Republic of the
SUPREME COURT
SECOND DIVISION
|
PILIPINAS
SHELL PETROLEUM CORPORATION, Petitioner, -
versus - COMMISSIONER
OF INTERNAL REVENUE, Respondent. |
|
G.R. No. 172598 Present: QUISUMBING,
J., Chairperson, CARPIO, CARPIO
MORALES, TINGA,
and VELASCO,
JR., JJ. Promulgated: December
21, 2007 |
x-----------------------------------------------------------------------------------------x
D E C I S I O N
VELASCO, JR., J.:
The Case
Before us
is a Petition for Review on Certiorari under Rule 45 assailing the April 28, 2006
Decision[1] of
the Court of Tax Appeals (CTA) En Banc in CTA EB No. 64, which upheld
respondent’s assessment against petitioner for deficiency excise taxes for the
taxable years 1992 and 1994 to 1997. Said
En Banc decision reversed and set
aside the August 2, 2004 Decision[2]
and January 20, 2005 Resolution[3] of
the CTA Division in CTA Case No. 6003 entitled Pilipinas Shell Petroleum
Corporation v. Commissioner of Internal Revenue, which ordered the
withdrawal of the April 22, 1998 collection letter of respondent and enjoined
him from collecting said deficiency excise taxes.
The Facts
Petitioner
Pilipinas Shell Petroleum Corporation (PSPC) is the Philippine subsidiary of
the international petroleum giant Shell, and is engaged in the importation, refining
and sale of petroleum products in the country.
From
1988 to 1997, PSPC paid part of its excise tax liabilities with Tax Credit
Certificates (TCCs) which it acquired through the Department of Finance (DOF) One
Stop Shop Inter-Agency Tax Credit and
Through
the Center, PSPC acquired for value various Center-issued TCCs which were
correspondingly transferred to it by other BOI-registered companies through Center-approved
Deeds of Assignments. Subsequently, when
PSPC signified its intent to use the TCCs to pay part of its excise tax
liabilities, said payments were duly approved by the Center through the
issuance of Tax Debit Memoranda (TDM), and the BIR likewise accepted as payments
the TCCs by issuing its own TDM covering said TCCs, and the corresponding
Authorities to Accept Payment for Excise Taxes (ATAPETs).
However,
on
PSPC
protested the
On
[T]he instant
petition for review is GRANTED. The
collection letter issued by the Respondent dated
Respondent
elevated the July 23, 1999 CTA Decision in CTA Case No. 5728 to the Court of
Appeals (CA) through a petition for review[7] docketed
as CA-G.R. SP No. 55329. This case was subsequently consolidated with the
similarly situated case of Petron Corporation under CA-G.R. SP No. 55330. To date, these consolidated cases are still
pending resolution before the CA.
Meanwhile,
in late 1999, and despite the pendency of CA-G.R. SP No. 55329, the Center sent
several letters to PSPC dated
In its
letter dated
On
PSPC
protested[13] the
assessment letter, but the protest was denied by the BIR, constraining it to
file another petition for review[14]
before the CTA, docketed as CTA Case No. 6003.
Parenthetically,
on
The Ruling of the Court of Tax
Appeals Division
(CTA Case No. 6003)
On
[T]he instant petition is hereby GRANTED. Accordingly, the assessment issued by the
respondent dated
In granting PSPC’s petition for review, the CTA Division
held that respondent failed to prove with convincing evidence that the TCCs
transferred to PSPC were fraudulently issued as respondent’s finding of alleged
fraud was merely speculative. The CTA Division
found that neither the respondent nor the Center could state what sales figures
were used as basis for the TCCs to issue, as they merely based their
conclusions on the audited financial statements of the transferors which did
not clearly show the actual export sales of transactions from which the TCCs
were issued.
In the same vein, the CTA Division held that the machinery
and equipment cannot be the basis in concluding that transferor could not have
produced the volume of products indicated in its BOI registration. It further ruled
that the Center erroneously based its findings of fraud on two possibilities: either
the transferor did not declare its export sales or underdeclare them. Thus, no
specific fraudulent acts were identified or proven. The CTA Division concluded that the TCCs
transferred to PSPC were not fraudulently issued.
On the issue of whether a TCC transferee should be
a supplier of either capital equipment, materials, or supplies, the CTA Division
ruled in the negative as the Memorandum of Agreement (MOA)[19]
between the DOF and BOI executed on
Anent the affidavits of former Officers or General
Managers of transferors attesting that no IFO deliveries were made by PSPC, the
CTA Division ruled that such cannot be given probative value as the affiants
were not presented during trial of the case.
However, the CTA Division said that the
Respondent forthwith filed his motion for
reconsideration of the above decision which was rejected on
The Ruling of the Court of Tax
Appeals En Banc
(CTA EB No. 64)
The CTA En
Banc, however, rendered the assailed
WHEREFORE, premises considered, the Petition for Review is hereby
GRANTED. The assailed Decision and
Resolution dated
Basic Tax P285,766,987.00
Add:
Surcharge (25%) 71,441,746.75
Interest (20%) 213,368,667.86
Total Tax Due P570,577,401.61
In addition,
respondent is hereby ORDERED TO PAY 20% delinquency interest thereon per annum
computed from
SO ORDERED.[24]
The CTA En Banc resolved respondent’s appeal
by holding that PSPC was liable to pay the alleged excise tax deficiencies arising
from the cancellation of the TDM issued against its TCCs which were used to pay
some of its excise tax liabilities for the years 1992 and 1994 to 1997. It ratiocinated
in this wise, to wit:
First, the finding of the DOF that the TCCs had no monetary
value was undisputed. Consequently, there was a non-payment of excise taxes
corresponding to the value of the TCCs used for payment. Since it was PSPC which acquired the subject
TCCs from a third party and utilized the same to discharge its own obligations,
then it must bear the loss.
