1. [G.R. No. 134114.
July 6, 2001] before the said Collector of Customs from
NESTLE PHILIPPINES, INC., (FORMERLY FILIPRO,
INC.) petitioner, vs. HONORABLE COURT OF
APPEALS, COURT OF TAX APPEALS and
COMMISSIONER OF CUSTOMS, respondents.
DECISION
DE LEON, JR., J.:
Challenged in this petition for review
on certiorari is the Decision[1] in CA-G.R. SP. No.
43188[2] dated September 23, 1997 of the Court
of Appeals which affirmed the Decision[3] dated
May 30, 1995 of the Court of Tax Appeals in
C.T.A. Case No. 4478[4] dismissing petitioners
petition for review to compel the Commissioner
of Customs to grant it a refund of allegedly
overpaid import duties, on its various
importations of milk and milk products,
amounting to Five Million Eight Thousand and
Twenty-Nine Pesos (P5,008,029.00).
Petitioners motion for reconsideration thereof
was denied by the Court of Appeals in a
Resolution[5] dated June 9, 1998.
The antecedent facts are as follows.
Petitioner is a duly organized domestic
corporation engaged in the importations of milk
and milk products for processing, distribution
and sale in the Philippines. Between July and
November 1984, petitioner transacted sixteen
(16) separate importations of milk and milk
products from different countries. Petitioner
was assessed customs duties and advance sales
taxes by the Collector of Customs of Manila for
each of these separate importations on the
basis of the published Home Consumption
Value (HCV) indicated in the Bureau of Customs
Revision Orders. Petitioner paid the same but
seasonably filed the corresponding protests
October 25 to December 5, 1984, uniformly
alleging therein that the latter erroneously
applied higher home consumption values in
determining the dutiable value for each of
these separate importations. In the said
protests, petitioner claims for refund of both
the alleged overpaid import duties amounting
to Five Million Eight Thousand and Twenty-Nine
Pesos (P5,008,029.00) and advance sales taxes
aggregating to Four Million Five Hundred Sixty-
Four Thousand One Hundred Seventy-Nine
Pesos and Thirty Centavos (P4,564,179.30).
On October 14, 1986, petitioner formally filed a
claim for refund of allegedly overpaid advance
sales taxes with the Bureau of Internal Revenue
(BIR) amounting to Four Million Five Hundred
Sixty-Four Thousand One Hundred Seventy-
Nine Pesos and Thirty Centavos (P4,564,179.30)
covering the same sixteen (16) importations of
milk and milk products from different
countries. Not long after, on October 15, 1986
and within the two-year prescriptive period
provided for under the National Internal
Revenue Code (NIRC) for claiming a tax refund,
petitioner filed the corresponding petition for
review with the Court of Tax Appeals (CTA)
which was docketed therein as C.T.A. Case No.
4114. On January 3, 1994, the tax court ruled in
favor of petitioner and forthwith ordered the
BIR to refund to the petitioner the sum of Four
Million Four Hundred Eighty-Nine Thousand Six
Hundred Sixty-One Pesos and Ninety-Four
Centavos (P4,489,661.94) representing the
overpaid Advance Sales Taxes on the aforesaid
importations.
On the other hand, the sixteen (16) protest
cases for refund of alleged overpaid customs
duties amounting to Five Million Eight
Thousand Twenty-Nine Pesos (P5,008,029.00)
were left with the Collector of Customs of
Manila. However, the said Collector of Customs
failed to render his decision thereon after
almost six (6) years since petitioner paid under
protest the customs duties on the said sixteen
(16) importations of milk and milk products and
filed the corresponding protests.
Consequently, in order to prevent these claims
from becoming stale on the ground of
prescription, petitioner immediately filed a
petition for review docketed as C.T.A. Case No.
4478, with the Court of Tax Appeals on August
2, 1990 despite the absence of a ruling on its
protests from both the Collector of Customs of
Manila and the Commissioner of Customs.
On May 30, 1995, the CTA rendered judgment
dismissing C.T.A. Case No. 4478 for want of
jurisdiction.[6] The subsequent motion for
reconsideration filed by the petitioner on July
11, 1995 was denied for lack of merit in a
Resolution[7] dated January 6, 1997.
Aggrieved, petitioner appealed on February 10,
1999 the said judgment and resolution of the
CTA in C.T.A. Case No. 4478 to the Court of
Appeals by way of petition for review on
certiorari under Rule 45 of the Rules of
Court. However, this appeal was later dismissed
by the appellate court on September 23, 1997
for lack of merit. The Court of Appeals
opined, inter alia, that the CTAs jurisdiction is
not concurrent with the appellate jurisdiction of
the Commissioner of Customs since there was
no decision or ruling yet of the Collector of
Customs of Manila on the matter; that the
petition does not fall under any of the
recognized exceptions on exhaustion of
administrative remedies to justify petitioners
immediate resort to the CTA; that the petitioner
failed to move for the early resolution of its
claims for refund nor was there any notice given
that the said Collector of Customs continued
inaction on its claims would be deemed a denial
of its claims; and that petitioner also neglected
to cite any law or jurisprudence which
prescribes a period for filing an appeal in the
CTA even if there was no action yet by the
Commissioner of Customs.
On June 9, 1998, the appellate court issued a
Resolution[8] denying petitioners motion for
reconsideration for lack of merit.
Hence, this petition.
Petitioner assigns the following as errors, to wit:
1. RESPONDENT COURT OF APPEALS ACTED
WITH GRAVE ABUSE OF DISCRETION IN
HOLDING THAT THE FILING OF PROTEST CASES
BEFORE THE COLLECTOR OF CUSTOMS HAD
EFFECTIVELY INTERRUPTED THE RUNNING OF
THE SIX-YEAR PRESCRIPTIVE PERIOD;
2. RESPONDENT COURTS COMMITTED
FUNDAMENTAL ERRORS AND ACTED WITH
GRAVE ABUSE OF DISCRETIONS IN HOLDING
THAT PETITIONER HAD FAILED TO EXHAUST
ADMINISTRATIVE REMEDIES,
NOTWITHSTANDING ALMOST 6 YEARS OF
PROCTRACTED HEARINGS OF THE 16 PROTEST
CASES WITH THE CUSTOMS COLLECTOR, AND
FILING OF THE PETITION ONLY WHEN THE SIX-
YEAR PRESCRIPTIVE PERIOD WAS ABOUT TO
EXPIRE TO AVOID NULLLIFICATION OF CLAIMS
ON GROUND OF PRESCRIPTION;
3. THE RESPONDENT COURTS GRAVELY ERRED
IN DISMISSING ON SHEER TECHNICALITIES
PETITIONERS CLAIMS FOR THE REFUND OF
P5,008,029.08 (SIC) OVERPAID DUTIES, WHEN
THE FACTS OF OVERPAYMENTS HAD BEEN
EARLIER RESOLVED IN CTA CASE NO. 4114,
HOLDING THAT THE WRONG APPLICATION OF
THE HIGHER HOME CONSUMPTION VALUES
RESULTED IN THE OVERPAYMENTS OF DUTIES
AND TAXES, AND UPON WHICH, IT ORDERED
THE REFUND OF P4,489,661.94 IN OVERPAID
TAXES. THERE IS NO VALID REASON THEREFORE
WHY THE CORRESPONDING OVERPAYMENTS IN
CUSTOMS DUTIES CAN NOT ALSO BE REFUNDED
TO ITS RIGHTFUL OWNER, THE PETITIONER
HEREIN.
In this petition, petitioner asserts that tax
refunds are based on quasi-contract or solutio
indebiti, which under Article 1145[9] of the Civil
Code, prescribes in six (6) years. Consequently,
the pendency of its protest cases before the
office of the Collector of Customs of Manila did
not interrupt the running of the prescriptive
period under the aforesaid provision of law
considering that it is only an administrative
body performing only quasi-judicial function
and not a regular court of justice.[10] Thus, in like
manner the thirty-day period for appealing to
the CTA must be made within the six-year
prescriptive period.
Petitioner further contends that the fact of
overpayment of customs duties has been duly
established and resolved with finality by the
Court of Tax Appeals on January 3, 1994 in
C.T.A. Case No. 4114.[11] In that case, the tax
court found that the Bureau of Customs
erroneously used the wrong home consumption
value in assessing the petitioner the Advance
Sales Tax on its subject sixteen (16)
importations.The tax court then ordered the
Commissioner of Internal Revenue to refund to
the petitioner the sum of Four Million Four
Hundred Eighty-Nine Thousand Six Hundred
Sixty-One Pesos and Ninety-Four Centavos
(P4,489,661.94), representing overpaid advance
sales tax covering the same sixteen (16)
importations. It is also from the same 16
separate importations of milk and milk products
that petitioner based its claims for refund of
overpayment of customs duties. Thus,
petitioner avers that its claims for refund of
overpaid customs duties must likewise be
granted and awarded in its favor.
In lieu of Comment,[12] the Solicitor General
manifested that there is merit in petitioners
argument considering that petitioners cause of
action to recover a tax erroneously paid is
based on solutio indebiti which is expressly
classified as a quasi-contract under the Civil
Code; that petitioners cause of action would
have prescribed on August 2, 1990 if it did not
bring the matter before the CTA; and that the
Collector of Customs has not even acted or
resolved the petitioners several protests it had
filed before his office within six (6) years after it
made the earliest payment of advance customs
duties on its importations.
There was also no violation of the principle of
exhaustion of administrative remedies in this
case. This doctrine does not apply to the case at
bar since its observance would only result in the
nullification of the claim for refund being
asserted nor would it provide a plain, speedy
and adequate remedy under the
circumstances. This notwithstanding, however,
the Solicitor General further opined that this
case should be remanded to the CTA in order
for the tax court to determine the veracity of
petitioners claim.
On the other hand, respondent Commissioner
of Customs, in his Comment[13] dated August 21,
2000, admitted with regret, their official
inaction adverted to by the
petitioner. Respondent Commissioner
expressed the view that petitioners claim for
refund of customs duties should not outrigthly
be denied by virtue of the strict adherence to
the rules to prevent grave injustice to hapless
taxpayers; that this does not justify, however,
an outright award of the refund of alleged
overpayment of customs duties in favor of
petitioner; and that there is no definite factual
determination yet that the customs duties and
taxes in question were overpaid and
refundable, and if refundable how much is the
refundable amount. The fact that the Collector
of Customs of Manila failed to act or decide on
the petitioners protest cases filed before his
Office does not relieve the petitioner of its
burden to prove that it is entitled to the refund
sought for. Thus, respondent Commissioner of
Customs, thru his special counsel,
recommended that this case be remanded to
the court of origin, namely, the CTA.
The recommendations of both the Solicitor
General and the respondent Commissioner of
Customs are well taken. After a meticulous
consideration of this case, we find that the
recommended remand of this case to the CTA is
warranted for the proper verification
and determination of the factual basis and
merits of this petition and in order that the ends
of substantial justice and fair play may be
subserved. We are of the view that the said
recommendation is in accord with the
provisions of the Tariff and Customs Code as
hereinafter discussed.
The right to claim for refund of customs duties
is specifically governed by Section 1708 of the
Tariff and Customs Code, which provides that -
Sec. 1708. Claim for Refund of Duties and Taxes
and Mode of Payment. All claims for refund of
duties shall be made in writing and forwarded
to the Collector to whom such duties are
paid, who upon receipt of such
claim, shall verify the same by the records of his
Office, and if found to be correct and in
accordance with law, shall certify the same to
the Commissioner with his recommendation
together with all necessary papers and
documents. Upon receipt by the Commissioner
of such certified claim he shall cause the same
to be paid if found correct.
It is clear from the foregoing provision of the
Tariff and Customs Code that in all claims for
refund of customs duties, the Collector to whom
such customs duties are paid and upon
receipt of such claim is mandated to verify the
same by the records of his Office. If such claim
is found correct and in accordance with law, the
Collector shall certify the same to the
Commissioner with his
recommendation together with all the
necessary papers and documents. This is
precisely one of the reasons why the Court of
Appeals upheld the dismissal of the case on the
ground that the CTAs jurisdiction[14] under the
Tariff and Customs Code is not concurrent with
that of the respondent Commissioner of
Customs due to the absence of any certification
from the Collector of Customs of
Manila. Accordingly, petitioners contention that
its claims for refund of alleged overpayment of
customs duties may be deemed established
from the findings of the tax court in C.T.A. Case
No. 4114 on the Advance Sales Tax is not
necessarily correct in the light of the above-
cited provision of the Tariff and Customs Code.
Customs duties is the name given to taxes on
the importation and exportation of
commodities, the tariff or tax assessed upon
merchandise imported from, or exported to, a
foreign country.[15] Any claim for refund of
customs duties, therefore, take the nature of
tax exemptions that must be
construed strictissimi juris against the claimants
and liberally in favor of the taxing
authority.[16] This power of taxation being a high
prerogative of sovereignty, its relinquishment is
never presumed. Any reduction or diminution
thereof with respect to its mode or its rate must
be strictly construed, and the same must be
couched in clear and unmistakable terms in
order that it may be applied.[17]
Thus, any outright award for the refund of
allegedly overpaid customs duties in favor of
petitioner on its subject sixteen (16)
importations is not favored in this jurisdiction
unless there is a direct and clear finding
thereon. The fact alone that the tax court, in
C.T.A. Case No. 4114, has awarded in favor of
the petitioner the refund of overpaid Advance
Sales Tax involving the same sixteen (16)
importations does not in any way excuse the
petitioner from proving its claims for refund of
alleged overpayment of customs duties. We
have scrutinized the decision rendered by the
tax court in C.T.A. Case No. 4114 and found no
clear indication therein that the tax court has
ruled on petitioners claims for alleged
overpayment of customs duties.
The petitioner is mistaken in its contention that
its claims for refund of allegedly overpaid
customs duties are governed by Article
2154[18] of the New Civil Code on quasi-contract,
or the rule on solutio indebiti, which prescribes
in six (6) years pursuant to Article 1145 of the
same Code.
Sections 2308 and 2309 of the Tariff and
Customs Code provide that:
Sec. 2308. Protest and Payment upon Protest in
Civil Matter. When a ruling or decision of the
collector is made whereby liability for duties,
taxes, fees, or other charges are determined,
except the fixing of fines in seizure cases, the
party adversely affected may protest such
ruling or decision by presenting to the
Collector at the time when payment of the
amount claimed to be due the government is
made, or within fifteen (15) days thereafter, a
written protest setting forth his objection to the
ruling or decision in question, together with the
reasons therefor. No protest shall be
considered unless payment of the amount due
after final liquidation has first been made and
the corresponding docket fee, as provided for in
Section 3301.
Sec. 2309. Protest Exclusive Remedy in
Protestable Case.In all cases subject to protest,
the interested party who desires to have the
action of the collector reviewed, shall make a
protest, otherwise, the action of the collector
shall be final and conclusive against him, x x x.
SEC. 2312. Decision or Action by the collector in
Protest and Seizure Cases. - When a protest in a
proper form is presented in a case where
protest is required, the collector shall issue
an order for hearing within fifteen (15) days
from receipt of the protest and hear the matter
thus presented. Upon termination of the
hearing, the Collector shall render a decision
within thirty (30) days, and if the protest is
sustained, in whole or in part, he shall make the
appropriate order, the entry reliquidated
necessary. x x x .
In the light of the above-cited provisions of the
Tariff and Customs Code, it appears that in all
cases subject to protest, the claim for refund of
customs duties may be foreclosed only when
the interested party claiming refund fails to file
a written protest before the Collector of
Customs. This written protest which must set
forth the claimants objection to the ruling or
decision in question together with the reasons
therefor must be made either at the time when
payment of the amount claimed to be due the
government is made or within fifteen (15) days
thereafter. In conjunction with this right of the
claimant is the duty of the Collector of Customs
to hear and decide such protest in accordance
and within the period of time prescribed by the
law.
Accordingly, once a written protest is
seasonably filed with the Collector of Customs
the failure or inaction of the latter to promptly
perform his mandated duty under the Tariff and
Customs Code should not be allowed to
prejudice the right of the party adversely
affected thereby. Technicalities and legalisms,
however exalted, should not be misused by the
government to keep money not belonging to
it, if any is proven, and thereby enrich itself at
the expense of the taxpayers. If the State
expects its taxpayers to observe fairness and
honesty in paying their taxes, so must it apply
the same standard against itself in refunding
excess payments, if any, of such taxes. Indeed
the State must lead by its own example of
honor, dignity and uprightness.
Here, it is undisputed that the inaction of the
Collector of Customs of Manila for nearly six (6)
years on the protests seasonably filed by the
petitioner has caused the latter to immediately
resort to the CTA. The petitioner did so on the
mistaken belief that its claims are governed by
the rule on quasi-contract or solutio
indebiti which prescribes in six (6) years under
Article 1145 of the New Civil Code.
This belief or contention of the petitioner is
misplaced. In order for the rule on solutio
indebiti to apply it is an essential condition that
petitioner must first show that its payment of
the customs duties was in excess of what was
required by the law at the time when the
subject sixteen (16) importations of milk and
milk products were made. Unless shown
otherwise, the disputable presumption of
regularity of performance of duty lies in favor of
the Collector of Customs.
In the present case, there is no factual showing
that the collection of the alleged overpaid
customs duties was more than what is required
of the petitioner when it made the aforesaid
separate importations.There is no factual
finding yet by the government agency
concerned that petitioner is indeed entitled to
its claim of overpayment and, if true, for how
much it is entitled. It bears stress that in
determining whether or not petitioner is
entitled to refund of alleged overpayment of
customs duties, it is necessary to determine
exactly how much the Government is entitled to
collect as customs duties on the
importations. Thus, it would only be just and
fair that the petitioner-taxpayer and the
Government alike be given equal opportunities
to avail of the remedies under the law to
contest or defeat each others claim and to
determine all matters of dispute between them
in one single case.[19] If the State expects its
taxpayers to observe fairness and honesty in
paying their taxes, so must it apply the same
standard against itself in refunding excess
payments, if truly proven, of such taxes. Indeed,
the State must lead by its own example of
honor, dignity and uprightness.
The ratiocination of the Court of Appeals is in
accord with a ruling of this Court which is
applicable to the case at bar, to wit:
As stated by the respondent court in its
Resolution dated January 6, 1997,
the petitioners claim cannot be deemed to
prescribe because the Collector of Customs has
not acted on the protest, and the period for
filing an appeal to the Commissioner of
Customs has not commenced to run. Moreover,
delay or inaction of a subordinate official, does
not constitute an exception to the afore-cited
principle as the delay should be brought to the
attention of a superior administrative officer for
immediate adjudication (Commissioner of
Immigration vs. Vamenta, Jr., 54 SCRA 342;
Barte vs. Dichoso, 47 SCRA 77).
WHEREFORE, the assailed Decision dated
September 23, 1997 of the Court of Appeals in
CA-G.R. SP. No. 43188 is hereby SET ASIDE; and
C.T.A. Case No. 4478 is REINSTATED and
REMANDED to the Court of Tax Appeals for
hearing and reception of evidence relative to
petitioners claims for refund of alleged
overpayment of customs duties. The Court of
Tax Appeals is directed to dispose of the said
case with dispatch.
SO ORDERED.
2. G.R. No. 94262 May 31, 1991
FEEDER INTERNATIONAL LINE, PTE., LTD., by its
agent, FEEDER INTERNATIONAL (PHILS.)
INC., petitioner,
vs.
COURT OF APPEALS, Fourteenth Division,
COURT OF TAX APPEALS, and COMMISSIONER
OF CUSTOMS,respondents.
Emma Quisumbing-Fernando and Yolanda
Quisumbing-Javellana & Associates for
petitioner.
REGALADO, J.:
The instant petition seeks the reversal of the
decision of respondent Court of Appeals dated
May 8, 1990, affirming the decision rendered by
respondent Court of Tax Appeals which found
the vessel M/T "ULU WAI" liable under Section
2530(a) of the Tariff and Customs Code of the
Philippines (Presidential Decree No. 1464), as
amended, and its cargo of 1,100 metric tons of
gas oil and 1,000 metric tons of fuel oil liable
under Section 2530(a), (f), and (1-1) of the same
Code and ordering the forfeiture of the said
vessel and its cargo.1
The facts as culled from the decision of the
Court of Appeals in CA-G.R. SP No. 20470 are as
follows:
The M/T "ULU WAI" foreign vessel of Honduran
registry, owned and operated by Feeder
International Shipping Lines of Singapore, left
Singapore on May 6, 1986 carrying 1,100 metric
tons of gas oil and 1,000 metric tons of fuel oil
consigned to Far East Synergy Corporation of
Zamboanga, Philippines.
On May 14, 1986, the vessel anchored at the
vicinity of Guiuanon Island in Iloilo without
notifying the Iloilo customs authorities. The
presence of the vessel only came to the
knowledge of the Iloilo authorities by
information of the civilian informer in the area.
Acting on said information, the Acting District
Collector of Iloilo dispatched a Customs team
on May 19, 1986 to verify the report.
The Customs team found out that the vessel did
not have on board the required ship and
shipping documents, except for a clearance
from the port authorities of Singapore clearing
the vessel for "Zamboanga."
In view thereof, the vessel and its cargo were
held and a Warrant of Seizure and Detention
over the same was issued after due
investigation. The petitioner then filed its
Motion to Dismiss and to Quash the Warrants
of Seizure and Detention which the District
Collector denied in his Order dated December
12, 1986.
In the course of the forfeiture proceedings, the
parties, through their respective counsel,
agreed on a stipulation of facts, to wit:
l. That the existence and identity of MT "ULU
WAI" subject of Sl-2-86, herein identified as
Exh. "A", is admitted.
2. That the existence and identity of l,100
metric tons of gas oil, subject of Sl-2-86-A,
herein identified as Exh. "B", is admitted;
3. That the existence and identity of 1,000
metric tons of fuel oil, subject of Sl-2-86 herein
identified as Exh. "B-1", is admitted;
4. That M/T "ULU WAI" left Singapore May 6,
1986 and was cleared by Singapore customs
authorities for Zamboanga, Philippines;
5. That subject vessel arrived at Guiuanon
Island, Municipality of Nueva Valencia, sub-
province of Guimaras, Province of Iloilo,
Philippines, about 1120HRS, May 14,1986;
6. That subject vessel was boarded by Customs
and Immigration authorities for the first time in
the afternoon of May 19, 1986, at about
1600HRS;
7. That an apprehension report dated May 21,
1986, submitted by the Team leader of the
Customs and Immigration Team, Roberto
Intrepido, marked and identified as Exh. "C", is
admitted;
8. That at the time of boarding, the Master of
subject vessel could not produce any ship
and/or shipping documents regarding her cargo
except the Port Clearance Certificate No.
179999 issued by the Port of Singapore
authority dated May 4, 1986, marked as Exh.
"D", which is hereby admitted;
9. That on May 26, 1986, the Master of M/T
"ULU WAI", Capt. Romeo E. Deposa filed a
Marine Protest dated same date, which Marine
Protest, marked and identified as Exh. "E", is
hereby admitted;
10. That the sworn statement of said Capt.
Romeo E. Deposa, marked and identified as Exh.
"F", given on May 26, 1986 before Atty.
Hernando Hinojales, Customs Legal Officer, is
admitted;
11. That the sworn statement of Mr. Antonio
Torres, Owner's representative of M/T "ULU
WAI" marked and identified as Exh. "G" given
before Atty. Hernando Hinojales on May
28,1986, is admitted;
12. That the sworn statement of Wilfredo
Lumagpas, Master of M/T "CATHEAD" given
before Lt. Dennis Azarraga on June 4, 1986,
marked and identified as Exh. "H", is admitted;
13. That the existence of Fixture Note No. FN-
M-86-05-41 entered into by and between the
National Stevedoring & Lighterage Corporation
and the Far East Synergy Corporation, marked
and identified as Exh. "I", is admitted; and;
14. That the Preliminary Report of Survey
Sounding Report dated June 17, 1986, signed by
J.P. Piad, Surveyor of Interport Surveying
Services, Inc. and duly attested by Ernesto
Cutay, Chief Officer of the M/T "ULU WAI"
marked and identified as Exh. "J", is also
admitted.2
On March 17, 1987, the District Collector issued
his decision, with the following disposition:
WHEREFORE, premises considered, the M/T
"ULU WAI" hereby found guilty of violating
Section 2530 (a) of the Tariff and Customs Code
of the Philippines (PD 1464), as amended, while
her cargo of 1,100 M/T Gas Oil and 1,000 M/T
Fuel Oil are hereby found guilty of violating
Section 2530* (a), (f), and (1-1) under the same
Code and are hereby forfeited in favor of the
Republic of the Philippines.
SO ORDERED.3
Petitioner appealed to the Commissioner of
Customs who rendered a decision dated May
13, 1987, the decretal portion of which reads:
WHEREFORE, premises considered, the decision
dated March 19, 1987 of the District Collector
of Customs of Iloilo, ordering the forfeiture of
M/T "ULU WAI" and its cargo of 2,100 metric
tons of gas and fuel oil is hereby affirmed in
toto.
SO ORDERED.4
On June 25, 1987, petitioner filed a petition for
review of the decisions of the Collector and the
Commissioner of Customs with the Court of Tax
Appeals, praying for the issuance of a writ of
preliminary injunction and/or a restraining
order to enjoin the Commissioner from
implementing his decision. On December 14,
1988, the Court of Tax Appeals issued its
decision, with this dispositive portion:
WHEREFORE, the decision of respondent
Commissioner of Customs dated May 13, 1987,
ordering the forfeiture of the vessel M/T "ULU
WAI" for violation of Section 2530(a) of the
Tariff and Custom Codes (sic), as amended, and
its cargo of 1,100 metric tons of Gas Oil and
1,000 metric tons of Fuel Oil for violation of
Section 2530 * (a) and (f), and (I-1) of the same
Code, is hereby affirmed. With costs.
SO ORDERED.5
Petitioner, on January 19, 1990, filed a petition
for review of the Court of Tax Appeals' decision
with this Court. On March 21, 1990, we issued a
resolution6 referring the disposition of the case
to the Court of Appeals in view of our decision
in Development Bank of the Philippines vs. Court
of Appeals, et al.7 holding that final judgments
or decrees of the Court of Tax Appeals are
within the exclusive appellate jurisdiction of the
Court of Appeals.
On May 8, 1990, the Court of Appeals rendered
its questioned decision affirming the decision of
the Court of Tax Appeals. Petitioner's motion
for reconsideration having been denied on July
4, 1990, it interposed this instant petition
contending that:
1. The Court of Appeals erred in finding on the
basis of circumstantial evidence that an illegal
importation had been committed;
2. Petitioner was deprived of property without
due process of law in that its right to be
presumed innocent was not recognized and the
decision was not supported by proof beyond
reasonable doubt; and
3. The sworn statements of Deposa and Torres
were taken without assistance of counsel in
violation of their constitutional right thereto.8
We find no merit in the Petition.
1. It must be here emphasized that a forfeiture
proceeding under tariff and customs laws is not
penal in nature, contrary to the argument
advanced by herein petitioner. In the case
of People vs. Court of first Instance of Rizal
etc.,et al.,9 this Court made an exhaustive
analysis of the nature of forfeiture proceedings,
in relation to criminal proceedings, as follows:
. . . It is quite clear that seizure and forfeiture
proceedings under the tariff and customs laws
are not criminal in nature as they do not result
in the conviction of the offender nor in the
imposition of the penalty provided for in
Section 3601 of the Code. As can be gleaned
from Section 2533 of the code, seizure
proceedings, such as those instituted in this
case, are purely civil and administrative in
character, the main purpose of which is to
enforce the administrative fines or forfeiture
incident to unlawful importation of goods or
their deliberate possession. The penalty in
seizure cases is distinct and separate from the
criminal liability that might be imposed against
the indicted importer or possessor and both
kinds of penalties may be imposed.
In the case at bar, the decision of the Collector
of Customs, as in other seizure proceedings,
concerns the resrather than the persona. The
proceeding is a probe on contraband or illegally
imported goods. These merchandise violated
the revenue law of the country, and as such,
have been prevented from being assimilated in
lawful commerce until corresponding duties are
paid thereon and the penalties imposed and
satisfied either in the form of fine or of
forfeiture in favor of the government who will
dispose of them in accordance with law. The
importer or possessor is treated differently. The
fact that the administrative penalty be falls on
him is an inconsequential incidence to criminal
liability. By the same token, the probable guilt
cannot be negated simply because he was not
held administratively liable. The Collector's final
declaration that the articles are not subject to
forfeiture does not detract his findings that
untaxed goods were transported in
respondents' car and seized from their
possession by agents of the law. Whether
criminal liability lurks on the strength of the
provision of the Tariff and Customs Code
adduced in the information can only be
determined in a separate criminal action.
Respondents' exoneration in the administrative
cases cannot deprive the State of its right to
prosecute. But under our penal laws, criminal
responsibility, if any, must be proven not by
preponderance of evidence but by proof
beyond reasonable doubt.
Considering, therefore, that proceedings for the
forfeiture of goods illegally imported are not
criminal in nature since they do not result in the
conviction of the wrongdoer nor in the
imposition upon him of a penalty, proof beyond
reasonable doubt is not required in order to
justify the forfeiture of the goods. In this case,
the degree of proof required is merely
substantial evidence which means such relevant
evidence as a reasonable mind might accept as
adequate to support a conclusion.10
In the case at bar, we find and so hold that the
Government has sufficiently established that an
illegal importation, or at least an attempt
thereof, has been committed with the use of
the vessel M/T "ULU WAI," thus warranting the
forfeiture of said vessel and its cargo pursuant
to the provisions of the Tariff and Customs
Code.
Before we proceed to a discussion of the factual
findings of the Court of Appeals, it bears
mention that petitioner, which is a corporate
entity, has no personality to invoke the right to
be presumed innocent which right is available
only to an individual who is an accused in a
criminal case.
2. The main issue for resolution is whether or
not there was an illegal importation committed,
or at least an attempt thereof, which would
justify a forfeiture of the subject vessel and its
cargo.
Petitioner avers that respondent court erred in
finding that an illegal importation had been
committed on the basis of circumstantial
evidence, erroneously relying on Section 5 (now
Section 4), Rule 133 of the Rules of Court. As
earlier stated, forfeiture proceedings are not
criminal in nature, hence said provision of Rule
133 which involves. such circumstantial
evidence as will produce a conviction beyond
reasonable doubt does not apply.
Section 1202 of the Tariff and Customs Code
provides that importation begins when the
carrying vessel or aircraft enters the jurisdiction
of the Philippines with intention to unload
therein. It is clear from the provision of the law
that mere intent to unload is sufficient to
commence an importation. And "intent," being
a state of mind, is rarely susceptible of direct
proof, but must ordinarily be inferred from the
facts,11 and therefore can only be proved by
unguarded, expressions, conduct and
12
circumstances generally.
In the case at bar, that petitioner is guilty of
illegal importation, there having been an intent
to unload, is amply supported by substantial
evidence as clearly demonstrated by this
comprehensive discussion in respondent court's
decision:
It is undisputed that the vessel M/T "ULU WAI"
entered the jurisdiction of the Philippines. The
issue that calls for Our resolution is whether or
not there was an intention to unload. The facts
and circumstances borne by the evidence
convince Us that there was intent to unload.
The following circumstances unmistakably point
to this conclusion.
1. Considering that the vessel came from
Singapore, the route to Zamboanga was shorter
and Iloilo lies further north.1âwphi1 It is not
logical for the sailing vessel to travel a longer
distance to get the necessary repairs.
2. When the vessel M/T "ULU WAI" anchored at
Guiuanon Island, Guimaras, Iloilo, it did not
notify the Iloilo port or Customs authorities of
its arrival. The master of the vessel did not file a
marine protest until 12 days after it had
anchored, despite the supposed urgency of the
repairs needed and notwithstanding the
provision (Sec. 1016) of the Code requiring the
master to file protest within 24 hours.
3. At the time of boarding by the customs
personnel, the required ship's and shipping
documents were not on board except the
clearance from Singaporean port officials
clearing the vessel for Zamboanga. Petitioner
claims that these were turned over to the
shipping agent who boarded the vessel on May
15, 1986. However, this claim is belied by the
sworn marine protest (Exhibit "E") of the master
of M/T "ULU WAI" Mr. Romeo Deposa.
It was only on or about the 20th of May when I
instructed one of the crew to: get down of (sic)
the vessel and find means and ways to contact
the vessel's representative.
Moreover, in such Sworn Statement (Exhibit
"G"), ship agent, Antonio Torres, stated that he
did not know the buyer of the oil, which is
impossible if he had the Local Purchase Order of
the alleged buyer, Pogun Construction SDN.
Torres also swore that his knowledge came
from the vessel's owner, without mentioning
the shipping documents which indicate such
data. He also said that he did not know the
consignee of the oil which would have been
patent from the documents. Lastly, as also
pointed out by the court a quo, the captain of
the vessel M/T "ULU WAI" Romeo Deposa, in
his sworn statement to custom authorities on
May 26, 1986, enumerated the documents he
allegedly gave to Mr. Antonio Torres, but did
not mention as among them the Local Purchase
Order of Pogun Construction SDN and the Bill of
Lading.
4. When the vessel was inspected, the tugboat
M/T "CATHEAD", and the large M/T "SEMIRANO
NO. 819" were alongside it. A fixture note
revealed that the barge and the tugboat were
contracted by Consignee Far East Synergy to
load the cargo of the vessel into the awaiting
barge and to discharge the same to Manila
(Exhibits "I" and "I-1").
It is of no moment that the fixture note did not
expressly mention the vessel M/T "ULU WAI"
Government witnesses, Asencio and Lumagpas,
testified that it was the vessel's cargo which
was to be unloaded and brought to Manila by
them.13
The aforequoted findings of fact of respondent
Court of Appeals are in consonance with the
findings of both the Collector and the
Commissioner of Customs, as affirmed by the
Court of Tax Appeals. We, therefore, find no
compelling reason to deviate from the
elementary principle that findings of fact of the
Court of Appeals, and of the administrative and
quasi-judicial bodies for that matter, are
entitled to great weight and are conclusive and
binding upon this Court absent a showing of a
grave abuse of discretion amounting to lack of
jurisdiction.
3. The fact that the testimonies of Deposa and
Torres were given without the assistance of
counsel may not be considered an outright
violation of their constitutional right to be
assisted by counsel. As explained in the case
of Nera vs. The Auditor General:14
The right to the assistance of counsel is not
indispensable to due process unless required by
the Constitution or a law. Exception is made in
the charter only during the custodial
investigation of a person suspected of a crime,
who may not waive his right to counsel except
in writing and in the presence of counsel, and
during the trial of the accused, who has the
right "to be heard by himself and counsel,"
either retained by him or provided for him by
the government at its expense. These
guarantees are embodied in the Constitution,
along with the other rights of the person facing
criminal prosecution, because of the odds he
must contend with to defend his liberty (and
before even his life) against the awesome
authority of the State.
In other proceedings, however, the need for the
assistance of counsel is not as urgent nor is it
deemed essential to their validity. There is
nothing in the Constitution that says a party in a
non-criminal proceeding is entitled to be
represented by counsel and that without such
representation he will not be bound by such
proceedings. The assistance of lawyers, while
desirable, is not indispensable. The legal
profession was not engrafted in the due process
clause such that without the participation of its
members the safeguard is deemed ignored or
violated. The ordinary citizen is not that
helpless that he cannot validly act at all except
only with a lawyer at his side.
Besides, if ever there was any doubt as to the
veracity of the sworn statements of Deposa and
Torres, they should have been presented during
any appropriate stage of the proceedings to
refute or deny the statements they made. This
was not done by petitioner. Hence, the
presumption that official duty was regularly
performed stands. In addition, petitioner does
not deny that Torres is himself a lawyer. Finally, DECISION
petitioner simply contends that the sworn
statements were taken without the assistance
of counsel but, however, failed to allege or
prove that the same were taken under
CALLEJO, SR., J.:
anomalous circumstances which would render
them inadmissible as evidence against
petitioner. We thus find no compelling reason
to doubt the validity or veracity of the said
sworn statements.
This is a petition for review of the Decision[1] of
WHEREFORE, the instant petition is DENIED for the Court of Appeals (CA) in CA-G.R. CR No.
lack of merit and the judgment appealed from is 25912 affirming, on appeal, the decision of the
hereby AFFIRMED in toto. Regional Trial Court (RTC) of Pasay City, Branch
117, convicting Maribel B. Jardeleza, the
SO ORDERED. accused therein, of violating the Tariff and
Customs Code (TCC) of the Philippines, as
3. MARIBEL B. JARDELEZA, G.R. No. 165265
amended.
Petitioner,

