Marinas, Rodeleine Grace C.

Case no.70. CIR v. CTA (Second Division) and Petron Corporation G.R. 207843 July 15, 2015

Facts:

Petron, which is engaged in the manufacture and marketing of petroleum products, imports
alkylate as a raw material or blending component for the manufacture of ethanol-blended motor
gasoline. For the period January 2009 to August 2011, as well as for the month of April 2012,
Petron transacted an aggregate of 22 separate importations for which petitioner the
Commissioner of Internal Revenue (CIR) issued Authorities to Release Imported Goods
(ATRIGs), categorically stating that Petron's importation of alkylate is exempt from the payment
of the excise tax because it was not among those articles enumerated as subject to excise tax
under Title VI of Republic Act No. (RA) 8424, as amended, or the 1997 National Internal
Revenue Code (NIRC). With respect, however, to Petron's alkylate importations covering the
period September 2011 to June 2012 (excluding April 2012), the CIR inserted, without prior
notice, a reservation for all ATRIGs issued, stating that:

This is without prejudice to the collection of the corresponding excise taxes, penalties and
interest depending on the final resolution of the Office of the Commissioner on the issue of
whether this item is subject to the excise taxes under the National Internal Revenue Code of
1997, as amended.

In June 2012, Petron imported 12,802,660 liters of alkylate and paid value-added tax (VAT) in
the total amount of ?41,657,533.00 as evidenced by Import Entry and Internal Revenue
Declaration (IEIRD) No. SN 122406532. Based on the Final Computation, said importation was
subjected by the Collector of Customs of Port Limay, Bataan, upon instructions of the
Commissioner of Customs (COC), to excise taxes of ₱4.35 per liter, or in the aggregate amount
of ₱55,691,571.00, and consequently, to an additional VAT of 12% on the imposed excise tax in
the amount of ₱6,682,989.00.8 The imposition of the excise tax was supposedly premised on
Customs Memorandum Circular (CMC) No. 164-2012 dated July 18, 2012, implementing the
Letter dated June 29, 2012 issued by the CIR, which states that:

Alkylate which is a product of distillation similar to that of naphta, is subject to excise tax under
Section 148( e) of the National Internal Revenue Code (NIRC) of 1997.

In view of the CIR's assessment, Petron filed before the CTA a petition for review,10 docketed
as CTA Case No. 8544, raising the issue of whether its importation of alkylate as a blending
component is subject to excise tax as contemplated under Section 148 (e) of the NIRC.

On October 5, 2012, the CIR filed a motion to dismiss on the grounds of lack of jurisdiction and
prematurity

Issue: Whether the CTA properly assumed jurisdiction over the petition assailing the imposition
of excise tax on Petron's importation of alkylate based on Section 148 (e) of the NIRC.

Ruling:
In this case, there was even no tax assessment to speak of. While customs collector Federico
Bulanhagui himself admitted during the CTA's November 8, 2012 hearing that the computation
he had written at the back page of the IEIRD served as the final assessment imposing excise tax
on Petron's importation of alkylate, the Court concurs with the CIR's stance that the subject
IEIRD was not yet the customs collector's final assessment that could be the proper subject of
review. And even if it were, the same should have been brought first for review before the COC
and not directly to the CTA. It should be stressed that the CTA has no jurisdiction to review by
appeal, decisions of the customs collector. The TCC prescribes that a party adversely affected by
a ruling or decision of the customs collector may protest such ruling or decision upon payment of
the amount due and, if aggrieved by the action of the customs collector on the matter under
protest, may have the same reviewed by the COC. It is only after the COC shall have made an
adverse ruling on the matter may the aggrieved party file an appeal to the CTA. he fact that there
is no decision by the COC to appeal from highlights Petron's failure to exhaust administrative
remedies prescribed by law. Before a party is allowed to seek the intervention of the courts, it is
a pre-condition that he avail of all administrative processes afforded him, such that if a remedy
within the administrative machinery can be resorted to by giving the administrative officer every
opportunity to decide on a matter that comes within his jurisdiction, then such remedy must be
exhausted first before the court's power of judicial review can be sought, otherwise, the
premature resort to the court is fatal to one's cause of action.40 While there are exceptions to the
principle of exhaustion of administrative remedies, it has not been sufficiently shown that the
present case falls under any of the exceptions.