Second, the TCCs carry a suspensive condition, that is,
their issuance was subject to post audit in order to determine if the holder is
indeed qualified to use it. Thus, until
final determination of the holder’s right to the issuance of the TCCs, there is
no obligation on the part of the DOF or BIR to recognize the rights of the
holder or assignee. And, considering that the subject TCCs were canceled after
the DOF’s finding of fraud in its issuance, the assignees must bear the
consequence of such cancellation.
Third, PSPC was not an innocent purchaser for value of
the TCCs as they contained liability clauses expressly stipulating that the
transferees are solidarily liable with the transferors for any fraudulent act
or violation of pertinent laws, rules, or regulations relating to the transfer
of the TCC.
Fourth, the BIR was not barred by estoppel as it is a
settled rule that in the performance of its governmental functions, the State
cannot be estopped by the neglect of its agents and officers. Although the TCCs were confirmed to be valid
in view of the TDM, the subsequent finding on post audit by the Center
declaring the TCCs to be fraudulently issued is entitled to the presumption of
regularity. Thus, the cancellation of
the TCCs was legal and valid.
Fifth, the BIR’s assessment did not prescribe
considering that no payment took effect as the subject TCCs were canceled upon
post audit. Consequently, the filing of
the tax return sans payment due to the cancellation of the TCCs resulted in the
falsity and/or omission in the filing of the tax return which put them in the
ambit of the applicability of the 10-year prescriptive period from the
discovery of falsity, fraud, or omission.
Finally, however, the CTA En Banc applied Aznar
v. Court of Tax Appeals,[25]
where this Court held that without proof that the taxpayer participated in
the fraud, the 50% fraud surcharge is not imposed, but the 25% late payment and
the 20% interest per annum are applicable.
Thus, PSPC filed this petition with the following
issues:
I
WHETHER OR NOT THE COURT OF TAX APPEALS
GRAVELY ERRED IN ORDERING PETITIONER PSPC TO PAY THE AMOUNT OF TWO HUNDRED
EIGHTY FIVE MILLION SEVEN HUNDRED SIXTY SIX THOUSAND NINE HUNDRED EIGHTY SEVEN
PESOS (P285,766,987.00), AS ALLEGED DEFICIENCY EXCISE TAXES, FOR THE TAXABLE
YEARS, 1992 AND 1994 TO 1997.
II
WHETHER OR NOT THE COURT OF TAX APPEALS
GRAVELY ERRED IN ISSUING THE QUESTIONED DECISION DATED
III
WHETHER OR NOT THE COURT OF TAX APPEALS
GRAVELY ERRED IN IMPOSING SURCHARGES AND INTERESTS ON THE ALLEGED DEFICIENCY
EXCISE TAX OF PETITIONER PSPC.
IV
WHETHER OR NOT THE ASSESSMENT DATED
The
Court’s Ruling
The
petition is meritorious.
First Issue: Assessment of excise tax deficiencies
PSPC
contends that respondent had no basis in issuing the
PSPC
likewise assails the BIR assessment on prescription for having been issued
beyond the three-year prescriptive period under Sec. 203 of the National
Internal Revenue Code (NIRC); and neither can the BIR use the 10-year prescriptive
period under Sec. 222(a) of the NIRC, as PSPC has neither failed to file a
return nor filed a false or fraudulent return with intent to evade taxes.
Respondent,
on the other hand, counters that petitioner is liable for the tax liabilities
adjudged by the CTA En Banc since PSPC, as transferee of the subject
TCCs, is bound by the liability clause found at the dorsal side of the TCCs
which subjects the genuineness, validity, and value of the TCCs to the outcome
of the post-audit to be conducted by the Center. He relies on the CTA En Banc’s finding of the presence of a
suspensive condition in the issuance of the TCCs. Thus, according to him, with the finding by
the Center that the TCCs were fraudulently procured the subsequent cancellation
of the TCCs resulted in the non-payment by PSPC of its excise tax liabilities
equivalent to the value of the canceled TCCs.
Respondent
likewise posits that the Center erred in approving the transfer and issuance of
the TDM, and of the TDM and ATAPETs issued by the BIR in accepting the utilization
by PSPC of the subject TCCs, as payments for excise taxes cannot prejudice the
BIR from assessing the tax deficiencies of PSPC resulting from the non-payment
of the deficiencies after due cancellation by the Center of the subject TCCs
and corresponding TDM.
Respondent
concludes that due to the fraudulent procurement of the subject TCCs, his right
to assess has not yet prescribed. He
relies on the finding of the Center that the fraud was discovered only after
the post-audit was conducted; hence, Sec. 222(a) of the NIRC applies, reckoned
from
We find
for PSPC.
The CTA
En Banc upheld respondent’s theory by holding that the Center has the authority
to do a post-audit on the TCCs it issued; the TCCs are subject to the results
of the post-audit since their issuance is subject to a suspensive condition;
the transferees of the TCCs are solidarily liable with the transferors on the
result of the post-audit; and the cancellation of the subject TCCs resulted in
PSPC having to bear the loss anchored on its solidary liability with the
transferor of the subject TCCs.
We can
neither sustain respondent’s theory nor that of the CTA En Banc.
First, in overturning the
August 2, 2004 Decision of the CTA Division, the CTA En Banc applied Article 1181 of the Civil Code in this manner:
To completely
understand the matter presented before Us, it is worth emphasizing that the
statement on the subject certificate stating that it is issued subject to
post-audit is in the nature of a suspensive condition under Article 1181 of the
Civil Code, which is quoted hereunder for ready reference, to wit:
‘In conditional
obligations, the acquisition of rights, as well as the extinguishment or loss
of those already acquired, shall depend upon the happening of the event which
constitutes the condition.’
The
above-quoted article speaks of obligations. ‘These conditions affect
obligations in diametrically opposed ways.