Present:
The Antecedents
PANGANIBAN, C.J., Chairperson,

YNARES-SANTIAGO,
The Information charging Jardeleza with
- versus - AUSTRIA-MARTINEZ, violating the TCC was filed before the RTC of
Pasay City on October 23, 1997. The accusatory
CALLEJO, SR., and portion of the indictment reads:
CHICO-NAZARIO, JJ. That on February 28, 1997, at the arrival area of
the Ninoy Aquino International Airport in
Paraaque, Metro Manila, and within the
jurisdiction of this Honorable Court, the above-
named Accused did, then and there, wilfully,
PEOPLE OF THE Promulgated: unlawfully and feloniously, bring or import into
PHILIPPINES, the Philippines in a fraudulent and illegal
manner a total of TWENTY POINT ONE (20.1)
Respondent. February 6, 2006 kilograms of assorted gold jewelry with an
estimated value of PESOS SEVEN MILLION FIVE
x------------------------------------
HUNDRED SIXTY-TWO THOUSAND TWO
--------------x
HUNDRED THIRTY-ONE POINT FIFTY CENTAVOS
(P7,562,231.50).
That the entry of said 20.1 kilograms of
imported assorted gold jewelry into the country
was made by the above-named Accused by
hiding said jewelry inside a hanger bag and,
thereafter, by not declaring it in the Customs
Declaration form and, likewise, by verbally
denying that she is carrying said items by
answering NO when asked by Bureau of
Customs if she has anything to declare prior to
the actual inspection of her luggage.[2]
The Case for the Prosecution
On February 27, 1997, Lt. Aquilino Ancheta of
the Customs Police at the Ninoy Aquino
International Airport (NAIA) issued an alert
order directing all customs policemen to
monitor an alleged carrier of jewelry on board
Philippine Airlines (PAL) Flight No. PR-502,
scheduled to fly in from Singapore the next
day.[3] Special Customs Agent Antonio
Fuentebella was assigned as Team Leader of X-
Ray Operations,[4] while Police Officer Rodrigo
Raada was assigned as one of its
members.[5] The Customs Law Enforcement
Chief also directed the examiners to conduct
rigid luggage inspection of said crew
members.[6] Accordingly, customs operation
police officers prepared to conduct the
surveillance operations.
On February 28, 1997, Customs Examiner
Estelita Nario was assigned in the arrival area at
the NAIA, Lane 1, which was exclusively for
crew members of incoming passenger planes,
including flight attendants and stewardesses.
Jardeleza, a flight stewardess of PAL Flight No.
PR 502, approached Lane 1 for baggage
checking at about 1:00 p.m. to 2:00 p.m. She
had two pieces of hand-carried luggage a black
bag and black hanger (zipper) bag.[7] She
approached Nario to have the bags examined,
and showed the Customs Declaration Form she
had accomplished and signed.[8] Raada was
about two feet away.[9] Fuentebella was
inspecting the baggage of the incoming
passengers.[10]
Nario asked Jardeleza if she had anything to
declare, and the latter replied, No. Nario
checked Jardelezas Customs Declaration Form,
and found that nothing was written or marked
on the form.[11] Nario then checked the black
hand-carried bag, and found that it contained
Jardelezas personal belongings.[12] Nario next
told Jardeleza to place her hanger bag on top of
the examination table and to open it for
inspection.[13]
Jardeleza complied and opened her hanger bag.
Nario unzipped the bag and found some clothes
inside.[14] Nario proceeded to unzip the interior
pockets of the bag and found three black
leatherette envelopes,[15] each measuring about
one foot by a little over one foot, no more than
three inches thick. Nario opened one of the
leatherette envelopes and found Bosch spark
plug brochures stacked inside.[16] As she
emptied the envelope of its contents, she felt
something bulging (matambok) beneath the
lining.[17] She
slipped her hand into the opening and found
pieces of jewelry.[18]
Nonplussed, Jardeleza stopped Nario. She
placed her hands on the envelope and the hand
that held it, looked Nario in the eye, and
requested that she be brought inside the
examination room at the arrival area because
there were media people and law enforcers
close by.[19] To keep Jardeleza from being
embarrassed, Nario relented.[20] Fuentebella
and Raada helped Jardeleza carry her handbags
to the examination room.
Once inside, Nario placed the three leatherette
envelopes on the table. Deputy Collector for
Passenger Services Rodolfo Buendia and Chief
of the Legal and Investigation Staff Atty.
Lourdes Mangaoang had been alerted of the
incident. The envelopes were opened and their
contents examined in the presence of Buendia
and Atty. Mangaoang. Pictures of the
bags,[21] including the examination, were
taken.[22] Nario removed the brochures from the
leatherette envelopes. While she saw nothing
else inside, she noticed the bulge beneath the
lining. She tried to look for an opening until she
saw that it was already partially detached. She
slipped her hand through the detached portion
and retrieved a pack of light brown paper
which, when opened, revealed several pieces of
jewelry.[23]
Nario opened the second leatherette
envelope,[24] and also found brochures. When
she emptied the envelope of its contents, she
noticed a similar bulging beneath the lining.
Once opened, she discovered gold earrings
wrapped in a light brown paper. An inspection
of the third leatherette envelope[25] yielded
pieces of gold rings hidden beneath the
lining. Nario placed the jewelry back in the
envelopes and placed her signature thereon.[26]
Nario prepared Held-Baggage Receipt No.
16592,[27] where she listed the pieces of jewelry
found in Jardelezas bags, including their gross
weight. She signed the receipt and gave a copy
to Jardeleza. Nario then turned over the jewelry
to the Customs In-Bound Room.[28] The receipt
was duly noted by Buendia. Nario then
prepared and signed a report[29] to the district
collector, recommending that the seized
jewelries be confiscated for violation of Sections
3601 and 3602, in relation to Section 2505 of
the TCC.
When apprised of the foregoing, Atty. Luis
Adviento, the District Commander of the
Customs Police, ordered that Jardeleza be
brought to the Legal and Investigation Staff for
investigation.
Aurelio B. Cabugao of the Legal and
Investigation Staff of the Customs Police
Division investigated the case and submitted a
Memorandum[30] to the Customs Police Director
which was duly noted by Atty. Mangaoang. He
reported that based on initial investigation,
Fuentebella had asked Jardeleza if she had
anything to declare, she replied that she was
carrying taxable items and asked that they
proceed to the Baggage Extension Office. He
also recommended that a seizure and detention
order of the jewelry be issued pursuant to
Section 2505 of the TCC.
Alma Duplito, a customs jewelry appraiser,
assessed the value of the jewelry
at P2,979,021.50 and their dutiable value
at P4,583,000.00.[31]
On March 31, 1997, Cabugao submitted his
Final Report on the investigation. He stated that
Jardeleza did not declare the assorted jewelries
and recommended that charges be filed against
her for violation of Sections 3601 and 3602, in
relation to Section 2505, of the TCC.[32] On April
30, 1997, Nario executed her
[33]
Affidavit relative to the incident.
The Case for the Accused
For her part, Jardeleza testified that she had
been with PAL for 23 years. She was assigned to
domestic flights during her first year, and in the
succeeding years, to international flights.[34] She
knew the policy of the
Bureau of Customs regarding the exclusive lane
through which arriving airline crew members
have to pass. She also knew the policy requiring
a 100% examination of all pieces of baggage
carried by them.[35]
Jardeleza further narrated that her retirement
from PAL was approaching. She decided to
invest in the jewelry business with her friend
Alberto, and she would get a percentage from
the business venture.[36] Her friend acquired
assorted jewelries worth P2,000,000.00 and
gave them to her for transportation to
the Philippines. The pieces of jewelry were
placed inside the leatherette bags, which she, in
turn, placed in her handbags. Albert also gave
her a list of the jewelry.[37]
According to Jardeleza, she knew that the
jewelry items were taxable, and that she was
obliged to declare them in the Customs
Declaration Form of the Customs
[38]
Bureau. When PAL Flight No. PR-502 landed
from Singapore, she was carrying three pieces
of baggage: a shoulder bag, a traveling bag and
a hanger bag.[39] Her hanger bag contained
jewelry items, but she did not declare them in
the Customs Declaration Form because they
were numerous and could not be
accommodated in the tiny form. As she was
completely aware of the two Customs policies,
she readily told Nario (in the presence of two
other customs people one of whom was
Fuentebella), about the taxable items she was
carrying.[40] Fuentebella approached her and
asked what was inside her bag. She readily
answered that they were jewelry items.[41]
Jardeleza then requested that her bags be
examined inside the examination room to avoid
the mischievous eyes of press people.[42] Her
request was granted, and the three of them
Nario, Fuentebella and Raada helped carry her
luggage to the examination room.[43] There she
opened her luggage and, thereafter, a count
was made of the jewelry items.[44] While the
examination was being conducted, Deputy
District Collector Buendia and Atty. Mangaoang
entered and they too witnessed the
examination of her baggage.[45]

After the inventory, pictures were
[46]
taken. Later, Nario left but Atty. Mangaoang
told her to come to her office at the NAIA
Terminal 1 basement.[47] When she reached the
office, she saw a man in front of the computer
whom Atty. Mangaoang introduced as Aurelio
Cabugao, the assigned investigator on the
case. While peeping through the screen, she
saw the name of a certain
[48]
Fuentebella. Curiously, they left Cabugao
alone in the room.[49]
According to Jardeleza, Atty. Mangaoang
demanded P100,000.00 for her and
another P400,000.00 for the rest of the
Customs people involved. She told Atty.
Mangaoang that she did not have that kind of
money.[50] When she told Atty. Mangaoang that
she would think it over,[51] she was asked to
write the following phone numbers on a piece
of paper a girl had given her: 912-7845 in the
bedroom, and 913-3670 in the living room. She
was also instructed to call if she had the
money.[52] Then, at about 7:00 p.m., after some
six hours, the Customs people allowed her to go
home.[53]
Jardeleza adduced in evidence the
[54]
Memorandum of Cabugao dated February
28, 1997 to the District Commander; the 1st
Indorsement of Atty. Louie Adviento of said
report to the District Collector of
Customs;[55] and the Warrant of Seizure and
Detention Order issued on March 25, 1997 by
the Customs District Collector.[56]
Daniel Aquino, a customs police at the NAIA,
testified that he discovered the affidavit of
Fuentebella dated February 28, 1997 in the
computer files in Atty. Mangaoangs office,
where Fuentebella stated that Jardeleza
admitted to him that she was carrying taxable
items. He also read the April 30, 1997 Affidavit
of Fuentebella and noticed that Jardelezas
admissions contained in the February 28,
1997 Affidavit were not stated therein.[57] On
cross-examination, Aquino admitted that said
affidavits/computer files were not signed by the
supposed officers.[58]
Atty. Estelita Diaz, who was designated as
Hearing Officer in the NAIA Lane Division during
the period from 1988 to 1997, testified on the
need for customs examiners to follow the
procedure laid down in Memorandum Order
(MO) No. 40, Series of 1957, and reiterated in
MO No. 53, Series of 1958, of the Bureau of
Customs.
Other Evidence of the Prosecution
Atty. Mangaoang denied Jardelezas accusation
of bribery. She testified that she was at her
office at the basement of the NAIA in the
afternoon of February 28, 1997 when Atty.
Adviento (who was at the arrival area) called
her because somebody had been apprehended
for bringing in jewelry. She then proceeded to
the interview room at the arrival area, where
she met Jardeleza, a PAL stewardess who told
her and Adviento that there were still pieces of
jewelry on the plane. She instructed the
Customs Police to search the plane, but the
search yielded negative results.[59] She insisted
that she never demanded any money from
Jardeleza or from anyone, and that it was the
first time she had met the woman.[60]
filed an administrative case against Atty. Diaz
before the Office of the Ombudsman. Jardeleza
herself, in turn, charged her (Atty. Mangaoang)
before the same office.[62] Cabugao executed an
affidavit corroborating, in part, Atty.
Mangaoangs testimony.

After Jardeleza had been apprehended, The Ruling of the Trial Court
Customs Deputy Collector for Passenger
Services Rodolfo Buendia told her, Attorney, 1.5 On December 15, 2000, the trial court rendered
million ang panggastos dyan. She clarified that judgment convicting the accused of violating
Buendia has since been separated from the Section 3601 of the TCC, as
service. She further revealed that the 1.5 amended. The fallo of the decision reads:
million offer was reiterated by Ding Villanueva,
a Customs broker. Atty. Estelita Diaz, the
hearing officer in the seizure case, also offered WHEREFORE, this court hereby finds accused
her P10,000.00 not to file the case. Ramon Tan, MARIBEL B. JARDELEZA guilty beyond
an intelligence officer of the Bureau of reasonable doubt of the crime of SMUGGLING
Immigration and Deportation, also approached as defined under Section 3601 of the Tariff and
her and said, Pwede ba nating aregluhin ang Customs Code of the Philippines.
kaso ni Jardeleza, may panggastos ito. One of
the men under her, Daniel Aquino, asked for
Jardelezas passport, but Aurelio Cabugao, the
Accordingly, said accused is hereby sentenced
investigator, refused to hand it over. The
to suffer an indeterminate imprisonment of
passport was later stolen from her
EIGHT (8) YEARS and ONE (1) DAY, as minimum,
office. Carlota Gabriel approached her
to TWELVE (12) YEARS, as maximum, to pay a
sometime in March, and informed her that Atty.
fine of TEN THOUSAND PESOS (P10,000.00), and
Sancho Almeda might handle the case. She was
to pay the costs.
also asked if the seizure case could be
settled.[61]

The entire jewelry subject of this case which

weighs TWENTY POINT TEN (20.10) KILOGRAMS
Atty. Mangaoang further testified that there
are hereby forfeited in favor of the State. The
were other people in the office when Deputy
record shows that these pieces of jewelry are
Collector Buendia tried to bribe her, but they
now in the custody of the Bureau of Customs of
were not within hearing distance; when Ding
the Philippines. Said bureau may now dispose of
Villanueva told her that there was 1.5 million
them in accordance with law.[63]
for the boys, they were alone. She also claimed
that Atty. Diaz offered the P10,000.00 to her at
the arrival area. While she did not charge, she
The trial court gave credence and probative
weight to the collective testimonies of the
witnesses for the prosecution. It rejected the
defense of the accused that her importation of
the jewelry was not absolutely or unqualifiedly
prohibited by law.
The Proceedings in the Court of Appeals
Jardeleza appealed the decision to the CA,
where she raised the following principal issues:
I Jardeleza was charged with violating Section
THE HONORABLE COURT A QUO ERRED IN
CONVICTING THE ACCUSED UNDER SECTION
3601 OF THE TARIFF AND CUSTOMS CODE OF
THE PHILIPPINES (TCC) WHEN THE FACTS
ALLEGED BOTH IN THE INFORMATION AND
THOSE SHOWN BY THE PROSECUTION
CONSTITUTE THE OFFENSE PUNISHABLE UNDER
SECTION 2505 OF THE TCC, OF WHICH THE
ACCUSED WAS ACQUITTED.
II
ASSUMING MOREOVER THAT THE CHARGE AND
PROOF ARE COVERED UNDER SECTION 3601 OF
THE TCC, THE HONORABLE COURT A
QUO ERRED IN DISREGARDING CUSTOMS
MEMORANDUM ORDER NOS. 40 AND 53 AND
THE ADMINISTRATIVE CONSTRUCTION PLACED
UPON THE PERTINENT PROVISIONS OF THE
TARIFF AND CUSTOMS CODE OF THE
PHILIPPINES BY CUSTOMS AUTHORITIES.
III
ASSUMING THAT THE CHARGE AND THE PROOF
CAN BE LEGALLY PLACED UNDER THE PURVIEW
OF SECTION 3601 OF THE TCC, THE HONORABLE
COURT A QUOERRED IN CONVICTING THE
ACCUSED DESPITE LACK OF PROOF BEYOND
REASONABLE DOUBT.[64]
On September 8, 2004, the CA rendered
judgment affirming the decision of the RTC.
The appellate court ruled that, based on the
material averments of the Information,
3601 of the TCC. It affirmed the RTC ruling that
the prosecution mustered the requisite
quantum of evidence to prove her guilt beyond
reasonable doubt. According to the CA,
Jardeleza committed actual fraud when she
brought 20.1 kilograms of taxable assorted
jewelries into the country without declaring
them in the customs declaration form as
required by law. Moreover, she denied having
said articles in her possession and hid them
beneath the lining of the leatherette envelopes
in her hanger bag. The appellate court affirmed
the trial courts finding that Jardeleza smuggled
the jewelry items into the country, and that
such importation was contrary to law. It also
ruled that the inconsistencies attributed to the
testimonial and documentary evidence of the
prosecution were minor and peripheral.
Jardeleza filed a motion for reconsideration of
such ruling, which the CA denied.

Petitioner now comes before this Court,
alleging that (a) she was charged with violating
Section 2505 of the TCC under the Information,
and that the prosecution adduced evidence to
prove her liability; hence, her conviction for
violation of Section 3601 of the TCC is
erroneous; and (b) the prosecution failed to
prove her guilt beyond reasonable doubt for
violation of Section 3601, in relation to Section
2505, of the TCC.
Petitioner maintains that, under the
Information and the evidence adduced by the
prosecution, she was charged and found guilty
of violating Section 2505 of the TCC. She avers
that the provision specifically refers to an
arriving person, including airline crew, who
brings in dutiable articles without declaring the
same in the customs declaration, and that for
failing to make such declaration or to mention
the same verbally may result in the seizure of
the baggage and articles, unless it can be
satisfactorily explained that such failure was
without fraud. She avers that the law
specifically refers to baggage declaration and
not to an import or export entry. In contrast,
Section 3601 of the TCC covers importing or
bringing into the country, in a fraudulent
manner, any article, contrary to law, or one
who assists in such criminal act or receives,
conceals, brings or sells or, in any way, helps in
the transportation, concealment or sale of such
article, knowing the same to have been
imported contrary to law. She insists that it
refers to rampant smuggling in any port in
the Philippines without the filing of an import or
export entry, and is called swing. Petitioner
points out that the law does not speak of any
entry or baggage declaration. Section 3601 is
general in its scope, while Section 2505 is
special and applies only to a criminal case
following under it. The words contrary to law
are descriptive of, and qualifies the word article
and not to the manner of importation. In
contrast, Section 3602 refers to the filing of a
false entry.
Petitioner asserts that Sections 2505, 3601 and
3602 of the TCC are separate and distinct from
one another, penalizing as they do different
offenses of smuggling. She insists that the facts
constituting the filing of one charge cannot
interchangeably be held to constitute the crime
under any of the other two provisions, as the
laws cannot be mixed with one set of facts.
On the other hand, the CA ruled that under the
Information, petitioner was charged of
smuggling under Section 3601 of the TCC. She
committed actual fraud when she brought into
the country 20.1 kilograms of taxable assorted
jewelries without declaring them to the
Customs authorities as required by law. Worse,
she expressly denied possession of said articles
and hid them surreptitiously. That she later
disclosed the existence of said jewelry or
intended to pay their corresponding duties and
taxes was merely an afterthought to avoid
liability.
The appellate court also declared that
petitioner was caught in flagrante
delicto. When dutiable goods are omitted in a
baggage declaration and the omission is not
due to inadvertence or ignorance, it is deemed
to be fraudulent. The appellate court declared
that to warrant her acquittal, petitioner must
prove that in carrying the subject jewelry, her
act was innocent and done without intent to
defraud. It further declared that petitioner
could not stretch the phrase contrary to law as
descriptive of the word article to exempt her
from the illegal importation. It cited the ruling
of the RTC that the law considers any person
who, contrary to law, imports any article as
guilty of smuggling without regard to whether
the article itself is absolutely or qualifiedly
prohibited. The CA declared that the crime
sought to be punished by this law is the act of
importing or bringing into the Philippines any
article contrary to law; it does not concern itself
with the nature of the article so imported or
brought in.[65]
The CA maintained that petitioners
interpretation of Sections 2505 and 3602 of the
law is untenable. It pointed out that Section
2505 speaks of failure to declare baggage which
can be seized and be released only to its owner
upon payment of the taxes and duties unless
such failure was attended by fraud. On the
other hand, Section 3602 lays down the various
acts of importation, entry or exportation of
articles considered as fraudulent. In
short, Section 2505 pertains to compliance with
a requirement in declaring a baggage, Section
3602 enumerates the fraudulent acts in
smuggling, while Section 3601 prescribes the
penalty therefor. The appellate court stated
that these three provisions are harmonized into
one interpretation and application befitting the
circumstances in the case at bench.
For its part, respondent People of
the Philippines, through the Office of the
Solicitor General, avers that there is no question
that petitioner brought into the country 20.1
kilograms of assorted gold jewelries which she
placed inside three black leatherette envelopes
and contained in the baggage she personally
carried. What made the act punishable under
Section 3601 of the TCC was her failure to
declare the items in the Customs Declaration
Form as required under Section 2505 of the
TCC, thus, making petitioners act contrary to
law. In other words, the phrase contrary to law
refers to the petitioners act, and not to dutiable
goods brought into the country.[66]
The Ruling of the Court
The petition has no merit.
The contention of petitioner that Section 2505
of the TCC defines a crime is not correct. Title
No. VI, Part 4, Section 2505 of the TCC reads:
SEC. 2505. Failure to Declare Baggage.
Whenever any dutiable article is found in the
baggage of any person arriving within the
Philippines which is not included in the baggage
declaration, such article shall be seized and the
person in whose baggage it is found may obtain
release of such article, if not imported contrary
to any law, upon payment of treble and
appraised value of such article plus all duties,
taxes and other charges due thereon unless it
shall be established to the satisfaction of the
Collector that the failure to mention or declare
said dutiable article was without fraud.
Nothing in this section shall preclude the
bringing of criminal action against the offender.
A person arriving in the Philippines with
baggages containing dutiable articles is bound
to declare the same in all respects.[67] In order
to meet the convenience of the travelers, a
simple and more expeditious method of
customs clearance is provided for baggages
occupying the passage therein for goods
imported in the regular manner.[68] Official
entry forms and forms of baggage declaration
are supplied to the passengers to be filled
before the customs officer.[69] The traveler has
the burden of carrying forward items that have
to be declared before examination of the cargo
has begun. Adequate reporting of dutiable
merchandise being brought into the country is
absolutely necessary to the enforcement of
customs laws, and failure to comply with those
requisites is as condemnable as failure to pay
customs fees.[70]
The provision is Part 4 of Title VI, Section 2505,
of the TCC which enumerates the administrative
penalties in the form of surcharges, fines and
forfeitures imposed by law on imported
dutiable goods. It does not define a crime. It
merely provides, inter alia, for the
administrative remedies which can be resorted
to by the Bureau of Customs when seizing the
dutiable articles found in the baggage of any
person arriving in the Philippines which is not
included in the accomplished baggage
declaration submitted to the customs
authorities, and the administrative penalties
that such person must pay for the release of
such goods if not imported contrary to law. Any
administrative penalty that may be imposed on
the person arriving in the Philippines with
undeclared dutiable articles is separate from
and independent of the criminal liability for
smuggling under Section 3601 of the TCC and
for violation of other penal provisions in the
TCC. The criminal liability of such person can
only be determined in the appropriate criminal
proceedings, prescinding from the outcome in
any administrative case that may have been
filed and disposed of by the customs
authorities.[71] Indeed, the second paragraph of
Section 2505 provides that nothing in this
Section shall prevent the bringing of criminal
action against the offender for smuggling under
Section 3601 of the TCC.
Section 3601 of the TCC provides:
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.
The last paragraph of said provision reads:
When, upon trial for 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.
Smuggling is penalized as follows:
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 this 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 this 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 this Code, including
duties and taxes, of the article unlawfully
imported is more than fifty thousand pesos but
does not exceed one hundred fifty 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 this 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 proceedings for
deportation; if the offender is a government
official or employee, the penalty shall be the
maximum as hereinabove prescribed and the
offender shall suffer an additional penalty of
perpetual disqualification from public office, to
vote and to participate in any public election.
Thus, in contrast to Section 2505, Section 3601
of the TCC is a penal provision. It defines the
crime of smuggling and provides compound
penalties of graduated fine and imprisonment
based on the appraised values of the imported
articles to be determined in the manner
provided in the TCC. There is no conflict
between Section 2505 and Section 3601. In
point of fact, the two sections and Section 3602
complement each other.
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 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.[72]
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.[73]
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.[74]
Importation consists of bringing an article into
the country from the outside.[75] The crime of
unlawful importation is complete, in the
absence of a bona fide intent to make entry and
pay duties when the prohibited article enters
Philippine territory.[76] Importation is complete
when the taxable, dutiable commodity is
brought within the limits of the port of
entry. Entry through a customs house is not the
essence of the act.[77]
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 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.[78] 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.[79] 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.[80]
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.[81] 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.
The term entry in Customs law has a triple
meaning. It means (1) the documents filed at
the Customs house; (2) the submission and
acceptance of the documents; and (3) the
procedure of passing goods through the
Customs house.[82] Customs declaration forms
or customs entry forms required to be
accomplished by passengers of incoming vessels
or passenger planes are envisaged in the
section.
There is thus no conflict between Sections
2505, 3601 and 3602 of the TCC. In point of
fact, the three provisions complement each
other.
The bare fact that, under the second paragraph
of the Information, petitioner is alleged to have
imported the jewelry into the country by, inter
alia, not declaring it in the customs declaration
form, it cannot thereby be concluded that she
was being charged of a crime under Section
2505 of the TCC. The acts alleged therein are
descriptive of the fraudulent manner petitioner
imported her jewelries into the
country. Petitioner was mandated to indicate in
the Customs Declaration Form that she had
jewelry in her possession to be imported into
the country valued at more than
US$350.00. Worse, when asked by Nario if she
had goods or articles to declare, she
spontaneously answered No. Petitioners
intentional concealment or nondisclosure that
she had such jewelry items in the leatherette
bags constituted fraud under Sections 3601 and
3602 of the TCC, aimed at depriving the
government of customs revenue.
Insisting on her acquittal, petitioner asserts that
the People failed to prove her guilt for
smuggling beyond reasonable doubt because
she readily admitted to Nario that the first
leatherette envelope contained jewelry even
before its lining was opened, and that she also
admitted to Raada that her hanger bag
contained jewelry before Nario discovered the
said items. Petitioner maintains that her
contention is buttressed by the affidavit of
Nario,[83] the February 28, 1997 Memorandum
of Cabugao to the District Commander,[84] and
the affidavit executed by Raada.[85]
We are not persuaded. The rule is that in all
criminal prosecutions, the prosecution is
burdened to prove the guilt of the accused
beyond reasonable doubt. In this case, the
burden of the prosecution was complied with,
as it was able to prove that petitioner possessed
the jewelry in question when Nario examined
her luggage. Under the last paragraph of
Section 3601 of the TCC, such evidence shall be
deemed sufficient evidence to authorize
conviction. The burden was then shifted to
petitioner, the accused below, to explain her
possession to the satisfaction of the court. The
last paragraph of Section 3601 reads:
When, upon trial for 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.[86]
Petitioner admitted her possession of the
jewelries and that she brought the same
from Singapore. She declared that she and her
business partner Albert acquired the same for
their business. The trial court did not believe
her claim of having spontaneously informed
Nario that she had jewelries in her handbag,
and ruled that, contrary to law, she fraudulently
imported the jewelries into the country. Thus,
the trial court found her guilty as charged, with
its illuminating findings and encompassing
ratiocinations which we find are based on the
evidence on record:
But the incriminating evidence that tops them
all is the manner the accused attempted to
smuggle her jewelry to this country. Accused
testified that it was she herself who placed and
arranged the jewelry inside three leatherette
bags, which she placed inside her hanger
bag. Nario showed this court just exactly how
the accused arranged her things inside her
hanger bag when she inspected it. The jewelry
was securely hidden in a place not meant to be
seen by anybody but the accused.
The hanger bag was stuff[ed] with accuseds
clothing. But it has pockets in the interior the
contents of which are not visible to the eyes
unless the pockets, which are secured shut by
zippers are opened. When the pockets were
unzipped only then did the three black
leatherette envelopes come to view. When one
of the leatherette envelopes was removed from
one of the pockets and opened, the viewer is
given the impression that all that it contained
were commercial brochures as nothing else can
be seen, if the viewer is merely content with
using her sense of sight. Even after all the
brochures are removed from the envelope, the
viewer sees only an empty space, if she uses
only sight. But the brochures turned out to be
mere decoys to lull the viewer into believing
that there is nothing more to see and the
inspection should stop at that point. But Nario,
the inspector, did not only use her sense of
sight. She noticed that even after the envelope
was emptied of its contents, it was still heavy
and she felt something bulging (matambok)
beneath the synthetic fabric that serves as its
lining. She looked for a gap in the lining by
tracing its borders with her hands until she
came upon a part where the stitches were
undone or deliberately broken, thereby creating
a secret pocket. She slipped her hand into the
secret pocket to retrieve the bulging thing that
was hidden in it. This bulging thing turned out
to be objects wrapped in a sturdy light brown
paper flattened out by pressure. When the
wrapper was opened, pieces of gold jewelry
came into view. The two other leatherette bags
yielded one pack of gold jewelry each. Both
packs were securely hidden in exactly the same
manner as the first. Alma Duplito, a Customs
appraiser, appraised the dutiable value of the
jewelry at P4,598,000.00 and the total taxes
and duties at P2,379,021.02.
The ingenuity with which accused tried to
conceal from view her jewelry shattered all her
pretensions of having declared or even just an
intention to declare them for proper
assessment of the corresponding customs
duties and taxes. On the contrary, her stacking
the envelope with worthless commercial
brochures as decoys to confuse or divert the
attention of the Customs inspectors and her
deliberate breaking of the stitches of the lining
of the bags to create a secret pocket in which to
hide and conceal from view her jewelry are
unmistakable badges of an intention to spirit
them away into this country in violation of its
customs and tariffs law. In this sense, it is a
direct evidence of the crime of smuggling. xxx[87]
As gleaned from his decision, the Presiding
Judge of the trial court was able to observe, at
close range, the demeanor and conduct of
Nario when she testified. He was convinced of
her honesty and found her testimony credible:
Nario impresses this court as an honest witness
compared with the manner accused
testified. Thus, this court finds it easy to believe
Narios steadfast testimony that accused did not
declare her jewelry, than accuseds claim that
she did. Besides, credence to the narration of
the incident and presumption of regularity in
the performance of duty are given to public
officers in the absence of contrary evidence
(see People vs. Marcos, 212 SCRA 748).[88]
xxx
No witness who came forward to testify is in a
better position to state what the accused did
than Estelita Nario. Accused herself declared
that it was Nario who checked her
baggages.Nario testified that the first thing she
did when accused presented to her baggage for
inspection was to ask her if she has anything to
declare, and accused said No. She noted that
accuseds response tallied with her Customs
Baggage Declaration (Exh. F). There was not an
instance prior to the discovery of the jewelry,
Nario stressed, that the accused declared
before her, even verbally, that she had jewelry
items with her.[89]
In contrast, the trial court gave no credence and
probative weight to petitioners testimony and
her claim that she divulged to Nario,
Fuentebella, Cabugao and Raada that she was
carrying dutiable jewelry before Nario
examined her handbag:
Accused cannot take refuge under Cabugaos
Memorandum (Exh. 1) which tends to show
that a certain SA I Antonio Fuentebella allegedly
revealed that accused admitted that she was
carrying taxable items. This evidence is hearsay
because Cabugao gathered this piece of
information from Fuentebella who did not
testify. Besides, Cabugao clarified that it was
Nario, the examiner, who had direct contact
with the accused, not he or Fuentebella. When
he investigated Nario on March 1, 1997, she
told him, Inamin na pagkatapos buksan ang
bagahe.
If accused really declared the jewelry she was
bringing to the Customs inspectors, there would
have been no fuss over it and that day would
have passed, for her and the customs people,
uneventfully. But the ensuring scene as she
herself described after her baggage was
inspected belies her claim. Several media
reporters took interest in the conduct of the
inspection of her baggage. Later, Atty. Lourdes
Mangaoang, who is the Chief of the Legal
Investigation Unit, even Customs Deputy
Collector for Passenger Services Rodolfo
Buendia, were called in to get a piece of the
action. The furor that her jewelry generated
even prompted Atty. Mangaoang and the
Customs people to hide her from the press and
prevented from being photographed by
them.This certainly could not be the scene
when a passenger is caught smuggling highly
dutiable items. Everybody seems interested to
dip their hands and try to get a piece of the
pie.[90]
The CA affirmed the trial courts findings on
appeal, as well as its calibration of the
testimony of the witnesses. Jurisprudence has it
that the findings of facts of the trial court,
which the CA affirmed on appeal, are conclusive
on this Court unless it can be shown that cogent
facts and circumstances of substance were
misunderstood or misinterpreted which, if
considered, would alter or reverse the outcome
of the case.[91] Indeed, as aptly stated by the
Supreme Court of Missouri in Creamer v.
Bivert:[92]
xxx We well know there are things of pith that
cannot be preserved in or shown by the written
page of a bill of exceptions. Truth does not
always stalk bodily forth naked, but modest
withal, in a printed abstract in a court of last
resort. She oft hides in nooks and crannies
visible only to the minds eye of the judge who
tries the case. To him appears the furtive
glance, the blush of conscious shame, the
hesitation, the sincere or the flippant or
sneering tone, the heat, the calmness, the
yawn, the sigh, the candor or lack of it, the
scant or full realization of the solemnity of an
oath, the carriage and mien. The brazen face of
the liar, the glibness of the schooled witness in
reciting a lesson, or the itching overeagerness
of the swift witness, as well as honest face of
the truthful one, are alone seen by him. In
short, one witness may give testimony that
reads in print, here, as if falling from the lips of
an angel of light, and yet not a soul who heard
it, nisi, believed a word of it; and another
witness may testify so that it reads brokenly
and obscurely in print, and yet there was that
about the witness that carried conviction of
truth to every soul who heard him
testify. Therefore, where an issue in equity rests
alone on the credibility of witnesses, the upper
court may with entire propriety rest somewhat
on the superior advantage of the lower court in
determining a fact. xxx[93]
If petitioner had no intention to fraudulently
import the jewelries and defraud the
government of the duties/taxes due thereon,
she should have indicated in the Customs
Declaration Form that she was carrying
jewelries valued at more than US$350.00, and
accomplished the Customs Entry Form.
Petitioner failed to do so. She even deliberately
concealed her possession of the jewelries, and
told Nario that she had nothing to declare. Even
as petitioner realized that the discovery of the
jewelry items was inevitable, she merely
requested Nario to continue with her
examination of the leatherette envelopes in the
examination room, beyond the prying eyes of
the media. In fine, petitioner was more
concerned with her exposure to the media than
her liabilities for violation of the TCC; such was
her mindset.
Petitioner cannot evade criminal liability for her
claim that when Nario was about to unzip the
leatherette envelopes and discover the
jewelries contained therein, she told Nario and
Raada that she imported jewelries. Petitioner
made her revelation to avoid being
embarrassed, as there were media in the area
where Nario and Raada discovered that she had
imported the jewelries which she did not
declare in the Customs Declaration Form. To
paraphrase Justice Oliver Wendell Holmes,
petitioner cannot get rid of the duty of
declaring the jewelries to the customs examiner
by hiding the jewelries in the leatherette
envelopes covered by brochures and beneath
the lining of the envelopes. She cannot purge
herself of the consequences of her fraud even
by confessing when she saw that she was on
the point of being discovered or, as might have
been found, after she had been.[94]
Neither can petitioner rely on the
memorandum of Cabugao to the Customs
District Commander on February 28, 1997, to
wit:
Initial investigation showed that when SA I
Antonio Fuentebella asked from crew members
if they have anything to declare, a crew
member later known [as] Maribel B. Jardeleza
admitted that she was carrying taxable items,
and asked that they proceed to the Baggage
extension room.
Examination was therefore conducted by
Customs Examiner Estelita Nario and found
inside three (3) leatherette envelopes
approximately 20.1 kgs. [of] Assorted
Jewelry.[95]
It must be stressed that petitioner failed to
present Fuentebella as her witness. The
information allegedly relayed by Fuentebella to
Cabugao is thus hearsay evidence, barren of
probative weight. Moreover, Fuentebella
alleged the following in his affidavit:
That, I am employed as Special Agent I at the
Bureau of Customs, and presently assigned at
the Arrival Area, as Team Leader, X-Ray
Operations;
That, on February 27, 1997, an Alert Order was
issued by the District Commander, directing us
to monitor an alleged courier of assorted
jewelry on board flight PR-502 which came
from Singapore;
That, X-Ray operations were conducted on
baggage from flight PR-502, but proved
negative. At the same time, surveillance
operations were conducted on all passengers
and flight crew members;
That, Ms. Maribel Jardeleza, PAL flight
stewardess approached Customs Examiner
Estelita Nario for the usual examination of her
baggages;
That, during the process of examination, Ms.
Nario found black envelopes inside the lining of
the hanger bag of Ms. Jardeleza, hence, the
examination was transferred to the interview
room for rigid examination;
That, found inside Ms. Maribel
Jardelezas baggage were assorted jewelry,
placed inside three (3) black leatherette
envelopes weighing more or less 20.1 kgs.
(Gross).[96]
According to Nario, she sought the assistance of
Fuentebella and Raada to bring petitioners
hanger bag to the examination room only after their authorized April 23, 2010
petitioner requested her to continue the search representative,
of her belongings inside the examination room
to avoid embarrassment.[97] Respondents.

x--------------------------------------------------------------
---------------------------x

IN LIGHT OF ALL THE FOREGOING, the petition

is DENIED for lack of merit. Costs against DECISION
petitioner.

SO ORDERED
CARPIO, J.:
4.