WHEREFORE, the petition is GRANTED. The Resolutions dated February 13, 2013 and May 8,
2013 of the Court of Tax Appeals (CTA), Second Division in CTA Case No. 8544 are hereby
REVERSED and SET ASIDE. The petition for review filed by private respondent Petron
Corporation before the CTA is DISMISSED for lack of jurisdiction and prematurity.

Case no. 71. Mitsubishi Motors Philippines v. Bureau of Customs G.R. 209830 June 17, 2015

Facts:

The instant case arose from a collection suit for unpaid taxes and customs duties in the aggregate
amount of P46,844,385.00 filed by respondent against petitioner Mitsubishi Motors Philippines
Corporation (petitioner) before the Regional Trial Court of Manila, Branch 17 (RTC)
Respondent alleged that from 1997 to 1998, petitioner was able to secure tax credit certificates
(TCCs) from various transportation companies; after which, it made several importations and
utilized said TCCs for the payment of various customs duties and taxes in the aggregate amount
of 46,844,385.00. Believing the authenticity of the TCCs, respondent allowed petitioner to use
the same for the settlement of such customs duties and taxes. However, a post-audit
investigation of the Department of Finance revealed that the TCCs were fraudulently secured
with the use of fake commercial and bank documents, and thus, respondent deemed that
petitioner never settled its taxes and customs duties pertaining to the aforesaid importations.
Thereafter, respondent demanded that petitioner pay its unsettled tax and customs duties, but to
no avail. Hence, it was constrained to file the instant complaint. In its defense, petitioner
maintained, inter alia, that it acquired the TCCs from their original holders in good faith and that
they were authentic, and thus, their remittance to respondent should be considered as proper
settlement of the taxes and customs duties it incurred in connection with the aforementioned
importations. Initially, the RTC dismissed the collection case due to the continuous absences of
respondent’s counsel during trial. On appeal to the CA, and eventually the Court, the said case
was reinstated and trial on the merits continued before the RTC. After respondent’s presentation
of evidence, petitioner filed a Demurrer to Plaintiff’s Evidence on February 10, 2012, essentially
contending that respondent failed to prove by clear and convincing evidence that the TCCs were
fraudulently procured, and thus, prayed for the dismissal of the complaint. In turn, respondent
filed an Opposition dated March 7, 2012 refuting petitioner’s contentions.

RTC ruling

RTC granted Mitsubishi’s demurrer to Evidence, dismissed BOC’s collection case on the ground
of insufficiency of evidence

CA ruling

CA referred the records of the collection case to the CTA for proper disposition of the appeal.
Mitsubishi filed a MR arguing that since CA has no jurisdiction over BOC’s appeal, it cannot
perform any action on it except to order its dismissal. DENIED. Hence, this petition.

Issue:

Whether the CA correctly referred the records of the collection case to the CTA for proper
disposition of the appeal taken by respondent.

Ruling:

The petition is meritorious.

In the instant case, the CA has no jurisdiction over respondent’s appeal; hence, it cannot perform
any action on the same except to order its dismissal pursuant to Section 2, Rule 50 of the Rules
of Court. Therefore, the act of the CA in referring respondent’s wrongful appeal before it to the
CTA under the guise of furthering the interests of substantial justice is blatantly erroneous, and
thus, stands to be corrected. WHEREFORE, the petition is GRANTED..