If the suspensive condition happens, the obligation arises; in other
words, if the condition does not happen, the obligation does not come into
existence. On the other hand, the
resolutory condition extinguishes rights and obligations already existing; in
other words, the obligations and rights already exist, but under the threat of
extinction upon the happening of the resolutory condition’. (8 Manresa 130-131, cited on page 140, Civil Code
of the Philippines, Tolentino, 1962 ed., Vol. IV).
In adopting the
foregoing provision of law, this Court rules that the issuance of the tax
credit certificate is subject to the condition that a post-audit will
subsequently be conducted in order to determine if the holder is indeed qualified
for its issuance. As stated earlier, the holder takes the same subject to the
outcome of the post-audit. Thus, unless and until there is a final
determination of the holder’s right to the issuance of the certificate, there
exists no obligation on the part of the DOF or the BIR to recognize the rights
of then holder or transferee. x x x
x x x x
The validity
and propriety of the TCC to effectively constitute payment of taxes to the
government are still subject to the outcome of the post-audit. In other words,
when the issuing authority (DOF) finds, as in the case at bar, circumstances
which may warrant the cancellation of the certificate, the holder is inevitably
bound by the outcome by the virtue of the express provisions of the TCCs.[27]
The CTA
En Banc is incorrect.
Art.1181
tells us that the condition is suspensive
when the acquisition of rights or demandability of the obligation must await
the occurrence of the condition.[28] However,
Art. 1181 does not apply to the present case since the parties did NOT agree to a suspensive condition.
Rather, specific laws, rules, and regulations govern the subject TCCs, not the
general provisions of the Civil Code. Among the applicable laws that cover the
TCCs are EO 226 or the Omnibus Investments Code, Letter of Instructions No.
1355, EO 765, RP-US Military Agreement, Sec. 106(c) of the Tariff and Customs Code,
Sec. 106 of the NIRC, BIR Revenue Regulations (RRs), and others. Nowhere in the aforementioned laws does the
post-audit become necessary for the validity or effectivity of the TCCs. Nowhere in the aforementioned laws is it
provided that a TCC is issued subject to a suspensive condition.
The CTA
En Banc’s holding of the presence of a suspensive condition is untenable
as the subject TCCs duly issued by the Center are immediately effective and
valid. The suspensive condition as ratiocinated by the CTA En Banc is
one where the transfer contract was duly effected on the day it was executed
between the transferee and the transferor but the TCC cannot be enforced until
after the post-audit has been conducted.
In short, under the ruling of the CTA En Banc, even if the TCC
has been issued, the real and true application of the tax credit happens only
after the post-audit confirms the TCC’s validity and not before the confirmation;
thus, the TCC can still be canceled even if it has already been ostensibly
applied to specific internal revenue tax liabilities.
We are
not convinced.
We
cannot subscribe to the CTA En Banc’s holding that the suspensive
condition suspends the effectivity of the TCCs as payment until after the
post-audit. This strains the very nature
of a TCC.
A tax
credit is not specifically defined in our Tax Code,[29] but Art. 21 of EO 226 defines a tax
credit as “any of the credits against taxes and/or duties equal to those
actually paid or would have been paid to evidence which a tax credit
certificate shall be issued by the Secretary of Finance or his representative,
or the Board (of Investments), if so delegated by the Secretary of Finance.”
Tax credits were granted under EO 226 as incentives to encourage investments in
certain businesses. A tax credit
generally refers to an amount that may be “subtracted directly from one’s total
tax liability.”[30] It is therefore an “allowance
against the tax itself”[31]
or “a deduction from what is owed”[32]
by a taxpayer to the government. In RR
5-2000,[33] a
tax credit is defined as “the amount due to a taxpayer resulting from an
overpayment of a tax liability or erroneous payment of a tax due.”[34]
A TCC is
a certification, duly issued to the
taxpayer named therein, by the Commissioner or his duly authorized
representative, reduced in a BIR Accountable Form in accordance with the
prescribed formalities, acknowledging that the grantee-taxpayer named therein
is legally entitled a tax credit, the money value of which may be used in
payment or in satisfaction of any of his internal revenue tax
liability (except those excluded), or may be converted as a cash refund, or may
otherwise be disposed of in the manner and in accordance with the limitations,
if any, as may be prescribed by the provisions of these Regulations.[35]
From
the above definitions, it is clear that a TCC is an undertaking by the government
through the BIR or DOF, acknowledging that a taxpayer is entitled to a certain
amount of tax credit from either an overpayment of income taxes, a direct
benefit granted by law or other sources and instances granted by law such as on
specific unused input taxes and excise taxes on certain goods. As such, tax
credit is transferable in accordance with pertinent laws, rules, and
regulations.
Therefore,
the TCCs are immediately valid and effective after their issuance. As aptly
pointed out in the dissent of Justice Lovell Bautista in CTA EB No. 64, this is
clear from the Guidelines and Instructions found at the back of each TCC, which
provide:
1. This Tax Credit
Certificate (TCC) shall entitle the grantee to apply the tax credit against
taxes and duties until the amount is fully utilized, in accordance with the
pertinent tax and customs laws, rules and regulations.
x x x x
4. To acknowledge
application of payment, the
The authorized Revenue Officer/Customs
Collector to which payment/utilization was made shall accomplish the
Application of Tax Credit portion at the back of the certificate and affix his
signature on the column provided.
(Emphasis supplied.)
The
foregoing guidelines cannot be clearer on the validity and effectivity of the
TCC to pay or settle tax liabilities of the grantee or transferee, as they do
not make the effectivity and validity of the TCC dependent on the outcome of a
post-audit. In fact, if we are to
sustain the appellate tax court, it would be absurd to make the effectivity of
the payment of a TCC dependent on a post-audit since there is no contemplation
of the situation wherein there is no post-audit. Does the payment made become effective if no
post-audit is conducted? Or does the so-called
suspensive condition still apply as no law, rule, or regulation specifies a
period when a post-audit should or could be conducted with a prescriptive
period? Clearly, a tax payment through a
TCC cannot be both effective when made and dependent on a future event for its
effectivity. Our system of laws and
procedures abhors ambiguity.