SUBIC BAY G.R. No. 160270

METROPOLITAN
AUTHORITY,
The Case
Petitioner, Present:

This is a petition for review[1] of the Court of

CARPIO, J., Appeals (CA) Decision[2] dated 20 June 2003 and
Chairperson,VELASCO, Resolution dated 8 October 2003 in CA-G.R. SP
JR.,* No. 74989. The CA dismissed the petition for
- versus - certiorari and
BRION, [3]
prohibition with prayer for temporary restrain
ABAD, and ing order, preliminary or permanent injunction
filed by Subic Bay Metropolitan Authority
PEREZ, JJ. (SBMA) against Judge Ramon S. Caguioa of the
Regional Trial Court (RTC) of Olongapo City,
MERLINO E. Branch 74, and Merlino E. Rodriguez and Wira
RODRIGUEZ and International Trading Corporation (WIRA), both
WIRA represented by Hilda Bacani. The CA also
INTERNATIONAL affirmed the Orders dated 21 November 2002
TRADING CORP., and 27 November 2002 issued by the RTC.
both represented Promulgated:
herein by HILDA
M. BACANI, as
The Antecedent Facts

The factual and procedural antecedents of this
case, as culled from the records, are as follows:
On 29 September 2001, a cargo shipment
described as agricultural product and valued at
US$6,000 arrived at the Port of Subic, Subic Bay
Freeport Zone.[4] On the basis of its declared
value, the shipment was assessed customs
duties and taxes totaling P57,101 which were
paid by respondent WIRA, the shipments
consignee.[5]
On 23 October 2001, Raval Manalas, Acting
COO III of the Bureau of Customs, Port of Subic
(BOC Subic Port), issued a Memorandum
addressed to the BOC Subic Port District
Collector, stating that upon examination, the
subject shipment was found to contain rice. The
Memorandum further stated as follows: that
the importer claimed there was a misshipment
since it also had a pending order for rice; that
the warehousing entry was amended to reflect
the change in description from agricultural
product to rice; that the shipment, as a
warehoused cargo inside the freeport zone, was
duty and tax free, and was not recommended
for any imposition of penalty and surcharge;
that the consumption entry was changed to
reflect a shipment of rice; and that the
consumption entry, together with supporting
documents belatedly received by the importer,
was submitted to the bank although not yet
filed with the BOC.[6]
On 24 October 2001, Hilda Bacani (respondents
authorized representative) wrote BOC Subic
Port District Collector Billy Bibit, claiming that
she was the representative of Metro Star Rice
Mill (Metro Star), the importer of the subject
cargo. She stated that there was a misshipment
of cargo which actually contained rice, and that
Metro Star is an authorized importer of rice as
provided in the permits issued by the National
Food Authority (NFA). Bacani requested that
the misshipment be upgraded from agricultural
product to a shipment of rice, and at the same
time manifested willingness to pay the
appropriate duties and taxes.[7] The following
day, or on 25 October 2001, the BOC issued
Hold OrderNo. 14/C1/2001 1025-101, directing
BOC Subic Port officers to (1) hold the delivery
of the shipment, and (2) to cause its transfer to
the security warehouse.[8]
On 26 October 2001, respondent WIRA, as the
consignee of the shipment, paid the amount
of P259,874 to the BOC representing additional
duties and taxes for the upgraded shipment.[9]
On 30 October 2001, BOC Commissioner Titus
Villanueva issued a directive stating as
follows:[10]
2nd Indorsement
30 October 2001
Returned to the District Collector of Customs,
Port of Subic, the within (sic) Import Entry No. C
2550-01 covering the shipment of 2,000 bags
Thai Rice 25% broken consigned to WIRA INTL
TRADING CORPORATION (METRO STAR RICE
MILL) ex MV Resolution V0139 with NFA Import
Permit IP SN 000032 and IP SN 000033 both
dated on 13 September 2001 duly issued by the
Administrator, National Food Authority.
Accordingly, the same may be released subject
to payment of duties and taxes based on an
upgraded value as provided for by the National
Food Authority at $153.00/MT and compliance
with all existing rules and regulations.
Further, ensure cancellation of NFA Import
Permit IP SN 000032 and IP SN 000033, to
prevent the same from being recycled.
Report to this office your compliance of herein
directives.
Be guided accordingly.
(Sgd.) Titus Villanueva, CESO 1
Commissioner
In accordance with the shipment upgrade,
respondent WIRA paid on 28 November 2001 a
further amount of P206,212 as customs duties
and taxes.[11] On 4 December 2001, Fertony G.
Marcelo, Officer-in-Charge of the Cash Division
of BOC Subic Port issued a certification/letter
addressed to Mr. Augusto Canlas, General
Manager of the Seaport Department, stating
thus:[12]
This is to certify that the undersigned Collecting
Officer validate[d] a revenue of Php 523,187.00
from above-mentioned importation[13] covered
by O.R. Numbers 8083840 dated October 23,
2001, 8084068 dated October 26, 2001 and
8165208 dated November 28, 2001,
respectively. And a Gate Pass was issued on
December 3, 2001 with signature of Mr. Percito
V. Lozada, Chief Assessment in behalf of the
District Collector Billy C. Bibit.
(Sgd.) Fertoni G. Marcelo
Officer-in-charge, Cash Division
(Collecting Officer)
Noted:
(Sgd. For) Coll. Billy C. Bibit
Despite the above certification/letter,
petitioner SBMA, through Seaport Department
General Manager Augusto Canlas, refused to
allow the release of the rice shipment. Hence,
on 11 June 2002, respondents filed with the RTC
of Olongapo City, a complaint for Injunction and
Damages with prayer for issuance of Writ of
Preliminary Prohibitory and Mandatory
Injunction and/or Temporary Restraining Order
against petitioner SBMA and Augusto L. Canlas,
and the case was docketed as Civil Case No.
261-0-2002.
The succeeding events were summarized by the
trial court and reproduced by the Court of
Appeals, as follows:[14]
1. On June 11, 2002, a complaint for Injunction
and Damages with prayer for issuance of Writ
of Preliminary Prohibitory and Mandatory
Injunction and/or Temporary Restraining Order
was filed by the plaintiff/petitioners Mernilo E.
Rodriguez, doing business under the name and
style Metro Star Rice Mill, represented by
Attorney-in-fact Hilda M. Bacani, and WIRA
International Trading, Inc. likewise represented
by Hilda M. Bacani as authorized
representative, against Subic Bay Metropolitan
Authority (SBMA) and Augusto L. Canlas, in his
personal and official capacity as General
Manager of the Seaport Department of said
SBMA. The complaint was docketed as Civil
Case No. 261-0-[2002].
2. On June 13, 2002, an Order was issued by the
Executive Judge of the Regional Trial Court of
Olongapo City, Branch 72, where
plaintiffs/petitioners application for injunctive
relief was granted. Said order restrained the
defendants/respondents for seventy-two (72)
hours, from interfering with
plaintiffs/petitioners right to enter the premises
of the CCA compound located within the
Bureau of Customs territory and authority
within the Subic Bay Freeport Zone (SBFZ),
Olongapo City, and to withdraw and release
from said CCA warehouse the rice importation
of plaintiffs and to take and possess the said
imported rice consisting of 2,000 bags; and
from interfering in any manner whatsoever with
plaintiffs/petitioners rights and possession over
the aforesaid imported rice. On the same day
also, June 13, 2002, the raffle of the case was
set on June 18, 2002 at 8:30 in the morning.
3. Copy of the complaint with summons
together with aforesaid Temporary Restraining
Order (TRO) was served by Sheriff Leopoldo
Rabanes and Leandro Madarang of the Office of
the Clerk of Court of the Regional Trial Court,
Olongapo City, upon the
defendants/respondents on the same day, June
13, 2002, at around 3:40 in the afternoon as
shown by the Sheriff's return of service (Exh. A-
3 and Exh. B-1) typed and found in the same
pleadings.
4. The following day, on June 14, 2002, the
same Sheriffs went back to
defendants/respondents' office to determine
whether or not the TRO issued by Branch 72
and served by them was followed. They were
however, met by defendants/respondents
Attys. Abella and Katalbas, in the office of
defendant/respondent Canlas, who after much
discussion, refused to honor the TRO issued by
Branch 72 alleging among other[s], that said
Order was illegal and therefore, will not be
followed by the defendants/respondents.
5. Unsuccessful in their efforts, the Sheriffs of
this Court prepared and filed their report dated
June 17, 2002 outlining therein what
transpired on June 14, 2002 and the
circumstances surrounding the refusal by
defendants/respondents to honor the TRO
issued by Branch 72-RTC, Olongapo City (Exh.
C). On the same day also, June 17, 2002,
plaintiffs/petitioners-movants filed in the
instant case a verified indirect contempt charge
alleging therein that because of the defiance
exhibited by the defendants/respondents[,]
specifically Augusto L. Canlas, Attys. Francisco
A. Abella, Jr. and Rizal V. Katalbas. Jr.[,] in not
honoring the court's TRO, they prayed that said
defendants/respondents, after due notice and
hearing, be declared and adjudged guilty of
indirect contempt committed against the court
for having directly failed and refused to comply
with the TRO dated June 13, 2002, and that
they be punished with imprisonment and/or
fine in accordance with Rule 71 of the 1997
Rules of Civil Procedure.
6. On June 18, 2002, the case was raffled to
Branch 74 of herein court.[15]
7. On June 24, 2002, a comment and/or
opposition to the verified indirect contempt
charge was filed by the
defendants/respondents alleging therein that
they cannot be cited for contempt of court
because they had legal basis to refuse to honor
the TRO.
8. Trial was conducted by the court in the
indirect contempt charge on July 12, 2002 as
per the courts Order of even
date. Plaintiffs/petitioners presented Sheriff
Leopoldo Rabanes who testified on direct
examination. During the August 20, 2002
hearing, Sheriff Rabanes was cross-
examined. Thereafter, the testimony of his co-
Sheriff Leandro Madarang was stipulated upon
the parties considering that his testimony
would only corroborate in all principal points
the testimony of Sheriff Rabanes.
9. On that same hearing also[,]
plaintiffs/petitioners formally offered their
evidence and rested.
Defendants/respondents[,] however, in the
meantime had earlier filed a motion on August
1, 2002[,] asking leave of court to file a motion
to dismiss with attached Motion to Dismiss and
in the said August 20, 2002 hearing,
defendants/respondents further manifested
that they were adopting their legal arguments
marshalled in the said motion to dismiss insofar
as the indirect contempt charge was concerned.
10. Thereafter, on August 29, 2002,
defendants/respondents filed a manifestation
with formal offer of evidence in the indirect
contempt case essentially alleging that it is the
Bureau of Customs that has jurisdiction over
this case in view of a Warrant of Seizure and
Detention case filed against the
plaintiff/petitioners and denominated as
Seizure Identification No. 200[2]-10. Therefore,
since it is the Bureau of Customs that has
jurisdiction, the indirect contempt case has no
legal leg to stand on and as such,
defendants/respondents had the right to refuse
to comply with the subject TRO in this case.
11. With the said formal offer of exhibits filed
by the defendants/respondents, the indirect
contempt case was considered submitted for
decision by this court.
In addition to the foregoing, on 19 July 2002,
petitioner SBMA and Augusto Canlas filed their
Answer to the Complaint for Injunction and
Damages with Counterclaim.[16] On 1 August
2002, petitioner SBMA, Augusto Canlas,
Francisco A. Abella, Jr. and Rizal V. Katalbas, Jr.
filed a Consolidated Motion to Dismiss which
sought the dismissal of (1) Civil Case No. 261-0-
2002 (Complaint for Injunction and Damages)
and (2) Civil Case No. 262-0-2002 (Petition for
Indirect Contempt), alleging the existence of a
Warrant of Seizure and Detention, dated 22
May 2002, issued against the subject rice
shipment.[17]
On 21 November 2002, the RTC issued an Order
on the indirect contempt case, stating thus:
WHEREFORE, foregoing considered, judgment is
hereby rendered finding all of the
defendants/respondents guilty of indirect
contempt of court. Atty. Francisco A. Abella, Jr.
is sentenced to suffer the penalty of
imprisonment of ten (10) days and fined the
amount of P10,000.00 Atty. Rizal V. Katalbas, Jr.
is sentenced to pay a fine
of P10,000.00. Augusto L. Canlas is sentenced to
pay a fine of P5,000.00. Subsidiary
imprisonment in case of insolvency for all.
Let a warrant of arrest issue against Atty.
Francisco A. Abella, Jr. The Clerk of Court, Atty.
John V. Aquino, of the Regional Trial Court,
Olongapo City is directed to collect the
corresponding fine from each of the
respondents immediately upon receipt of this
order and to report the same to the court.
SO ORDERED.[18]
On 27 November 2002, the RTC issued another
Order considering the pending incidents in the
injunction case. The RTC held that there should
be prior determination by the BOC on whether
the 2,000 bags of imported rice were smuggled,
and thus issued the following order:
WHEREFORE, the Bureau of Customs, Customs
District XIII, Port of Subic, Olongapo City
through Atty. Titus A. Sangil, Chief, Law Division
and Deputy Collector for Administration is
hereby directed to resolve Seizure Identification
Case No. 2002-10 and submit to the court its
resolution therewith, within fifteen (15) days
from receipt of this order. Meantime, the
proceedings in this case are suspended until the
court is in receipt of the resolution of the
Bureau of Customs.
Furnish a copy of this order to Atty. Titus A.
Sangil at his abovecited office address.
SO ORDERED.[19]
The Court of Appeals Ruling
Petitioner filed with the CA a Petition for
Certiorari and Prohibition with prayer for
Temporary Restraining Order and Preliminary or
Permanent Injunction seeking to nullify and set
aside the RTC Orders dated 21 November 2002
and 27 November 2002. On 20 June 2003, the
CA rendered a Decision dismissing the petition
for lack of merit and affirming the Orders issued
by the RTC. We quote the dispositive portion of
the CA decision below.
WHEREFORE, premises considered, the
assailed Orders dated November 21, 2002 and
November 27, 2002 are hereby AFFIRMED in
toto and the present petition is hereby DENIED
DUE COURSE and accordingly DISMISSED for
lack of merit.
SO ORDERED.[20]
Petitioners Motion for Reconsideration was
denied by the CA in its Resolution of 8 October
2003.[21]
Hence, this appeal.
The Issue
The issue for resolution in this case is whether
the CA erred in affirming the RTC Orders dated
21 November 2002 and 27 November 2002.
The Courts Ruling
We find the appeal meritorious.
As a rule, actions for injunction and damages lie
within the jurisdiction of the RTC pursuant to
Section 19 of Batas Pambansa Blg. 129 (BP 129),
otherwise known as the Judiciary
Reorganization Act of 1980, as amended by
Republic Act (RA) No. 7691.[22]
An action for injunction is a suit which has for
its purpose the enjoinment of the defendant,
perpetually or for a particular time, from the
commission or continuance of a specific act, or
his compulsion to continue performance of a
particular act.[23] It has an independent
existence, and is distinct from the ancillary
remedy of preliminary injunction which cannot
exist except only as a part or an incident of an
independent action or proceeding.[24] In an
action for injunction, the auxiliary remedy of
preliminary injunction, prohibitory or
[25]
mandatory, may issue.
Until the propriety of granting an injunction,
temporary or perpetual, is determined, the
court (i.e., the RTC in this case) may issue a
temporary restraining order. [26]A TRO is an
interlocutory order or writ issued by the court
as a restraint on the defendant until the
propriety of granting an injunction can be
determined, thus going no further in its
operation than to preserve the status quo until
that determination.[27] A TRO is not intended to
operate as an injunction pendente lite, and
should not in effect determine the issues
involved before the parties can have their day
in court.[28]
Petitioner alleges that the RTC of Olongapo City
has no jurisdiction over the action for injunction
and damages filed by respondents on 11 June
2002 as said action is within the exclusive
original jurisdiction of the BOC pursuant to
Section 602 of Republic Act No. 1937, otherwise
known as the Tariff and Customs Code of the
Philippines, as amended.Section 602 provides,
thus:
Sec. 602. Functions of the Bureau.- The general
duties, powers and jurisdiction of the bureau
shall include:
xxx
g. Exercise exclusive original jurisdiction over
seizure and forfeiture cases under the tariff and
customs laws.
Petitioner contends that the imported 2,000
bags of rice were in the actual physical control
and possession of the BOC as early as 25
October 2001, by virtue of the BOC Subic Port
Hold Order of even date, and of the BOC
Warrant of Seizure and Detention dated 22 May
2002. As such, the BOC had acquired exclusive
original jurisdiction over the subject shipment,
to the exclusion of the RTC.
We agree with petitioner.
It is well settled that the Collector of Customs
has exclusive jurisdiction over seizure and
forfeiture proceedings, and regular courts
cannot interfere with his exercise thereof or
stifle or put it at naught.[29] The Collector of
Customs sitting in seizure and forfeiture
proceedings has exclusive jurisdiction to hear
and determine all questions touching on the
seizure and forfeiture of dutiable
[30]
goods. Regional trial courts are devoid of any
competence to pass upon the validity or
regularity of seizure and forfeiture proceedings
conducted by the BOC and to enjoin or
otherwise interfere with these
[31]
proceedings. Regional trial courts are
precluded from assuming cognizance over such
matters even through petitions for certiorari,
prohibition or mandamus.[32]
Verily, the rule is that from the moment
imported goods are actually in the possession
or control of the Customs authorities, even if no
warrant for seizure or detention had previously
been issued by the Collector of Customs in
connection with the seizure and forfeiture
proceedings, the BOC acquires exclusive
jurisdiction over such imported goods for the
purpose of enforcing the customs laws, subject
to appeal to the Court of Tax Appeals whose
decisions are appealable to this Court.[33] As we
have clarified in Commissioner of Customs v.
Makasiar, [34] the rule that RTCs have no review
powers over such proceedings is anchored upon
the policy of placing no unnecessary hindrance
on the government's drive, not only to prevent
smuggling and other frauds upon Customs, but
more importantly, to render effective and
efficient the collection of import and export
duties due the State, which enables the
government to carry out the functions it has
been instituted to perform.
Based on the records of this case, the BOC Subic
Port issued a Hold Order against the subject rice
shipment on 25 October 2001. However, on 30
October 2001, BOC Commissioner Titus
Villanueva issued a directive to the BOC District
Collector stating that the shipment may be
released subject to payment of duties and taxes
based on an upgraded value x x x and
compliance with all existing rules and
regulations. Accordingly, respondents made
additional payments of customs duties and
taxes for the upgraded shipment. Consequently,
on 4 December 2001, the Officer-in-Charge of
the BOC Subic Port Cash Division issued a
certification/letter addressed to Augusto
Canlas, the General Manager of the Subic
Seaport Department, stating that respondents
have already paid the customs taxes and duties
due on the shipment, and a Gate Pass was
issued on December 3, 2001 with signature of
Mr. Percito V. Lozada, Chief Assessment (sic) in
behalf of the District Collector Billy C.
Bibit.[35] Thus, the Hold Order previously issued
by the BOC[36] had been superseded, and made
ineffective, by the succeeding BOC issuances.
However, BOC Subic Port District Collector
Felipe A. Bartolome subsequently issued a
Warrant of Seizure and Detention dated 22 May
2002 against the subject rice shipment.The
warrant was issued upon recommendation
made by Atty. Baltazar Morales of the Customs
Intelligence and Investigation Service (CIIS) on
29 April 2002.[37] With the issuance of the
warrant of seizure and detention, exclusive
jurisdiction over the subject shipment was
regained by the BOC.
We note that the appellate court found
suspicious the existence of the warrant of
seizure and detention at the time of filing of the
injunction and damages case with the RTC by
respondents. The CA pointed out that petitioner
did not mention the existence of the warrant in
its Answer to the Complaint for Injunction and
Damages, filed on 19 July 2002, and only
mentioned the warrant in its Consolidated
Motion to Dismiss [the Complaint for Injunction
and Damages, and the Petition for Indirect
Contempt], filed on 1 August 2002.[38] We do
not agree with the appellate court. Petitioner's
apparent neglect to mention the warrant of
seizure and detention in its Answer is
insufficient to cast doubt on the existence of
said warrant.
Respondents filed a case for indirect contempt
against Augusto L. Canlas, Atty. Francisco A.
Abella, Jr., and Atty. Rizal V. Katalbas, Jr. for
allegedly defying the TRO issued by the RTC in
connection with the complaint for injunction
and damages previously filed by respondents.
Contempt constitutes disobedience to the court
by setting up an opposition to its authority,
justice and dignity.[39] It signifies not only a
willful disregard or disobedience of the court's
orders but such conduct as tends to bring the
authority of the court and the administration of
law into disrepute or in some manner to
impede the due administration of
[40]
justice. There are two kinds of contempt
punishable by law: direct contempt and indirect
contempt. Direct contempt is committed when
a person is guilty of misbehavior in the presence
of or so near a court as to obstruct or interrupt
the proceedings before the same, including
disrespect toward the court, offensive
personalities toward others, or refusal to be
sworn or to answer as a witness, or to subscribe
an affidavit or deposition when lawfully
required to do so.[41] Indirect contempt or
constructive contempt is that which is
committed out of the presence of the court.[42]
Section 3 of Rule 71 of the Revised Rules of Civil
Procedure includes, among the grounds for
filing a case for indirect contempt, the
following:
Section 3. Indirect contempt to be punished
after charge and hearing.
After charge in writing has been filed, and an
opportunity given to the accused to be heard by
himself or counsel, a person guilty of any of the
following acts may be punished for contempt:
xxx
(b) Disobedience of or resistance to a lawful
writ, process, order, judgment or command of a
court, or injunction granted by a court or judge,
xxx
(c) Any abuse of or any unlawful interference
with the process or proceedings of a court not
constituting direct contempt under Section 1 of
this rule;
(d) Any improper conduct tending, directly or
indirectly, to impede, obstruct or degrade the
administration of justice;
xxx
When the TRO issued by the RTC was served
upon the SBMA officers on 13 June 2002, there
was already an existing warrant of seizure and
detention (dated 22 May 2002) issued by the
BOC against the subject rice shipment. Thus, as
far as the SBMA officers were concerned,
exclusive jurisdiction over the subject shipment
remained with the BOC, and the RTC had no
jurisdiction over cases involving said shipment.
Consequently, the SBMA officers refused to
comply with the TRO issued by the RTC.
Considering the foregoing circumstances, we
believe that the SBMA officers may be
considered to have acted in good faith when
they refused to follow the TRO issued by the
RTC. The SBMA officers' refusal to follow the
court order was not contumacious but due to
the honest belief that jurisdiction over the
subject shipment remained with the BOC
because of the existing warrant of seizure and
detention against said shipment. Accordingly,
these SBMA officers should not be held
accountable for their acts which were done in
good faith and not without legal basis. Thus, we
hold that the RTC Order dated 21 November
2002 which found the SBMA officers guilty
of indirect contempt for not complying with the
RTC's TRO should be invalidated.
Finally, the RTC stated in its Order dated 27
November 2002 that based on the records,
there is a pending case with the Bureau of
Customs District XIII, Port of Subic, Olongapo
City, identified and docketed as Seizure
Identification No. 2002-10 and involving the
same 2,000 bags of imported rice that is also
the subject matter of the case herein. The
existence and pendency of said case before the
Bureau of Customs have in fact been admitted
by the parties.[43]
The RTC then proceeded to order the
suspension of court proceedings, and directed
the BOC Subic Port Chief of the Law Division
and Deputy Collector for Administration, Atty.
Titus Sangil, to resolve the seizure case and
submit to the RTC its resolution within fifteen
(15) days from receipt of the court order. We
quote the dispositive portion of the RTC Order
dated 27 November 2002, to wit:
WHEREFORE, the Bureau of Customs, Customs
District XIII, Port of Subic, Olongapo City
through Atty. Titus A. Sangil, Chief, Law Division
and Deputy Collector for Administration is
hereby directed to resolve Seizure Identification
Case No. 2002-10 and submit to the court its
resolution therewith, within fifteen (15) days
from receipt of this order. Meantime, the
proceedings in this case are suspended until the
court is in receipt of the resolution of the
Bureau of Customs.
Furnish a copy of this order to Atty. Titus A.
Sangil at his abovecited office address.[44]
We find the issuance of the RTC Order dated 27
November 2002 improper. The pendency of the
BOC seizure proceedings which was
made known to the RTC through petitioner's
consolidated motion to dismiss should have
prompted said court to dismiss the case before
it. As previously discussed, the BOC has
exclusive original jurisdiction over seizure cases
under Section 602 of the Tariff and Customs
Code. The rule that the RTC must defer to the
exclusive original jurisdiction of the BOC in
cases involving seizure and forfeiture of goods is
absolute. Thus, the RTC had no jurisdiction to
issue its Order dated 27 November 2002.
WHEREFORE, we GRANT the petition.
We REVERSE the Court of Appeals Decision
dated 20 June 2003 and Resolution dated 8
October 2003 in CA-G.R. SP No. 74989.We
declare VOID the Regional Trial Court Orders
dated 21 November 2002 and 27 November
2002.
SO ORDERED.
5. G.R. No. 84111 December 22, 1989
JIMMY O. YAOKASIN, petitioner,
vs.
THE COMMISSIONER OF CUSTOMS, SALVADOR
M. MISON and the DISTRICT COLLECTOR OF THE
PORT OF TACLOBAN, VICENTE D.
YUTANGCO, respondents.
GRIÑO-AQUINO, J.:
This petition questions the power of automatic
review of the Commissioner of Customs over
the decision of the Collector of Customs in
protest and seizure cases.
On May 27, 1988, the Philippine Coast Guard
seized 9000 bags/ sacks of refined sugar, which
were being unloaded from the M/V Tacloban,
and turned them over to the custody of the
Bureau of Customs.
The petitioner presented a sales invoice from
the Jordan Trading of Iloilo (Annex A, Petition)
to prove that the sugar was purchased locally.
The District Collector of Customs, however,
proceeded with the seizure of the bags of sugar.
On June 3 and 6, 1988, show-cause hearings
were conducted. On June 7, 1988, the District
Collector of Customs ordered the release of the
sugar as follows:
WHEREFORE, premises considered subject Nine
Thousand (9,000) sacks/bags of refined sugar
are hereby ordered released to Mr. Jimmy O.
Yaokasin, consignee/claimant and the
immediate withdrawal of Customs Guard within
its bodega's premises. (p. 276, Rollo.)
On June 10, 1988, the decision, together with
the entire records of the case, were transmitted
to, and received by, the Commissioner of
Customs (Annex H, Petition, p. 277, Rollo).
On June 14, 1988, without modifying his
decision, the District Collector of Customs
ordered the warehouse, wherein the bags of
sugar were stored, to be sealed.
On June 19, 1988, the Economic Intelligence
and Investigation Board (EIIB) filed a Motion for
Reconsideration (Annex I, Petition, p. 278,
Rollo), for "further hearing on the merits" (p.
279, Rollo), based on evidence that the seized
sugar was of foreign origin. Petitioner opposed
the motion for being merely pro forma and/or
that the same was, in effect, a motion for new
trial.
Hearing Officer Paula Alcazaren set the Motion
for reconsideration for hearing on July 13, 1988.
But before that, or on July 4, 1988, the
Commissioner of Customs by "2nd
Indorsement" returned to the District Collector
of Customs the:
... folder of Tacloban S.I. No. 06-01 (R.P. vs.
9000 bags/sacks of refined sugar, MR. JIMMY
YAOKASIN, consignee/claimant), together with
the proposed decision, for hearing and/or
resolution of the government is motion for
reconsideration ... . (p. 437, Rollo, Emphasis
Ours.)
On the same date, July 4, 1988,
petitioner applied for and secured a writ of
replevin from the Regional Trial Court of Leyte
(CC 7627, Branch VII), through a
Petition/Complaint for certiorari Prohibition
with Replevin and Damages with Preliminary
Injunction and/or Restraining Order (Annex L,
Petition, p. 288, Rollo).
On July 12, 1988, respondent District Collector
of Customs filed an Answer assailing the court's
jurisdiction. On the same day, the District
Collector and the Commissioner of Customs
filed in the Court of Appeals a Petition for
certiorari and Prohibition with Application for a
Writ of Preliminary Injunction and/or
Restraining Order to annul the July 4, 1988 —
"Order Granting Replevin with Temporary
Restraining Order" (CA-G.R. SP NO. 15090; p.
396, Rollo).
On July 15, 1988, the Collector of Customs
reconsidered his June 7, 1988 decision, as
follows:
WHEREFORE, the undersigned hereby
reconsiders his Decision, finds that the 9,000
bags/sacks of refined sugar in question are of
foreign origin, smuggled into the country, and
declares them forfeited in favor of the
government.
Considering the provision in the quoted CUSTOMS MEMORANDUM ORDER
Customs Memorandum Order, especially the
latter part thereof prohibiting the release of the NO. 20-87
articles in question to the claimant, and TO: All Collectors of Customs and Others
considering also that the said sacks of sugar are Concerned
presently stored in the bodega of claimant, and
considering further that there are no facilities Effective immediately, you are hereby directed
for storage in Tacloban City, for security to implement strictly the following —
reasons, the Honorable Commissioner of
Decisions of the Collector of Customs in seizure
Customs is respectfully and earnestly urged to
and protest cases are subject to review by the
order the immediate transfer of the sugar from
Commissioner upon appeal as provided under
the said bodega to any Customs Warehouse,
existing laws; provided, however, that where a
preferably in Manila and to this end to order the
decision of the Collector of Customs in such
setting aside of such sum of money in order to
seizure and protest cases is adverse to the
effectively accomplish this purpose." (p. 11,
government it shall automatically be
Rollo.)
reviewed by the Commissioner of Customs. (PD.
Also, on the same day, the Court of Appeals: (a) No. 1, Annex C.)
gave due course to respondent's petition; and
In view thereof, no releases in any seizure or
(b) restrained Judge Pedro S. Espina, Regional
like cases may be effected unless and until the
Trial Court, Leyte, from further proceeding in
decision of the Collector has been confirmed in
Civil Case No. 7627, and from enforcing his
writing by the Commissioner of Customs.
Order of July 4, 1988.
For immediate and strict compliance.
It is petitioner's contention that the June 7,
1988 decision of the District Collector of (Sgd.) ALEXANDER A. PADILLA
Customs became final and executory, in view of Acting Commissioner of Customs
the absence of an appeal therefrom by the
"aggrieved party" (himself) within the 15-day (p. 436, Rollo; Emphasis Ours)
period provided for in Sec. 2313 of the Tariff
The memorandum order implements Section 12
and Customs Code. Hence, the release of the
(Art. IV, Part. IV, Vol. I) of the Integrated
9,000 bags of sugar must be upheld.
Reorganization Plan (hereafter, "PLAN") which
On the other hand, the District Collector and provides:
the Commissioner of Customs argue that since
12. The Collector of Customs at each principal
the June 7, 1988 decision is adverse to the
port of entry shall be the official head of the
government, the case should go to the
customs service in his port and district
Commissioner of Customs on automatic review,
responsible to the Commissioner. He shall have
pursuant to Memorandum Order No. 20-87,
the authority to take final action on the
dated May 18, 1987, of former Acting
enforcement of tariff and customs laws within
Commissioner of Customs Alexander Padilla,
his collection district and on administrative
which provides:
matters in accordance with Chapter III, Part II of
this Plan. Decisions of the Collector of Customs
in seizure and protest cases are subject to
review by the Commissioner upon appeal as
provided under existing laws; provided,
however, that where a decision of a Collector of
Customs in such seizure and protest cases is
adverse to the government, it shall
automatically be reviewed by the Commissioner
of Customs which, if affirmed, shall
automatically be elevated for final review by the
Secretary of Finance; provided, further that if
within thirty days from receipt of the records of
the case by the Commissioner of Customs or the
Secretary of Finance, no decision is rendered by
the Commissioner of Customs or the Secretary
of Finance, the decision under review shall
become final and executory. (Emphasis
supplied)
In Presidential Decree No. 1, dated September
24, 1972, former President Marcos decreed and
ordered that the Plan be (4 adopted, approved,
and made as part of the law of the land." Under
the 1987 Constitution, "[a]ll existing laws,
decrees, executive orders, proclamations,
letters of instruction, and other executive
issuances not inconsistent with this Constitution
shall remain operative until amended, repealed,
or revoked" (Sec. 3, Art. XVIII). While some
provisions of the Plan have ceased to be
operative because of subsequent
reorganizations, other provisions, such as
Section 12 have not been repealed by
subsequent legislation.
Section 12 of the Plan applies to petitioner's
shipment of 9,000 bags of sugar. Taxes being
the lifeblood of the Government, Section 12,
which the Commissioner of Customs in his
Customs Memorandum Order No. 20-87,
enjoined all collectors to follow strictly, is
intended to protect the interest of the
Government in the collection of taxes and
customs duties in those seizure and protest
cases which, without the automatic review
provided therein, neither the Commissioner of
Customs nor the Secretary of Finance would
probably ever know about. Without the
automatic review by the Commissioner of
Customs and the Secretary of Finance, a
collector in any of our country's far-flung ports,
would have absolute and unbridled discretion
to determine whether goods seized by him are
locally produced, hence, not dutiable or of
foreign origin, and therefore subject to
payment of customs duties and taxes. His
decision, unless appealed by the aggrieved
party (the owner of the goods), would become
final with 'the no one the wiser except himself
and the owner of the goods. The owner of the
goods cannot be expected to appeal the
collector's decision when it is favorable to him.
A decision that is favorable to the taxpayer
would correspondingly be unfavorable to the
Government, but who will appeal the collector's
decision in that case certainly not the collector.
Evidently, it was to cure this anomalous
situation (which may have already defrauded
our government of huge amounts of
uncollected taxes), that the provision for
automatic review by the Commissioner of
Customs and the Secretary of Finance of
unappealed seizure and protest cases was
conceived to protect the government against
corrupt and conniving customs collectors.
Section 12 of the Plan and Section 2313 of the
Tariff and Customs Code do not conflict with
each other. They may co-exist. Section 2313 of
the Code provides for the procedure for the
review of the decision of a collector in seizure
and protest cases upon appeal by the aggrieved
party, i.e., the importer or owner of the goods.
On the other hand, Section 12 of the Plan refers
to the general procedure in appeals in seizure
and protest cases with a special proviso on
automatic review when the collector's decision
is adverse to the government. Section 2313 and
the proviso in Section 12, although they both
relate to the review of seizure and protest
cases, refer to two different situations — when
the collector's decision is adverse to the
importer or owner of the goods, and when the
decision is adverse to the government.
The decision of the Court in the case of Sy Man
vs. Jacinto (93 Phil. 1093 [19531]), which the
petitioner invokes as precedent, is riot in point.
In the present case the Acting Commissioner, in
issuing the memorandum circular, was directing
strict compliance with an existing provision of
law, which mandates automatic review of
decisions of collectors in seizure and protest
cases which are adverse to the government. On
the other hand, in Sy Man, the memorandum
order of the Insular Collector of Customs
directed the elevation of records in seizure and
forfeiture cases for automatic review even if he
had not been expressly granted such power
under the then existing law.
The objection to the enforcement of Section 12
of the Plan and CMO No. 20-87 on the ground
that they had not been published in the Official
Gazette, is not well taken. The Plan, as part of
P.D. No. 1, was "adopted, approved and made
as part of the law of the land" and published in
Volume 68, No. 40, p. 7797 of the Official
Gazette issue of October 2, 1972.
Article 2 of the Civil Code, which requires laws
to be published in the Official Gazette, does not
apply to CMO No. 20-87 which is only an
administrative order of the Commissioner of
Customs addressed to his subordinates. the
customs collectors.
Commonwealth Act No. 638 (an Act to Provide
for the Uniform Publication and Distribution of
the Official Gazette) enumerates what shall be
published in the Official Gazette besides
legislative acts and resolutions of a public
natureof the Congress of the Philippines.
Executive and administrative orders and
proclamations, shall also be published in the
Official Gazette, except such as have no general
applicability." CMO No. 20-87 requiring
collectors of customs to comply strictly with
Section 12 of the Plan, is an issuance which is
addressed only to particular persons or a class
of persons (the customs collectors). "It need not
be published, on the assumption that it has
been circularized to all concerned" (Tanada vs.
Tuvera, 136 SCRA 27).
WHEREFORE, the petition for review is denied
for lack of merit. The temporary restraining
order which we issued in this case is hereby
made permanent. Cost against the petitioner.
SO ORDERED.
Narvasa, Melencio-Herrera, Cruz, Paras,
Feliciano, Gancayco, Bidin, Sarmiento and
Cortes, JJ., concur.
Padilla, Jr., took no part.
Separate Opinions
MEDIALDEA, J., dissenting:
The present case involves two decisions of the
Collector of Customs of Tacloban City on a
seizure case. The first decision was rendered on
June 7, 1988, ordering the release of 9,000 bags
of sugar belonging to petitioner Jimmy Yaokasin
which were seized by the Philippine Coast
Guard and turned over to the custody of
customs authorities. The second, rendered on
July 15, 1988 reverses the first decision and
orders the forfeiture of the sugar. Petitioner did
not appeal the June 7decision and the Collector
of Customs rendered the second decision
predicated on the automatic review powers of
the Commissioner in decisions adverse to the
government as embodied in Customs
Memorandum Order (CMO) No. 20-87.
The memorandum was issued by then Acting
Commissioner of Customs Alexander Padilla on
May 18, 1987, and provides as follows:
CUSTOMS MEMORANDUM ORDER NO. 20-87
TO: All Collectors of Customs and Others
Concerned
Effective immediately, you are hereby directed
to implement strictly the following —
Decisions of the Collector of Customs in seizure
and protest cases are subject to review by the
Commissioner upon appeal as provided under
existing laws; provided, however, that where a
decision of the Collector Customs in such seizure
and protest cases is adverse to the government,
it shall automatically be reviewed by the
Commissioner of Customs.'
In view thereof, no releases iii any seizure or
like cases may be effected unless and until the
decision of the Collector has been confirmed in
writing by the Commissioner of Customs.
For immediate and strict compliance.
(Sgd.) ALEXANDER A. PADILLA
Acting Commissioner of Customs
(p. 436, Rollo) (Italics Ours)
Petitioner disputes the validity of the
memorandum, claiming instead that the law
applicable to his case is Sec. 2313 of the Tariff
and Customs Code of the Philippines of 1982.
The main issue in this case is whether or not the
Commissioner of Customs has the power of
automatic review over decisions of the Collector
of Customs in seizure and protest cases.
The majority upholds the automatic review
power, based on CMO No. 20-87. I disagree,
based on the provisions of Section 2313 of the
Tariff and Customs Code.
The facts of this case are similar to that involved
in Sy Man v. Jacinto (93 Phil. 1093), briefly
stated below:
On January 2, 1951, the Manila Port Collector of
Customs ordered the seizure of the shipments
of textile and a number of sewing machines,
consigned to Sy Man. On June 4, 1951, he
ordered the release of the articles covered by
the seizure order, upon payment of the
corresponding customs duties, except the
sewing machines which were declared forfeited
to be sold, if saleable or otherwise, destroyed.
On June 27, 1951, Sy Man received a copy of
the decision. Sy Man's counsel sought execution
of the decision, based on the facts that the
Commissioner of Customs could no longer
review the decision after the lapse of 15 days
from notification of said decision to Sy Man.
The issue centered on the power of automatic
review of the Commissioner of Customs, based
on his power and supervision and control over
the Collector of Customs allegedly implemented
by way of the Memorandum promulgated by
the Insular Collector of Customs, dated August
18, 1947, which provides that as in protest
cases, decisions of the Collector of Customs in
seizure cases, whether appealed or not, are
subject to review by the Insular Collector (now
Commissioner).
We ruled that:
(1) Since the Memorandum Order dated August
18, 1947 was never approved by the
department head and was never published in
the Official Gazette, as required by Sec. 551 of
the Revised Administrative Code, the same
cannot be given legal effect;
(2) Additionally, the Memorandum is adjudged
in consistent with law, since there is no law
giving the Commissioner the power to review
and revise unappealed decision of the Collector
of Customs in seizure cases;
(3) Under the law then in force, governing the
Bureau of Customs, the decisions of the
Collector of Customs in a seizure case, if not
protested and appealed by the importer to the
Commissioner of Customs on time becomes
final, not only to him, but also against the
Government as well, and neither the
Commissioner nor the Department Head has
the power to review, revise or modify such
unappealed decision.
In the present case, it is claimed that CMO No.
20-87 merely implements Section 12 (Part IV,
Chp. I, Art. IV) of the Integrated Reorganization
Plan (Plan) of former President Marcos. The
Plan was prepared by the Commission on
Reorganization (authorized under RA 5435) and
submitted to former President Marcos for the
reorganization of the Executive Branch of the
government. It was adopted as law, pursuant to
P.D. No. 1, issued on September 24, 1972.
Section 12 of the Plan provides in part as
follows:
Part. IV — Revenue Administration
Chp. I — Department of Finance
xxx xxx xxx
Art. IV — Bureau of Customs
12. ... Decisions of the Collector of Customs in
seizure and protest cases are subject to review
by the Commissioner upon appeal as provided
under existing laws; provided, however, that
where a decision of a Collector of Customs in
such seizure and protest case is adverse to the
government, it shall automatically be
reviewed by the Commissioner of Customs
which, if affirmed, shall automatically be
elevated for final review by the Secretary of
Finance; provided, further, that if within thirty
days from receipt of the records of the case by
the Commissioner of Customs or the Secretary
of Finance, no decision is rendered by the
Commissioner of Customs or the Secretary of
Finance the decision under review shall become
final and executory. (Emphasis ours)
As will be noted, the Plan grants the
Commissioner of Customs the power to review
automatically, decisions of the Collector of
Customs in seizure and protest cases adverse to
the government. Cases not decided by the
Commissioner within 30 days from receipt of
the records become final and executory.
There is no question that P. D. No. 1/ the Plan is
still a valid law. However, I do not agree that
this is legal authority to uphold the
Commissioner's right to automatically review
decisions of the Collector of Customs in seizure
cases, and, in the process, allow a reversal of a
decision favorable to the importer. When the
Plan became law pursuant to P.D. No. 1, Section
2313 of RA 1937 (Tariff and Customs Code of
the Philippines) already governed the review
powers of the Commissioner of Customs. Thus,
while both Section 12 of the Plan and 2313 of
the Tariff and Customs Code deal with the
review powers of the Commissioner of
Customs, the Plan is a general law, as it
concerns itself with the reorganization of the
executive branch of the government in a martial
law regime, whereas the Code is a special law,
i.e., specifically on tariff and customs duties.
Consequently, the Plan is subservient to the
Code and the automatic review power granted
therein can not be upheld.
Prior to subsequent amendments, Section 2313
of the Code provided as follows:
SEC. 2313. Review by Commissioner. — The
person aggrieved by the decision or action of
the Collector in any matter presented upon
protest or by his action in any case
of seizure may, within fifteen days after
notification in writing by the collector of his
action or decision, give written notice to the
Collector of his desire to have the matter
reviewed by the Commissioner. Thereupon the
Collector shall forthwith transmit all the records
of the proceedings to the Commissioner, who
shall approve, modify or reverse the action or
decision of the Collector and take such steps
and make such orders as may be necessary to
give effect to his decision. (Emphasis ours)
As will be noted, the foregoing provision does
not contain any automatic review powers of the
Commissioner of Customs.
On October 27, 1972, former President Marcos
issued P.D. No. 34, amending the Tariff and
Customs Revision Act of 1972 (earlier issued by
the former Congress, martial law having been
proclaimed) without any reference to the
provisions of Sec. 12 of P.D. No. 1.
As amended by P.D. No. 34, Section 2313
provided as follows:
SEC. 2313. Review by Commissioner. —
The person aggieved by the decision or action
of the Collector in any matter presented
upon protest or by his action in any case
of seizure may, within fifteen (15) days after
notificaton in writing by the Collector of his
action or decision, give written notice to the
Collector and one copy furnished to the
Commissioner of his desire to have the matter
reviewed by the Commissioner. Thereupon the
Collector shall forthwith transmit all the records
of the proceedings to the Commissioner, who
shall approve, modify or reverse the action or
decision of the Collector and take such steps
and make such orders as may be necessary to
give effect to his decision. (Emphasis ours)
One notes that except for the phrase requiring
a copy of the notice to be furnished to the
Commissioner of Customs, no other substantial
change was introduced by P.D. No. 34.
Consequently, the right to elevate the case to
the Commissioner of Customs remained an
exclusive authority of the aggrieved party.
On June 11, 1978, P.D. No. 1464 was issued
directing the consolidation and codification of
the tariff and customs laws of the Philippines
into a single code, to be known as the Tariff and
Customs Code of 1978. The Code was
subsequently codified as the "Tariff and
Customs Code of 1982" pursuant to Executive
Order No. 688, dated May 9, 1981, again
without any reference to Section 12 of P.D. No.
1.
Throughout the various
amendments/modifications of the tariff and
customs laws, the review power of the
Commissioner of Customs in seizure cases
has remained the same, i.e., it arises only upon
appeal of the aggrieved party. Hence, if no
appeal is made, the decision of the Collector of
Customs becomes final and executory, even as
against the government.
It is therefore clear that while it was intended
by the Plan to invest the Commissioner of
Customs with automatic review powers over
decisions of the Collector of Customs in seizure
cases, more importantly in cases adverse to the
government, this intention was never carried
out.
As a matter of fact, despite the requirement of
P.D. No. 1, viz:
xxx xxx xxx
Implementation of the Integrated
Reorganization Plan as herein adopted,
approved and decreed shall be carried out by
Letters of Implementation which will be issued
by me from time to time or by my duly elected
authorized representative.
. . . (Emphasis ours)
and the Plan itself
I. After this Plan shall have been approved, the
President of the Philippines shall, in
consultation with the department or agency
head concerned, prepare the implementing
details with the assistance of such technical
groups or agencies which he may designate,
and issue the necessary executive order or
orders within three months after the approval
of this plan; .... (Emphasis ours.)
no Letter of Implementation as called for, was
ever issued.
Private respondents contend that CMO No. 20-
87 implements the Plan on the automatic
review powers. I do not agree. Section 12 of the
Plan/P.D. No. 1 is no longer good law, as earlier
pointed out, since despite various presidential
issuances and amendments on customs laws,
the Commissioner of customs was never
granted any automatic review power.
The power of review of the Commissioner of
customs found in Sec. 2313 is different from
the supervisory authorityof the Commissioner
of Customs presently embodied in Sec. 2315 of
the Tariff Customs Code, quoted below, and
which gives him the authority of automatic
review of the decisions of the Collector of
Customs in assessment of duties adverse to the
government.
SEC. 2315. Supervisory Authority of
Commissioner and of Secretary of Finance in
Certain Cases — If in any case involving
the assessment of duties, the Collector renders
a decision adverse to the government, such
decision shall automatically be elevated to and
reviewed by, the Commissioner; and if the
Collector's decision would be affirmed by the
Commissioner, such decision shall be
automatically elevated to, and be finally
reviewed by, the Secretary of Finance: Provided,
however, That if within thirty (30) days from
receipt of the record of the case by the
Commissioner or by the Secretary of the
Finance: as the case may be, no decision is
rendered by either of them, the decision under
review shall become final and
executory: Provided, further, That any party
aggrieved by either the decision of the
Commissioner or of the Secretary of Finance
may appeal to the Court of Tax Appeal within
thirty (30) days from receipt of a copy of such
decision. For to purpose Republic Act
Numbered Eleven Hundred and twenty-five is
hereby amended accordingly. ( Emphasis Ours)
Prior to the amendment introduced by P.D. No.
34, Sec. 2315 read as follows:
SEC. 2315. Supervisory Authority of
Commissoner and of Department Head in
Certain Cases. — If in any case involving the
assessment of duties the importer shall fail to
protest the ruling of the Collector, and the
Commissioner shall be of the opinion that the
ruling was erroneous and unfavorable to the
Government, the latter may order a
reliquidation; and if the ruling of the
Commissioner in any unprotested case should,
in the opinion of the department head, be
erroneous and unfavorable to the government,
the department head may require the
Commissioner to order a reliquidation.
(Emphasis ours)
xxx xxx xxx
Under the old provision, We note that the
Commissioner of Customs had the right to order
a reliquidation in unprotested cases of
assesment of duties, where he is "of the opinion
that the ruling of the Collector of Customs was
erroneous and unfavorable to the government."
As amended, Sec. 2315 has been rephrased,
giving the Commissioner of Customs the power
of "automatic review"(not reliquidation) over
adverse decisions of the Collector of Customs in
cases involving assessment of duties, but must
do so within a period of thirty days; otherwise,
his decision becomes final and executory.
The 30-day period appears to be a response to a
defect We noted in the Sy Man case found in
the old provision of Sec. 2315 which did not
prescribe a period within which a reliquidation
may be undertaken. The absence of a period
was "decidedly unsatisfactory and even unjust,
if not oppressive" to the importer, who was
willing "to abide by the decision of the
Collector, to pay the amounts fixed, including
the fines, and desired to get the goods released
so as to be able to dispose of them," but was
unable to do so because of the prolonged
inaction of the Commissioner. (See Sy Man,
supra, p.1101)
In the Sy Man case, We noted two defects. The
first pertained to the absence of the period
found in Sec. 2315, while the second referred to
a need for a provision on review and revision by
the Commissioner of Customs on unappealed
seizure cases, as governed by Sec. 2313. Thus:
But if the Government deems it necessary to
provide for review and revision by the
Commissioner or even by the Department Head
of the decision of the Collector of Customs in
an unappealed seizure cases, the Legislature
may be requested to insert a section in the
Revised Administrative Code similar to Section
1393 (now Section of the Customs Law) which
applies to unprotested cases of assessment
duties. The defect in said section however is
that it does not fix the period within which the
automatic review and revision or reliquidation
to be ordered by the Commissioner and the
Secretary of Finance must be effected. This
defect should be remedied. (p. 1107)
Unfortunately, as can be seen, our legislators
merely acted on the defect found in Sec. 2315
by providing for a period in cases of assessment
of duties. Additionally, they invested the
Commissioner with automatic review powers
where an assessment was adverse to the
government, thus, eliminating any possible
prejudice to the government. They did not,
however, provide any authority for automatic
review in unappealed seizure cases, similar to
that found in Sec. 2313, thus belying any intent
to implement the Plan with respect to the
automatic review powers.
As in the Sy Man case, it is now argued that the
lack of automatic review causes prejudice to the
government. We quote from Sy Man:
It is argued that if this power of review and
revision by the Commissioner of unappealed
seizure casesis not conceded, then in cases
