices Act is AFFIRMED with the MODIFICATION that petitioner is sentenced to suffer an
indeterminate penalty of imprisonment of six (6) years and one month as minimum to twelve (12)
years as maximum. The penalty of perpetual disqualification from public office is likewise imposed
on her. No costs.
1wphi1.nt

SO ORDERED.
Davide, Jr., C.J., Puno, Kapunan and Pardo, JJ., concur.