Moreover,
if the TCCs are considered to be subject to post-audit as a suspensive
condition, the very purpose of the TCC would be defeated as there would be no
guarantee that the TCC would be honored by the government as payment for
taxes. No investor would take the risk
of utilizing TCCs if these were subject to a post-audit that may invalidate
them, without prescribed grounds or limits as to the exercise of said
post-audit.
The
inescapable conclusion is that the TCCs are not subject to post-audit as a
suspensive condition, and are thus valid and effective from their issuance. As such, in the present case, if the TCCs
have already been applied as partial payment for the tax liability of PSPC, a
post-audit of the TCCs cannot simply annul them and the tax payment made through
said TCCs. Payment has already been made
and is as valid and effective as the issued TCCs. The subsequent post-audit cannot void the TCCs
and allow the respondent to declare that utilizing canceled TCCs results in
nonpayment on the part of PSPC. As will be discussed, respondent and the Center
expressly recognize the TCCs as valid payment of PSPC’s tax liability.
Second, the only conditions
the TCCs are subjected to are those found on its face. And these are:
1. Post-audit and
subsequent adjustment in the event of computational discrepancy;
2. A reduction for any
outstanding account/obligation of herein claimant with the BIR and/or BOC; and
3. Revalidation with the
Center in case the TCC is not utilized or applied within one (1) year from date
of issuance/date of last utilization.
The
above conditions clearly show that the post-audit contemplated in the TCCs does
not pertain to their genuineness or validity, but on computational
discrepancies that may have resulted from the transfer and utilization of the
TCC.
This is
shown by a close reading of the first and second conditions above; the third
condition is self explanatory. Since a
tax credit partakes of what is owed by the State to a taxpayer, if the taxpayer
has an outstanding liability with the BIR or the BOC, the money value of the
tax credit covered by the TCC is primarily applied to such internal revenue
liabilities of the holder as provided under condition number two. Elsewise put, the TCC issued to a claimant is
applied first and foremost to any outstanding liability the claimant may have
with the government. Thus, it may happen
that upon post-audit, a TCC of a taxpayer may be reduced for whatever liability
the taxpayer may have with the BIR which remains unpaid due to inadvertence or
computational errors, and such reduction necessarily affects the balance of the
monetary value of the tax credit of the TCC.
For
example, Company A has been granted a TCC in the amount of PhP 500,000 through
its export transactions, but it has an outstanding excise tax liability of PhP
250,000 which due to inadvertence was erroneously assessed and paid at PhP
225,000. On post-audit, with the finding
of a deficiency of PhP 25,000, the utilization of the TCC is accordingly
corrected and the tax credit remaining in the TCC correspondingly reduced by PhP
25,000. This is a concrete example of a computational discrepancy which comes
to light after a post-audit is conducted on the utilization of the TCC. The same holds true for a transferee’s use of
the TCC in paying its outstanding internal revenue tax liabilities.
Other
examples of computational errors would include the utilization of a single TCC
to settle several internal revenue tax liabilities of the taxpayer or
transferee, where errors committed in the reduction of the credit tax running
balance are discovered in the post-audit resulting in the adjustment of the TCC
utilization and remaining tax credit balance.
Third, the post-audit the
Center conducted on the transferred TCCs, delving into their issuance and
validity on alleged violations by PSPC of the
The IRR
of EO 226, which incorporated the October 5, 1982 MOA between the MOF and BOI,
pertinently provides for the guidelines concerning the transferability of TCCs:
[T]he MOF and
the BOI, through their respective representatives, have agreed on the following
guidelines to govern the transferability of tax credit certificates:
1) All tax credit certificates issued to
BOI-registered enterprises under P.D. 1789 may be transferred under conditions
provided herein;
2) The transferee should be a BOI-registered
firm;
3) The transferee may apply such tax
credit certificates for payment of taxes, duties, charges or fees directly due
to the national government for as long as it enjoys incentives under P.D. 1789. (Emphasis supplied.)
The
above requirement has not been amended or repealed during the unfolding of the
instant controversy. Thus, it is clear from
the above proviso that it is only required that a TCC transferee be
BOI-registered. In requiring PSPC to
submit sales documents for its purported post-audit of the TCCs, the Center
gravely abused its discretion as these are not required of the transferee PSPC
by law and by the rules.
While the
October 5, 1982 MOA appears to have been amended by the August 29, 1989 MOA
between the DOF and BOI, such may not operate to prejudice transferees like
PSPC. For one, the August 29, 1989 MOA remains
only an internal agreement as it has neither been elevated to the level of nor
incorporated as an amendment in the IRR of EO 226. As aptly put by the CTA Division:
If the 1989 MOA
has validly amended the 1982 MOA, it would have been incorporated either
expressly or by reference in Rule VII of the Implementing Rules and Regulations
(IRRs) of E.O. 226. To date, said Rule
VII has not been repealed, amended or otherwise modified. It is noteworthy that the 1999 edition of the
official publication by the BOI of E.O. 226 and its IRRs (Exhibit R)
which is the latest version, as amended, has not mentioned expressly or by
reference [sic] 1989 MOA. The MOA
mentioned therein is still the 1982 MOA.