where the Collector in his decision commits a
blunder prejudicial to the interest of the
Government, or renders a decision through
fraud or in collusion with the importer, the
Government cannot protect itself. The
argument is not without merit; but we must
bear in mind that the law is promulgated to
operate on ordinary, common, routine cases.
The rule is and the law presumes that in seizure
cases Collectors of Customs act honestly and
correctly and as Government officials, always
with an eye to the protection of the interests of
the Government employing them. If mistakes
are committed at all more often than not they
are in favor of the Government and not against
it, and that is the reason why when the importer
feels aggrieved by their decision, he is given
every chance and facility to protest the decision
and appeal to the Commissioner. Cases of
erroneous decisions against the interest of the
Government of decisions rendered in collusion
and connivance with importers are the
exception. To protect the Government in such
exceptional cases, we find that in every seizure
case, section 1378 (now Section 2301, Customs
Law) of the Revised Administrative Code
requires the Collector to immediately notify the
Commissioner and the Auditor General. It may
be that this requirement has for its main
purpose the recording of and accounting for the
articles seized so that in case of confiscation the
Commissioner and the Auditor General will
know what articles have become government
property. But the notice will also inform the
Commissioner and the Auditor General of the
seizure. If the seizure is important or unusual,
the Commissioner may, if he so desires, order
the Collector as his subordinate to withhold
action on the seizure, or hold in abeyance,
within a reasonable time, the promulgation of
his decision until after he had conferred with
the Commissioner or the latter had studied the
case and given suggestions. At that stage of the
proceedings before definite action is taken by
the Collector, and a decision rendered by him, it
would seem that any action by him as a
subordinate is still subject to the supervisory
authority and control of the Commissioner as
his chief, and the latter may still influence and
direct the Collector's action if he finds occasion
for doing so. (Emphasis ours)
We believe that for as long as the procedure
laid down in Sec. 2302 is observed, there can be
no resulting prejudice to the government in
unappealed seizure cases, since the
Commissioner in the exercise of his supervisory
authority can ask the Collector to "withhold
action on the seizure or hold in abeyance within
a reasonable time the promulgation of a
decision, until after he has conferred with the
Collector," in cases of unusual or important
seizure.
As it now stands therefore, there is no law
allowing automatic review in seizure cases. For
this reason, CMO No. 20-87, issued supposedly
in implementation of Sec. 12 of the Plan/P.D.
No. 1, which has since been amended/modified,
is void and of no effect, being inconsistent with
law.
Assuming applicability of P.D. No. 1/Plan, CMO
No. 20-87 would still not be effective since it
was not published as required by Section 551 of
the Revised Administrative Code (the law then
in force since the 1987 Revised Administrative
Code took effect on September 21, 1988),
which in part provides:
Section 551. Authority to prescribe forms and
make regulation. — ...
Regulations and orders shall become effective
only when approved by the Department Head
and published in the Official Gazette or
otherwise publicly promulgated. Formal
approval or publication shall not be necessary
as regards circulars of information or
instructions for the guidance of officers and
employees in the internal administration of the
affairs of the Bureau. (Italics ours)
Previous customs administrative orders had
complied with this requirement. Thus, Customs
Administrative Order Nos. 225 and 226, issued
by then Commissioner of Customs Eleuterio
Capapas on August 15,1957 and December
3,1957, respectively, were duly published in Vol.
54, No. 2, p. 300 of the Official Gazette.
CAO No. 226 deals, among others, with
"protests and appeals," and implements Section
2313 of the Code. Thus, Par. VII thereof similarly
gives the importer exclusive authority to
elevate the case to the Commissioner, viz:
Customs Administrative Order No. 226
December 3, 1957
PROTEST AND APPEALS: REDEMPTION OF
FORFEITED ARTICLES; AND EXECUTION OF
DECISIONS.
xxx xxx xxx
Par. VII. The person aggrieved by the decision or
action of a collector of customs in any matter
presented upon protest or by his action in any
case of seizure pursuant to section 2312 of the
Tariff and Customs Code of the
Philipppines may give a written notice to the
Collector of Customs of his desire to have the
matter reviewed by the Commissioner of
Customs. (Italics ours).
In contrast, CMO No. 20-87 enlarges the power
of the Commissioner of Customs by investing
him with automatic powers in seizure cases, in
effect amending COA No. 226. Expectedly, the
memorandum must be published in accordance
with Sec. 551 of the Revised Administrative
Code not only for effectivity but also to fully
apprise third persons. Absent such publication,
the same cannot be upheld for non-compliance
with Sec. 551 of the Revised Administrative
Code.
For these reasons, I vote to GRANT the petition.
Fernan, C.J., Gutierrez, Jr., and Regalado, JJ.,
concur.
Separate Opinions
MEDIALDEA, J., dissenting:
The present case involves two decisions of the
Collector of Customs of Tacloban City on a
seizure case. The first decision was rendered on
June 7, 1988, ordering the release of 9,000 bags
of sugar belonging to petitioner Jimmy Yaokasin
which were seized by the Philippine Coast
Guard and turned over to the custody of
customs authorities. The second, rendered on
July 15, 1988 reverses the first decision and
orders the forfeiture of the sugar. Petitioner did
not appeal the June 7decision and the Collector
of Customs rendered the second decision
predicated on the automatic review powers of
the Commissioner in decisions adverse to the
government as embodied in Customs
Memorandum Order (CMO) No. 20-87.
The memorandum was issued by then Acting
Commissioner of Customs Alexander Padilla on
May 18, 1987, and provides as follows:
CUSTOMS MEMORANDUM ORDER NO. 20-87
TO: All Collectors of Customs and Others
Concerned
Effective immediately, you are hereby directed
to implement strictly the following —
Decisions of the Collector of Customs in seizure
and protest cases are subject to review by the
Commissioner upon appeal as provided under
existing laws; provided, however, that where a
decision of the Collector Customs in such seizure
and protest cases is adverse to the government,
it shall automatically be reviewed by the
Commissioner of Customs.'
In view thereof, no releases iii any seizure or
like cases may be effected unless and until the
decision of the Collector has been confirmed in
writing by the Commissioner of Customs.
For immediate and strict compliance.
(Sgd.) ALEXANDER A. PADILLA
Acting Commissioner of Customs
(p. 436, Rollo) (Italics Ours)
Petitioner disputes the validity of the
memorandum, claiming instead that the law
applicable to his case is Sec. 2313 of the Tariff
and Customs Code of the Philippines of 1982.
The main issue in this case is whether or not the
Commissioner of Customs has the power of
automatic review over decisions of the Collector
of Customs in seizure and protest cases.
The majority upholds the automatic review
power, based on CMO No. 20-87. I disagree,
based on the provisions of Section 2313 of the
Tariff and Customs Code.
The facts of this case are similar to that involved
in Sy Man v. Jacinto (93 Phil. 1093), briefly
stated below:
On January 2, 1951, the Manila Port Collector of
Customs ordered the seizure of the shipments
of textile and a number of sewing machines,
consigned to Sy Man. On June 4, 1951, he
ordered the release of the articles covered by
the seizure order, upon payment of the
corresponding customs duties, except the
sewing machines which were declared forfeited
to be sold, if saleable or otherwise, destroyed.
On June 27, 1951, Sy Man received a copy of
the decision. Sy Man's counsel sought execution
of the decision, based on the facts that the
Commissioner of Customs could no longer
review the decision after the lapse of 15 days
from notification of said decision to Sy Man.
The issue centered on the power of automatic
review of the Commissioner of Customs, based
on his power and supervision and control over
the Collector of Customs allegedly implemented
by way of the Memorandum promulgated by
the Insular Collector of Customs, dated August
18, 1947, which provides that as in protest
cases, decisions of the Collector of Customs in
seizure cases, whether appealed or not, are
subject to review by the Insular Collector (now
Commissioner).
We ruled that:
(1) Since the Memorandum Order dated August
18, 1947 was never approved by the
department head and was never published in
the Official Gazette, as required by Sec. 551 of
the Revised Administrative Code, the same
cannot be given legal effect;
(2) Additionally, the Memorandum is adjudged
in consistent with law, since there is no law
giving the Commissioner the power to review
and revise unappealed decision of the Collector
of Customs in seizure cases;
(3) Under the law then in force, governing the
Bureau of Customs, the decisions of the
Collector of Customs in a seizure case, if not
protested and appealed by the importer to the
Commissioner of Customs on time becomes
final, not only to him, but also against the
Government as well, and neither the
Commissioner nor the Department Head has
the power to review, revise or modify such
unappealed decision.
In the present case, it is claimed that CMO No.
20-87 merely implements Section 12 (Part IV,
Chp. I, Art. IV) of the Integrated Reorganization
Plan (Plan) of former President Marcos. The
Plan was prepared by the Commission on
Reorganization (authorized under RA 5435) and
submitted to former President Marcos for the
reorganization of the Executive Branch of the
government. It was adopted as law, pursuant to
P.D. No. 1, issued on September 24, 1972.
Section 12 of the Plan provides in part as
follows:
Part. IV — Revenue Administration
Chp. I — Department of Finance
xxx xxx xxx
Art. IV — Bureau of Customs
12. ... Decisions of the Collector of Customs in
seizure and protest cases are subject to review
by the Commissioner upon appeal as provided
under existing laws; provided, however, that
where a decision of a Collector of Customs in
such seizure and protest case is adverse to the
government, it shall automatically be
reviewed by the Commissioner of Customs
which, if affirmed, shall automatically be
elevated for final review by the Secretary of
Finance; provided, further, that if within thirty
days from receipt of the records of the case by
the Commissioner of Customs or the Secretary
of Finance, no decision is rendered by the
Commissioner of Customs or the Secretary of
Finance the decision under review shall become
final and executory. (Emphasis ours)
As will be noted, the Plan grants the
Commissioner of Customs the power to review
automatically, decisions of the Collector of
Customs in seizure and protest cases adverse to
the government. Cases not decided by the
Commissioner within 30 days from receipt of
the records become final and executory.
There is no question that P. D. No. 1/ the Plan is
still a valid law. However, I do not agree that
this is legal authority to uphold the
Commissioner's right to automatically review
decisions of the Collector of Customs in seizure
cases, and, in the process, allow a reversal of a
decision favorable to the importer. When the
Plan became law pursuant to P.D. No. 1, Section
2313 of RA 1937 (Tariff and Customs Code of
the Philippines) already governed the review
powers of the Commissioner of Customs. Thus,
while both Section 12 of the Plan and 2313 of
the Tariff and Customs Code deal with the
review powers of the Commissioner of
Customs, the Plan is a general law, as it
concerns itself with the reorganization of the
executive branch of the government in a martial
law regime, whereas the Code is a special law,
i.e., specifically on tariff and customs duties.
Consequently, the Plan is subservient to the
Code and the automatic review power granted
therein can not be upheld.
Prior to subsequent amendments, Section 2313
of the Code provided as follows:
SEC. 2313. Review by Commissioner. — The
person aggrieved by the decision or action of
the Collector in any matter presented upon
protest or by his action in any case
of seizure may, within fifteen days after
notification in writing by the collector of his
action or decision, give written notice to the
Collector of his desire to have the matter
reviewed by the Commissioner. Thereupon the
Collector shall forthwith transmit all the records
of the proceedings to the Commissioner, who
shall approve, modify or reverse the action or
decision of the Collector and take such steps
and make such orders as may be necessary to
give effect to his decision. (Emphasis ours)
As will be noted, the foregoing provision does
not contain any automatic review powers of the
Commissioner of Customs.
On October 27, 1972, former President Marcos
issued P.D. No. 34, amending the Tariff and
Customs Revision Act of 1972 (earlier issued by
the former Congress, martial law having been
proclaimed) without any reference to the
provisions of Sec. 12 of P.D. No. 1.
As amended by P.D. No. 34, Section 2313
provided as follows:
SEC. 2313. Review by Commissioner. —
The person aggieved by the decision or action
of the Collector in any matter presented
upon protest or by his action in any case
of seizure may, within fifteen (15) days after
notificaton in writing by the Collector of his
action or decision, give written notice to the
Collector and one copy furnished to the
Commissioner of his desire to have the matter
reviewed by the Commissioner. Thereupon the
Collector shall forthwith transmit all the records
of the proceedings to the Commissioner, who
shall approve, modify or reverse the action or
decision of the Collector and take such steps
and make such orders as may be necessary to
give effect to his decision. (Emphasis ours)
One notes that except for the phrase requiring
a copy of the notice to be furnished to the
Commissioner of Customs, no other substantial
change was introduced by P.D. No. 34.
Consequently, the right to elevate the case to
the Commissioner of Customs remained an
exclusive authority of the aggrieved party.
On June 11, 1978, P.D. No. 1464 was issued
directing the consolidation and codification of
the tariff and customs laws of the Philippines
into a single code, to be known as the Tariff and
Customs Code of 1978. The Code was
subsequently codified as the "Tariff and
Customs Code of 1982" pursuant to Executive
Order No. 688, dated May 9, 1981, again
without any reference to Section 12 of P.D. No.
1.
Throughout the various
amendments/modifications of the tariff and
customs laws, the review power of the
Commissioner of Customs in seizure cases
has remained the same, i.e., it arises only upon
appeal of the aggrieved party. Hence, if no
appeal is made, the decision of the Collector of
Customs becomes final and executory, even as
against the government.
It is therefore clear that while it was intended
by the Plan to invest the Commissioner of
Customs with automatic review powers over
decisions of the Collector of Customs in seizure
cases, more importantly in cases adverse to the
government, this intention was never carried
out.
As a matter of fact, despite the requirement of
P.D. No. 1, viz:
xxx xxx xxx
Implementation of the Integrated
Reorganization Plan as herein adopted,
approved and decreed shall be carried out by
Letters of Implementation which will be issued
by me from time to time or by my duly elected
authorized representative.
. . . (Emphasis ours)
and the Plan itself
I. After this Plan shall have been approved, the
President of the Philippines shall, in
consultation with the department or agency
head concerned, prepare the implementing
details with the assistance of such technical
groups or agencies which he may designate,
and issue the necessary executive order or
orders within three months after the approval
of this plan; .... (Emphasis ours.)
no Letter of Implementation as called for, was
ever issued.
Private respondents contend that CMO No. 20-
87 implements the Plan on the automatic
review powers. I do not agree. Section 12 of the
Plan/P.D. No. 1 is no longer good law, as earlier
pointed out, since despite various presidential
issuances and amendments on customs laws,
the Commissioner of customs was never
granted any automatic review power.
The power of review of the Commissioner of
customs found in Sec. 2313 is different from
the supervisory authorityof the Commissioner
of Customs presently embodied in Sec. 2315 of
the Tariff Customs Code, quoted below, and
which gives him the authority of automatic
review of the decisions of the Collector of
Customs in assessment of duties adverse to the
government.
SEC. 2315. Supervisory Authority of
Commissioner and of Secretary of Finance in
Certain Cases — If in any case involving
the assessment of duties, the Collector renders
a decision adverse to the government, such
decision shall automatically be elevated to and
reviewed by, the Commissioner; and if the
Collector's decision would be affirmed by the
Commissioner, such decision shall be
automatically elevated to, and be finally
reviewed by, the Secretary of Finance: Provided,
however, That if within thirty (30) days from
receipt of the record of the case by the
Commissioner or by the Secretary of the
Finance: as the case may be, no decision is
rendered by either of them, the decision under
review shall become final and
executory: Provided, further, That any party
aggrieved by either the decision of the
Commissioner or of the Secretary of Finance
may appeal to the Court of Tax Appeal within
thirty (30) days from receipt of a copy of such
decision. For to purpose Republic Act
Numbered Eleven Hundred and twenty-five is
hereby amended accordingly. ( Emphasis Ours)
Prior to the amendment introduced by P.D. No.
34, Sec. 2315 read as follows:
SEC. 2315. Supervisory Authority of
Commissoner and of Department Head in
Certain Cases. — If in any case involving the
assessment of duties the importer shall fail to
protest the ruling of the Collector, and the
Commissioner shall be of the opinion that the
ruling was erroneous and unfavorable to the
Government, the latter may order a
reliquidation; and if the ruling of the
Commissioner in any unprotested case should,
in the opinion of the department head, be
erroneous and unfavorable to the government,
the department head may require the
Commissioner to order a reliquidation.
(Emphasis ours)
xxx xxx xxx
Under the old provision, We note that the
Commissioner of Customs had the right to order
a reliquidation in unprotested cases of
assesment of duties, where he is "of the opinion
that the ruling of the Collector of Customs was
erroneous and unfavorable to the government."
As amended, Sec. 2315 has been rephrased,
giving the Commissioner of Customs the power
of "automatic review"(not reliquidation) over
adverse decisions of the Collector of Customs in
cases involving assessment of duties, but must
do so within a period of thirty days; otherwise,
his decision becomes final and executory.
The 30-day period appears to be a response to a
defect We noted in the Sy Man case found in
the old provision of Sec. 2315 which did not
prescribe a period within which a reliquidation
may be undertaken. The absence of a period
was "decidedly unsatisfactory and even unjust,
if not oppressive" to the importer, who was
willing "to abide by the decision of the
Collector, to pay the amounts fixed, including
the fines, and desired to get the goods released
so as to be able to dispose of them," but was
unable to do so because of the prolonged
inaction of the Commissioner. (See Sy Man,
supra, p.1101)
In the Sy Man case, We noted two defects. The
first pertained to the absence of the period
found in Sec. 2315, while the second referred to
a need for a provision on review and revision by
the Commissioner of Customs on unappealed
seizure cases, as governed by Sec. 2313. Thus:
But if the Government deems it necessary to
provide for review and revision by the
Commissioner or even by the Department Head
of the decision of the Collector of Customs in
an unappealed seizure cases, the Legislature
may be requested to insert a section in the
Revised Administrative Code similar to Section
1393 (now Section of the Customs Law) which
applies to unprotested cases of assessment
duties. The defect in said section however is
that it does not fix the period within which the
automatic review and revision or reliquidation
to be ordered by the Commissioner and the
Secretary of Finance must be effected. This
defect should be remedied. (p. 1107)
Unfortunately, as can be seen, our legislators
merely acted on the defect found in Sec. 2315
by providing for a period in cases of assessment
of duties. Additionally, they invested the
Commissioner with automatic review powers
where an assessment was adverse to the
government, thus, eliminating any possible
prejudice to the government. They did not,
however, provide any authority for automatic
review in unappealed seizure cases, similar to
that found in Sec. 2313, thus belying any intent
to implement the Plan with respect to the
automatic review powers.
As in the Sy Man case, it is now argued that the
lack of automatic review causes prejudice to the
government. We quote from Sy Man:
It is argued that if this power of review and
revision by the Commissioner of unappealed
seizure casesis not conceded, then in cases
where the Collector in his decision commits a
blunder prejudicial to the interest of the
Government, or renders a decision through
fraud or in collusion with the importer, the
Government cannot protect itself. The
argument is not without merit; but we must
bear in mind that the law is promulgated to
operate on ordinary, common, routine cases.
The rule is and the law presumes that in seizure
cases Collectors of Customs act honestly and
correctly and as Government officials, always
with an eye to the protection of the interests of
the Government employing them. If mistakes
are committed at all more often than not they
are in favor of the Government and not against
it, and that is the reason why when the importer
feels aggrieved by their decision, he is given
every chance and facility to protest the decision
and appeal to the Commissioner. Cases of
erroneous decisions against the interest of the
Government of decisions rendered in collusion
and connivance with importers are the
exception. To protect the Government in such
exceptional cases, we find that in every seizure
case, section 1378 (now Section 2301, Customs
Law) of the Revised Administrative Code
requires the Collector to immediately notify the
Commissioner and the Auditor General. It may
be that this requirement has for its main
purpose the recording of and accounting for the
articles seized so that in case of confiscation the
Commissioner and the Auditor General will
know what articles have become government
property. But the notice will also inform the
Commissioner and the Auditor General of the
seizure. If the seizure is important or unusual,
the Commissioner may, if he so desires, order
the Collector as his subordinate to withhold
action on the seizure, or hold in abeyance,
within a reasonable time, the promulgation of
his decision until after he had conferred with
the Commissioner or the latter had studied the
case and given suggestions. At that stage of the
proceedings before definite action is taken by
the Collector, and a decision rendered by him, it
would seem that any action by him as a
subordinate is still subject to the supervisory
authority and control of the Commissioner as
his chief, and the latter may still influence and
direct the Collector's action if he finds occasion
for doing so. (Emphasis ours)
We believe that for as long as the procedure
laid down in Sec. 2302 is observed, there can be
no resulting prejudice to the government in
unappealed seizure cases, since the
Commissioner in the exercise of his supervisory
authority can ask the Collector to "withhold
action on the seizure or hold in abeyance within
a reasonable time the promulgation of a
decision, until after he has conferred with the
Collector," in cases of unusual or important
seizure.
As it now stands therefore, there is no law
allowing automatic review in seizure cases. For
this reason, CMO No. 20-87, issued supposedly
in implementation of Sec. 12 of the Plan/P.D.
No. 1, which has since been amended/modified,
is void and of no effect, being inconsistent with
law.
Assuming applicability of P.D. No. 1/Plan, CMO
No. 20-87 would still not be effective since it
was not published as required by Section 551 of
the Revised Administrative Code (the law then
in force since the 1987 Revised Administrative
Code took effect on September 21, 1988),
which in part provides:
Section 551. Authority to prescribe forms and
make regulation. — ...
Regulations and orders shall become effective
only when approved by the Department Head
and published in the Official Gazette or
otherwise publicly promulgated. Formal
approval or publication shall not be necessary
as regards circulars of information or
instructions for the guidance of officers and
employees in the internal administration of the
affairs of the Bureau. (Italics ours)
Previous customs administrative orders had
complied with this requirement. Thus, Customs
Administrative Order Nos. 225 and 226, issued
by then Commissioner of Customs Eleuterio
Capapas on August 15,1957 and December
3,1957, respectively, were duly published in Vol.
54, No. 2, p. 300 of the Official Gazette.
CAO No. 226 deals, among others, with
"protests and appeals," and implements Section
2313 of the Code. Thus, Par. VII thereof similarly
gives the importer exclusive authority to
elevate the case to the Commissioner, viz:
Customs Administrative Order No. 226
December 3, 1957
PROTEST AND APPEALS: REDEMPTION OF
FORFEITED ARTICLES; AND EXECUTION OF
DECISIONS.
xxx xxx xxx
Par. VII. The person aggrieved by the decision or
action of a collector of customs in any matter
presented upon protest or by his action in any
case of seizure pursuant to section 2312 of the
Tariff and Customs Code of the
Philipppines may give a written notice to the
Collector of Customs of his desire to have the
matter reviewed by the Commissioner of
Customs. (Italics ours).
In contrast, CMO No. 20-87 enlarges the power
of the Commissioner of Customs by investing
him with automatic powers in seizure cases, in
effect amending COA No. 226. Expectedly, the
memorandum must be published in accordance
with Sec. 551 of the Revised Administrative
Code not only for effectivity but also to fully
apprise third persons. Absent such publication,
the same cannot be upheld for non-compliance
with Sec. 551 of the Revised Administrative
Code.
For these reasons, I vote to GRANT the petition.
6. G.R. No. 183137 April 10, 2013
PELIZLOY REALTY CORPORATION, represented
herein by its President, GREGORY K.
LOY, Petitioner,
vs.
THE PROVINCE OF BENGUET, Respondent.
DECISION
LEONEN, J.:
The principal issue in this case is the scope of
authority of a province to impose an
amusement tax.
This is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court praying that the
December 10, 2007 decision of the Regional
Trial Court,- Branch 62, La Trinidad, Benguet in
Civil Case No. 06-CV-2232 be reversed and set
aside and a new one issued in which: ( 1)
respondent Province of Benguet is declared as
having no authority to levy amusement taxes on
admission fees for resorts, swimming pools,
bath houses, hot springs, tourist spots, and
other places for recreation; (2) Section 59,
Article X of the Benguet Provincial Revenue
Code of 2005 is declared null and void; and (3)
the respondent Province of Benguet is
permanently enjoined from enforcing Section
59, Article X of the Benguet Provincial Revenue
Code of 2005.
Petitioner Pelizloy Realty Corporation
("Pelizloy") owns Palm Grove Resort, which is
designed for recreation and which has facilities
like swimming pools, a spa and function halls. It
is located at Asin, Angalisan, Municipality of
Tuba, Province of Benguet.
On December 8, 2005, the Provincial Board of
the Province of Benguet approved Provincial
Tax Ordinance No. 05-107, otherwise known as
the Benguet Revenue Code of 2005 ("Tax
Ordinance"). Section 59, Article X of the Tax
Ordinance levied a ten percent (10%)
amusement tax on gross receipts from
admissions to "resorts, swimming pools, bath
houses, hot springs and tourist spots."
Specifically, it provides the following:
Article Ten: Amusement Tax on Admission
Section 59. Imposition of Tax. There is hereby
levied a tax to be collected from the
proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, cockpits,
dancing halls, dancing schools, night or day
clubs, and other places of amusement at the
rate of thirty percent (30%) of the gross receipts
from admission fees; and
A tax of ten percent (10%) of gross receipts
from admission fees for boxing, resorts,
swimming pools, bath houses, hot springs, and
tourist spots is likewise levied. [Emphasis and
underscoring supplied]
Section 162 of the Tax Ordinance provided that
the Tax Ordinance shall take effect on January
1, 2006.
It was Pelizloy's position that the Tax
Ordinance's imposition of a 10% amusement
tax on gross receipts from admission fees for
resorts, swimming pools, bath houses, hot
springs, and tourist spots is an ultra vires act on
the part of the Province of Benguet. Thus, it
filed an appeal/petition before the Secretary of
Justice on January 27, 2006.
The appeal/petition was filed within the thirty
(30)-day period from the effectivity of a tax
ordinance allowed by Section 187 of Republic
Act No. 7160, otherwise known as the Local
Government Code (LGC).1 The appeal/petition
was docketed as MSO-OSJ Case No. 03-2006.
Under Section 187 of the LGC, the Secretary of
Justice has sixty (60) days from receipt of the
appeal to render a decision. After the lapse of
which, the aggrieved party may file appropriate
proceedings with a court of competent
jurisdiction.
Treating the Secretary of Justice's failure to
decide on its appeal/petition within the sixty
(60) days provided by Section 187 of the LGC as
an implied denial of such appeal/petition,
Pelizloy filed a Petition for Declaratory Relief
and Injunction before the Regional Trial Court,
Branch 62, La Trinidad, Benguet. The petition
was docketed as Civil Case No. 06-CV-2232.
Pelizloy argued that Section 59, Article X of the
Tax Ordinance imposed a percentage tax in
violation of the limitation on the taxing powers
of local government units (LGUs) under Section
133 (i) of the LGC. Thus, it was null and void ab
initio. Section 133 (i) of the LGC provides:
Section 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:
xxx
(i) Percentage or value-added tax (VAT) on
sales, barters or exchanges or similar
transactions on goods or services except as
otherwise provided herein
The Province of Benguet assailed the Petition
for Declaratory Relief and Injunction as an
improper remedy. It alleged that once a tax
liability has attached, the only remedy of a
taxpayer is to pay the tax and to sue for
recovery after exhausting administrative
remedies.2
On substantive grounds, the Province of
Benguet argued that the phrase ‘other places of
amusement’ in Section 140 (a) of the
LGC3 encompasses resorts, swimming pools,
bath houses, hot springs, and tourist spots since
"Article 220 (b) (sic)" of the LGC defines
"amusement" as "pleasurable diversion and
entertainment x x x synonymous to relaxation,
avocation, pastime, or fun."4 However, the
Province of Benguet erroneously cited Section
220 (b) of the LGC. Section 220 of the LGC refers
to valuation of real property for real estate tax
purposes. Section 131 (b) of the LGC, the
provision which actually defines "amusement",
states:
Section 131. Definition of Terms. - When used
in this Title, the term:
xxx
(b) "Amusement" is a pleasurable diversion and
entertainment. It is synonymous to relaxation,
avocation, pastime, or fun On December 10,
2007, the RTC rendered the assailed Decision
dismissing the Petition for Declaratory Relief
and Injunction for lack of merit.
Procedurally, the RTC ruled that Declaratory
Relief was a proper remedy. On the validity of
Section 59, Article X of the Tax Ordinance, the
RTC noted that, while Section 59, Article X
imposes a percentage tax, Section 133 (i) of the
LGC itself allowed for exceptions. It noted that
what the LGC prohibits is not the imposition by
LGUs of percentage taxes in general but the
"imposition and levy of percentage tax on sales,
barters, etc., on goods and services only."5It
further gave credence to the Province of
Benguet's assertion that resorts, swimming
pools, bath houses, hot springs, and tourist
spots are encompassed by the phrase ‘other
places of amusement’ in Section 140 of the LGC.
On May 21, 2008, the RTC denied Pelizloy’s
Motion for Reconsideration.
Aggrieved, Pelizloy filed the present petition on
June 10, 2008 on pure questions of law. It
assailed the legality of Section 59, Article X of
the Tax Ordinance as being a (supposedly)
prohibited percentage tax per Section 133 (i) of
the LGC.
In its Comment, the Province of Benguet,
erroneously citing Section 40 of the LGC, argued
that Section 59, Article X of the Tax Ordinance
does not levy a percentage tax "because the
imposition is not based on the total gross
receipts of services of the petitioner but solely
and actually limited on the gross receipts of the
admission fees collected."6 In addition, it argued
that provinces can validly impose amusement
taxes on resorts, swimming pools, bath houses,
hot springs, and tourist spots, these being
‘amusement places’.
For resolution in this petition are the following
issues:
1. Whether or not Section 59, Article X of
Provincial Tax Ordinance No. 05-107, otherwise
known as the Benguet Revenue Code of 2005,
levies a percentage tax.
2. Whether or not provinces are authorized to
impose amusement taxes on admission fees to
resorts, swimming pools, bath houses, hot
springs, and tourist spots for being "amusement
places" under the Local Government Code.
The power to tax "is an attribute of
sovereignty,"7 and as such, inheres in the State.
Such, however, is not true for provinces, cities,
municipalities and barangays as they are not
the sovereign;8 rather, they are mere "territorial
and political subdivisions of the Republic of the
Philippines".9
The rule governing the taxing power of
provinces, cities, muncipalities and barangays is
summarized in Icard v. City Council of Baguio:10
It is settled that a municipal corporation unlike
a sovereign state is clothed with no inherent
power of taxation. The charter or statute must
plainly show an intent to confer that power or
the municipality, cannot assume it. And the
power when granted is to be construed in
strictissimi juris. Any doubt or ambiguity arising
out of the term used in granting that power
must be resolved against the municipality.
Inferences, implications, deductions – all these
– have no place in the interpretation of the
taxing power of a municipal
corporation. [Underscoring supplied]
11
Therefore, the power of a province to tax is
limited to the extent that such power is
delegated to it either by the Constitution or by
statute. Section 5, Article X of the 1987
Constitution is clear on this point:
Section 5. Each local government unit shall have
the power to create its own sources of revenues
and to levy taxes, fees and charges subject to
such guidelines and limitations as the Congress
may provide, consistent with the basic policy of
local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local
governments. [Underscoring supplied]
Per Section 5, Article X of the 1987 Constitution,
"the power to tax is no longer vested exclusively
on Congress; local legislative bodies are now
given direct authority to levy taxes, fees and
other charges."12 Nevertheless, such authority is
"subject to such guidelines and limitations as
the Congress may provide".13
In conformity with Section 3, Article X of the
1987 Constitution,14 Congress enacted Republic
Act No. 7160, otherwise known as the Local
Government Code of 1991. Book II of the LGC
governs local taxation and fiscal matters.
Relevant provisions of Book II of the LGC
establish the parameters of the taxing powers
of LGUS found below.
First, Section 130 provides for the following
fundamental principles governing the taxing
powers of LGUs:
1. Taxation shall be uniform in each LGU.
2. Taxes, fees, charges and other impositions
shall:
a. be equitable and based as far as practicable
on the taxpayer's ability to pay;
b. be levied and collected only for public
purposes;
c. not be unjust, excessive, oppressive, or
confiscatory;
d. not be contrary to law, public policy, national
economic policy, or in the restraint of trade.
3. The collection of local taxes, fees, charges
and other impositions shall in no case be let to
any private person.
4. The revenue collected pursuant to the
provisions of the LGC shall inure solely to the
benefit of, and be subject to the disposition by,
the LGU levying the tax, fee, charge or other
imposition unless otherwise specifically
provided by the LGC.
5. Each LGU shall, as far as practicable, evolve a
progressive system of taxation.
Second, Section 133 provides for the common
limitations on the taxing powers of LGUs.
Specifically, Section 133 (i) prohibits the levy by
LGUs of percentage or value-added tax (VAT) on
sales, barters or exchanges or similar
transactions on goods or services except as
otherwise provided by the LGC.
As it is Pelizloy’s contention that Section 59,
Article X of the Tax Ordinance levies a
prohibited percentage tax, it is crucial to
understand first the concept of a percentage
tax.
In Commissioner of Internal Revenue v.
Citytrust Investment Phils. Inc.,15 the Supreme
Court defined percentage tax as a "tax
measured by a certain percentage of the gross
selling price or gross value in money of goods
sold, bartered or imported; or of the gross
receipts or earnings derived by any person
engaged in the sale of services." Also, Republic
Act No. 8424, otherwise known as the National
Internal Revenue Code (NIRC), in Section 125,
Title V,16 lists amusement taxes as among the
(other) percentage taxes which are levied
regardless of whether or not a taxpayer is
already liable to pay value-added tax (VAT).
Amusement taxes are fixed at a certain
percentage of the gross receipts incurred by
certain specified establishments.
Thus, applying the definition in CIR v. Citytrust
and drawing from the treatment of amusement
taxes by the NIRC, amusement taxes are
percentage taxes as correctly argued by
Pelizloy.
However, provinces are not barred from levying
amusement taxes even if amusement taxes are
a form of percentage taxes. Section 133 (i) of
the LGC prohibits the levy of percentage taxes
"except as otherwise provided" by the LGC.
Section 140 of the LGC provides:
SECTION 140. Amusement Tax - (a) The
province may levy an amusement tax to be
collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls,
circuses, boxing stadia, and other places of
amusement at a rate of not more than thirty
percent (30%) of the gross receipts from
admission fees.
(b) In the case of theaters of cinemas, the tax
shall first be deducted and withheld by their
proprietors, lessees, or operators and paid to
the provincial treasurer before the gross
receipts are divided between said proprietors,
lessees, or operators and the distributors of the
cinematographic films.
(c) The holding of operas, concerts, dramas,
recitals, painting and art exhibitions, flower
shows, musical programs, literary and oratorical
presentations, except pop, rock, or similar
concerts shall be exempt from the payment of
the tax herein imposed.
(d) The Sangguniang Panlalawigan may
prescribe the time, manner, terms and
conditions for the payment of tax. In case of
fraud or failure to pay the tax, the Sangguniang
Panlalawigan may impose such surcharges,
interests and penalties.
(e) The proceeds from the amusement tax shall
be shared equally by the province and the
municipality where such amusement places are
located. [Underscoring supplied]
Evidently, Section 140 of the LGC carves a clear
exception to the general rule in Section 133 (i).
Section 140 expressly allows for the imposition
by provinces of amusement taxes on "the
proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia,
and other places of amusement."
However, resorts, swimming pools, bath
houses, hot springs, and tourist spots are not
among those places expressly mentioned by
Section 140 of the LGC as being subject to
amusement taxes. Thus, the determination of
whether amusement taxes may be levied on
admissions to resorts, swimming pools, bath
houses, hot springs, and tourist spots hinges on
whether the phrase ‘other places of
amusement’ encompasses resorts, swimming
pools, bath houses, hot springs, and tourist
spots.
Under the principle of ejusdem generis, "where
a general word or phrase follows an
enumeration of particular and specific words of
the same class or where the latter follow the
former, the general word or phrase is to be
construed to include, or to be restricted to
persons, things or cases akin to, resembling, or
of the same kind or class as those specifically
mentioned."17
The purpose and rationale of the principle was
explained by the Court in National Power
Corporation v. Angas18 as follows:
The purpose of the rule on ejusdem generis is
to give effect to both the particular and general
words, by treating the particular words as
indicating the class and the general words as
including all that is embraced in said class,
although not specifically named by the
particular words. This is justified on the ground
that if the lawmaking body intended the general
terms to be used in their unrestricted sense, it
would have not made an enumeration of
particular subjects but would have used only
general terms. [2 Sutherland, Statutory
Construction, 3rd ed., pp. 395-400].19
In Philippine Basketball Association v. Court of
Appeals,20 the Supreme Court had an
opportunity to interpret a starkly similar
provision or the counterpart provision of
Section 140 of the LGC in the Local Tax Code
then in effect. Petitioner Philippine Basketball
Association (PBA) contended that it was subject
to the imposition by LGUs of amusement taxes
(as opposed to amusement taxes imposed by
the national government).1âwphi1 In support of
its contentions, it cited Section 13 of
Presidential Decree No. 231, otherwise known
as the Local Tax Code of 1973, (which is
analogous to Section 140 of the LGC) providing
the following:
Section 13. Amusement tax on admission. - The
province shall impose a tax on admission to be
collected from the proprietors, lessees, or
operators of theaters, cinematographs, concert
halls, circuses and other places of amusement
xxx.
Applying the principle of ejusdem generis, the
Supreme Court rejected PBA's assertions and
noted that:
In determining the meaning of the phrase
'other places of amusement', one must refer to
the prior enumeration of theaters,
cinematographs, concert halls and circuses with
artistic expression as their common
characteristic. Professional basketball games do
not fall under the same category as theaters,
cinematographs, concert halls and circuses as
the latter basically belong to artistic forms of
entertainment while the former caters to sports
and gaming.21 [Underscoring supplied]
However, even as the phrase ‘other places of
amusement’ was already clarified in Philippine
Basketball Association, Section 140 of the LGC
adds to the enumeration of 'places of
amusement' which may properly be subject to
amusement tax. Section 140 specifically
mentions 'boxing stadia' in addition to
"theaters, cinematographs, concert halls and
circuses" which were already mentioned in PD
No. 231. Also, 'artistic expression' as a
characteristic does not pertain to 'boxing
stadia'.
In the present case, the Court need not embark
on a laborious effort at statutory construction.
Section 131 (c) of the LGC already provides a
clear definition of ‘amusement places’:
Section 131. Definition of Terms. - When used
in this Title, the term:
xxx
(c) "Amusement Places" include theaters,
cinemas, concert halls, circuses and other
places of amusement where one seeks
admission to entertain oneself by seeing or
viewing the show or performances
[Underscoring supplied]
Indeed, theaters, cinemas, concert halls,
circuses, and boxing stadia are bound by a
common typifying characteristic in that they are
all venues primarily for the staging of spectacles
or the holding of public shows, exhibitions,
performances, and other events meant to be
viewed by an audience. Accordingly, ‘other
places of amusement’ must be interpreted in
light of the typifying characteristic of being
venues "where one seeks admission to
entertain oneself by seeing or viewing the show
or performances" or being venues primarily
used to stage spectacles or hold public shows,
exhibitions, performances, and other events
meant to be viewed by an audience.
As defined in The New Oxford American
Dictionary,22 ‘show’ means "a spectacle or
display of something, typically an impressive
one";23 while ‘performance’ means "an act of
staging or presenting a play, a concert, or other
form of entertainment."24 As such, the ordinary
definitions of the words ‘show’ and
‘performance’ denote not only visual
engagement (i.e., the seeing or viewing of
things) but also active doing (e.g., displaying,
staging or presenting) such that actions are
manifested to, and (correspondingly) perceived
by an audience.
Considering these, it is clear that resorts,
swimming pools, bath houses, hot springs and
tourist spots cannot be considered venues
primarily "where one seeks admission to
entertain oneself by seeing or viewing the show
or performances". While it is true that they may
be venues where people are visually engaged,
they are not primarily venues for their
proprietors or operators to actively display,
stage or present shows and/or performances.
Thus, resorts, swimming pools, bath houses, hot
springs and tourist spots do not belong to the
same category or class as theaters, cinemas,
concert halls, circuses, and boxing stadia. It
follows that they cannot be considered as
among the ‘other places of amusement’
contemplated by Section 140 of the LGC and
which may properly be subject to amusement
taxes.
At this juncture, it is helpful to recall this Court’s
pronouncements in Icard:
The power to tax when granted to a province is
to be construed in strictissimi juris. Any doubt
or ambiguity arising out of the term used in
granting that power must be resolved against
the province. Inferences, implications,
deductions – all these – have no place in the
interpretation of the taxing power of a
province.25
In this case, the definition of' amusement
places' in Section 131 (c) of the LGC is a clear
basis for determining what constitutes the
'other places of amusement' which may
properly be subject to amusement tax
impositions by provinces. There is no reason for
going beyond such basis. To do otherwise
would be to countenance an arbitrary
interpretation/application of a tax law and to
inflict an injustice on unassuming taxpayers.
The previous pronouncements notwithstanding,
it will be noted that it is only the second
paragraph of Section 59, Article X of the Tax
Ordinance which imposes amusement taxes on
"resorts, swimming pools, bath houses, hot
springs, and tourist spots". The first paragraph
of Section 59, Article X of the Tax Ordinance
refers to "theaters, cinemas, concert halls,
circuses, cockpits, dancing halls, dancing
schools, night or day clubs, and other places of
amusement".1âwphi1 In any case, the issues
raised by Pelizloy are pertinent only with
respect to the second paragraph of Section 59,
Article X of the Tax Ordinance. Thus, there is no
reason to invalidate the first paragraph of
Section 59, Article X of the Tax Ordinance. Any
declaration as to the Province of Benguet's lack
of authority to levy amusement taxes must be
limited to admission fees to resorts, swimming
pools, bath houses, hot springs and tourist
spots.
Moreover, the second paragraph of Section 59,
Article X of the Tax Ordinance is not limited to
resorts, swimming pools, bath houses, hot
springs, and tourist spots but also covers
admission fees for boxing. As Section 140 of the
LGC allows for the imposition of amusement
taxes on gross receipts from admission fees to
boxing stadia, Section 59, Article X of the Tax
Ordinance must be sustained with respect to
admission fees from boxing stadia.
WHEREFORE, the petition for review on
certiorari is GRANTED. The second paragraph of
Section 59, Article X of the Benguet Provincial
Revenue Code of 2005, in so far as it imposes
amusement taxes on admission fees to resorts,
swimming pools, bath houses, hot springs and
tourist spots, is declared null and void.
Respondent Province of Benguet is permanently
enjoined from enforcing the second paragraph
of Section 59, Article X of the Benguet Provincial
Revenue Code of 2005 with respect to resorts,
swimming pools, bath houses, hot springs and
tourist spots.
SO ORDERED.
7. G.R. No. L-30159 March 31, 1987
MUNICIPALITY OF SAN FERNANDO, LA UNION
represented by Mayor LORENZO L.
DACANAY, plaintiff-appellee, (respondent)
vs.
MAYOR TIMOTEO STA. ROMANA, MUNICIPAL
TREASURER and their authorized Agents of
Luna, La Union and the MUNICIPALITY OF LUNA,
LA UNION, defendants-appellants (petitioners).
PARAS, J.:
This is a petition for review on certiorari of the
November 11, 1968 Order of the Court of First
Instance of La Union, the dispositive portion of
which reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS,
the preliminary injunction already issued is
made permanent and the defendants are
enjoined not to prevent the plaintiff from
getting sand and gravel from barrio Nalvo
Norte.
The undisputed facts of this case are as follows:
The Municipality of San Fernando, La Union
which was undertaking a cement road
construction around its Supermarket and other
municipal projects, needed sufficient gravel and
sand from their source, the Municipality of Luna
but its trucks sent to the latter municipality to
haul said road construction materials were
allegedly charged unreasonable fees per truck
load.
On March 18, 1968, the Municipality of San
Fernando represented by its incumbent
Municipal Mayor Lorenzo L. Dacanay filed a
complaint for Injunction with Writ of
Preliminary Injunction at the Court of First
Instance of La Union against the Municipality of
Luna and its officials and authorized agents,
praying that the defendants be immediately
enjoined from preventing plaintiff's truck
obtaining road construction materials from
Luna, La Union and from levying unreasonable
fees, and after trial to make the injunction
permanent (Complaint "Annex A, "Rollo, p. 13).
On the same day the complaint was filed, the
Court of First Instance of La Union (Branch 11)
issued an Order granting the Writ of Preliminary
Injunction ex parte (Petition, Rollo, p. 7, "Annex
B," Rollo, p. 18). On March 26, 1968, the
defendants filed their Answer wherein they
averred that the license fees collected from the
hauling of sand and gravel excavated from the
municipality of Luna, La Union are by virtue of
an ordinance duly approved by the Municipal
Council of defendant municipality in
consonance with its power to tax, and that the
fees collected are reasonable, fair and legal. The
Answer further pointed out that the remedy of
Injunction availed of is not the proper remedy.
On May 21, 1968, after the issues were joined,
the lower court issued an Order requiring the
parties to submit their respective memoranda
since the issue raised was purely a question of
law. On November 11, 1968, the lower court
issued an Order making permanent the writ of
preliminary injunction issued and further
ordered the defendants not to prevent the
plaintiff from getting sand and gravel from
Barrio Nalvo Norte, a barrio of Luna, La Union.
Hence, this petition.
The main issue in this case is whether or not the
Municipality of Luna has the authority to pass
Ordinance No. 1 and impose the license fees in
question.
Aforesaid Ordinance reads:
ORDINANCE NO. 1
Section 1. There shall be collected from any
person, partnership or corporation engaged in
any business, occupation or calling or enjoying
any privilege hereunder enumerated the
following municipal license and/or fees at the
rate set opposite each:
xxx xxx xxx
14. Dealer and/or hauler of sand, gravel and/or
stones for every truck load or fraction thereof:
Sand.......................................................P1. 50
Gravel........................................................8.00
Course sand...........................................10.00
Selected stones or pea size..................15.00
The Municipality of Luna insists on the validity
of its Ordinance No. 1 imposing the license fees
in question on the basis of its authority to
exercise police power under Section 2238 of the
Revised Administrative Code, otherwise known
as the General Welfare Clause and its power to
levy licenses and fees for public purposes under
Republic Act 2264 (Petition, Rollo, p. 10) and
justifies the inclusion of the Municipality of San
Fernando thereunder, among the persons,
partnership or corporation engaged in any
business, occupation or calling to be charged for
hauling sand and gravel from its seashore,
claiming that respondent municipality in hauling
sand and gravel for the improvement of its
roads is engaged in a proprietary function as it
can later exact higher license fees from those in
the business center. Thus, for eventually
obtaining profit by the improvement of its
roads, the Municipality of San Fernando should
allegedly pay license fees to the Municipality of
Luna (Brief for Petitioner, pp. 5 and 6).
On the other hand, respondent Municipality
alleges that the license fee embodied in
Ordinance No. I is beyond the authority of the
Municipality of Luna, La Union to impose, as the
sand and gravel deposits in the seashore of
Nalvo Norte are classified as minerals under the
Mining Laws of the Philippines and as such
belong to the State, and fall under the
administration and control of the Bureau of
Mines and not of the Municipality of Luna. For
this purpose, respondent Municipality obtained
on March 18, 1968, a gratuitous Revocable
Permit from the Bureau of Mines (Answer,
Rollo, pp. 55-56; Brief for Respondent, pp. 3 and
4). Even granting arguendo that the disposition
of sand and gravel belongs to petitioner,
nevertheless, the Municipality of San Fernando
does not fall under Ordinance No. 1 because
the gravel and sand extracted by said
municipality are used for the improvement of
its streets which function is governmental.
This issue in the case at bar is now governed by
Presidential Decree No. 231, enacting a Local
Tax Code (for Provinces, Cities, Municipalities
and Barrios which took effect on July 1, 1973.
The Code provides:
SEC. 10. Sand and gravel fee. — The province
may levy and collect a fee of not exceeding
seventy-five centavos per cubic meter of
ordinary stones, sand, gravel earth and other
materials extracted from lakes, rivers, streams,
creeks, and other public waters within the
jurisdiction of the province.
SEC. 22. Specific limitations on power. — Except
as otherwise provided in this Code, the
municipality shall not levy the following:
(a) Taxes, fees, and charges that the province or
city is authorized to levy in this Code;
(b) Taxes on articles, subject to specific tax without paying the corresponding taxes or fees
under the provisions of the National Internal that may be imposed by the province of La
Revenue Code; and Union.