Case no. 72. Republic v. Heirs of Gabriel Q. Fernandez G.R. 175493 March 25, 2015

Facts:

The Heirs of Gabriel Q. Fernandez (Heirs of Fernandez) are the owners of an 11,165-square-
meter property in Barangay Tuyo, Balanga, Bataan. The Republic, through its Verified
Complaint for Expropriation, alleged that the Department of Public Works and Highways
intended to construct a four-lane highway in Barangay Tuyo. It further alleged that it was
necessary to acquire the properties of the Heirs of Fernandez and Sotera Santuyo for that
purpose, but its offer to purchase was refused. It also alleged that the adjacent properties were
already acquired by negotiation. The Republic prayed that a Writ of Possession be issued in its
favor upon the filing of the Petition and the deposit of the value of the properties "as
provisionally ascertained and fixed by the court, which should not be more than P50.00 per
square meter." In their Answer, the Heirs of Fernandez admitted that there was "nobility and
utility" in the construction of the highway but disputed the necessity of expropriating their
property. They argued that the expropriation of their property was not permitted by the
Constitution and that the Republic must first comply with the guidelines stated in Section 4 of
Republic Act No. 8974 and Section 12 of its Implementing Rules and Regulations before a Writ
of Possession can be issued. They also alleged that the fair and true market value of their
property was 200.00 per square meter. On the issue, however, on the correct valuation of the
property, the Court of Appeals relied on the Heirs of Fernandez's copy of the Bureau of Internal
Revenue zonal valuation and Gabriel Q. Fernandez's tax declaration submitted by the Republic,
which categorized the property as "A1" or "1st agricultural land" valued at P50.00 per square
meter. Citing Section 4 of Republic Act No. 8974, the Court of Appeals ruled that it was only
upon the payment of P558,250.00, which was 100% of the zonal value of the property, and the
submission of a certificate of availability of funds that a Writ of Possession may be issued.

Issue:

Whether the Court of Appeals erred in setting aside petitioner Republic's Writ of Possession for
the latter's failure to comply with Section 4 of Republic Act No. 8974

Ruling:

A Writ of Possession may be issued only upon full compliance with Section 4 of Republic Act
No. 8974.

Before the state may expropriate private property for a national infrastructure project, it must
first comply with the requisites in Republic Act No. 8974, otherwise known as An Act to
Facilitate the Acquisition of Right-of-Way, Site or Location for National Government
Infrastructure Projects and for Other Purposes. Section 4 of Republic Act No. 8974 states:
Section 4. Guidelines for Expropriation Proceedings. - Whenever it is necessary to acquire real
property for the right-of-way or location for any national government infrastructure project
through expropriation, the appropriate implementing agency shall initiate the expropriation
proceedings before the proper court under the following guidelines:

(a)
Upon the filing of the complaint, and after due notice to the defendant, the implementing agency
shall immediately pay the owner of the property the amount equivalent to the sum, of (1) . one
hundred percent (100%) of the value of the property based on the current relevant zonal
valuation of the Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or
structures as determined under Section 7[38] hereof;
(b)
In provinces, cities, municipalities and other areas where there is no zonal valuation, the BIR is
hereby mandated within the period of sixty (60) days from the date of the expropriation case, to
come up with a zonal valuation for said area; and
(c)
In case the completion of a government infrastructure project is of utmost urgency and
importance, and there is no existing valuation of the area concerned, the implementing agency
shall immediately pay the owner of the property its proffered value taking into consideration the
standards prescribed in Section 5 hereof.
Upon compliance with the guidelines abovementioned, the court shall immediately issue to the
implementing agency an order to take possession of the property and start the implementation of
the project.

Before the court can issue a Writ of Possession, the implementing agency shall present to the
court a certificate of availability of funds from the proper official concerned.

In the event that the owner of the property contests the implementing agency's proffered value,
the court shall determine the just compensation to be. paid the owner within sixty (60) days from
the date of filing of the expropriation case. When the decision of the court becomes final and
executory, the implementing agency shall pay the owner the difference between the amount
already paid and the just compensation as determined by the court.

Under Section 4 of Republic Act No. 8974, the implementing agency must, upon filing of the
expropriation complaint, immediately pay the property owner an amount equivalent to 100% of
the value of the property based on the current relevant zonal valuation by the Bureau of Internal
Revenue and the value of any improvements or structure on a replacement cost method. The law
further mandates that courts may issue a Writ of Possession only upon the presentation by the
implementing agency of a certificate of availability of funds.

The provisional value that must be paid under Section 4 of Republic Act No. 8974 should not be
confused with the payment of just compensation required by the Constitution[39] in the exercise
of the power of eminent domain.