The 1982 MOA,
although executed as a mere agreement between the DOF and the BOI was elevated
to the status of a rule and regulation applicable to the general public by
reason of its having been expressly incorporated in Rule VII of the IRRs. On the other hand, the 1989 MOA which
purportedly amended the 1982 MOA, remained a mere agreement between the DOF and
the BOI because, unlike the 1982 MOA, it was never incorporated either
expressly or by reference to any amendment or revision of the said IRRs. Thus, it cannot be the basis of any
invalidation of the transfers of TCCs to petitioner nor of any other sanction
against petitioner.[36]
For
another, even if the August 29, 1989 MOA has indeed amended the IRR, which it
has not, still, it is ineffective and cannot prejudice third parties for lack
of publication as mandatorily required under Chapter 2 of Book VII, EO 292,
otherwise known as the Administrative Code of 1987, which pertinently provides:
Section 3. Filing.––(1) Every agency shall file
with the University of the
(2) The records officer of the agency, or his
equivalent functionary, shall carry out the requirements of this section under
pain of disciplinary action.
(3) A permanent register of all rules shall be
kept by the issuing agency and shall be open to public inspection.
Section 4. Effectivity.––In addition to other
rule-making requirement provided by law not inconsistent with this Book, each
rule shall become effective fifteen (15) days from the date of filing as above
provided unless a different date is fixed by law, or specified in the rule in
cases of imminent danger to public health, safety and welfare, the existence of
which must be expressed in a statement accompanying the rule. The agency shall take appropriate measures to
make emergency rules known to persons who may be affected by them.
Section 5. x x x
x
(2) Every rule establishing an offense or
defining an act which pursuant to law, is punishable as a crime or subject to a
penalty shall in all cases be published in full text.
It is
clear that the Center or DOF cannot compel PSPC to submit sales documents for
the purported post-audit, as PSPC has duly complied with the requirements of
the law and rules to be a qualified transferee of the subject TCCs.
Fourth, we likewise fail to
see the liability clause at the dorsal portion of the TCCs to be a suspensive
condition relative to the result of the post-audit. Said liability clause indicates:
LIABILITY
CLAUSE
Both the
TRANSFEROR and the TRANSFEREE shall be jointly and severally liable for any
fraudulent act or violation of the pertinent laws, rules and regulations
relating to the transfer of this TAX CREDIT CERTIFICATE. (Emphasis supplied.)
The
above clause to our mind clearly provides only for the solidary liability
relative to the transfer of the TCCs
from the original grantee to a transferee.
There is nothing in the above clause that provides for the liability of
the transferee in the event that the validity of the TCC issued to the original
grantee by the Center is impugned or where the TCC is declared to have been
fraudulently procured by the said original grantee. Thus, the solidary liability, if any, applies
only to the sale of the TCC to the transferee by the original grantee. Any fraud or breach of law or rule relating
to the issuance of the TCC by the Center to the transferor or the original
grantee is the latter’s responsibility and liability. The transferee in good faith and for value
may not be unjustly prejudiced by the fraud committed by the claimant or transferor
in the procurement or issuance of the
TCC from the Center. It is not only
unjust but well-nigh violative of the constitutional right not to be deprived
of one’s property without due process of law.
Thus, a re-assessment of tax liabilities previously paid through TCCs by
a transferee in good faith and for value is utterly confiscatory, more so when
surcharges and interests are likewise assessed.
A
transferee in good faith and for value of a TCC who has relied on the Center’s
representation of the genuineness and validity of the TCC transferred to it may
not be legally required to pay again the tax covered by the TCC which has been
belatedly declared null and void, that is, after the TCCs have been fully utilized
through settlement of internal revenue tax liabilities. Conversely, when the transferee is party to
the fraud as when it did not obtain the TCC for value or was a party to or has
knowledge of its fraudulent issuance, said transferee is liable for the taxes
and for the fraud committed as provided for by law.
In the
instant case, a close review of the factual milieu and the records reveals that
PSPC is a transferee in good faith and for value. No evidence was adduced that PSPC
participated in any way in the issuance of the subject TCCs to the corporations
who in turn conveyed the same to PSPC. It
has likewise been shown that PSPC was not involved in the processing for the approval
of the transfers of the subject TCCs from the various BOI-registered transferors.
Respondent,
through the Center, made much of the alleged non-payment through non-delivery
by PSPC of the IFOs it purportedly sold to the transferors covered by supply
agreements which were allegedly the basis of the Center for the approval of the
transfers. Respondent points to the
requirement under the August 29, 1989 MOA between the DOF and BOI, specifying
the requirement that “[t]he transferee should be a BOI-registered firm which is
a domestic capital equipment supplier, or a raw material and/or component
supplier of the transferor.”[37]
As
discussed above, the above amendment to the October 5, 1982 MOA between BOI and
MOF cannot prejudice any transferee, like PSPC, as it was neither incorporated
nor elevated to the IRR of EO 226, and for lack of due publication. The pro-forma supply agreements allegedly executed
by PSPC and the transferors covering the sale of IFOs to the transferors have
been specifically denied by PSPC.
Moreover, the above-quoted requirement is not required under the IRR of
EO 226. Therefore, it is incumbent for
respondent to present said supply agreements to prove participation by PSPC in
the approval of the transfers of the subject TCCs. Respondent failed to do this.
PSPC
claims to be a transferee in good faith of the subject TCCs. It believed that its tax obligations for 1992
and 1994 to 1997 had in fact been paid when it applied the subject TCCs,
considering that all the necessary authorizations and approvals attendant to
the transfer and utilization of the TCCs were present. It is undisputed that the transfers of the
TCCs from the original holders to PSPC were duly approved by the Center, which
is composed of a number of government agencies, including the BIR. Such approval was annotated on the reverse
side of the TCCs, and the Center even issued TDM which is proof of its approval
for PSPC to apply the TCCs as payment for the tax liabilities. The BIR issued its own TDM, also signifying
approval of the TCCs as payment for PSPC’s tax liabilities. The BIR also issued ATAPETs covering the
aforementioned BIR-issued TDM, further proving its acceptance of the TCCs as
valid tax payments, which formed part of PSPC’s total tax payments along with
checks duly acknowledged and received by BIR’s authorized agent banks.