(c) Taxes and other impositions enumerated in PREMISES CONSIDERED, the Court RESOLVED to
Section 5, Chapter I of this Code. DISMISS this petition and to AFFIRM assailed
Order of the trial court.
Section 10 of aforesaid decree was later
amended by Presidential Decree No. 426, dated 8.
March 30, 1974, and now reads:
COMMISSIONER OF G.R. No. 177279
Sec. 10. Sand and gravel tax. — The province INTERNAL REVENUE,
may levy and collect a tax of not exceeding
seventy-five centavos per cubic meter of Petitioner,
Present:
ordinary stones, sand, gravel earth and other
materials extracted from public and private
lands of the government or from the beds of
CARPIO MORALES, J.,
seas, lakes, rivers, streams, creeks and other
public waters within the jurisdiction of the Chairperson,
province. The municipality where the materials - versus -
are extracted shall share in the proceeds of the BRION,
tax herein authorized at a rate of not less than
BERSAMIN,
thirty per cent thereof as may be determined by
the Provincial Board. VILLARAMA, JR., and

The permit to extract the materials shall be SERENO, JJ.

issued by the Director of Mines or his duly
authorized representative and the extraction
thereof shag be governed by regulations issued
HON. RAUL M.
by the Director of Mines. (As amended by
GONZALEZ, Secretary of
Presidential Decree No. 426).
Justice, L. M. CAMUS Promulgated:
Under the above-quoted provisions of the Local ENGINEERING
Tax Code, there is no question that the CORPORATION
authority to impose the license fees in dispute, (represented by LUIS M. October 13, 2010
properly belongs to the province concerned and CAMUS and LINO D.
not to the Municipality of Luna which is MENDOZA),
specifically prohibited under Section 22 of the
Respondents.
same Code "from levying taxes, fees and
charges that the province or city is authorized x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
to levy in this Code. " On the other hand, the - - - - - - - - - - - - - - -x
Municipality of San Fernando cannot extract
sand and gravel from the Municipality of Luna
DECISION 956 of the Office of the City Prosecutor of
Quezon City).[5]

Based on data obtained from an informer and

VILLARAMA, JR., J.: various clients of LMCEC,[6] it was discovered
that LMCEC filed fraudulent tax returns with
substantial underdeclarations of taxable income
This is a petition for review on certiorari under for the years 1997, 1998 and 1999. Petitioner
Rule 45 of the 1997 Rules of Civil Procedure, as thus assessed the company of total deficiency
amended, assailing the Decision[1] dated October taxes amounting to P430,958,005.90 (income
31, 2006 and Resolution[2]dated March 6, 2007 of tax - P318,606,380.19 and value-added tax
the Court of Appeals (CA) in CA-G.R. SP No. 93387 [VAT] - P112,351,625.71) covering the said
which affirmed the Resolution[3] dated December period. The Preliminary Assessment Notice
13, 2005 of respondent Secretary of Justice in I.S. (PAN) was received by LMCEC on February 22,
No. 2003-774 for violation of Sections 254 and 2001.[7]
255 of the National Internal Revenue Code of
1997 (NIRC). LMCECs alleged underdeclared income was
summarized by petitioner as follows:
The facts as culled from the records:
Year Income Income Undecla
Pursuant to Letter of Authority (LA) No.
00009361 dated August 25, 2000 issued by then Per ITR Per Investigation Income
Commissioner of Internal Revenue (petitioner)
1997 96,638,540.00 283,412,140.84 186,733
Dakila B. Fonacier, Revenue Officers Remedios
C. Advincula, Jr., Simplicio V. Cabantac, Jr., 1998 86,793,913.00 236,863,236.81 150,069
Ricardo L. Suba, Jr. and Aurelio Agustin T.
Zamora supervised by Section Chief Sixto C. Dy, 1999 88,287,792.00 251,507,903.13 163,220
Jr. of the Tax Fraud Division (TFD), National
In view of the above findings, assessment
Office, conducted a fraud investigation for all
notices together with a formal letter of demand
internal revenue taxes to ascertain/determine
dated August 7, 2002 were sent to LMCEC
the tax liabilities of respondent L. M. Camus
through personal service on October 1,
Engineering Corporation (LMCEC) for the
2002.[9] Since the company and its
taxable years 1997, 1998 and 1999.[4] The audit
representatives refused to receive the said
and investigation against LMCEC was
notices and demand letter, the revenue officers
precipitated by the information provided by an
resorted to constructive service[10] in
informer that LMCEC had
accordance with Section 3, Revenue Regulations
substantial underdeclared income for the said
(RR) No. 12-99[11].
period. For failure to comply with the
subpoena duces tecum issued in connection with On May 21, 2003, petitioner, through then
the tax fraud investigation, a criminal complaint Commissioner Guillermo L. Parayno, Jr.,
was instituted by the Bureau of Internal Revenue referred to the Secretary of Justice for
(BIR) against LMCEC on January 19, 2001 for preliminary investigation its complaint against
violation of Section 266 of the NIRC (I.S. No. 00-
LMCEC, Luis M. Camus and Lino D. Mendoza, Recovery Assistance Payment [ERAP] Program
the latter two were sued in their capacities as and the Voluntary Assessment Program [VAP])
President and Comptroller, respectively. The for 1998 and 1999; for 1997, its tax liability was
case was docketed as I.S. No. 2003-774. In the terminated and closed under Letter of
Joint Affidavit executed by the revenue officers Termination[14] dated June 1, 1999 issued by
who conducted the tax fraud investigation, it petitioner and signed by the Chief of the
was alleged that despite the receipt of the final Assessment Division.[15] LMCEC claimed it made
assessment notice and formal demand letter on payments of income tax, VAT and expanded
October 1, 2002, LMCEC failed and refused to withholding tax (EWT), as follows:
pay the deficiency tax assessment in the total
amount of P630,164,631.61, inclusive of TAXAB AMOUNT OF
increments, which had become final and LE TAXES
executory as a result of the said taxpayers
YEAR PAID
failure to file a protest thereon within the thirty
(30)-day reglementary period.[12] 1997 Termination EWT -
Letter Under P 6,000.00
Camus and Mendoza filed a Joint Counter-
Letter of
Affidavit contending that LMCEC cannot be held
Authority No. VAT -
liable whatsoever for the alleged tax deficiency 540,605.02
174600
which had become due and
Dated Novem IT - 3,000.00
demandable. Considering that the complaint
ber 4, 1998
and its annexes all showed that the suit is a
simple civil action for collection and not a tax 1998 ERAP Program WC -
evasion case, the Department of Justice (DOJ) is pursuant 38,404.55
not the proper forum for BIRs complaint. They
also assail as invalid the assessment notices to RR #2-99 VAT -
which bear no serial numbers and should be 61,635.40
shown to have been validly served by an
1999 VAP Program IT -
Affidavit of Constructive Service executed and
pursuant 878,495.28
sworn to by the revenue officers who served
the same. As stated in LMCECs letter-protest to RR #8-2001 VAT -
dated December 12, 2002addressed to Revenue 1,324,317.0
District Officer (RDO) Clavelina S. Nacar of RD 0[16]
No. 40, Cubao, Quezon City, the company had
already undergone a series of routine
examinations for the years 1997, 1998 and
LMCEC argued that petitioner is now estopped
1999; under the NIRC, only one examination of
from further taking any action against it and its
the books of accounts is allowed per taxable
corporate officers concerning the taxable years
year.[13]
1997 to 1999. With the grant of immunity from
LMCEC further averred that it had availed of the audit from the companys availment of ERAP
Bureaus Tax Amnesty Programs (Economic and VAP, which have a feature of a tax amnesty,
the element of fraud is negated the moment
the Bureau accepts the offer of compromise or
payment of taxes by the taxpayer. The act of
the revenue officers in finding justification
under Section 6(B) of the NIRC (Best Evidence
Obtainable) is misplaced and unavailing
because they were not able to open the books
of the company for the second time, after the
routine examination, issuance of termination
letter and the availment of ERAP and
VAP. LMCEC thus maintained that unless there
is a prior determination of fraud supported by
documents not yet incorporated in the docket
of the case, petitioner cannot just issue LAs
without first terminating those previously
issued. It emphasized the fact that the BIR
officers who filed and signed the Affidavit-
Complaint in this case were the same ones who
appeared as complainants in an earlier case
filed against Camus for his alleged failure to
obey summons in violation of Section 5
punishable under Section 266 of the NIRC of
1997 (I.S. No. 00-956 of the Office of the City
Prosecutor of Quezon City). After preliminary
investigation, said case was dismissed for lack
of probable cause in a Resolution issued by the
Investigating Prosecutor on May 2, 2001.[17]
LMCEC further asserted that it filed on April 20,
2001 a protest on the PAN issued by petitioner
for having no basis in fact and law. However,
until now the said protest remains
unresolved. As to the alleged informant who
purportedly supplied the confidential
information, LMCEC believes that such person is
fictitious and his true identity and personality
could not be produced. Hence, this case is
another form of harassment against the
company as what had been found by the Office
of the City Prosecutor of Quezon City in I.S. No.
00-956. Said case and the present case both
have something to do with the
audit/examination of LMCEC for taxable years
1997, 1998 and 1999 pursuant to LA No.
00009361.[18]
In the Joint Reply-Affidavit executed by the
Bureaus revenue officers, petitioner disagreed
with the contention of LMCEC that the
complaint filed is not criminal in nature,
pointing out that LMCEC and its officers Camus
and Mendoza were being charged for the
criminal offenses defined and penalized under
Sections 254 (Attempt to Evade or Defeat Tax)
and 255 (Willful Failure to Pay Tax) of the
NIRC. This finds support in Section 205 of the
same Code which provides for administrative
(distraint, levy, fine, forfeiture, lien, etc.) and
judicial (criminal or civil action) remedies in
order to enforce collection of taxes. Both
remedies may be pursued either independently
or simultaneously.In this case, the BIR decided
to simultaneously pursue both remedies and
thus aside from this criminal action, the Bureau
also initiated administrative proceedings
against LMCEC.[19]
On the lack of control number in the
assessment notice, petitioner explained that
such is a mere office requirement in the
Assessment Service for the purpose of internal
control and monitoring; hence, the
unnumbered assessment notices should not be
interpreted as irregular or
anomalous. Petitioner stressed that LMCEC
already lost its right to file a protest letter after
the lapse of the thirty (30)-day reglementary
period. LMCECs protest-letter dated December
12, 2002 to RDO Clavelina S. Nacar, RD No. 40,
Cubao, Quezon City was actually filed only
on December 16, 2002, which was disregarded
by the petitioner for being filed out of
time. Even assuming for the sake of argument
that the assessment notices were invalid,
petitioner contended that such could not affect
the present criminal action,[20] citing the ruling
in the landmark case of Ungab v. Cusi, Jr.[21]
As to the Letter of Termination signed by Ruth
Vivian G. Gandia of the Assessment Division,
Revenue Region No. 7, Quezon City, petitioner
pointed out that LMCEC failed to mention that
the undated Certification issued by RDO Pablo
C. Cabreros, Jr. of RD No. 40, Cubao, Quezon
City stated that the report of the 1997 Internal
Revenue taxes of LMCEC had already been
submitted for review and approval of higher
authorities. LMCEC also cannot claim as excuse
from the reopening of its books of accounts the
previous investigations and
examinations. Under Section 235 (a), an
exception was provided in the rule on once a
year audit examination in case of fraud,
irregularity or mistakes, as determined by the
Commissioner. Petitioner explained that the
distinction between a Regular Audit
Examination and Tax Fraud Audit Examination
lies in the fact that the former is conducted by
the district offices of the Bureaus Regional
Offices, the authority emanating from the
Regional Director, while the latter is conducted
by the TFD of the National Office only when
instances of fraud had been determined by the
petitioner.[22]
Petitioner further asserted that LMCECs claim
that it was granted immunity from audit when it
availed of the VAP and ERAP programs is
misleading. LMCEC failed to state that its
availment of ERAP under RR No. 2-99 is not a
grant of absolute immunity from audit and
investigation, aside from the fact that said
program was only for income tax and did not
cover VAT and withholding tax for the taxable
year 1998. As for LMCECS availment of VAP in
1999 under RR No. 8-2001 dated August 1, 2001
as amended by RR No. 10-2001 dated
September 3, 2001, the company failed to state
that it covers only income tax and VAT, and did
not include withholding tax. However, LMCEC is
not actually entitled to the benefits of VAP
under Section 1 (1.1 and 1.2) of RR No. 10-
2001. As to the principle of estoppel invoked by
LMCEC, estoppel clearly does not lie against the
BIR as this involved the exercise of an inherent
power by the government to collect taxes.[23]
Petitioner also pointed out that LMCECs
assertion correlating this case with I.S. No. 00-
956 is misleading because said case involves
another violation and offense (Sections 5 and
266 of the NIRC). Said case was filed by
petitioner due to the failure of LMCEC to submit
or present its books of accounts and other
accounting records for examination despite the
issuance of subpoena duces tecum against
Camus in his capacity as President of
LMCEC. While indeed a Resolution was issued
by Asst. City Prosecutor Titus C. Borlas on May
2, 2001 dismissing the complaint, the same is
still on appeal and pending resolution by the
DOJ. The determination of probable cause in
said case is confined to the issue of whether
there was already a violation of the NIRC by
Camus in not complying with the
subpoena duces tecum issued by the BIR.[24]
Petitioner contended that precisely the reason
for the issuance to the TFD of LA No. 00009361
by the Commissioner is because the latter
agreed with the findings of the investigating
revenue officers that fraud exists in this case. In
the conduct of their investigation, the revenue
officers observed the proper procedure under
Revenue Memorandum Order (RMO) No. 49-
2000 wherein it is required that before the
issuance of a Letter of Authority against a
particular taxpayer, a preliminary investigation
should first be conducted to determine if a prima
facie case for tax fraud exists. As to the allegedly
unresolved protest filed on April 20, 2001 by
LMCEC over the PAN, this has been disregarded
by the Bureau for being pro forma and having
been filed beyond the 15-day reglementary
period. A subsequent letter dated April 20,
2001 was filed with the TFD and signed by a
certain Juan Ventigan. However, this was
disregarded and considered a mere scrap of
paper since the said signatory had not shown any
prior authorization to represent LMCEC. Even
assuming said protest letter was validly filed on
behalf of the company, the issuance of a Formal
Demand Letter and Assessment Notice through
constructive service on October 1, 2002 is
deemed an implied denial of the said
protest. Lastly, the details regarding the informer
being confidential, such information is entitled to
some degree of protection, including the identity
of the informant against LMCEC.[25]
In their Joint Rejoinder-Affidavit,[26] Camus and
Mendoza reiterated their argument that the
identity of the alleged informant is crucial to
determine if he/she is qualified under Section
282 of the NIRC. Moreover, there was no
assessment that has already become final, the
validity of its issuance and service has been put
in issue being anomalous, irregular and
oppressive. It is contended that for criminal
prosecution to proceed before assessment,
there must be a prima facie showing of a willful
attempt to evade taxes. As to LMCECs
availment of the VAP and ERAP programs, the
certificate of immunity from audit issued to it
by the BIR is plain and simple, but petitioner is
now saying it has the right to renege with
impunity from its undertaking. Though
petitioner deems LMCEC not qualified to avail
of the benefits of VAP, it must be noted that if it
is true that at the time the petitioner filed I.S.
No. 00-956 sometime in January 2001 it had
already in its custody that Confidential
Information No. 29-2000 dated July 7, 2000,
these revenue officers could have rightly filed
the instant case and would not resort to filing
said criminal complaint for refusal to comply
with a subpoena duces tecum.
On September 22, 2003, the Chief State
Prosecutor issued a Resolution[27] finding no
sufficient evidence to establish probable cause
against respondents LMCEC, Camus and
Mendoza. It was held that since the payments
were made by LMCEC under ERAP and VAP
pursuant to the provisions of RR Nos. 2-99 and
8-2001 which were offered to taxpayers by the
BIR itself, the latter is now in estoppel to insist
on the criminal prosecution of the respondent
taxpayer. The voluntary payments made
thereunder are in the nature of a tax
amnesty. The unnumbered assessment notices
were found highly irregular and thus their
validity is suspect; if the amounts indicated
therein were collected, it is uncertain how these
will be accounted for and if it would go to the
coffers of the government or elsewhere. On the
required prior determination of fraud, the Chief
State Prosecutor declared that the Office of the
City Prosecutor in I.S. No. 00-956 has already
squarely ruled that (1) there was no prior
determination of fraud, (2) there was
indiscriminate issuance of LAs, and (3) the
complaint was more of harassment. In view of
such findings, any ensuing LA is thus defective
and allowing the collection on the assailed
assessment notices would already be in the
context of a fishing expedition or witch-
hunting. Consequently, there is nothing to
speak of regarding the finality of assessment
notices in the aggregate amount
of P630,164,631.61.
Petitioner filed a motion for reconsideration
which was denied by the Chief State
Prosecutor.[28]
Petitioner appealed to respondent Secretary of
Justice but the latter denied its petition for
review under Resolution dated December 13,
2005.[29]
The Secretary of Justice found that petitioners
claim that there is yet no finality as to LMCECs
payment of its 1997 taxes since the audit report
was still pending review by higher authorities, is
unsubstantiated and misplaced. It was noted
that the Termination Letter issued by the
Commissioner on June 1, 1999 is explicit that
the matter is considered closed. As for taxable
year 1998, respondent Secretary stated that the
record shows that LMCEC paid VAT and
withholding tax in the amount of P61,635.40
and P38,404.55, respectively. This eventually
gave rise to the issuance of a certificate of
immunity from audit for 1998 by the Office of
the Commissioner of Internal Revenue. For
taxable year 1999, respondent Secretary found
that pursuant to earlier LA No. 38633 dated July
4, 2000, LMCECs 1999 tax liabilities were still
pending investigation for which reason LMCEC
assailed the subsequent issuance of LA No.
00009361 dated August 25, 2000 calling for a
similar investigation of its alleged 1999 tax
deficiencies when no final determination has
yet been arrived on the earlier LA No. 38633.[30]
On the allegation of fraud, respondent
Secretary ruled that petitioner failed to
establish the existence of the following
circumstances indicating fraud in the settlement
of LMCECs tax liabilities: (1) there must be
intentional and substantial understatement of
tax liability by the taxpayer; (2) there must be
intentional and substantial overstatement of
deductions or exemptions; and (3) recurrence
of the foregoing circumstances. First, petitioner
miserably failed to explain why the assessment
notices were unnumbered; second,the claim
that the tax fraud investigation was precipitated
by an alleged informant has not been
corroborated nor was it clearly established,
hence there is no other conclusion but that the
Bureau engaged in a fishing expedition;
and furthermore, petitioners course of action is
contrary to Section 235 of the NIRC allowing
only once in a given taxable year such
examination and inspection of the taxpayers
books of accounts and other accounting
records. There was no convincing proof
presented by petitioner to show that the case
of LMCEC falls under the exceptions provided in
Section 235. Respondent Secretary duly
considered the issuance of Certificate of
Immunity from Audit and Letter of Termination
dated June 1, 1999 issued to LMCEC.[31]
Anent the earlier case filed against the same
taxpayer (I.S. No. 00-956), the Secretary of
Justice found petitioner to have engaged in
forum shopping in view of the fact that while
there is still pending an appeal from the
Resolution of the City Prosecutor of Quezon City
in said case, petitioner hurriedly filed the
instant case, which not only involved the same
parties but also similar substantial issues (the
joint complaint-affidavit also alleged the
issuance of LA No. 00009361 dated August 25,
2000). Clearly, the evidence of litis pendentia is
present. Finally, respondent Secretary noted
that if indeed LMCEC committed fraud in the
settlement of its tax liabilities, then at the
outset, it should have been discovered by the
agents of petitioner, and consequently
petitioner should not have issued the Letter of
Termination and the Certificate of Immunity
From Audit. Petitioner thus should have been
more circumspect in the issuance of said
documents.[32]
Its motion for reconsideration having been
denied, petitioner challenged the ruling of
respondent Secretary via a certiorari petition in
the CA.
On October 31, 2006, the CA rendered the
assailed decision[33] denying the petition and
concurred with the findings and conclusions of
respondent Secretary. Petitioners motion for
reconsideration was likewise denied by the
appellate court.[34] It appears that entry of
judgment was issued by the CA stating that
its October 31, 2006 Decision attained finality
on March 25, 2007.[35] However, the said entry
of judgment was set aside upon manifestation
by the petitioner that it has filed a petition for
review before this Court subsequent to its
receipt of the Resolution dated March 6,
2007 denying petitioners motion for
reconsideration on March 20, 2007. [36]
The petition is anchored on the following
grounds:
I.
The Honorable Court of Appeals erroneously
sustained the findings of the Secretary of Justice
who gravely abused his discretion by dismissing
the complaint based on grounds which are not
even elements of the offenses charged.
II.
The Honorable Court of Appeals erroneously
sustained the findings of the Secretary of Justice
who gravely abused his discretion by dismissing
petitioners evidence, contrary to law.
III.
The Honorable Court of Appeals erroneously
sustained the findings of the Secretary of Justice
who gravely abused his discretion by inquiring
into the validity of a Final Assessment Notice
which has become final, executory and
demandable pursuant to Section 228 of the Tax
Code of 1997 for failure of private respondent
to file a protest against the same.[37]
The core issue to be resolved is whether LMCEC
and its corporate officers may be prosecuted
for violation of Sections 254 (Attempt to Evade
or Defeat Tax) and 255 (Willful Failure to Supply
Correct and Accurate Information and Pay Tax).
Petitioner filed the criminal complaint against
the private respondents for violation of the
following provisions of the NIRC, as amended:
SEC. 254. Attempt to Evade or Defeat Tax. Any
person who willfully attempts in any manner to
evade or defeat any tax imposed under this
Code or the payment thereof shall, in addition
to other penalties provided by law, upon
conviction thereof, be punished by a fine of not
less than Thirty thousand pesos (P30,000) but
not more than One hundred thousand pesos
(P100,000) and suffer imprisonment of not less
than two (2) years but not more than four (4)
years: Provided, That the conviction or acquittal
obtained under this Section shall not be a bar to
the filing of a civil suit for the collection of
taxes.
SEC. 255. Failure to File Return, Supply Correct
and Accurate Information, Pay Tax, Withhold
and Remit Tax and Refund Excess Taxes
Withheld on Compensation. Any person
required under this Code or by rules and
regulations promulgated thereunder to pay any
tax, make a return, keep any record, or supply
any correct and accurate information, who
willfully fails to pay such tax, make such return,
keep such record, or supply such correct and
accurate information, or withhold or remit
taxes withheld, or refund excess taxes withheld
on compensations at the time or times required
by law or rules and regulations shall, in addition
to other penalties provided by law, upon
conviction thereof, be punished by a fine of not
less than Ten thousand pesos (P10,000) and
suffer imprisonment of not less than one (1)
year but not more than ten (10) years.
x x x x (Emphasis supplied.)
Respondent Secretary concurred with the Chief
State Prosecutors conclusion that there is
insufficient evidence to establish probable
cause to charge private respondents under the
above provisions, based on the following
findings: (1) the tax deficiencies of LMCEC for
taxable years 1997, 1998 and 1999 have all
been settled or terminated, as in fact LMCEC
was issued a Certificate of Immunity and Letter
of Termination, and availed of the ERAP and
VAP programs; (2) there was no prior
determination of the existence of fraud; (3) the
assessment notices are unnumbered, hence
irregular and suspect; (4) the books of accounts
and other accounting records may be subject to
audit examination only once in a given taxable
year and there is no proof that the case falls
under the exceptions provided in Section 235 of
the NIRC; and (5) petitioner committed forum
shopping when it filed the instant case even as
the earlier criminal complaint (I.S. No. 00-956)
dismissed by the City Prosecutor of Quezon City
was still pending appeal.
Petitioner argues that with the finality of the
assessment due to failure of the private
respondents to challenge the same in
accordance with Section 228 of the NIRC,
respondent Secretary has no jurisdiction and
authority to inquire into its validity. Respondent
taxpayer is thereby allowed to do indirectly
what it cannot do directly to raise a collateral
attack on the assessment when even a direct
challenge of the same is legally barred. The
rationale for dismissing the complaint on the
ground of lack of control number in the
assessment notice likewise betrays a lack of
awareness of tax laws and jurisprudence, such
circumstance not being an element of the
offense. Worse, the final, conclusive and
undisputable evidence detailing a crime under
our taxation laws is swept under the rug so
easily on mere conspiracy theories imputed on
persons who are not even the subject of the
complaint.
We grant the petition.
There is no dispute that prior to the filing of the
complaint with the DOJ, the report on the tax
fraud investigation conducted on LMCEC
disclosed that it made substantial
underdeclarations in its income tax returns for
1997, 1998 and 1999. Pursuant to RR No. 12-
99,[38] a PAN was sent to and received by LMCEC
on February 22, 2001 wherein it was notified of
the proposed assessment of deficiency taxes
amounting to P430,958,005.90 (income tax -
P318,606,380.19 and VAT - P112,351,625.71)
covering taxable years 1997, 1998 and
1999.[39] In response to said PAN, LMCEC sent a
letter-protest to the TFD, which denied the
same on April 12, 2001 for lack of legal and
factual basis and also for having been filed
beyond the 15-day reglementary period.[40]
As mentioned in the PAN, the revenue officers
were not given the opportunity to examine
LMCECs books of accounts and other
accounting records because its officers failed to
comply with the subpoena duces tecum earlier
issued, to verify its alleged underdeclarations of
income reported by the Bureaus informant
under Section 282 of the NIRC. Hence, a
criminal complaint was filed by the Bureau
against private respondents for violation of
Section 266 which provides:
SEC. 266. Failure to Obey Summons. Any person
who, being duly summoned to appear to testify,
or to appear and produce books of accounts,
records, memoranda, or other papers, or to
furnish information as required under the
pertinent provisions of this Code, neglects to
appear or to produce such books of accounts,
records, memoranda, or other papers, or to
furnish such information, shall, upon conviction,
be punished by a fine of not less than Five
thousand pesos (P5,000) but not more than Ten
thousand pesos (P10,000) and suffer
imprisonment of not less than one (1) year but
not more than two (2) years.
It is clear that I.S. No. 00-956 involves a
separate offense and hence litis pendentia is
not present considering that the outcome of I.S.
No. 00-956 is not determinative of the issue as
to whether probable cause exists to charge the
private respondents with the crimes of attempt
to evade or defeat tax and willful failure to
supply correct and accurate information and
pay tax defined and penalized under Sections
254 and 255, respectively. For the crime of tax
evasion in particular, compliance by the
taxpayer with such subpoena, if any had been
issued, is irrelevant. As we held in Ungab v.
Cusi, Jr.,[41] [t]he crime is complete when the
[taxpayer] has x x x knowingly and willfully filed
[a] fraudulent [return] with intent to evade and
defeat x x x the tax. Thus, respondent Secretary
erred in holding that petitioner committed
forum shopping when it filed the present
criminal complaint during the pendency of its
appeal from the City Prosecutors dismissal of
I.S. No. 00-956 involving the act of disobedience
to the summons in the course of the
preliminary investigation on LMCECs correct tax
liabilities for taxable years 1997, 1998 and 1999.
In the Details of Discrepancies attached as
Annex B of the PAN,[42] private respondents
were already notified that inasmuch as the
revenue officers were not given the opportunity
to examine LMCECs books of accounts,
accounting records and other documents, said
revenue officers gathered information from
third parties. Such procedure is authorized
under Section 5 of the NIRC, which provides:
SEC. 5. Power of the Commissioner to Obtain
Information, and to Summon, Examine, and
Take Testimony of Persons. In ascertaining the
correctness of any return, or in making a return
when none has been made, or in determining
the liability of any person for any internal
revenue tax, or in collecting any such liability, or
in evaluating tax compliance, the Commissioner
is authorized:
(A) To examine any book, paper, record or other
data which may be relevant or material to such
inquiry;
(B) To obtain on a regular basis from any person
other than the person whose internal revenue
tax liability is subject to audit or investigation,
or from any office or officer of the national and
local governments, government agencies and
instrumentalities, including the Bangko Sentral
ng Pilipinas and government-owned or -
controlled corporations, any information such
as, but not limited to, costs and volume of
production, receipts or sales and gross incomes
of taxpayers, and the names, addresses, and
financial statements of corporations, mutual
fund companies, insurance companies, regional
operating headquarters of multinational
companies, joint accounts, associations, joint
ventures or consortia and registered
partnerships, and their members;
(C) To summon the person liable for tax or
required to file a return, or any officer or
employee of such person, or any person having
possession, custody, or care of the books of
accounts and other accounting records
containing entries relating to the business of
the person liable for tax, or any other person, to
appear before the Commissioner or his duly
authorized representative at a time and place
specified in the summons and to produce such
books, papers, records, or other data, and to
give testimony;
(D) To take such testimony of the person
concerned, under oath, as may be relevant or
material to such inquiry; x x x
x x x x (Emphasis supplied.)
Private respondents assertions regarding the
qualifications of the informer of the Bureau
deserve scant consideration. We have held that
the lack of consent of the taxpayer under
investigation does not imply that the BIR
obtained the information from third parties
illegally or that the information received is false
or malicious. Nor does the lack of consent
preclude the BIR from assessing deficiency taxes
on the taxpayer based on the documents.[43] In
the same vein, herein private respondents
cannot be allowed to escape criminal
prosecution under Sections 254 and 255 of the
NIRC by mere imputation of a fictitious or
disqualified informant under Section 282 simply
because other than disclosure of the official
registry number of the third party informer, the
Bureau insisted on maintaining the
confidentiality of the identity and personal
circumstances of said informer.
Subsequently, petitioner sent to LMCEC by
constructive service allowed under Section 3 of
RR No. 12-99, assessment notice and formal
demand informing the said taxpayer of the law
and the facts on which the assessment is made,
as required by Section 228 of the
NIRC. Respondent Secretary, however, fully
concurred with private respondents contention
that the assessment notices were invalid for
being unnumbered and the tax liabilities therein
stated have already been settled and/or
terminated.
We do not agree.
A notice of assessment is:
[A] declaration of deficiency taxes issued to a
[t]axpayer who fails to respond to a Pre-
Assessment Notice (PAN) within the prescribed
period of time, or whose reply to the PAN was
found to be without merit. The Notice of
Assessment shall inform the [t]axpayer of this
fact, and that the report of investigation
submitted by the Revenue Officer conducting
the audit shall be given due course.
The formal letter of demand calling for payment
of the taxpayers deficiency tax or taxes
shall state the fact, the law, rules and
regulations or jurisprudence on which the
assessment is based, otherwise the formal
letter of demand and the notice of assessment
shall be void.[44]
As it is, the formality of a control number in the
assessment notice is not a requirement for its
validity but rather the contents thereof which
should inform the taxpayer of the declaration of
deficiency tax against said taxpayer. Both the
formal letter of demand and the notice of
assessment shall be void if the former failed to
state the fact, the law, rules and regulations or
jurisprudence on which the assessment is
based, which is a mandatory requirement under
Section 228 of the NIRC.
Section 228 of the NIRC provides that the
taxpayer shall be informed in writing of the law
and the facts on which the assessment is made.
Otherwise, the assessment is void. To
implement the provisions of Section 228 of the
NIRC, RR No. 12-99 was enacted. Section 3.1.4
of the revenue regulation reads:
3.1.4. Formal Letter of Demand and Assessment
Notice. The formal letter of demand and
assessment notice shall be issued by the
Commissioner or his duly authorized
representative. The letter of demand calling for
payment of the taxpayers deficiency tax or
taxes shall state the facts, the law, rules and
regulations, or jurisprudence on which the
assessment is based, otherwise, the formal
letter of demand and assessment notice shall
be void. The same shall be sent to the taxpayer
only by registered mail or by personal delivery.
x x x.[45](Emphasis supplied.)
The Formal Letter of Demand dated August 7,
2002 contains not only a detailed computation
of LMCECs tax deficiencies but also details of
the specified discrepancies, explaining the legal
and factual bases of the assessment. It also
reiterated that in the absence of accounting
records and other documents necessary for the
proper determination of the companys internal
revenue tax liabilities, the investigating revenue
officers resorted to the Best Evidence
Obtainable as provided in Section 6(B) of the
NIRC (third party information) and in
accordance with the procedure laid down in
RMC No. 23-2000 dated November 27,
2000. Annex A of the Formal Letter of Demand
thus stated:
Thus, to verify the validity of the information
previously provided by the informant, the
assigned revenue officers resorted to third
party information. Pursuant to Section 5(B) of
the NIRC of 1997, access letters requesting for
information and the submission of certain
documents (i.e., Certificate of Income Tax
Withheld at Source and/or Alphabetical List
showing the income payments made to L.M.
Camus Engineering Corporation for the taxable
years 1997 to 1999) were sent to the various
clients of the subject corporation, including but
not limited to the following:
1. Ayala Land Inc.
2. Filinvest Alabang Inc.
3. D.M. Consunji, Inc.
4. SM Prime Holdings, Inc.
5. Alabang Commercial Corporation
6. Philam Properties Corporation
7. SM Investments, Inc.
8. Shoemart, Inc.
9. Philippine Securities Corporation
10. Makati Development Corporation
From the documents gathered and the data
obtained therein, the substantial
underdeclaration as defined under Section
248(B) of the NIRC of 1997 by your corporation
of its income had been confirmed. x x x
x[46] (Emphasis supplied.)
In the same letter, Assistant Commissioner
Percival T. Salazar informed private respondents
that the estimated tax liabilities arising from
LMCECs underdeclaration amounted
to P186,773,600.84 in 1997, P150,069,323.81 in
1998 and P163,220,111.13 in 1999. These
figures confirmed that the non-declaration by
LMCEC for the taxable years 1997, 1998 and
1999 of an amount exceeding 30%
income[47] declared in its return is considered a
substantial underdeclaration of income, which
constituted prima facieevidence of false or
fraudulent return under Section 248(B)[48] of the
NIRC, as amended.[49]
On the alleged settlement of the assessed tax
deficiencies by private respondents, respondent
Secretary found the latters claim as meritorious
on the basis of the Certificate of Immunity From
Audit issued on December 6, 1999 pursuant to
RR No. 2-99 and Letter of Termination dated
June 1, 1999 issued by Revenue Region No. 7
Chief of Assessment Division Ruth Vivian G.
Gandia. Petitioner, however, clarified that the
certificate of immunity from audit covered only
income tax for the year 1997 and does not
include VAT and withholding taxes, while the
Letter of Termination involved tax liabilities for
taxable year 1997 (EWT, VAT and income taxes)
but which was submitted for review of higher
authorities as per the Certification of RD No. 40
District Officer Pablo C. Cabreros, Jr.[50] For
1999, private respondents supposedly availed
of the VAP pursuant to RR No. 8-2001.
RR No. 2-99 issued on February 7, 1999
explained in its Policy Statement that
considering the scarcity of financial and human
resources as well as the time constraints within
which the Bureau has to clean the Bureaus
backlog of unaudited tax returns in order to
keep updated and be focused with the most
current accounts in preparation for the full
implementation of a computerized tax
administration, the said revenue regulation was
issued providing for last priority in audit and
investigation of tax returns to accomplish the
said objective without, however, compromising
the revenue collection that would have been
generated from audit and enforcement
activities. The program named as Economic
Recovery Assistance Payment (ERAP) Program
granted immunity from audit and investigation
of income tax, VAT and percentage tax returns
for 1998. It expressly excluded withholding tax
returns (whether for income, VAT, or
percentage tax purposes). Since such immunity
from audit and investigation does not preclude
the collection of revenues generated from audit
and enforcement activities, it follows that the
Bureau is likewise not barred from collecting
any tax deficiency discovered as a result of tax
fraud investigations. Respondent Secretarys
opinion that RR No. 2-99 contains the feature of
a tax amnesty is thus misplaced.
Tax amnesty is a general pardon to taxpayers
who want to start a clean tax slate. It also gives
the government a chance to collect uncollected
tax from tax evaders without having to go
through the tedious process of a tax
case.[51] Even assuming arguendo that the
issuance of RR No. 2-99 is in the nature of tax
amnesty, it bears noting that a tax amnesty,
much like a tax exemption, is never favored nor
presumed in law and if granted by statute, the
terms of the amnesty like that of a tax
exemption must be construed strictly against
the taxpayer and liberally in favor of the taxing
authority.[52]
For the same reason, the availment by LMCEC
of VAP under RR No. 8-2001 as amended by RR
No. 10-2001, through payment supposedly
made in October 29, 2001 before the said
program ended on October 31, 2001, did not
amount to settlement of its assessed tax
deficiencies for the period 1997 to 1999, nor
immunity from prosecution for filing fraudulent
return and attempt to evade or defeat tax. As
correctly asserted by petitioner, from the
express terms of the aforesaid revenue
regulations, LMCEC is not qualified to avail of
the VAP granting taxpayers the privilege of last
priority in the audit and investigation of all
internal revenue taxes for the taxable year 2000
and all prior years under certain conditions,
considering that first, it was issued a PAN
on February 19, 2001, and second, it was the
subject of investigation as a result of verified
information filed by a Tax Informer under
Section 282 of the NIRC duly recorded in the BIR
Official Registry as Confidential Information (CI)
No. 29-2000[53] even prior to the issuance of the
PAN.
Section 1 of RR No. 8-2001 provides:
SECTION 1. COVERAGE. x x x
Any person, natural or juridical, including
estates and trusts, liable to pay any of the
above-cited internal revenue taxes for the
above specified period/s who, due to
inadvertence or otherwise, erroneously paid his
internal revenue tax liabilities or failed to file
tax return/pay taxes may avail of the Voluntary
Assessment Program (VAP), except those falling
under any of the following instances:
1.1 Those covered by a Preliminary Assessment
Notice (PAN), Final Assessment Notice (FAN), or
Collection Letter issued on or before July 31,
2001; or
1.2 Persons under investigation as a result of
verified information filed by a Tax Informer
under Section 282 of the Tax Code of 1997, duly
processed and recorded in the BIR Official
Registry Book on or before July 31, 2001;
1.3 Tax fraud cases already filed and pending in
courts for adjudication; and
x x x x (Emphasis supplied.)
Moreover, private respondents cannot invoke
LMCECs availment of VAP to foreclose any
subsequent audit of its account books and other
accounting records in view of the strong finding
of underdeclaration in LMCECs payment of
correct income tax liability by more than 30% as
supported by the written report of the TFD
detailing the facts and the law on which such
finding is based, pursuant to the tax fraud
investigation authorized by petitioner under LA
No. 00009361. This conclusion finds support in
Section 2 of RR No. 8-2001 as amended by RR
No. 10-2001 provides:
SEC. 2. TAXPAYERS BENEFIT FROM AVAILMENT
OF THE VAP. A taxpayer who has availed of the
VAP shall not be audited except upon
authorization and approval of the
Commissioner of Internal Revenue when there
is strong evidence or finding of understatement
in the payment of taxpayers correct tax liability
by more than thirty percent (30%) as supported
by a written report of the appropriate office
detailing the facts and the law on which such
finding is based: Provided, however, that any
VAP payment should be allowed as tax credit
against the deficiency tax due, if any, in case the
concerned taxpayer has been subjected to tax
audit.
xxxx
Given the explicit conditions for the grant of
immunity from audit under RR No. 2-99, RR No.
8-2001 and RR No. 10-2001, we hold that
respondent Secretary gravely erred in declaring
that petitioner is now estopped from assessing
any tax deficiency against LMCEC after issuance
of the aforementioned documents of immunity
from audit/investigation and settlement of tax
liabilities. 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 governments financial
position.[54]
Respondent Secretarys other ground for
assailing the course of action taken by
petitioner in proceeding with the audit and
investigation of LMCEC -- the alleged violation
of the general rule in Section 235 of the NIRC
allowing the examination and inspection of
taxpayers books of accounts and other
accounting records only once in a taxable year -
- is likewise untenable. As correctly pointed out
by petitioner, the discovery of substantial
underdeclarations of income by LMCEC for
taxable years 1997, 1998 and 1999 upon
verified information provided by an informer
under Section 282 of the NIRC, as well as the
necessity of obtaining information from third
parties to ascertain the correctness of the
return filed or evaluation of tax compliance in
collecting taxes (as a result of the disobedience
to the summons issued by the Bureau against
the private respondents), are circumstances
warranting exception from the general rule in
Section 235.[55]
As already stated, the substantial
underdeclared income in the returns filed by
LMCEC for 1997, 1998 and 1999 in amounts
equivalent to more than 30% (the computation
in the final assessment notice showed
underdeclarations of almost 200%)
constitutes prima facie evidence of fraudulent
return under Section 248(B) of the NIRC. Prior
to the issuance of the preliminary and final
notices of assessment, the revenue officers
conducted a preliminary investigation on the
information and documents showing
substantial understatement of LMCECs tax
liabilities which were provided by the Informer,
following the procedure under RMO No. 15-
95.[56] Based on the prima facie finding of the
existence of fraud, petitioner issued LA No.
00009361 for the TFD to conduct a formal fraud
investigation of LMCEC.[57] Consequently,
respondent Secretarys ruling that the filing of
criminal complaint for violation of Sections 254
and 255 of the NIRC cannot prosper because of
lack of prior determination of the existence of
fraud, is bereft of factual basis and contradicted
by the evidence on record.
Tax assessments by tax examiners are
presumed correct and made in good faith, and
all presumptions are in favor of the correctness
of a tax assessment unless proven
otherwise.[58] We have held that a taxpayers
failure to file a petition for review with the
Court of Tax Appeals within the statutory period
rendered the disputed assessment final,
executory and demandable, thereby precluding
it from interposing the defenses of legality or
validity of the assessment and prescription of
the Governments right to assess.[59]Indeed, any
objection against the assessment should have
been pursued following the avenue paved in
Section 229 (now Section 228) of the NIRC on
protests on assessments of internal revenue
taxes.[60]
Records bear out that the assessment notice
and Formal Letter of Demand dated August 7,
2002 were duly served on LMCEC on October 1,
2002. Private respondents did not file a motion
for reconsideration of the said assessment
notice and formal demand; neither did they
appeal to the Court of Tax Appeals. Section 228
of the NIRC[61] provides the remedy to dispute a
tax assessment within a certain period of time. It
states that an assessment may be protested by
filing a request for reconsideration or
reinvestigation within 30 days from receipt of
the assessment by the taxpayer. No such
administrative protest was filed by private
respondents seeking reconsideration of
the August 7, 2002 assessment notice and formal
letter of demand. Private respondents cannot
belatedly assail the said assessment, which they
allowed to lapse into finality, by raising issues as
to its validity and correctness during the
preliminary investigation after the BIR has
referred the matter for prosecution under
Sections 254 and 255 of the NIRC.
[62]
As we held in Marcos II v. Court of Appeals
It is not the Department of Justice which is the
government agency tasked to determine the
amount of taxes due upon the subject estate,
but the Bureau of Internal Revenue, whose
determinations and assessments are presumed
correct and made in good faith. The taxpayer
has the duty of proving otherwise. In the
absence of proof of any irregularities in the
performance of official duties, an assessment
will not be disturbed. Even an assessment based
on estimates is prima facie valid and lawful
where it does not appear to have been arrived
at arbitrarily or capriciously. The burden of
proof is upon the complaining party to show
clearly that the assessment is erroneous. Failure
to present proof of error in the assessment will
justify the judicial affirmance of said
assessment. x x x.
Moreover, these objections to the assessments
should have been raised, considering the ample
remedies afforded the taxpayer by the Tax
Code, with the Bureau of Internal Revenue and
the Court of Tax Appeals, as described earlier,
and cannot be raised now via Petition
for Certiorari, under the pretext of grave abuse
of discretion. The course of action taken by the
petitioner reflects his disregard or even
repugnance of the established institutions for
governance in the scheme of a well-ordered
society. The subject tax assessments having
become final, executory and enforceable, the
same can no longer be contested by means of a
disguised protest. In the main, Certiorari may
not be used as a substitute for a lost appeal or
remedy. This judicial policy becomes more
pronounced in view of the absence of sufficient
attack against the actuations of
government. (Emphasis supplied.)
The determination of probable cause is part of
: the discretion granted to the investigating
prosecutor and ultimately, the Secretary of
Justice. However, this Court and the CA possess
the power to review findings of prosecutors in
preliminary investigations. Although policy
considerations call for the widest latitude of
deference to the prosecutors findings, courts
should never shirk from exercising their power,
when the circumstances warrant, to determine
whether the prosecutors findings are supported
by the facts, or by the law. In so doing, courts
do not act as prosecutors but as organs of the
judiciary, exercising their mandate under the
Constitution, relevant statutes, and remedial
rules to settle cases and
[63]
controversies. Clearly, the power of the
Secretary of Justice to review does not preclude
this Court and the CA from intervening and
exercising our own powers of review with
respect to the DOJs findings, such as in the
exceptional case in which grave abuse of
discretion is committed, as when a clear
sufficiency or insufficiency of evidence to
support a finding of probable cause is Promulgated:
ignored.[64]
COMMISSIONER
WHEREFORE, the petition is GRANTED. The OF INTERNAL
Decision dated October 31, 2006 and Resolution REVENUE, August 7, 2006
dated March 6, 2007 of the Court of Appeals in
CA-G.R. SP No. 93387 are Respondent.
hereby REVERSED and SET ASIDE. The Secretary
of Justice is hereby DIRECTED to order the Chief
State Prosecutor to file before the Regional Trial
Court of Quezon City, National Capital Judicial
Region, the corresponding Information against
L. M. Camus Engineering Corporation,
represented by its President Luis M. Camus and
Comptroller Lino D. Mendoza, for Violation of
Sections 254 and 255 of the National Internal
Revenue Code of 1997. x------------------------------------
--------------x
No costs.

SO ORDERED.

DECISION
9. BARCELON, G. R. No. 157064
ROXAS
SECURITIES, INC.
(now known as Present:
UBP Securities, CHICO-NAZARIO, J.:
Inc.)
This is a Petition for Review on Certiorari, under
Petitioner, PANGANIBAN, C.J., Rule 45 of the Rules of Court, seeking to set
aside the Decision of the Court of Appeals in
Chairman, CA-G.R. SP No. 60209 dated 11 July
YNARES-SANTIAGO 2002,[1] ordering the petitioner to pay the
Government the amount of P826,698.31 as
AUSTRIA- deficiency income tax for the year 1987 plus
MARTINEZ, 25% surcharge and 20% interest per annum.The
- versus - Court of Appeals, in its assailed Decision,
CALLEJO, SR., and
reversed the Decision of the Court of Tax
CHICO -NAZARIO, JJ. Appeals (CTA) dated 17 May 2000[2] in C.T.A.
Case No. 5662.
Petitioner Barcelon, Roxas Securities Inc. (now
known as UBP Securities, Inc.) is a corporation
engaged in the trading of securities. On 14 April
1988, petitioner filed its Annual Income Tax
Return for taxable year 1987. After an audit
investigation conducted by the Bureau of
Internal Revenue (BIR), respondent
Commissioner of Internal Revenue (CIR) issued
an assessment for deficiency income tax in the
amount of P826,698.31 arising from the
disallowance of the item on salaries, bonuses
and allowances in the amount of P1,219,093,93
as part of the deductible business expense since
petitioner failed to subject the salaries, bonuses
and allowances to withholding taxes. This
assessment was covered by Formal Assessment
Notice No. FAN-1-87-91-000649 dated 1
February 1991, which, respondent alleges, was
sent to petitioner through registered mail on 6
February 1991.However, petitioner denies
receiving the formal assessment notice.[3]
On 17 March 1992, petitioner was served with a
Warrant of Distraint and/or Levy to enforce
collection of the deficiency income tax for the
year 1987. Petitioner filed a formal protest,
dated 25 March 1992, against the Warrant
of Distraint and/or Levy, requesting for its
cancellation. On 3 July 1998, petitioner received
a letter dated 30 April 1998 from the
respondent denying the protest with finality.[4]
On 31 July 1998, petitioner filed a petition for
review with the CTA. After due notice and
hearing, the CTA rendered a decision in favor of
petitioner on 17 May 2000. The CTA ruled on
the primary issue of prescription and found it
unnecessary to decide the issues on the validity
and propriety of the assessment. It maintained
that while a mailed letter is deemed received by
the addressee in the course of mail, this is
merely a disputable presumption. It reasoned
that the direct denial of the petitioner shifts the
burden of proof to the respondent that the
mailed letter was actually received by the
petitioner. The CTA found the BIR records
submitted by the respondent immaterial, self-
serving, and therefore insufficient to prove that
the assessment notice was mailed and duly
received by the petitioner.[5] The dispositive
portion of this decision reads:
WHEREFORE, in view of the foregoing,
the 1988 deficiency tax assessment against
petitioner is hereby CANCELLED. Respondent is
hereby ORDERED TO DESIST from collecting said
deficiency tax. No pronouncement as to costs.[6]
On 6 June 2000, respondent moved for
reconsideration of the aforesaid decision but
was denied by the CTA in a Resolution dated 25
July 2000. Thereafter, respondent appealed to
the Court of Appeals on 31 August 2001. In
reversing the CTA decision, the Court of Appeals
found the evidence presented by the
respondent to be sufficient proof that the tax
assessment notice was mailed to
the petitioner, therefore the legal presumption
that it was received should apply.[7] Thus, the
Court of Appeals ruled that:
WHEREFORE, the petition is hereby
GRANTED. The decision dated May 17, 2000 as
well as the Resolution dated July 25, 2000 are
hereby REVERSED and SET ASIDE, and a new on
entered ordering the respondent to pay the
amount of P826,698.31 as deficiency income
tax for the year 1987 plus 25% surcharge and
20% interest per annum from February 6, 1991
until fully paid pursuant to Sections 248 and 249
of the Tax Code.[8]
Petitioner moved for reconsideration of the said
decision but the same was denied by the Court
of Appeals in its assailed Resolution dated 30
January 2003.[9]
Hence, this Petition for Review
on Certiorari raising the following issues:
I WHETHER OR NOT PETITIONER IS LIABLE FOR
WHETHER OR NOT LEGAL BASES EXIST
FOR THE COURT OF APPEALS FINDING
THAT THE COURT OF TAX APPEALS
COMMITTED GROSS ERROR IN THE
APPRECIATION OF FACTS.
II
WHETHER OR NOT THE COURT OF APPEALS
WAS CORRECT IN REVERSING THE SUBJECT
DECISION OF THE COURT OF TAX APPEALS.
III
WHETHER OR NOT THE RIGHT OF THE BUREAU
OF INTERNAL REVENUE TO ASSESS PETITIONER
FOR ALLEGED DEFICIENCY INCOME TAX FOR
1987 HAS PRESCRIBED.
IV
WHETHER OR NOT THE RIGHT OF THE BUREAU
OF INTERNAL REVENUE TO COLLECT THE
SUBJECT ALLEGED DEFICIENCY INCOME TAX
FOR 1987 HAS PRESCRIBED.
V
THE ALLEGED DEFICIENCY INCOME TAX
ASSESSMENT FOR 1987.
VI
WHETHER OR NOT THE SUBJECT ASSESSMENT
IS VIOLATIVE OF THE RIGHT OF PETITIONER TO
DUE PROCESS.[10]
This Court finds the instant Petition meritorious.
The core issue in this case is whether or not
respondents right to assess petitioners alleged
deficiency income tax is barred by prescription,
the resolution of which depends on reviewing
the findings of fact of the Court of Appeals and with postage prepaid, and (b) that it was
the CTA. mailed. Once these facts are proved, the
presumption is that the letter was received by
the addressee as soon as it could have been
While the general rule is that factual findings of transmitted to him in the ordinary course of the
the Court of Appeals are binding on this Court, mail. But if one of the said facts fails to appear,
there are, however, recognized the presumption does not lie. (VI, Moran,
[11]
exceptions thereto, such as when the Comments on the Rules of Court, 1963 ed, 56-
findings are contrary to those of the trial court 57 citing Enriquez vs. Sunlife Assurance of
or, in this case, the CTA.[12] Canada, 41 Phil 269).

In its Decision, the CTA resolved the In the instant case, Respondent utterly failed to
issues raised by the parties thus: discharge this duty. No substantial evidence
was ever presented to prove that the
assessment notice No. FAN-1-87-91-000649 or
other supposed notices subsequent thereto
Jurisprudence is replete with cases holding that
were in fact issued or sent to the taxpayer. As a
if the taxpayer denies ever having received an
matter of fact, it only submitted the BIR record
assessment from the BIR, it is incumbent upon
book which allegedly contains the list of
the latter to prove by competent evidence that
taxpayers names, the reference number, the
such notice was indeed received by the
year, the nature of tax, the city/municipality
addressee. The onus probandi was shifted to
and the amount (see Exh. 5-a for the
respondent to prove by contrary evidence that
Respondent). Purportedly, Respondent
the Petitioner received the assessment in the
intended to show to this Court that all
due course of mail. The Supreme Court has
assessments made are entered into a record
consistently held that while a mailed letter is
book in chronological order outlining the details
deemed received by the addressee in the
of the assessment and the taxpayer liable
course of mail, this is merely a disputable
thereon. However, as can be gleaned from the
presumption subject to controversion and a
face of the exhibit, all entries thereon appears
direct denial thereof shifts the burden to the
to be immaterial and impertinent in proving
party favored by the presumption to prove that
that the assessment notice was mailed and duly
the mailed letter was indeed received by the
received by Petitioner. Nothing indicates
addressee (Republic vs. Court of Appeals, 149
therein all essential facts that could sustain the
SCRA 351). Thus as held by the Supreme Court
burden of proof being shifted to the
in Gonzalo P. Nava vs. Commissioner of Internal
Respondent. What is essential to prove the fact
Revenue, 13 SCRA 104, January 30, 1965:
of mailing is the registry receipt issued by the
Bureau of Posts or the Registry return card
which would have been signed by the Petitioner
The facts to be proved to raise this presumption or its authorized representative. And if said
are (a) that the letter was properly addressed documents cannot be located, Respondent at
the very least, should have submitted to the
Court a certification issued by the Bureau of
Posts and any other pertinent document which
is executed with the intervention of the Bureau
of Posts. This Court does not put much
credence to the self serving documentations
made by the BIR personnel especially if they are
unsupported by substantial evidence
establishing the fact of mailing. Thus:
While we have held that an assessment is made
when sent within the prescribed period, even if
received by the taxpayer after its expiration
(Coll. of Int. Rev. vs. Bautista, L-12250 and L-
12259, May 27, 1959), this ruling makes it the
more imperative that the release, mailing or
sending of the notice be clearly and
satisfactorily proved. Mere notations made
without the taxpayers intervention, notice or
control, without adequate supporting evidence
cannot suffice; otherwise, the taxpayer would
be at the mercy of the revenue offices, without
adequate protection or defense. (Nava vs. CIR,
13 SCRA 104, January 30, 1965).
xxxx
The failure of the respondent to prove receipt
of the assessment by the Petitioner leads to the
conclusion that no assessment was
issued. Consequently, the governments right to
issue an assessment for the said period has
already prescribed. (Industrial Textile
Manufacturing Co. of the Phils., Inc. vs. CIR CTA
Case 4885, August 22, 1996).[13]
Jurisprudence has consistently shown that this
Court accords the findings of fact by the CTA
with the highest respect. In Sea-Land Service
Inc. v. Court of Appeals[14] this Court recognizes
that the Court of Tax Appeals, which by the very
nature of its function is dedicated exclusively to
the consideration of tax problems, has
necessarily developed an expertise on the
subject, and its conclusions will not be
overturned unless there has been an abuse or
improvident exercise of authority. Such findings
can only be disturbed on appeal if they are not
supported by substantial evidence or there is a
showing of gross error or abuse on the part of
the Tax Court.[15] In the absence of any clear and
convincing proof to the contrary, this Court
must presume that the CTA rendered a decision
which is valid in every respect.
Under Section 203[16] of the National Internal
Revenue Code (NIRC), respondent had three (3)
years from the last day for the filing of the
return to send an assessment notice to
petitioner. In the case of Collector of Internal
Revenue v. Bautista,[17] this Court held that an
assessment is made within the prescriptive
period if notice to this effect is released, mailed
or sent by the CIR to the taxpayer within said
period. Receipt thereof by the taxpayer within
the prescriptive period is not necessary. At this
point, it should be clarified that the rule does
not dispense with the requirement that the
taxpayer should actually receive, even beyond
the prescriptive period, the assessment notice
which was timely released, mailed and sent.
In the present case, records show that
petitioner filed its Annual Income Tax Return for
taxable year 1987 on 14 April 1988.[18] The last
day for filing by petitioner of its return was
on 15 April 1988,[19] thus, giving respondent
until 15 April 1991 within which to send an
assessment notice. While respondent avers that
it sent the assessment notice dated 1 February
1991 on 6 February 1991, within the three (3)-
year period prescribed by law, petitioner denies
having received an assessment notice from
respondent. Petitioner alleges that it came to
know of the deficiency tax assessment only
on 17 March 1992 when it was served with the
Warrant of Distraint and Levy.[20]
In Protectors Services, Inc. v. Court of
Appeals,[21] this Court ruled that when a mail
matter is sent by registered mail, there exists a
presumption, set forth under Section 3(v), Rule
131 of the Rules of Court, [22] that it was
received in the regular course of mail. The facts
to be proved in order to raise this presumption
are: (a) that the letter was properly addressed
with postage prepaid; and (b) that it was
mailed. While a mailed letter is deemed
received by the addressee in the ordinary
course of mail, this is still merely a disputable
presumption subject to controversion, and a
direct denial of the receipt thereof shifts the
burden upon the party favored by the
presumption to prove that the mailed letter
was indeed received by the addressee.[23]
In the present case, petitioner denies receiving
the assessment notice, and the respondent was
unable to present substantial evidence that
such notice was, indeed, mailed or sent by the
respondent before the BIRs right to assess had
prescribed and that said notice was received by
the petitioner. The respondent presented the
BIR record book where the name of the
taxpayer, the kind of tax assessed, the registry
receipt number and the date of mailing were
noted. The BIR records custodian,
Ingrid Versola, also testified that she made the
entries therein. Respondent offered the entry in
the BIR record book and the testimony of its
record custodian as entries in official records in
accordance with Section 44, Rule 130 of the
Rules of Court,[24] which states that:
Section 44. Entries in official records. - Entries in
official records made in the performance of his
duty by a public officer of the Philippines, or by
a person in the performance of a duty specially
enjoined by law, are prima facie evidence of the
facts therein stated.
The foregoing rule on evidence, however, must
be read in accordance with this Courts
pronouncement in Africa v. Caltex (Phil.),
[25]
Inc., where it has been held that an entrant
must have personal knowledge of the facts
stated by him or such facts were acquired by
him from reports made by persons under a legal
duty to submit the same.
There are three requisites for admissibility
under the rule just mentioned: (a) that the
entry was made by a public officer, or by
another person specially enjoined by law to do
so; (b) that it was made by the public officer in
the performance of his duties, or by such other
person in the performance of a duty specially
enjoined by law; and (c) that the public officer
or other person had sufficient knowledge of the
facts by him stated, which must have been
acquired by him personally or through official
information x x x.
In this case, the entries made by
Ingrid Versola were not based on her personal
knowledge as she did not attest to the fact that
she personally prepared and mailed the
assessment notice. Nor was it stated in the
transcript of stenographic notes[26] how and
from whom she obtained the pertinent
information. Moreover, she did not attest to
the fact that she acquired the reports from
persons under a legal duty to submit the
same. Hence, Rule 130, Section 44 finds no
application in the present case. Thus, the
evidence offered by respondent does not
qualify as an exception to the rule against
hearsay evidence.
Furthermore, independent evidence, such as
the registry receipt of the assessment notice, or
a certification from the Bureau of Posts, could
have easily been obtained. Yet respondent
failed to present such evidence.
In the case of Nava v. Commissioner of Internal
Revenue, [27] this Court stressed on the
importance of proving the release, mailing or
sending of the notice.
While we have held that an assessment is made
when sent within the prescribed period, even if
received by the taxpayer after its expiration
(Coll. of Int. Rev. vs. Bautista, L-12250 and L-
12259, May 27, 1959), this ruling makes it the
more imperative that the release, mailing, or
sending of the notice be clearly and
satisfactorily proved. Mere notations made
without the taxpayers intervention, notice, or
control, without adequate supporting evidence,
cannot suffice; otherwise, the taxpayer would
be at the mercy of the revenue offices, without
adequate protection or defense.
In the present case, the evidence offered by the
respondent fails to convince this Court that
Formal Assessment Notice No. FAN-1-87-91-
000649 was released, mailed, or sent before 15
April 1991, or before the lapse of the period of
limitation upon assessment and collection
prescribed by Section 203 of the NIRC. Such
evidence, therefore, is insufficient to give rise to
the presumption that the assessment notice
was received in the regular course of
mail. Consequently, the right of the government
to assess and collect the alleged deficiency tax
is barred by prescription.
IN VIEW OF THE FOREGOING, the instant
Petition is GRANTED. The assailed Decision of
the Court of Appeals in CA-G.R. SP No. 60209
dated 11 July 2002, is hereby REVERSED and SET
ASIDE, and the Decision of the Court of Tax
Appeals in C.T.A. Case No. 5662, dated 17 May
2000, cancelling the 1988 Deficiency Tax
Assessment against Barcelon, Roxas Securitites,
Inc. (now known as UPB Securities, Inc.) for
being barred by prescription, is hereby
REINSTATED. No costs.
SO ORDERED.
 This petition for review on certiorari under Rule
45 of the Rules of Court filed by the
10 petitioner Commissioner of Internal
COMMISSIONER OF INTERNAL REVENUE, Revenue
G.R. (CIR) seeks to reverse and set aside the
No. 185371
1] September 16, 2008 Decision[1] of the Court
Petitioner, of Tax Appeals En Banc (CTA-En Banc), in C.T.A.
EB No. 306 and 2] its November 18, 2008
Present:
Resolution[2] denying petitioners motion for
reconsideration.

CARPIO, J., Chairperson,

NACHURA,

- versus - The CTA-En Banc affirmed in toto the decision

PERALTA,
of its Second Division (CTA-Second Division) in
ABAD,
CTA and
Case No. 7169 reversing the February 8,
2005 Decision of the CIR which assessed
MENDOZA, JJ.
respondent Metro Star Superama, Inc. (Metro
Star) of deficiency value-added tax and
withholding tax for the taxable year 1999.
METRO STAR SUPERAMA, INC., Promulgated:

Respondent.
Based on a Joint Stipulation of Facts and
December 8, the
Issues[3] of 2010parties, the CTA Second Division
summarized the factual and procedural
antecedents of the case, the pertinent portions
of which read:

x ------------------------------------------------------------- Petitioner is a domestic corporation duly

------------------------- x organized and existing by virtue of the laws of
the Republic of the Philippines, x x x.