Several
approvals were secured by PSPC before it utilized the transferred TCCs, and it relied
on the verification of the various government agencies concerned of the
genuineness and authenticity of the TCCs as well as the validity of their issuances. Furthermore, the parties stipulated in open
court that the BIR-issued ATAPETs for the taxes covered by the subject TCCs
confirm the correctness of the amount of excise taxes paid by PSPC during the
tax years in question.
Thus, it
is clear that PSPC is a transferee in good faith and for value of the subject
TCCs and may not be prejudiced with a re-assessment of excise tax liabilities
it has already settled when due with the use of the subject TCCs. Logically, therefore, the excise tax returns
filed by PSPC duly covered by the TDM and ATAPETs issued by the BIR confirming
the full payment and satisfaction of the excise tax liabilities of PSPC, have
not been fraudulently filed.
Consequently, as PSPC is a transferee in good faith and for value, Sec.
222(a) of the NIRC does not apply in the instant case as PSPC has neither been
shown nor proven to have committed any fraudulent act in the transfer and
utilization of the subject TCCs. With
more reason, therefore, that the three-year prescriptive period for assessment
under Art. 203 of the NIRC has already set in and bars respondent from
assessing anew PSPC for the excise taxes already paid in 1992 and 1994 to 1997. Besides, even if the period for assessment
has not prescribed, still, there is no valid ground for the assessment as the
excise tax liabilities of PSPC have been duly settled and paid.
Fifth, PSPC cannot be blamed
for relying on the Center’s approval for the transfers of the subject TCCs and
the Center’s acceptance of the TCCs for the payment of its excise tax
liabilities. Likewise, PSPC cannot be
faulted in relying on the BIR’s acceptance of the subject TCCs as payment for
its excise tax liabilities. This
reliance is supported by the fact that the subject TCCs have passed through
stringent reviews starting from the claims of the transferors, their issuance
by the Center, the Center’s approval for their transfer to PSPC, the Center’s
acceptance of the TCCs to pay PSPC’s excise tax liabilities through the
issuance of the Center’s TDM, and finally the acceptance by the BIR of the
subject TCCs as payment through the issuance of its own TDM and ATAPETs.
Therefore,
PSPC cannot be prejudiced by the Center’s turnaround in assailing the validity
of the subject TCCs which it issued in due course.
Sixth, we are of the view
that the subject TCCs cannot be canceled by the Center as these had already
been canceled after their application to PSPC’s excise tax liabilities. PSPC contends they are already functus
officio, not quite in the sense of being no longer effective, but in the
sense that they have been used up. When
the subject TCCs were accepted by the BIR through the latter’s issuance of TDM
and the ATAPETs, the subject TCCs were duly canceled.
The tax
credit of a taxpayer evidenced by a TCC is used up or, in accounting parlance,
debited when applied to the taxpayer’s internal revenue tax liability, and the
TCC canceled after the tax credit it represented is fully debited or used up. A credit is a payable or a liability. A tax credit, therefore, is a liability of
the government evidenced by a TCC. Thus,
the tax credit of a taxpayer evidenced by a TCC is debited by the BIR through a
TDM, not only evidencing the payment of the tax by the taxpayer, but likewise
deducting or debiting the existing tax credit with the amount of the tax paid.
For
example, a transferee or the tax claimant has a TCC of PhP 1 million, which was
used to pay income tax liability of PhP 500,000, documentary stamp tax
liability of PhP 100,000, and value-added tax liability of PhP 350,000, for an
aggregate internal revenue tax liability of PhP 950,000. After the payments
through the PhP 1 million TCC have been approved and accepted by the BIR
through the issuance of corresponding TDM, the TCC money value is reduced to
only PhP 50,000, that is, a credit balance of PhP 50,000. In this sense, the tax credit of the TCC has
been canceled or used up in the amount of PhP 950,000. Now, let us say the transferee or taxpayer
has excise tax liability of PhP 250,000, s/he only has the remaining PhP 50,000
tax credit in the TCC to pay part of said excise tax. When the transferee or taxpayer applies such
payment, the TCC is canceled as the money value of the tax credit it
represented has been fully debited or used up.
In short, there is no more tax credit available for the taxpayer to
settle his/her other tax liabilities.
In the
instant case, with due application, approval, and acceptance of the payment by
PSPC of the subject TCCs for its then outstanding excise tax liabilities in
1992 and 1994 to 1997, the subject TCCs have been canceled as the money value of
the tax credits these represented have been used up. Therefore, the DOF through the Center may not
now cancel the subject TCCs as these have already been canceled and used up
after their acceptance as payment for PSPC’s excise tax liabilities. What has been used up, debited, and canceled
cannot anymore be declared to be void, ineffective, and canceled anew.
Besides,
it is indubitable that with the issuance of the corresponding TDM, not only is
the TCC canceled when fully utilized, but the payment is also final subject
only to a post-audit on computational errors.
Under RR 5-2000, a TDM is
a certification, duly issued by the
Commissioner or his duly authorized representative, reduced in a BIR Accountable
Form in accordance with the prescribed formalities, acknowledging that the
taxpayer named therein has duly paid his internal revenue tax liability in the
form of and through the use of a Tax Credit Certificate, duly issued and
existing in accordance with the provisions of these Regulations. The Tax Debit Memo shall serve as the
official receipt from the BIR evidencing a taxpayer’s payment or satisfaction
of his tax obligation. The amount
shown therein shall be charged against and deducted from the credit balance of
the aforesaid Tax Credit Certificate.
Thus,
with the due issuance of TDM by the Center and TDM by the BIR, the payments
made by PSPC with the use of the subject TCCs have been effected and
consummated as the TDMs serve as the official receipts evidencing PSPC’s
payment or satisfaction of its tax obligation.
Moreover, the BIR not only issued the corresponding TDM, but it also
issued ATAPETs which doubly show the payment of the subject excise taxes of
PSPC.
Based
on the above discussion, we hold that respondent erroneously and without
factual and legal basis levied the assessment.
Consequently, the CTA En Banc erred in sustaining respondent’s
assessment.
Second
Issue: Cancellation of TCCs
PSPC
argues that the CTA En Banc erred in upholding the cancellation by the
Center of the subject TCCs it used in paying some of its excise tax liabilities
as the subject TCCs were genuine and authentic, having been subjected to
thorough and stringent procedures, and approvals by the Center. Moreover, PSPC posits that both the CTA’s Division
and En Banc duly found that PSPC had neither knowledge, involvement, nor
participation in the alleged fraudulent issuance of the subject TCCs, and,
thus, as a transferee in good faith and for value, it cannot be held solidarily
liable for any fraud attendant to the issuance of the subject TCCs. PSPC further asserts that the Center has no
authority to cancel the subject TCCs as such authority is lodged exclusively
with the BOI. Lastly, PSPC said that the
Center’s Excom Resolution No. 03-05-99 which the Center relied upon as basis
for the cancellation is defective, ineffective, and cannot prejudice third
parties for lack of publication.
As we
have explained above, the subject TCCs after being fully utilized in the settlement
of PSPC’s excise tax liabilities have been canceled, and thus cannot be canceled
anymore. For being immediately effective
and valid when issued, the subject TCCs have been duly utilized by transferee
PSPC which is a transferee in good faith and for value.
On the
issue of the fraudulent procurement of the TCCs, it has been asseverated that
fraud was committed by the TCC claimants who were the transferors of the
subject TCCs. We see no need to rule on
this issue in view of our finding that the real issue in this petition does not
dwell on the validity of the TCCs
procured by the transferor from the Center but on whether fraud or
breach of law attended the transfer of said TCCs by the transferor to the
transferee.
The
finding of the CTA En Banc that there
was fraud in the procurement of the subject TCCs is, therefore, irrelevant and
immaterial to the instant petition.
Moreover, there are pending criminal cases arising from the alleged
fraud. We leave the matter to the
anti-graft court especially considering the failure of the affiants to the
affidavits to appear, making these hearsay evidence.
We note
in passing that PSPC and its officers were not involved in any fraudulent act
that may have been undertaken by the transferors of subject TCCs, supported by
the finding of the Ombudsman Special Prosecutor Leonardo P. Tamayo that
Pacifico R. Cruz, PSPC General Manager of the Treasury and Taxation Department,
who was earlier indicted as accused in OMB-0-99-2012 to 2034 for violation of
Sec. 3(e) and (j) of RA 3019, as amended, otherwise known as the “Anti-Graft
and Corrupt Practices Act,” for allegedly conspiring with other accused in
defrauding and causing undue injury to the government,[38]
did not in any way participate in alleged fraudulent activities relative to the
transfer and use of the subject TCCs.
In a
Memorandum[39]
addressed to then Ombudsman Aniano A. Desierto, the Special Prosecutor Leonardo
P. Tamayo recommended dropping Pacifico Cruz as accused in Criminal Case Nos.
25940-25962 entitled People of the
Prosecutor Tamayo found that
Cruz’s involvement in the transfers of the subject TCCs came after the
applications for the transfers had been duly processed and approved; and that
Cruz could not have been part of the conspiracy as he cannot be presumed to
have knowledge of the irregularity, because the 1989 MOA, which prescribed the
additional requirement that the transferee of a TCC should be a supplier of the
transferor, was not yet published and made known to private parties at the time
the subject TCCs were transferred to PSPC.
The Memorandum of Special Prosecutor Tamayo was duly approved by then
Ombudsman Desierto. Consequently, on May
31, 2000, the Sandiganbayan Fifth Division, hearing Criminal Case Nos.
25940-25962, dropped Cruz as accused.[40]
But even
assuming that fraud attended the procurement of the subject TCCs, it cannot
prejudice PSPC’s rights as earlier explained since PSPC has not been shown or
proven to have participated in the perpetration of the fraudulent acts, nor is
it shown that PSPC committed fraud in the transfer and utilization of the
subject TCCs.
On the
issue of the authority to cancel duly issued TCCs, we agree with respondent
that the Center has concurrent authority with the BIR and BOC to cancel the
TCCs it issued. The Center was created
under Administrative Order No. (AO) 266 in relation to EO 226. A scrutiny of said executive issuances
clearly shows that the Center was granted the authority to issue TCCs pursuant
to its mandate under AO 266. Sec. 5 of
AO 266 provides:
SECTION
5. Issuance of Tax Credit Certificates and/or Duty
Drawback.—The Secretary of Finance shall designate his representatives who
shall, upon the recommendation of the CENTER, issue tax credit certificates
within thirty (30) working days from acceptance of applications for the
enjoyment thereof. (Emphasis supplied.)
On the
other hand, it is undisputed that the BIR under the NIRC and related statutes has
the authority to both issue and cancel TCCs it has issued and even those issued
by the Center, either upon full utilization in the settlement of internal
revenue tax liabilities or upon conversion into a tax refund of unutilized TCCs
in specific cases under the conditions provided.[41] AO 266 however is silent on whether or not
the Center has authority to cancel a TCC it itself issued. Sec. 3 of AO 266
reveals:
SECTION 3. Powers, Duties and Functions.—The
Center shall have the following powers, duties and functions:
a. To promulgate the necessary
rules and regulations and/or guidelines for the effective implementation of
this administrative order;
x x x x
g. To enforce compliance with tax credit/duty drawback
policy and procedural guidelines;
x x x
x
l. To perform such other
functions/duties as may be necessary or incidental in the furtherance of
the purpose for which it has been established. (Emphasis supplied.)