DECISION
On January 26, 2001, the Regional Director of
Revenue Region No. 10, Legazpi City, issued
Letter of Authority No. 00006561 for Revenue
MENDOZA, J.:
Officer Daisy G. Justiniana to examine
petitioners books of accounts and other
accounting records for income tax and other
internal revenue taxes for the taxable year
1999. Said Letter of Authority was revalidated
on August 10, 2001 by Regional Director
Leonardo Sacamos. ASSESSMENT NOTICE NO. 067-99-003-579-072

For petitioners failure to comply with several VALUE ADDED TAX

requests for the presentation of records and Gross Sales P1,697,718.90
Subpoena Duces Tecum, [the] OIC of BIR Legal
Division issued an Indorsement Output Tax P 154,338.08
dated September 26, 2001 informing Revenue
Less: Input Tax
District Officer of Revenue Region No.
67, Legazpi City to proceed with the VAT Payable P 154,338.08
investigation based on the best evidence
obtainable preparatory to the issuance of Add: 25% Surcharge P 38,584.54
assessment notice.
20% Interest 79,746.49

Compromise Penalty
On November 8, 2001, Revenue District Officer
Late Payment P16,000.00
Socorro O. Ramos-Lafuente issued a Preliminary
15-day Letter, which petitioner received Failure to File VAT
on November 9, 2001. The said letter stated returns 2,400.00 18,400.00 136,731.01
that a post audit review was held and it was
ascertained that there was deficiency value- TOTAL P 291,069.09
added and withholding taxes due from
petitioner in the amount of P292,874.16.
WITHHOLDING TAX

Compensation 2,772.91
On April 11, 2002, petitioner received a Formal
Letter of Demand dated April 3, 2002 from Expanded 110,103.92
Revenue District No. 67, Legazpi City, assessing
petitioner the amount of Two Hundred Ninety Total Tax Due P 112,876.83
Two Thousand Eight Hundred Seventy Four
Less: Tax Withheld 111,848.27
Pesos and Sixteen Centavos (P292,874.16.) for
deficiency value-added and withholding taxes Deficiency Withholding Tax P 1,028.56
for the taxable year 1999, computed as follows:
Add: 20% Interest p.a. 576.51

Compromise Penalty 200.00

TOTAL P 1,805.07
*Expanded Withholding
Tax P1,949,334.25 x 5% 97,466.71
Film Rental 10,000.25 x 10% 1,000.00
Audit Fee 193,261.20 x 5% 9,663.00
Rental Expense 41,272.73 x 1% 412.73
Security Service 156,142.01 x 1% 1,561.42
Service Contractor P 110,103.92
Total
SUMMARIES OF DEFICIENCIES
VALUE ADDED TAX P 291,069.09
WITHHOLDING TAX 1,805.07
TOTAL P 292,874.16
Subsequently, Revenue District Office No. 67
sent a copy of the Final Notice of Seizure dated
May 12, 2003, which petitioner received on
May 15, 2003, giving the latter last opportunity
to settle its deficiency tax liabilities within ten
(10) [days] from receipt thereof, otherwise
respondent BIR shall be constrained to serve
and execute the Warrants of Distraint and/or
Levy and Garnishment to enforce collection.
On February 6, 2004, petitioner received from
Revenue District Office No. 67 a Warrant of
Distraint and/or Levy No. 67-0029-23 dated
May 12, 2003 demanding payment of deficiency
value-added tax and withholding tax payment in
the amount of P292,874.16.
On July 30, 2004, petitioner filed with the Office
of respondent Commissioner a Motion for
Reconsideration pursuant to Section 3.1.5 of
Revenue Regulations No. 12-99.
On February 8, 2005, respondent
Commissioner, through its authorized
representative, Revenue Regional Director of
Revenue Region 10, Legaspi City, issued a
Decision denying petitioners Motion for
Reconsideration. Petitioner, through counsel
received said Decision on February 18, 2005.
x x x.
Denying that it received a Preliminary
Assessment Notice (PAN) and claiming that it
was not accorded due process, Metro Star filed
a petition for review[4] with the CTA. The parties
then stipulated on the following issues to be
decided by the tax court:
1. Whether the respondent complied with the
due process requirement as provided under the
National Internal Revenue Code and Revenue
Regulations No. 12-99 with regard to the
issuance of a deficiency tax assessment;
1.1 Whether petitioner is liable for the
respective amounts of P291,069.09
and P1,805.07 as deficiency VAT and
withholding tax for the year 1999;

1.2. Whether the assessment has become final
and executory and demandable for failure of
petitioner to protest the same within 30 days
from its receipt thereof on April 11, 2002,
pursuant to Section 228 of the National Internal
Revenue Code;
2. Whether the deficiency assessments issued
by the respondent are void for failure to state
the law and/or facts upon which they are
based.
2.2 Whether petitioner was informed of the law
and facts on which the assessment is made in
compliance with Section 228 of the National
Internal Revenue Code;
3. Whether or not petitioner, as
owner/operator of a movie/cinema house, is
subject to VAT on sales of services under
Section 108(A) of the National Internal Revenue
Code;
4. Whether or not the assessment is based on
the best evidence obtainable pursuant to
Section 6(b) of the National Internal Revenue
Code.
The CTA-Second Division found merit in the
petition of Metro Star and, on March 21, 2007,
rendered a decision, the decretal portion of
which reads:
WHEREFORE, premises considered, the Petition
for Review is hereby GRANTED. Accordingly, the
assailed Decision dated February 8, 2005 is
hereby REVERSED and SET ASIDE and
respondent is ORDERED TO DESIST from
collecting the subject taxes against petitioner.
The CTA-Second Division opined that [w]hile
there [is] a disputable presumption that a
mailed letter [is] deemed received by the
addressee in the ordinary course of mail, a
direct denial of the receipt of mail shifts the
burden upon the party favored by the
presumption to prove that the mailed letter
was indeed received by the addressee.[5] It also
found that there was no clear showing that
Metro Star actually received the alleged PAN,
dated January 16, 2002. It, accordingly, ruled
that the Formal Letter of Demand dated April 3,
2002, as well as the Warrant of Distraint and/or
Levy dated May 12, 2003 were void, as Metro
Star was denied due process.[6]
The CIR sought reconsideration[7] of the decision
of the CTA-Second Division, but the motion was
denied in the latters July 24, 2007 Resolution.[8]
Aggrieved, the CIR filed a petition for
review[9] with the CTA-En Banc, but the petition
was dismissed after a determination that no
new matters were raised. The CTA-En
Bancdisposed:
WHEREFORE, the instant Petition for Review is
hereby DENIED DUE COURSE and DISMISSED for
lack of merit. Accordingly, the March 21, 2007
Decision and July 27, 2007 Resolution of the
CTA Second Division in CTA Case No. 7169
entitled, Metro Star Superama, Inc., petitioner
vs. Commissioner of Internal Revenue,
respondent are hereby AFFIRMED in toto.
SO ORDERED.
The motion for reconsideration[10] filed by the
CIR was likewise denied by the CTA-En Banc in
its November 18, 2008 Resolution.[11]
The CIR, insisting that Metro Star received the
PAN, dated January 16, 2002, and that due
process was served nonetheless because the
latter received the Final Assessment Notice
(FAN), comes now before this Court with the
sole issue of whether or not Metro Star was
denied due process.
The general rule is that the Court will not lightly
set aside the conclusions reached by the CTA
which, by the very nature of its functions, has
accordingly developed an exclusive expertise on
the resolution unless there has been an abuse
or improvident exercise
[12]
authority. In Barcelon, Roxas Securities, Inc.
(now known as UBP Securities, Inc.) v.
Commissioner of Internal Revenue,[13] the Court
wrote:
Jurisprudence has consistently shown that this
Court accords the findings of fact by the CTA
with the highest respect. In Sea-Land Service
Inc. v. Court of Appeals[G.R. No. 122605, 30
April 2001, 357 SCRA 441, 445-446], this Court
recognizes that the Court of Tax Appeals, which
by the very nature of its function is dedicated
exclusively to the consideration of tax
problems, has necessarily developed an
expertise on the subject, and its conclusions will
not be overturned unless there has been an
abuse or improvident exercise of
authority. Such findings can only be disturbed
on appeal if they are not supported by
substantial evidence or there is a showing of
gross error or abuse on the part of the Tax
Court. In the absence of any clear and
convincing proof to the contrary, this Court
must presume that the CTA rendered a decision
which is valid in every respect.
On the matter of service of a tax assessment, a
further perusal of our ruling in Barcelon is
instructive, viz:
Jurisprudence is replete with cases holding
that if the taxpayer denies ever having received
an assessment from the BIR, it is incumbent
upon the latter to prove by competent evidence
that such notice was indeed received by the
addressee. The onus probandi was shifted to
respondent to prove by contrary evidence that
of
the Petitioner received the assessment in the
due course of mail. The Supreme Court has
consistently held that while a mailed letter is
deemed received by the addressee in the
course of mail, this is merely a disputable
presumption subject to controversion and a
direct denial thereof shifts the burden to the
party favored by the presumption to prove that
the mailed letter was indeed received by the
addressee (Republic vs. Court of Appeals, 149
SCRA 351). Thus as held by the Supreme Court
in Gonzalo P. Nava vs. Commissioner of Internal
Revenue, 13 SCRA 104, January 30, 1965:
"The facts to be proved to raise this
presumption are (a) that the letter was properly
addressed with postage prepaid, and (b) that it
was mailed. Once these facts are proved, the
presumption is that the letter was received by
the addressee as soon as it could have been
transmitted to him in the ordinary course of the
mail. But if one of the said facts fails to appear,
the presumption does not lie. (VI, Moran,
Comments on the Rules of Court, 1963 ed, 56-
57 citing Enriquez vs. Sunlife Assurance of
Canada, 41 Phil 269)."
x x x. What is essential to prove the fact of
mailing is the registry receipt issued by the
Bureau of Posts or the Registry return card
which would have been signed by the Petitioner
or its authorized representative. And if said
documents cannot be located, Respondent at
the very least, should have submitted to the
Court a certification issued by the Bureau of
Posts and any other pertinent document which
is executed with the intervention of the Bureau
of Posts. This Court does not put much
credence to the self serving documentations
made by the BIR personnel especially if they are
unsupported by substantial evidence
establishing the fact of mailing. Thus:
"While we have held that an assessment is
made when sent within the prescribed period,
even if received by the taxpayer after its
expiration (Coll. of Int. Rev. vs. Bautista, L-
12250 and L-12259, May 27, 1959), this ruling
makes it the more imperative that the release,
mailing or sending of the notice be clearly and
satisfactorily proved. Mere notations made
without the taxpayers intervention, notice or
control, without adequate supporting evidence
cannot suffice; otherwise, the taxpayer would
be at the mercy of the revenue offices, without
adequate protection or defense." (Nava vs. CIR,
13 SCRA 104, January 30, 1965).
x x x.
The failure of the respondent to prove receipt
of the assessment by the Petitioner leads to the
conclusion that no assessment was issued.
Consequently, the governments right to issue
an assessment for the said period has already
prescribed. (Industrial Textile Manufacturing
Co. of the Phils., Inc. vs. CIR CTA Case 4885,
August 22, 1996). (Emphases supplied.)
The Court agrees with the CTA that the CIR
failed to discharge its duty and present any
evidence to show that Metro Star indeed
received the PAN dated January 16, 2002. It
could have simply presented the registry receipt
or the certification from the postmaster that it
mailed the PAN, but failed. Neither did it offer
any explanation on why it failed to comply with
the requirement of service of the PAN. It merely
accepted the letter of Metro Stars chairman
dated April 29, 2002, that stated that he had
received the FAN dated April 3, 2002, but not
the PAN; that he was willing to pay the tax as
computed by the CIR; and that he just wanted
to clarify some matters with the hope of
lessening its tax liability.
This now leads to the question: Is the failure to
strictly comply with notice requirements
prescribed under Section 228 of the National
Internal Revenue Code of 1997 and Revenue
Regulations (R.R.) No. 12-99 tantamount to a
denial of due process? Specifically, are the
requirements of due process satisfied if only the
FAN stating the computation of tax liabilities
and a demand to pay within the prescribed
period was sent to the taxpayer?
The answer to these questions require an
examination of Section 228 of the Tax Code
which reads:
SEC. 228. Protesting of Assessment. - When the
Commissioner or his duly authorized
representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his
findings: provided, however, that
preassessment notice shall not be required in
the following cases:
(a) When the finding for any deficiency tax is
the result of mathematical error in the
computation of the tax as appearing on the face
of the return; or
(b) When a discrepancy has been determined
between the tax withheld and the amount
actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a
refund or tax credit of excess creditable
withholding tax for a taxable period was
determined to have carried over and
automatically applied the same amount claimed
against the estimated tax liabilities for the
taxable quarter or quarters of the succeeding
taxable year; or
(d) When the excise tax due on exciseable
articles has not been paid; or
(e) When the article locally purchased or
imported by an exempt person, such as, but not
limited to, vehicles, capital equipment,
machineries and spare parts, has been sold,
traded or transferred to non-exempt persons.
The taxpayers shall be informed in writing of
the law and the facts on which the assessment
is made; otherwise, the assessment shall be
void.
a
Within a period to be prescribed by
implementing rules and regulations, the
taxpayer shall be required to respond to said
notice. If the taxpayer fails to respond, the
Commissioner or his duly authorized
representative shall issue an assessment based
on his findings.
Such assessment may be protested
administratively by filing a request for
reconsideration or reinvestigation within thirty
(30) days from receipt of the assessment in such
form and manner as may be prescribed by
implementing rules and regulations. Within
sixty (60) days from filing of the protest, all
relevant supporting documents shall have been
submitted; otherwise, the assessment shall
become final.
If the protest is denied in whole or in part, or is
not acted upon within one hundred eighty (180)
days from submission of documents, the
taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax Appeals
within thirty (30) days from receipt of the said
decision, or from the lapse of one hundred
eighty (180)-day period; otherwise, the decision
shall become final, executory and demandable.
(Emphasis supplied).
Indeed, Section 228 of the Tax Code clearly
requires that the taxpayer must first be
informed that he is liable for deficiency taxes
through the sending of a PAN. He must be
informed of the facts and the law upon which
the assessment is made. The law imposes a
substantive, not merely a formal, requirement.
To proceed heedlessly with tax collection
without first establishing a valid assessment is
evidently violative of the cardinal principle in
administrative investigations - that taxpayers
should be able to present their case and adduce
supporting evidence.[14]
This is confirmed under the provisions R.R.
No. 12-99 of the BIR which pertinently provide:
SECTION 3. Due Process Requirement in the
Issuance of a Deficiency Tax Assessment.
3.1 Mode of procedures in the issuance of a
deficiency tax assessment:
3.1.1 Notice for informal conference. The
Revenue Officer who audited the taxpayer's
records shall, among others, state in his report
whether or not the taxpayer agrees with his
findings that the taxpayer is liable for deficiency
tax or taxes. If the taxpayer is not amenable,
based on the said Officer's submitted report of
investigation, the taxpayer shall be informed, in
writing, by the Revenue District Office or by the
Special Investigation Division, as the case may
be (in the case Revenue Regional Offices) or by
the Chief of Division concerned (in the case of
the BIR National Office) of the discrepancy or
discrepancies in the taxpayer's payment of his
internal revenue taxes, for the purpose of
"Informal Conference," in order to afford the
taxpayer with an opportunity to present his side
of the case. If the taxpayer fails to respond
within fifteen (15) days from date of receipt of
the notice for informal conference, he shall be
considered in default, in which case, the
Revenue District Officer or the Chief of the
Special Investigation Division of the Revenue
Regional Office, or the Chief of Division in the
National Office, as the case may be, shall
endorse the case with the least possible delay
to the Assessment Division of the Revenue
Regional Office or to the Commissioner or his
duly authorized representative, as the case may
be, for appropriate review and issuance of a
deficiency tax assessment, if warranted.
3.1.2 Preliminary Assessment Notice (PAN). If
after review and evaluation by the Assessment
Division or by the Commissioner or his duly
authorized representative, as the case may be,
it is determined that there exists sufficient basis
to assess the taxpayer for any deficiency tax or
taxes, the said Office shall issue to the taxpayer,
at least by registered mail, a Preliminary
Assessment Notice (PAN) for the proposed
assessment, showing in detail, the facts and the
law, rules and regulations, or jurisprudence on
which the proposed assessment is based (see
illustration in ANNEX A hereof). If the taxpayer
fails to respond within fifteen (15) days from
date of receipt of the PAN, he shall be
considered in default, in which case, a formal
letter of demand and assessment notice shall
be caused to be issued by the said Office, calling
for payment of the taxpayer's deficiency tax
liability, inclusive of the applicable penalties.
3.1.3 Exceptions to Prior Notice of the
Assessment. The notice for informal conference
and the preliminary assessment notice shall not
be required in any of the following cases, in
which case, issuance of the formal assessment
notice for the payment of the taxpayer's
deficiency tax liability shall be sufficient:
(i) When the finding for any deficiency tax is the
result of mathematical error in the computation
of the tax appearing on the face of the tax
return filed by the taxpayer; or
(ii) When a discrepancy has been determined
between the tax withheld and the amount
actually remitted by the withholding agent; or
(iii) When a taxpayer who opted to claim a
refund or tax credit of excess creditable
withholding tax for a taxable period was
determined to have carried over and
automatically applied the same amount claimed
against the estimated tax liabilities for the
taxable quarter or quarters of the succeeding
taxable year; or
(iv) When the excise tax due on excisable
articles has not been paid; or
(v) When an article locally purchased or
imported by an exempt person, such as, but not
limited to, vehicles, capital equipment,
machineries and spare parts, has been sold,
traded or transferred to non-exempt persons.
3.1.4 Formal Letter of Demand and Assessment
Notice. The formal letter of demand and
assessment notice shall be issued by the
Commissioner or his duly authorized
representative. The letter of demand calling for
payment of the taxpayer's deficiency tax or
taxes shall state the facts, the law, rules and
regulations, or jurisprudence on which the
assessment is based, otherwise, the formal
letter of demand and assessment notice shall
be void (see illustration in ANNEX B hereof).
The same shall be sent to the taxpayer only by
registered mail or by personal delivery.
If sent by personal delivery, the taxpayer or his
duly authorized representative shall
acknowledge receipt thereof in the duplicate
copy of the letter of demand, showing the
following: (a) His name; (b) signature; (c)
designation and authority to act for and in
behalf of the taxpayer, if acknowledged
received by a person other than the taxpayer
himself; and (d) date of receipt thereof.
x x x.
From the provision quoted above, it is clear that
the sending of a PAN to taxpayer to inform him
of the assessment made is but part of the due
process requirement in the issuance of a
deficiency tax assessment, the absence of which
renders nugatory any assessment made by the
tax authorities. The use of the word shall in
subsection 3.1.2 describes the mandatory
nature of the service of a PAN. The
persuasiveness of the right to due process
reaches both substantial and procedural rights
and the failure of the CIR to strictly comply with
the requirements laid down by law and its own
rules is a denial of Metro Stars right to due
process.[15] Thus, for its failure to send the PAN
stating the facts and the law on which the
assessment was made as required by Section
228 of R.A. No. 8424, the assessment made by
the CIR is void.
The case of CIR v. Menguito[16] cited by the CIR
in support of its argument that only the non-
service of the FAN is fatal to the validity of an
assessment, cannot apply to this case because
the issue therein was the non-compliance with
the provisions of R. R. No. 12-85 which sought
to interpret Section 229 of the old tax law. RA
No. 8424 has already amended the provision of
Section 229 on protesting an assessment. The
old requirement of merely notifying the
taxpayer of the CIRs findings was changed in
1998 to informing the taxpayer of not only the
law, but also of the facts on which an
assessment would be made. Otherwise, the
assessment itself would be invalid.[17] The
regulation then, on the other hand, simply
provided that a notice be sent to the
respondent in the form prescribed, and that no
consequence would ensue for failure to comply
with that form.
The Court need not belabor to discuss the
matter of Metro Stars failure to file its protest,
for it is well-settled that a void assessment
bears no fruit.[18]
It is an elementary rule enshrined in the 1987
Constitution that no person shall be deprived of
property without due process of law.[19] In
balancing the scales between the power of the
State to tax and its inherent right to prosecute
perceived transgressors of the law on one side,
and the constitutional rights of a citizen to due
process of law and the equal protection of the
laws on the other, the scales must tilt in favor of
the individual, for a citizens right is amply
protected by the Bill of Rights under the
Constitution. Thus, while taxes are the lifeblood
of the government, the power to tax has its
limits, in spite of all its plenitude. Hence
in Commissioner of Internal Revenue v. Algue,
Inc.,[20] it was said
Taxes are the lifeblood of the government and
so should be collected without unnecessary
hindrance. On the other hand, such collection
should be made in accordance with law as any
arbitrariness will negate the very reason for
government itself. It is therefore necessary to
reconcile the apparently conflicting interests of
the authorities and the taxpayers so that the
real purpose of taxation, which is the
promotion of the common good, may be
achieved.
But even as we concede the inevitability and
indispensability of taxation, it is a requirement
in all democratic regimes that it be exercised
reasonably and in accordance with the
prescribed procedure. If it is not, then the
taxpayer has a right to complain and the courts
will then come to his succor. For all the
awesome power of the tax collector, he may
still be stopped in his tracks if the taxpayer can
demonstrate x x x that the law has not
been observed.[21] (Emphasis supplied).
WHEREFORE, the petition is DENIED.
SO ORDERED.

xxx xxx xxx

11

It is said that taxes are what we pay for civilized COMMISSIONER OF INTERNAL REVENUE, G.R. No. 167
society. Without taxes, the government would Petitioner,
be paralyzed for the lack of the motive power to
activate and operate it. Hence, despite the Present:
natural reluctance to surrender part of ones
hard-earned income to taxing authorities, every
person who is able to must contribute his share QUISUMBING
in the running of the government. The
government for its part is expected to respond CARPIO MOR
in the form of tangible and intangible benefits
- versus - TINGA,
intended to improve the lives of the people and
enhance their moral and material values. This VELASCO, JR
symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion BRION, JJ.
that it is an arbitrary method of exaction by
those in the seat of power.
FMFDEVELOPMENTCORPORATION, Promulgated

Respondent.
 Juneon
30,February
2008 2, 1999 to allow it to present
evidence to dispute the BIR assessments.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - -x On February 9, 1999, FMF President Enrique
Fernandez executed a waiver of the three-year
prescriptive period for the BIR to assess internal
DECISION revenue taxes, hence extending the assessment
period until October 31, 1999. The waiver was
accepted and signed by RDO Zambarrano.

QUISUMBING, J.: On October 18, 1999, FMF received amended

pre-assessment notices[5] dated October 6,
For review on certiorari is the Decision[1] and
1999 from the BIR. FMF immediately filed a
Resolution[2] dated January 31, 2005 and April 14,
protest on November 3, 1999 but on the same
2005, respectively, of the Court of Appeals in
day, it received BIRs Demand Letter and
CA- G.R. SP No. 79675, which affirmed the
Assessment Notice No. 33-1-00487-95 dated
Decision[3] dated March 20, 2003 of the Court of
October 25, 1999 reflecting FMFs alleged
Tax Appeals (CTA) in C.T.A. Case No. 6153. In
deficiency taxes and accrued interests, as
effect, the Court of Appeals cancelled the
follows:
assessment notice issued by the Bureau of
Internal Revenue (BIR) for the deficiency Income Tax Assessment P1,608,015.50
income and withholding taxes for the taxable
year 1995 of respondent FMF Development Compromise Penalty on Income Tax
Corporation (FMF), a domestic corporation Assessment 20,000.00
organized and existing under Philippine laws. Increments on Withholding Tax on
The facts are as follows: Compensation 184,132.26

On April 15, 1996, FMF filed its Corporate Compromise Penalty on Increments on
Annual Income Tax Return for taxable year 1995 Withholding
and declared a loss of P3,348,932. On May 8, Tax on Compensation 16,000.00
1996, however, it filed an amended return and
declared a loss of P2,826,541. The BIR then sent Increments on Withholding Tax on
FMF pre-assessment notices, all dated October Management Fees 209,550.49
6, 1998, informing it of its alleged tax
Compromise Penalty on Increments on
liabilities.[4] FMF filed a protest against these
notices with the BIR and requested for a Withholding Tax
reconsideration/reinvestigation. on Management Fees 16,000.00
On January 22, 1999, Revenue District Officer TOTAL P2,053,698.25[6]
(RDO) Rogelio Zambarrano informed FMF that
the reinvestigation had been referred to On November 24, 1999, FMF filed a letter of
Revenue Officer Alberto Fortaleza.He also protest on the assessment invoking, inter
advised FMF of the informal conference set alia,[7] the defense of prescription by reason of
the invalidity of the waiver. In its reply, the BIR
insisted that the waiver is valid because it was
signed by the RDO, a duly authorized
representative of petitioner. It also ordered
FMF to immediately settle its tax liabilities;
otherwise, judicial action will be taken. Treating
this as BIRs final decision, FMF filed a petition
for review with the CTA challenging the validity
of the assessment.
On March 20, 2003, the CTA granted the
petition and cancelled Assessment Notice No.
33-1-00487-95 because it was already time-
barred. The CTA ruled that the waiver did not
extend the three-year prescriptive period within
which the BIR can make a valid assessment
because it did not comply with the procedures
laid down in Revenue Memorandum Order
(RMO) No. 20-90.[8] First, the waiver did not
state the dates of execution and acceptance of
the waiver, by the taxpayer and the BIR,
respectively; thus, it cannot be determined with
certainty if the waiver was executed and
accepted within the prescribed period. Second,
the CTA also found that FMF was not furnished
a copy of the waiver signed by RDO
Zambarrano. Third, the CTA pointed out that
since the case involves an amount of more
than P1 million, and the period to assess is not
yet about to prescribe, the waiver should have
been signed by the Commissioner of Internal
Revenue, and not a mere RDO.[9] The
Commissioner of Internal Revenue filed a
motion for reconsideration, but it was denied.
On appeal to the Court of Appeals, the decision
of the CTA was affirmed. Sustaining the findings
of the CTA, the Court of Appeals held that the
waiver did not strictly comply with RMO No. 20-
90. Thus, it nullified Assessment Notice No. 33-
1-00487-95. The fallo of the Court of Appeals
decision reads:
WHEREFORE, finding the instant petition not
impressed with merit, the same is DENIED DUE
COURSE and is hereby DISMISSED. No costs.
SO ORDERED.[10]
The Commissioner of Internal Revenue sought
reconsideration, but it was denied.
Hence the instant petition, raising the following
issues:
I.
WHETHER OR NOT RESPONDENTS WAIVER OF
THE STATUTE OF LIMITATIONS WAS VALIDLY
EXECUTED.
II.
WHETHER O[R] NOT THE PERIOD TO ASSESS
HAD PRESCRIBED.
III.
WHETHER OR NOT THE COURT OF APPEALS
CORRECTLY DISREGARDED PETITIONERS
SUBSTANTIVE ARGUMENT.[11]
Essentially, the present controversy deals with
the validity of the waiver and whether it validly
extended the original three-year prescriptive
period so as to make Assessment Notice No. 33-
1-00487-95 valid. The basic questions to be
resolved therefore are: (1) Is the waiver valid?
and (2) Did the three-year period to assess
internal revenue taxes already prescribe?
Petitioner contends that the waiver was validly
executed mainly because it complied with
Section 222 (b)[12] of the National Internal
Revenue Code (NIRC). Petitioner points out that
the waiver was in writing, signed by the
taxpayer and the Commissioner, and executed
within the three-year prescriptive
period. Petitioner also argues that the
requirements in RMO No. 20-90 are merely
directory; thus, the indication of the dates of
execution and acceptance of the waiver, by the
taxpayer and the BIR, respectively, are not
required by law. Petitioner adds that there is no
provision in RMO No. 20-90 stating that a
waiver may be invalidated upon failure of the
BIR to furnish the taxpayer a copy of the
waiver. Further, it contends that respondents
execution of the waiver was a renunciation of
its right to invoke prescription. Petitioner also
argues that the government cannot be
estopped by the mistakes committed by its
revenue officer in the enforcement of RMO No.
20-90.
On the other hand, respondent counters that
the waiver is void because it did not comply
with RMO No. 20-90. Respondent assails the
waiver because (1) it was not signed by the
Commissioner despite the fact that the
assessment involves an amount of more
than P1 million; (2) there is no stated date of
acceptance by the Commissioner or his duly
authorized representative; and (3) it was not
furnished a copy of the BIR-accepted
waiver. Respondent also cites Philippine
Journalists, Inc. v. Commissioner of Internal
Revenue[13] and contends that the procedures in
RMO No. 20-90 are mandatory in character,
precisely to give full effect to Section 222 (b) of
the NIRC. Moreover, a waiver of the statute of
limitations is not a waiver of the right to invoke
the defense of prescription.[14]
After considering the issues and the
submissions of the parties in the light of the
facts of this case, we are in agreement that the
petition lacks merit.
Under Section 203[15] of the NIRC, internal
revenue taxes must be assessed within three
years counted from the period fixed by law for
the filing of the tax return or the actual date of
filing, whichever is later. 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. Accordingly, the
government must assess internal revenue taxes
on time so as not to extend indefinitely the
period of assessment and deprive 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.[16]
An exception to the three-year prescriptive
period on the assessment of taxes is Section
222 (b) of the NIRC, which provides:
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.
xxxx
The above provision authorizes the extension of
the original three-year period by the execution
of a valid waiver, where the taxpayer and the
BIR agreed in writing that the period to issue an
assessment and collect the taxes due is
extended to an agreed upon date. Under RMO
No. 20-90, which implements Sections 203 and
222 (b), the following procedures should be
followed:
1. The waiver must be in the form identified as
Annex A hereof.
2. The waiver shall 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.
Soon after the waiver is signed by the taxpayer,
the Commissioner of Internal Revenue or the
revenue official authorized by him, as
hereinafter provided, shall sign the waiver
indicating that the Bureau has accepted and
agreed to the waiver. The date of such
acceptance by the Bureau should be
indicated. 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.
3. The following revenue officials are
authorized to sign the waiver.
A. In the National Office
xxxx
3. Commissioner For tax cases involving more
than P1M
B. In the Regional Offices
1. The Revenue District Officer with respect to
tax cases still pending investigation and the
period to assess is about to prescribe regardless
of amount.
xxxx
4. The waiver must be executed in three (3)
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 shall be indicated
in the original copy.
5. The foregoing procedures shall be strictly
followed. Any revenue official found not to have
complied with this Order resulting in
prescription of the right to assess/collect shall
be administratively dealt with. (Emphasis
supplied.)
Applying RMO No. 20-90, the waiver in question
here was defective and did not validly extend
the original three-year prescriptive
period. Firstly, it was not proven that
respondent was furnished a copy of the BIR-
accepted waiver. Secondly, the waiver was
signed only by a revenue district officer, when it
should have been signed by the Commissioner
as mandated by the NIRC and RMO No. 20-90,
considering that the case involves an amount of
more than P1 million, and the period to assess
is not yet about to prescribe. Lastly, it did not
contain the date of acceptance by the
Commissioner of Internal Revenue, a requisite
necessary to determine whether the waiver was
validly accepted before the expiration of the
original three-year period. Bear in mind that the
waiver in question is a bilateral agreement, thus
necessitating the very signatures of both the
Commissioner and the taxpayer to give birth to
a valid agreement.[17]
Petitioner contends that the procedures in RMO
No. 20-90 are merely directory and that the
execution of a waiver was a renunciation of
respondents right to invoke prescription. We do
not agree. RMO No. 20-90 must be strictly
followed. In Philippine Journalists, Inc. v.
Commissioner of Internal Revenue,[18] we ruled
that a waiver of the statute of limitations under
the NIRC, to a certain extent being a derogation
of the taxpayers right to security against
prolonged and unscrupulous investigations, must incomplete and defective and thus, the three-year
be carefully and strictly construed. The waiver of prescriptive period was not tolled nor extended
the statute of limitations does not mean that the and continued to run until April 15, 1999. Even if
taxpayer relinquishes the right to invoke the three-year period be counted from May 8,
prescription unequivocally, particularly where 1996, the date of filing of the amended return,
the language of the document is assuming the amended return was substantially
equivocal.[19] Notably, in this case, the waiver different from the original return, a case which
became unlimited in time because it did not affects the reckoning point of the prescriptive
specify a definite date, agreed upon between the period,[22] still, the subject assessment is definitely
BIR and respondent, within which the former considered time-barred.
may assess and collect taxes. It also had no
binding effect on respondent because there was WHEREFORE, the petition is DENIED for lack of
no consent by the Commissioner. On this basis, merit. The assailed Decision and Resolution
no implied consent can be presumed, nor can it dated January 31, 2005 and April 14, 2005,
be contended that the concurrence to such respectively, of the Court of Appeals in CA-G.R.
waiver is a mere formality.[20] SP No. 79675 are hereby AFFIRMED. No
pronouncement as to costs.
Consequently, petitioner cannot rely on its
invocation of the rule that the government cannot SO ORDERED.
be estopped by the mistakes of its revenue 12
officers in the enforcement of RMO No. 20-90
because the law on prescription should be LASCONA LAND CO., INC., G.R. No. 171251
interpreted in a way conducive to bringing about
Petitioner, Present:
the beneficent purpose of affording protection to
the taxpayer within the contemplation of the
Commission which recommended the approval of
the law. To the Government, its tax officers are VELASCO, JR., J.,
obliged to act promptly in the making of
PERALTA,
assessment so that taxpayers, after the lapse of
the period of prescription, would have a feeling of - versus - ABAD,
security against unscrupulous tax agents who will
always try to find an excuse to inspect the books VILLARAMA, JR.,
of taxpayers, not to determine the latters real
MENDOZA, JJ.
liability, but to take advantage of a possible
opportunity to harass even law-abiding
businessmen. Without such legal defense,
taxpayers would be open season to harassment Promulgated:
by unscrupulous tax agents.[21]
COMMISSIONER OF INTERNAL REVENUE,
In fine, Assessment Notice No. 33-1-00487-95
March 5, 2012
dated October 25, 1999, was issued beyond the
three-year prescriptive period. The waiver was
Respondent.
x--------------------------------------------------------------
--------------------------x
DECISION
PERALTA, J.:
Before this Court is a Petition for Review
on Certiorari under Rule 45 of the Rules of
Court seeking the reversal of the
[1]
Decision dated October 25, 2005 and
Resolution[2]dated January 20, 2006 of the
Court of Appeals (CA) in CA-G.R. SP No. 58061
which set aside the Decision[3] dated January 4,
2000 and Resolution[4] dated March 3, 2000 of
the Court of Tax Appeals (CTA) in C.T.A. Case
No. 5777 and declared Assessment Notice No.
0000047-93-407 dated March 27, 1998 to be
final, executory and demandable.
The facts, as culled from the records, are as
follows:
On March 27, 1998, the Commissioner of
Internal Revenue (CIR) issued Assessment
Notice No. 0000047-93-407[5] against Lascona
Land Co., Inc. (Lascona) informing the latter of
its alleged deficiency income tax for the year
1993 in the amount of P753,266.56.
Consequently, on April 20, 1998, Lascona filed a
letter protest, but was denied by Norberto R.
Odulio, Officer-in-Charge (OIC), Regional
Director, Bureau of Internal Revenue, Revenue
Region No. 8, Makati City, in his
[6]
Letter dated March 3, 1999, which reads,
thus:
xxxx
Subject: LASCONA LAND CO., INC.
1993 Deficiency Income Tax
Madam,
Anent the 1993 tax case of subject taxpayer,
please be informed that while we agree with
the arguments advanced in your letter protest,
we regret, however, that we cannot give due
course to your request to cancel or set aside the
assessment notice issued to your client for the
reason that the case was not elevated to the
Court of Tax Appeals as mandated by the
provisions of the last paragraph of Section 228
of the Tax Code. By virtue thereof, the said
assessment notice has become final, executory
and demandable.
In view of the foregoing, please advise your
client to pay its 1993 deficiency income tax
liability in the amount of P753,266.56.
x x x x (Emphasis ours)
On April 12, 1999, Lascona appealed the
decision before the CTA and was docketed as
C.T.A. Case No. 5777. Lascona alleged that the
Regional Director erred in ruling that the failure
to appeal to the CTA within thirty (30) days
from the lapse of the 180-day period rendered
the assessment final and executory.
The CIR, however, maintained that Lascona's
failure to timely file an appeal with the CTA
after the lapse of the 180-day reglementary
period provided under Section 228 of the
National Internal Revenue Code (NIRC) resulted
to the finality of the assessment.
On January 4, 2000, the CTA, in its
Decision,[7] nullified the subject assessment. It
held that in cases of inaction by the CIR on the
protested assessment, Section 228 of the NIRC
provided two options for the taxpayer: (1)
appeal to the CTA within thirty (30) days from
the lapse of the one hundred eighty (180)-day
period, or (2) wait until the Commissioner
decides on his protest before he elevates the
case.
The CIR moved for reconsideration. It argued
that in declaring the subject assessment as final,
executory and demandable, it did so pursuant
to Section 3 (3.1.5) of Revenue Regulations No.
12-99 dated September 6, 1999 which reads,
thus:
If the Commissioner or his duly authorized
representative fails to act on the taxpayer's
protest within one hundred eighty (180) days
from date of submission, by the taxpayer, of the
required documents in support of his protest,
the taxpayer may appeal to the Court of Tax
Appeals within thirty (30) days from the lapse of
the said 180-day period; otherwise, the
assessment shall become final, executory and
demandable.
On March 3, 2000, the CTA denied the CIR's
motion for reconsideration for lack of
merit.[8] The CTA held that Revenue Regulations
No. 12-99 must conform to Section 228 of the
NIRC. It pointed out that the former spoke of an
assessment becoming final, executory and
demandable by reason of the inaction by the
Commissioner, while the latter referred to
decisions becoming final, executory and
demandable should the taxpayer adversely
affected by the decision fail to appeal before
the CTA within the prescribed period.Finally, it
emphasized that in cases of discrepancy,
Section 228 of the NIRC must prevail over the
revenue regulations.
Dissatisfied, the CIR filed an appeal before the
CA.[9]
In the disputed Decision dated October 25,
2005, the Court of Appeals granted the CIR's
petition and set aside the Decision
dated January 4, 2000 of the CTA and its
Resolution dated March 3, 2000. It further
declared that the subject Assessment Notice
No. 0000047-93-407 dated March 27, 1998 as
final, executory and demandable.
Lascona moved for reconsideration, but was
denied for lack of merit.
Thus, the instant petition, raising the following
issues:
I
THE HONORABLE COURT HAS, IN THE REVISED
RULES OF COURT OF TAX APPEALS WHICH IT
RECENTLY PROMULGATED, RULED THAT AN
APPEAL FROM THE INACTION OF RESPONDENT
COMMISSIONER IS NOT MANDATORY.
II
THE COURT OF APPEALS SERIOUSLY ERRED
WHEN IT HELD THAT THE ASSESSMENT HAS
BECOME FINAL AND DEMANDABLE BECAUSE,
ALLEGEDLY, THE WORD DECISION IN THE LAST
PARAGRAPH OF SECTION 228 CANNOT BE
STRICTLY CONSTRUED AS REFERRING ONLY TO
THE DECISION PER SE OF THE COMMISSIONER,
BUT SHOULD ALSO BE CONSIDERED
SYNONYMOUS WITH AN ASSESSMENT WHICH
HAS BEEN PROTESTED, BUT THE PROTEST ON
WHICH HAS NOT BEEN ACTED UPON BY THE
COMMISSIONER.[10]
In a nutshell, the core issue to be resolved is:
Whether the subject assessment has become
final, executory and demandable due to the
failure of petitioner to file an appeal before the
CTA within thirty (30) days from the lapse of the
One Hundred Eighty (180)-day period pursuant
to Section 228 of the NIRC.
Petitioner Lascona, invoking Section 3,[11] Rule 4
of the Revised Rules of the Court of Tax
Appeals, maintains that in case of inaction by
the CIR on the protested assessment, it has the
option to either: (1) appeal to the CTA within 30
days from the lapse of the 180-day period; or
(2) await the final decision of the Commissioner
on the disputed assessment even beyond the
180-day period − in which case, the taxpayer
may appeal such final decision within 30 days
from the receipt of the said decision. Corollarily,
petitioner posits that when the Commissioner
failed to act on its protest within the 180-day
period, it had the option to await for the final
decision of the Commissioner on the protest,
which it did.
The petition is meritorious.
Section 228 of the NIRC is instructional as to the
remedies of a taxpayer in case of the inaction of
the Commissioner on the protested assessment,
to wit:
SEC. 228. Protesting of Assessment. − x x x
xxxx
Within a period to be prescribed by
implementing rules and regulations, the
taxpayer shall be required to respond to said
notice. If the taxpayer fails to respond, the
Commissioner or his duly authorized
representative shall issue an assessment based
on his findings.
Such assessment may be protested
administratively by filing a request for
reconsideration or reinvestigation within thirty
(30) days from receipt of the assessment in such
form and manner as may be prescribed by
implementing rules and regulations.
Within sixty (60) days from filing of the protest,
all relevant supporting documents shall have
been submitted; otherwise, the assessment
shall become final.
If the protest is denied in whole or in part, or is
not acted upon within one hundred eighty (180)
days from submission of documents, the
taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax Appeals
within (30) days from receipt of the said
decision, or from the lapse of the one hundred
eighty (180)-day period; otherwise the decision
shall become final, executory and
demandable. (Emphasis supplied).
Respondent, however, insists that in case of the
inaction by the Commissioner on the protested
assessment within the 180-day reglementary
period, petitioner should have appealed the
inaction to the CTA. Respondent maintains that
due to Lascona's failure to file an appeal with
the CTA after the lapse of the 180-day period,
the assessment became final and executory.
We do not agree.
In RCBC v. CIR,[12] the Court has held that in case
the Commissioner failed to act on the disputed
assessment within the 180-day period from
date of submission of documents, a taxpayer
can either: (1) file a petition for review with the
Court of Tax Appeals within 30 days after the
expiration of the 180-day period; or (2) await
the final decision of the Commissioner on the
disputed assessments and appeal such final
decision to the Court of Tax Appeals within 30
days after receipt of a copy of such decision.[13]
This is consistent with Section 3 A (2), Rule 4 of
the Revised Rules of the Court of Tax
Appeals,[14] to wit:
SEC. 3. Cases within the jurisdiction of the Court
in Divisions. The Court in Divisions shall
exercise:
(a) Exclusive original or appellate jurisdiction to
review by appeal the following:
(1) Decisions of the Commissioner of Internal
Revenue in cases involving disputed
assessments, refunds of internal revenue taxes,
fees or other charges, penalties in relation
thereto, or other matters arising under the
National Internal Revenue Code or other laws
administered by the Bureau of Internal
Revenue;
(2) Inaction by the Commissioner of Internal
Revenue in cases involving disputed
assessments, refunds of internal revenue taxes,
fees or other charges, penalties in relation
thereto, or other matters arising under the
National Internal Revenue Code or other laws
administered by the Bureau of Internal
Revenue, where the National Internal Revenue
Code or other applicable law provides a specific
period for action: Provided, that in case of
disputed assessments, the inaction of the
Commissioner of Internal Revenue within the
one hundred eighty day-period under Section
228 of the National Internal revenue Code shall
be deemed a denial for purposes of allowing
the taxpayer to appeal his case to the Court and
does not necessarily constitute a formal
decision of the Commissioner of Internal
Revenue on the tax case; Provided, further, that
should the taxpayer opt to await the final
decision of the Commissioner of Internal
Revenue on the disputed assessments beyond
the one hundred eighty day-period
abovementioned, the taxpayer may appeal such
final decision to the Court under Section 3(a),
Rule 8 of these Rules; and Provided, still further,
that in the case of claims for refund of taxes
erroneously or illegally collected, the taxpayer
must file a petition for review with the Court
prior to the expiration of the two-year period
under Section 229 of the National Internal
Revenue Code;
(Emphasis ours)
In arguing that the assessment became final
and executory by the sole reason that petitioner
failed to appeal the inaction of the
Commissioner within 30 days after the 180-day
reglementary period, respondent, in effect,
limited the remedy of Lascona, as a taxpayer,
under Section 228 of the NIRC to just one, that
is - to appeal the inaction of the Commissioner
on its protested assessment after the lapse of
the 180-day period. This is incorrect.
As early as the case of CIR v. Villa,[15] it was
already established that the word "decisions" in
paragraph 1, Section 7 of Republic Act No. 1125,
quoted above, has been interpreted to mean
the decisions of the Commissioner of Internal
Revenue on the protest of the taxpayer against
the assessments. Definitely, said word does not
signify the assessment itself. We quote what
this Court said aptly in a previous case:
In the first place, we believe the respondent
court erred in holding that the assessment in
question is the respondent Collector's decision
or ruling appealable to it, and that
consequently, the period of thirty days
prescribed by section 11 of Republic Act No.
1125 within which petitioner should have
appealed to the respondent court must be
counted from its receipt of said
assessment. Where a taxpayer questions an
assessment and asks the Collector to reconsider
or cancel the same because he (the taxpayer)
believes he is not liable therefor, the
assessment becomes a "disputed assessment"
that the Collector must decide, and the
taxpayer can appeal to the Court of Tax Appeals
only upon receipt of the decision of the
Collector on the disputed assessment, . . . [16]
Therefore, as in Section 228, when the law
provided for the remedy to appeal the inaction
of the CIR, it did not intend to limit it to a single
remedy of filing of an appeal after the lapse of
the 180-day prescribed period. Precisely, when
a taxpayer protested an assessment, he
naturally expects the CIR to decide either
positively or negatively. A taxpayer cannot be
prejudiced if he chooses to wait for the final
decision of the CIR on the protested
assessment. More so, because the law and
jurisprudence have always contemplated a
scenario where the CIR will decide on the
protested assessment.
It must be emphasized, however, that in case of
the inaction of the CIR on the protested
assessment, while we reiterate − the taxpayer
has two options, either: (1) file a petition for
review with the CTA within 30 days after the
expiration of the 180-day period; or (2) await
the final decision of the Commissioner on the
disputed assessment and appeal such final
decision to the CTA within 30 days after the
receipt of a copy of such decision, these options
are mutually exclusive and resort to one bars
the application of the other.
Accordingly, considering that Lascona opted to
await the final decision of the Commissioner on
the protested assessment, it then has the right
to appeal such final decision to the Court by
filing a petition for review within thirty days
after receipt of a copy of such decision or ruling,
even after the expiration of the 180-day period
fixed by law for the Commissioner of Internal
Revenue to act on the disputed
[17]
assessments. Thus, Lascona, when it filed an
appeal on April 12, 1999 before the CTA, after
its receipt of the Letter[18] dated March 3,
1999 on March 12, 1999, the appeal was timely
made as it was filed within 30 days after receipt
of the copy of the decision.
Finally, the CIR should be reminded that
taxpayers cannot be left in quandary by its
inaction on the protested assessment. It is
imperative that the taxpayers are informed of
its action in order that the taxpayer should then
at least be able to take recourse to the tax court
at the opportune time. As correctly pointed out
by the tax court:
x x x to adopt the interpretation of the
respondent will not only sanction inefficiency,
but will likewise condone the Bureau's inaction.
This is especially true in the instant case when
despite the fact that respondent found
petitioner's arguments to be in order, the
assessment will become final, executory and
demandable for petitioner's failure to appeal
before us within the thirty (30) day period.[19]
Taxes are the lifeblood of the government and
so should be collected without unnecessary
hindrance. On the other hand, such collection
should be made in accordance with law as any
arbitrariness will negate the very reason for
government itself. It is therefore necessary to
reconcile the apparently conflicting interests of
the authorities and the taxpayers so that the
real purpose of taxation, which is the
promotion of the common good, may be
achieved.[20] Thus, even as we concede the
inevitability and indispensability of taxation, it is
a requirement in all democratic regimes that it SONY PHILIPPINES, INC.,
be exercised reasonably and in accordance with
the prescribed procedure.[21] Respondent. Promulgated

November 17

WHEREFORE, the petition is GRANTED. The

Decision dated October 25, 2005 and the X -------------------------------------------------------------
Resolution dated January 20, 2006 of the --------------------------X
Court of Appeals in CA-G.R. SP No. 58061
are REVERSED and SET ASIDE. Accordingly, the
Decision dated January 4, 2000 of the Court
DECISION
of Tax Appeals in C.T.A. Case No. 5777 and its
Resolution dated March 3, 2000
are REINSTATED.
MENDOZA, J.:

SO ORDERED.
This petition for review on certiorari seeks to
set aside the May 17, 2007 Decision and the
July 5, 2007 Resolution of the Court of Tax
13.
Appeals En Banc[1] (CTA-EB), in C.T.A. EB No. 90,
COMMISSIONER OF INTERNAL REVENUE, affirming
G.R. No. 178697 the October 26, 2004 Decision of the
CTA-First Division[2] which, in turn, partially
Petitioner, granted the petition for review of respondent
Sony Philippines, Inc. (Sony). The CTA-First
Present:
Division decision cancelled the deficiency
assessment issued by petitioner Commissioner
of Internal Revenue (CIR) against Sony for Value
CARPIO,
AddedJ., Chairperson,
Tax (VAT) but upheld the deficiency
assessmentCASTRO,
LEONARDO-DE for * expanded withholding
tax (EWT) in the amount of P1,035,879.70 and
- versus - PERALTA,
the penalties for late remittance of internal
revenue taxes in the amount of P1,269,
ABAD, and [3]
593.90.
MENDOZA, JJ.

THE FACTS:

On November 24, 1998, the CIR issued Letter of

Authority No. 000019734 (LOA
19734) authorizing certain revenue officers to
examine Sonys books of accounts and other
accounting records regarding revenue taxes DEFICIENCY OF VAT ON ROYALTY PAYMENTS
for the period 1997 and unverified prior (Assessment No. ST-LR1-97-0126-2000)
years. On December 6, 1999, a preliminary
assessment for 1997 deficiency taxes and Basic Tax Due
penalties was issued by the CIR which Sony
Add: Penalties
protested. Thereafter, acting on the protest, the
CIR issued final assessment notices, the formal Surcharge P 35
letter of demand and the details of
discrepancies.[4] Said details of the deficiency Interest up to 3-31-2000 87
taxes and penalties for late remittance of
Compromise 16
internal revenue taxes are as follows:
Penalties Due
DEFICIENCY VALUE -ADDED TAX (VAT)

(Assessment No. ST-VAT-97-0124-2000)

LATE REMITTANCE OF FINAL WITHHOLDING TAX
Basic Tax Due P 7,958,700.00
(Assessment No. ST-LR2-97-0127-2000)
Add: Penalties
Basic Tax Due
Interest up to 3-31-2000 P 3,157,314.41
Add: Penalties
Compromise 25,000.00 3,182,314.41
Surcharge P 1,7
Deficiency VAT Due P 11,141,014.41
Interest up to 3-31-2000 50

Compromise 50
DEFICIENCY EXPANDED WITHHOLDING TAX (EWT)
Penalties Due
(Assessment No. ST-EWT-97-0125-2000)

Basic Tax Due P 1,416,976.90

LATE REMITTANCE OF INCOME PAYMENTS
Add: Penalties
(Assessment No. ST-LR3-97-0128-2000)
Interest up to 3-31-2000 P 550,485.82
Basic Tax Due
Compromise 25,000.00 575,485.82
Add: Penalties
Deficiency EWT Due P 1,992,462.72
25 % Surcharge P 8,8

Interest up to 3-31-2000 58
 Compromise disallowed
2,000.00
the EWT assessment
10,923.60 on rental
expense since it found that the total rental
Penalties Due P 10,923.60
deposit of P10,523,821.99 was incurred from
January to March 1998 which was again beyond
the coverage of LOA 19734. Except for the
compromise penalties, the CTA-First Division
also upheld the penalties for the late payment
GRAND TOTAL P 15,895,632.65[5]
of VAT on royalties, for late remittance of final
withholding tax on royalty as of December 1997
and for the late remittance of EWT by some of
Sonys branches.[8] In sum, the CTA-First Division
partly granted Sonys petition by cancelling the
deficiency VAT assessment but upheld a
modified deficiency EWT assessment as well as
the penalties. Thus, the dispositive portion
Sony sought re-evaluation of the reads:
aforementioned assessment by filing a protest
on February 2, 2000. Sony submitted relevant
documents in support of its protest on the
WHEREFORE, the petition for review is hereby
16th of that same month.[6]
PARTIALLY GRANTED. Respondent is ORDERED
to CANCEL and WITHDRAW the deficiency
assessment for value-added tax for 1997 for
On October 24, 2000, within 30 days after the lack of merit. However, the deficiency
lapse of 180 days from submission of the said assessments for expanded withholding tax and
supporting documents to the CIR, Sony filed a penalties for late remittance of internal revenue
petition for review before the CTA.[7] taxes are UPHELD.

Accordingly, petitioner is DIRECTED to PAY the

respondent the deficiency expanded
After trial, the CTA-First Division disallowed the
withholding tax in the amount of P1,035,879.70
deficiency VAT assessment because the
and the following penalties for late remittance
subsidized advertising expense paid by Sony
of internal revenue taxes in the sum
which was duly covered by a VAT invoice
of P1,269,593.90:
resulted in an input VAT credit. As regards the
EWT, the CTA-First Division maintained the
deficiency EWT assessment on Sonys motor
vehicles and on professional fees paid to 1. VAT on Royalty P 429,242.07
general professional partnerships. It also
2. Withholding Tax on Royalty 831,428.20
assessed the amounts paid to sales agents as
commissions with five percent (5%) EWT 3. EWT of Petitioners Branches 8,923.63
pursuant to Section 1(g) of Revenue Regulations
No. 6-85. The CTA-First Division, however, Total P 1,269,593.90

Plus 20% delinquency interest from January 17,
2000 until fully paid pursuant to Section
249(C)(3) of the 1997 Tax Code.
SO ORDERED.[9]
The CIR sought a reconsideration of the above
decision and submitted the following grounds in
support thereof:
A. The Honorable Court committed reversible
error in holding that petitioner is not liable for
the deficiency VAT in the amount
of P11,141,014.41;
B. The Honorable court committed reversible
error in holding that the commission expense in
the amount of P2,894,797.00 should be
subjected to 5% withholding tax instead of the
10% tax rate;
C. The Honorable Court committed a
reversible error in holding that the withholding
tax assessment with respect to the 5%
withholding tax on rental deposit in the amount
of P10,523,821.99 should be cancelled; and
D. The Honorable Court committed reversible
error in holding that the remittance of final
withholding tax on royalties covering the period
January to March 1998 was filed on time.[10]
On April 28, 2005, the CTA-First Division denied
the motion for reconsideration. Unfazed, the
CIR filed a petition for review with the CTA-EB
raising identical issues:
1. Whether or not respondent (Sony) is
liable for the deficiency VAT in the amount of
P11,141,014.41;
2. Whether or not the commission expense
in the amount of P2,894,797.00 should be
subjected to 10% withholding tax instead of the
5% tax rate;
3. Whether or not the withholding
assessment with respect to the 5% withholding
tax on rental deposit in the amount
of P10,523,821.99 is proper; and
4. Whether or not the remittance of final
withholding tax on royalties covering the period
January to March 1998 was filed outside of
time.[11]
Finding no cogent reason to reverse the
decision of the CTA-First Division, the CTA-EB
dismissed CIRs petition on May 17, 2007. CIRs
motion for reconsideration was denied by the
CTA-EB on July 5, 2007.
The CIR is now before this Court via this petition
for review relying on the very same grounds it
raised before the CTA-First Division and the
CTA-EB. The said grounds are reproduced
below:
GROUNDS FOR THE ALLOWANCE OF THE
PETITION
I ordered the CIR to file its reply thereto. The CIR
THE CTA EN BANC ERRED IN RULING THAT
RESPONDENT IS NOT LIABLE FOR DEFICIENCY
VAT IN THE AMOUNT OF PHP11,141,014.41.
II
AS TO RESPONDENTS DEFICIENCY EXPANDED
WITHHOLDING TAX IN THE AMOUNT OF
PHP1,992,462.72:
A. THE CTA EN BANC ERRED IN RULING THAT
THE COMMISSION EXPENSE IN THE AMOUNT
OF PHP2,894,797.00 SHOULD BE SUBJECTED TO
A WITHHOLDING TAX OF 5% INSTEAD OF THE
10% TAX RATE.
B. THE CTA EN BANC ERRED IN RULING THAT
THE ASSESSMENT WITH RESPECT TO THE 5%
WITHHOLDING TAX ON RENTAL DEPOSIT IN THE
AMOUNT OF PHP10,523,821.99 IS NOT PROPER.
III
THE CTA EN BANC ERRED IN RULING THAT THE
FINAL WITHHOLDING TAX ON ROYALTIES
COVERING THE PERIOD JANUARY TO MARCH
1998 WAS FILED ON TIME.[12]
Upon filing of Sonys comment, the Court
subsequently filed a manifestation informing
the Court that it would no longer file a reply.
Thus, on December 3, 2008, the Court resolved
to give due course to the petition and to decide
the case on the basis of the pleadings filed.[13]
The Court finds no merit in the petition.
The CIR insists that LOA 19734, although it
states the period 1997 and unverified prior
years, should be understood to mean the fiscal
year ending in March 31, 1998.[14]The Court
cannot agree.
Based on Section 13 of the Tax Code, a Letter of
Authority or LOA is the authority given to the
appropriate revenue officer assigned to
perform assessment functions. It empowers or
enables said revenue officer to examine the
books of account and other accounting records
of a taxpayer for the purpose of collecting the
correct amount of tax.[15]The very provision of
the Tax Code that the CIR relies on is
unequivocal with regard to its power to grant
authority to examine and assess a taxpayer.
SEC. 6. Power of the Commissioner to Make
Assessments and Prescribe Additional
Requirements for Tax Administration and
Enforcement.
(A)Examination of Returns and Determination
of tax Due. After a return has been filed as
required under the provisions of this Code, the
Commissioner or his duly authorized
representative may authorize the examination
of any taxpayer and the assessment of the
correct amount of tax: Provided, however, That
failure to file a return shall not prevent the
Commissioner from authorizing the
examination of any taxpayer. x x x [Emphases
supplied]
Clearly, there must be a grant of authority
before any revenue officer can conduct an
examination or assessment. Equally important
is that the revenue officer so authorized must
not go beyond the authority given. In the
absence of such an authority, the assessment or
examination is a nullity.
As earlier stated, LOA 19734 covered the period
1997 and unverified prior years. For said
reason, the CIR acting through its revenue
officers went beyond the scope of their
authority because the deficiency VAT
assessment they arrived at was based on
records from January to March 1998 or using
the fiscal year which ended in March 31, 1998.
As pointed out by the CTA-First Division in its
April 28, 2005 Resolution, the CIR knew which
period should be covered by the investigation.
Thus, if CIR wanted or intended the
investigation to include the year 1998, it should
have done so by including it in the LOA or
issuing another LOA.
Upon review, the CTA-EB even added that the
coverage of LOA 19734, particularly the phrase
and unverified prior years, violated Section C of
Revenue Memorandum Order No. 43-90 dated
September 20, 1990, the pertinent portion of
which reads:
3. A Letter of Authority should cover a taxable
period not exceeding one taxable year. The
practice of issuing L/As covering audit of
unverified prior years is hereby prohibited. If
the audit of a taxpayer shall include more than
one taxable period, the other periods or years
shall be specifically indicated in the
L/A.[16] [Emphasis supplied]
On this point alone, the deficiency VAT
assessment should have been disallowed. Be
that as it may, the CIRs argument, that Sonys
advertising expense could not be considered as
an input VAT credit because the same was
eventually reimbursed by Sony International
Singapore (SIS), is also erroneous.
The CIR contends that since Sonys advertising
expense was reimbursed by SIS, the former
never incurred any advertising expense. As a
result, Sony is not entitled to a tax credit. At
most, the CIR continues, the said advertising
expense should be for the account of SIS, and
not Sony.[17]
The Court is not persuaded. As aptly found by
the CTA-First Division and later affirmed by the
CTA-EB, Sonys deficiency VAT assessment
stemmed from the CIRs disallowance of the
input VAT credits that should have been reimbursement was not even exclusively
realized from the advertising expense of the earmarked for Sonys advertising expense for it
latter.[18] It is evident under Section 110[19] of was but an assistance or aid in view of Sonys
the 1997 Tax Code that an advertising expense dire or adverse economic conditions, and was
duly covered by a VAT invoice is a legitimate only equivalent to the latters (Sonys)
business expense. This is confirmed by no less advertising expenses.
than CIRs own witness, Revenue Officer Antonio
Aluquin.[20] There is also no denying that Sony
incurred advertising expense. Aluquin testified Section 106 of the Tax Code explains when VAT
that advertising companies issued invoices in may be imposed or exacted. Thus:
the name of Sony and the latter paid for the
same.[21] Indubitably, Sony incurred and paid for
advertising expense/ services. Where the
SEC. 106. Value-added Tax on Sale of Goods or
money came from is another matter all
Properties.
together but will definitely not change said fact.

(A) Rate and Base of Tax. There shall be levied,

The CIR further argues that Sony itself admitted
assessed and collected on every sale, barter or
that the reimbursement from SIS was income
exchange of goods or properties, value-added
and, thus, taxable. In support of this, the CIR
tax equivalent to ten percent (10%) of the gross
cited a portion of Sonys protest filed before it:
selling price or gross value in money of the
goods or properties sold, bartered or
exchanged, such tax to be paid by the seller or
The fact that due to adverse economic transferor.
conditions, Sony-Singapore has granted to our
client a subsidy equivalent to the latters
advertising expenses will not affect the validity
Thus, there must be a sale, barter or exchange
of the input taxes from such expenses. Thus, at
of goods or properties before any VAT may be
the most, this is an additional income of our
levied. Certainly, there was no such sale, barter
client subject to income tax. We submit further
or exchange in the subsidy given by SIS to
that our client is not subject to VAT on the
Sony. It was but a dole out by SIS and not in
subsidy income as this was not derived from the
payment for goods or properties sold, bartered
sale of goods or services.[22]
or exchanged by Sony.

Insofar as the above-mentioned subsidy may be

In the case of CIR v. Court of Appeals
considered as income and, therefore, subject to
(CA),[23] the Court had the occasion to rule that
income tax, the Court agrees. However, the
services rendered for a fee even on
Court does not agree that the same subsidy
reimbursement-on-cost basis only and without
should be subject to the 10% VAT. To begin
realizing profit are also subject to VAT. The
with, the said subsidy termed by the CIR as
case, however, is not applicable to the present
case. In that case, COMASERCO rendered
service to its affiliates and, in turn, the affiliates
paid the former reimbursement-on-cost which
means that it was paid the cost or expense that
it incurred although without profit. This is not
true in the present case. Sony did not render
any service to SIS at all. The services rendered
by the advertising companies, paid for by Sony
using SIS dole-out, were for Sony and not SIS.
SIS just gave assistance to Sony in the amount
equivalent to the latters advertising expense
but never received any goods, properties or
service from Sony.
Regarding the deficiency EWT assessment,
more particularly Sonys commission expense,
the CIR insists that said deficiency EWT
assessment is subject to the ten percent (10%)
rate instead of the five percent (5%) citing
Revenue Regulation No. 2-98 dated April 17,
1998.[24] The said revenue regulation provides
that the 10% rate is applied when the recipient
of the commission income is a natural person.
According to the CIR, Sonys schedule of Selling,
General and Administrative expenses shows the
commission expense as commission/dealer
salesman incentive, emphasizing the word
salesman.
On the other hand, the application of the five
percent (5%) rate by the CTA-First Division is
based on Section 1(g) of Revenue
Regulations No. 6-85 which provides:
(g) Amounts paid to certain Brokers and Agents.
On gross payments to customs, insurance, real
estate and commercial brokers and agents of
professional entertainers five per centum
(5%).[25]
In denying the very same argument of the CIR in
its motion for reconsideration, the CTA-First
Division, held:
x x x, commission expense is indeed subject to
10% withholding tax but payments made to
broker is subject to 5% withholding tax
pursuant to Section 1(g) of Revenue Regulations
No. 6-85. While the commission expense in the
schedule of Selling, General and Administrative
expenses submitted by petitioner (SPI) to the
BIR is captioned as commission/dealer salesman
incentive the same does not justify the
automatic imposition of flat 10% rate. As
itemized by petitioner, such expense is
composed of Commission Expense in the
amount of P10,200.00 and Broker Dealer of
P2,894,797.00.[26]
The Court agrees with the CTA-EB when it
affirmed the CTA-First Division decision. Indeed,
the applicable rule is Revenue Regulations No.
6-85, as amended by Revenue Regulations No.
12-94, which was the applicable rule during the
subject period of examination and assessment
as specified in the LOA. Revenue Regulations
No. 2-98, cited by the CIR, was only adopted in
April 1998 and, therefore, cannot be applied in
the present case. Besides, the withholding tax
on brokers and agents was only increased to
10% much later or by the end of July 2001
under Revenue Regulations No. 6-2001.[27] Until
then, the rate was only 5%.
The Court also affirms the findings of both the
CTA-First Division and the CTA-EB on the
deficiency EWT assessment on the rental
deposit. According to their findings, Sony
incurred the subject rental deposit in the
amount of P10,523,821.99 only from January to
March 1998. As stated earlier, in the absence of
the appropriate LOA specifying the coverage,
the CIRs deficiency EWT assessment from
January to March 1998, is not valid and must be
disallowed.
Finally, the Court now proceeds to the third
ground relied upon by the CIR.
The CIR initially assessed Sony to be liable for
penalties for belated remittance of its FWT on
royalties (i) as of December 1997; and (ii) for
the period from January to March 1998. Again,
the Court agrees with the CTA-First Division
when it upheld the CIR with respect to the
royalties for December 1997 but cancelled that
from January to March 1998.
The CIR insists that under Section 3[28] of
Revenue Regulations No. 5-82 and Sections
2.57.4 and 2.58(A)(2)(a)[29] of Revenue
Regulations No. 2-98, Sony should also be made
liable for the FWT on royalties from January to
March of 1998. At the same time, it downplays
the relevance of the Manufacturing License
Agreement (MLA) between Sony and Sony-
Japan, particularly in the payment of royalties.
The above revenue regulations provide the
manner of withholding remittance as well as
the payment of final tax on royalty. Based on
the same, Sony is required to deduct and
withhold final taxes on royalty payments when
the royalty is paid or is payable. After which, the
corresponding return and remittance must be
made within 10 days after the end of each
month. The question now is when does the
royalty become payable?
Under Article X(5) of the MLA between Sony
and Sony-Japan, the following terms of royalty
payments were agreed upon:
(5)Within two (2) months following each semi-
annual period ending June 30 and December
31, the LICENSEE shall furnish to the LICENSOR a
statement, certified by an officer of the
LICENSEE, showing quantities of the MODELS
sold, leased or otherwise disposed of by the
LICENSEE during such respective semi-annual
period and amount of royalty due pursuant this
ARTICLE X therefore, and the LICENSEE shall pay
the royalty hereunder to the LICENSOR
concurrently with the furnishing of the above
statement.[30]
Withal, Sony was to pay Sony-Japan royalty
within two (2) months after every semi-annual
period which ends in June 30 and December 31.
However, the CTA-First Division found that
there was accrual of royalty by the end of
December 1997 as well as by the end of June
1998. Given this, the FWTs should have been
paid or remitted by Sony to the CIR on January
10, 1998 and July 10, 1998. Thus, it was correct
for the CTA-First Division and the CTA-EB in
ruling that the FWT for the royalty from January
to March 1998 was seasonably filed. Although
the royalty from January to March 1998 was
well within the semi-annual period ending June
30, which meant that the royalty may be
payable until August 1998 pursuant to the MLA,
the FWT for said royalty had to be paid on or
before July 10, 1998 or 10 days from its accrual DECISION
at the end of June 1998. Thus, when Sony
remitted the same on July 8, 1998, it was not
yet late.
YNARES-SANTIAGO, J.:

In view of the foregoing, the Court finds no

reason to disturb the findings of the CTA-EB.
WHEREFORE, the petition is DENIED.
SO ORDERED.
14. RIZAL COMMERCIAL G.R. No. 168498
This is a petition for review under Rule 45 of the
Rules of Court assailing the Decision[1] of the
Court of Tax Appeals (CTA) En Banc dated June
7, 2005 in C.T.A. EB No. 50 which affirmed the
Resolutions of the CTA Second Division dated
May 3, 2004[2] and November 5, 2004[3] in C.T.A.
Case No. 6475 denying petitioners Petition for
Relief from Judgment and the Motion for
Reconsideration thereof, respectively.

BANKING CORPORATION,
The undisputed facts are as follows:
Petitioner, Present:

Panganiban, C.J. (Chairperson),

On July 5, 2001, petitioner Rizal Commercial
- versus - Ynares-Santiago, Banking Corporation received a Formal Letter of
Austria-Martinez, Demand dated May 25, 2001 from the
respondent Commissioner of Internal Revenue
Callejo, Sr., and for its tax liabilities particularly for Gross
Onshore Tax in the amount of P53,998,428.29
Chico-Nazario, JJ.
and Documentary Stamp Tax for its Special
COMMISSIONER OF INTERNAL Savings Placements in the amount of
P46,717,952.76, for the taxable year 1997.[4]
REVENUE, Promulgated:

Respondent.
On July 20, 2001, petitioner filed a protest
June 16, 2006 letter/request for
reconsideration/reinvestigation pursuant to
x -------------------------------------------------------------
--------------------------- x
Section 228 of the National Internal Revenue Opposition[13] while petitioner submitted its
Code of 1997 (NIRC).[5] Manifestation and Counter-Motion.[14]

As the protest was not acted upon by the On May 3, 2004, the CTA Second Division
respondent, petitioner filed on April 30, 2002 a rendered a Resolution[15] denying petitioners
petition for review with the CTA for the Petition for Relief from Judgment.
cancellation of the assessments which was
docketed as C.T.A. Case No. 6475.[6]

Petitioners motion for reconsideration was

denied in a Resolution dated November 5,
On July 15, 2003, respondent filed a motion to 2004,[16] hence it filed a petition for review with the
resolve first the issue of CTAs
CTA En Banc, docketed as C.T.A. EB No. 50,
jurisdiction, which was granted by the CTA in a
[7]
which affirmed the assailed Resolutions of the
Resolution dated September 10, 2003.[8] The CTA Second Division in a Decision dated June 7,
petition for review was dismissed because it 2005.
was filed beyond the 30-day period following
the lapse of 180 days from petitioners
submission of documents in support of its
protest, as provided under Section 228 of the Hence, this petition for review based on the
NIRC and Section 11 of R.A. No. 1125, otherwise following grounds:
known as the Law Creating the Court of Tax
Appeals.
I.

Petitioner did not file a motion for reconsideration or an

appeal to the CTA En Banc from the dismissal of its petition for
review. Consequently, the September 10, 2003Resolution
THE HONORABLE CTA AND CTA EN
became final and executory on October 1, 2003 and Entry of BANC GRAVELY ERRED IN DENYING
Judgment was made on December 1, 2003.[9] Thereafter,
respondent sent a Demand Letter to petitioner for the payment
PETITIONERS PETITION FOR RELIEF, WITHOUT
of the deficiency tax assessments. FIRST AFFORDING IT THE OPPORTUNITY TO
ADDUCE EVIDENCE TO ESTABLISH THE FACTUAL
ALLEGATIONS CONSTITUTING ITS ALLEGED
On February 20, 2004, petitioner filed a Petition EXCUSABLE NEGLIGENCE, IN CLEAR VIOLATION
for Relief from Judgment[10] on the ground of OF PETITIONERS BASIC RIGHT TO DUE PROCESS.
excusable negligence of its counsels secretary
who allegedly misfiled and lost the September
10, 2003 Resolution. The CTA Second Division II.
set the case for hearing on April 2, 2004[11] during
which petitioners counsel was
present. Respondent
[12] filed an
CONSIDERING THAT THE SUBJECT ASSESSMENT,
INSOFAR AS IT INVOLVES ALLEGED DEFICIENCY
DOCUMENTARY STAMP TAXES ON SPECIAL
SAVINGS ACCOUNTS, IS AN ISSUE AFFECTING
ALL MEMBERS OF THE BANKING INDUSTRY,
PETITIONER, LIKE ALL OTHER BANKS, SHOULD
BE AFFORDED AN EQUAL OPPORTUNITY TO
FULLY LITIGATE THE ISSUE, AND HAVE THE CASE
DETERMINED BASED ON ITS MERITS, RATHER
THAN ON A MERE TECHNICALITY.[17]
Relief from judgment under Rule 38 of the Rules
of Court is a legal remedy that is allowed only in
exceptional cases whereby a party seeks to set
aside a judgment rendered against him by a
court whenever he was unjustly deprived of a
hearing or was prevented from taking an
appeal, in either case, because of fraud,
accident, mistake or excusable neglect.[18]
Petitioner argues that it was denied due process
when it was not given the opportunity to be
heard to prove that its failure to file a motion
for reconsideration or appeal from the dismissal
of its petition for review was due to the failure
of its employee to forward the copy of the
September 10, 2003 Resolution which
constitutes excusable negligence.
Petitioners argument lacks merit.
It is basic that as long as a party is given the
opportunity to defend his interests in due
course, he would have no reason to complain,
for it is this opportunity to be heard that makes
up the essence of due
process.[19] In Batongbakal v. Zafra,[20] the Court
held that:
There is no question that the essence of due
process is a hearing before conviction and
before an impartial and disinterested tribunal
but due process as a constitutional precept
does not, always and in all situations, require a
trial-type proceeding. The essence of due
process is to be found in the reasonable
opportunity to be heard and submit any
evidence one may have in support of ones
defense. To be heard does not only mean
verbal arguments in court; one may be heard
also through pleadings. Where opportunity to
be heard, either through oral arguments or
pleadings, is accorded, there is no denial of
procedural due process. (Emphasis supplied)
As correctly pointed by the Office of the
Solicitor General (OSG), the CTA Second Division
set the case for hearing on April 2, 2004 after
the filing by the petitioner of its petition for
relief from judgment. Petitioners counsel was
present on the scheduled hearing and in fact
orally argued its petition.
Moreover, after the CTA Second Division
dismissed the petition for relief from judgment
in a Resolution dated May 3, 2004, petitioner
filed a motion for reconsideration and the court
further required both parties to file their
respective memorandum. Indeed, petitioner
was not denied its day in court considering the
opportunities given to argue its claim.
Relief cannot be granted on the flimsy excuse
that the failure to appeal was due to the neglect
of petitioners counsel.[21] Otherwise, all that a
losing party would do to salvage his case would
be to invoke neglect or mistake of his counsel as
a ground for reversing or setting aside the
adverse judgment, thereby putting no end to
litigation.[22]
Negligence to be excusable must be one which
ordinary diligence and prudence could not have
guarded against and by reason of which the
rights of an aggrieved party have probably been
impaired.[23] Petitioners former counsels
omission could hardly be characterized as
excusable, much less unavoidable.
The Court has repeatedly admonished lawyers
to adopt a system whereby they can always
receive promptly judicial notices and pleadings
intended for them.[24]Apparently, petitioners
counsel was not only remiss in complying with
this admonition but he also failed to check
periodically, as an act of prudence and
diligence, the status of the pending case before
the CTA Second Division. The fact that counsel
allegedly had not renewed the employment of
his secretary, thereby making the latter no
longer attentive or focused on her work, did not
relieve him of his responsibilities to his client. It
is a problem personal to him which should not
in any manner interfere with his professional
commitments.
In exceptional cases, when the mistake of
counsel is so palpable that it amounts to gross
negligence, this Court affords a party a second
opportunity to vindicate his right. But this
opportunity is unavailing in the case at bar,
especially since petitioner had squandered the
various opportunities available to it at the
different stages of this case. Public interest
demands an end to every litigation and a
belated effort to reopen a case that has already
attained finality will serve no purpose other
than to delay the administration of justice.[25]
Since petitioners ground for relief is not well-
taken, it follows that the assailed judgment
stands. Assuming ex gratia argumenti that the
negligence of petitioners counsel is excusable,
still the petition must fail. As aptly observed by
the OSG, even if the petition for relief from
judgment would be granted, petitioner will not
fare any better if the case were to be returned
to the CTA Second Division since its action for
the cancellation of its assessments had already
prescribed.[26]
Petitioner protested the assessments pursuant
to Section 228 of the NIRC, which provides:
SEC. 228. Protesting of Assessment.- x x x.
xxxx
Within a period to be prescribed by
implementing rules and regulations, the
taxpayer shall be required to respond to said
notice. If the taxpayer fails to respond, the
Commissioner or his duly authorized
representative shall issue an assessment based
on his findings.
Such assessment may be protested
administratively by filing a request for
reconsideration or reinvestigation within thirty
(30) days from receipt of the assessment in such
form and manner as may be prescribed by
implementing rules and regulations. Within
sixty (60) days from filing of the protest, all
relevant supporting documents shall have been
submitted; otherwise, the assessment shall
become final.
If the protest is denied in whole or in part, or is
not acted upon within one hundred eighty (180)
days from submission of documents, the
taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax Appeals
within (30) days from receipt of the said
decision, or from the lapse of the one hundred
eighty (180)-day period; otherwise the decision
shall become final, executory and
demandable. (Emphasis supplied)
The CTA Second Division held:
Following the periods provided for in the
aforementioned laws, from July 20, 2001, that
is, the date of petitioners filing of protest, it had
until September 18, 2001 to submit relevant
documents and from September 18, 2001, the
Commissioner had until March 17, 2002 to issue
his decision. As admitted by petitioner, the
protest remained unacted by the Commissioner
of Internal Revenue. Therefore, it had until April
16, 2002 within which to elevate the case to
this court. Thus, when petitioner filed its
Petition for Review on April 30, 2002, the same
is outside the thirty (30) period.[27]
As provided in Section 228, the failure of a
taxpayer to appeal from an assessment on time
rendered the assessment final, executory and
demandable. Consequently, petitioner is
precluded from disputing the correctness of the
assessment.
In Ker & Company, Ltd. v. Court of Tax
Appeals,[28] the Court held that while the right to
appeal a decision of the Commissioner to the
Court of Tax Appeals is merely a statutory
remedy, nevertheless the requirement that it
must be brought within 30 days is
jurisdictional. If a statutory remedy provides as
a condition precedent that the action to enforce
it must be commenced within a prescribed
time, such requirement is jurisdictional and
failure to comply therewith may be raised in a
motion to dismiss.
In fine, the failure to comply with the 30-day
statutory period would bar the appeal and
deprive the Court of Tax Appeals of its
jurisdiction to entertain and determine the
correctness of the assessment.[29]
WHEREFORE, in view of the foregoing, the
Decision of the Court of Tax Appeals En
Banc dated June 7, 2005 in C.T.A. EB No. 50
affirming the Resolutions of the Court of Tax
Appeals Second Division dated May 3, 2004 and
November 5, 2004 in C.T.A. Case No. 6475
denying petitioners Petition for Relief from
Judgment and Motion for Reconsideration,
respectively, is AFFIRMED.
SO ORDERED.