Sec. 3,
letter l. of AO 266, in relation to letters a. and g., does give ample
authority to the Center to cancel the TCCs it issued. Evidently, the Center cannot carry out its
mandate if it cannot cancel the TCCs it may have erroneously issued or those
that were fraudulently issued. It is
axiomatic that when the law and its implementing rules are silent on the matter
of cancellation while granting explicit authority to issue, an inherent and
incidental power resides on the issuing authority to cancel that which was
issued. A caveat however is required in
that while the Center has authority to do so, it must bear in mind the nature
of the TCC’s immediate effectiveness and validity for which cancellation may
only be exercised before a transferred TCC has been fully utilized or canceled
by the BIR after due application of the available tax credit to the internal
revenue tax liabilities of an innocent transferee for value, unless of course
the claimant or transferee was involved in the perpetration of the fraud in the
TCC’s issuance, transfer, or utilization. The utilization of the TCC will not
shield a guilty party from the consequences of the fraud committed.
While
we agree with respondent that the State in the performance of governmental
function is not estopped by the neglect or omission of its agents, and nowhere
is this truer than in the field of taxation,[42]
yet this principle cannot be applied to work injustice against an innocent
party. In the case at bar, PSPC’s rights
as an innocent transferee for value must be protected. Therefore, the remedy for respondent is to go
after the claimant companies who allegedly perpetrated the fraud. This is now the subject of a criminal
prosecution before the Sandiganbayan docketed as Criminal Case Nos. 25940-25962
for violation of RA 3019.
On the
issue of the publication of the Center’s Excom Resolution No. 03-05-99
providing for the “Guidelines and Procedures for the Cancellation, Recall and
Recovery of Fraudulently Issued Tax Credit Certificates,” we find that the
resolution is invalid and unenforceable.
It authorizes the cancellation of TCCs and TDM which are found to have
been granted without legal basis or based on fraudulent documents. The cancellation of the TCCs and TDM is
covered by a penal provision of the assailed resolution. Such being the case, it should have been
published and filed with the National Administrative Register of the
We
explained in People v. Que Po Lay[43] that a rule which carries a penal
sanction will bind the public if the public is officially and specifically
informed of the contents and penalties prescribed for the breach of the
rule. Since Excom Resolution No.
03-05-99 was neither registered with the U.P.
Third Issue: Imposition of surcharges and interests
PSPC claims
that having no deficiency excise tax liabilities, it may not be liable for the
late payment surcharges and annual interests.
This
issue has been mooted by our disquisition above resolving the first issue in that
PSPC has duly settled its excise tax liabilities for 1992 and 1994 to
1997. Consequently, there is no basis
for the imposition of a late payment surcharges and for interests, and no need
for further discussion on the matter.
Fourth Issue: Non-compliance with statutory and
procedural due process
Finally,
PSPC avers that its statutory and procedural right to due process was violated
by respondent in the issuance of the assessment. PSPC claims respondent violated RR 12-99
since no pre-assessment notice was issued to PSPC before the November 15, 1999
assessment. Moreover, PSPC argues that the
November 15, 1999 assessment effectively deprived it of its statutory right to
protest the pre-assessment within 30 days from receipt of the disputed
assessment letter.
While
this has likewise been mooted by our discussion above, it would not be amiss to
state that PSPC’s rights to substantive and procedural due process have indeed
been violated. The facts show that PSPC
was not accorded due process before the assessment was levied on it. The Center required PSPC to submit certain
sales documents relative to supposed delivery of IFOs by PSPC to the TCC
transferors. PSPC contends that it could
not submit these documents as the transfer of the subject TCCs did not require
that it be a supplier of materials and/or component supplies to the transferors
in a letter dated October 29, 1999 which was received by the Center on November
3, 1999. On the same day, the Center
informed PSPC of the cancellation of the subject TCCs and the TDM covering the
application of the TCCs to PSPC’s excise tax liabilities. The objections of PSPC were brushed aside by
the Center and the assessment was issued by respondent on November 15, 1999,
without following the statutory and procedural requirements clearly provided
under the NIRC and applicable regulations.
What is
applicable is RR 12-99, which superseded RR 12-85, pursuant to Sec. 244 in
relation to Sec. 245 of the NIRC implementing Secs. 6, 7,
204, 228, 247, 248, and 249 on the assessment of national internal revenue
taxes, fees, and charges. The procedures
delineated in the said statutory provisos and RR 12-99 were not followed by
respondent, depriving PSPC of due process in contesting the formal assessment
levied against it. Respondent ignored RR
12-99 and did not issue PSPC a notice for informal conference[44] and
a preliminary assessment notice, as required.[45] PSPC’s November 4, 1999 motion for
reconsideration of the purported Center findings and cancellation of the
subject TCCs and the TDM was not even acted upon.
PSPC
was merely informed that it is liable for the amount of excise taxes it
declared in its excise tax returns for 1992 and 1994 to 1997 covered by the
subject TCCs via the formal letter of demand and assessment notice. For
being formally defective, the November 15, 1999 formal letter of demand and
assessment notice is void. Paragraph
3.1.4 of Sec. 3, RR 12-99 pertinently provides:
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. The
same shall be sent to the taxpayer only by registered mail or by personal
delivery. x x x (Emphasis supplied.)
In
short, respondent merely relied on the findings of the Center which did not
give PSPC ample opportunity to air its side.
While PSPC indeed protested the formal assessment, such does not
denigrate the fact that it was deprived of statutory and procedural due process
to contest the assessment before it was issued.
Respondent must be more circumspect in the exercise of his functions, as
this Court aptly held in Roxas v. Court of Tax Appeals:
The power of taxation is
sometimes called also the power to destroy.
Therefore it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer. It
must be exercised fairly, equally and uniformly, lest the tax collector kill
the “hen that lays the golden egg.” And, in the order to maintain the general
public’s trust and confidence in the Government this power must be used justly
and not treacherously.[46]
WHEREFORE, the
petition is GRANTED. The April 28,
2006 CTA En Banc Decision in CTA EB
No. 64 is hereby REVERSED and SET ASIDE, and the August 2, 2004 CTA
Decision in CTA Case No. 6003 disallowing the assessment is hereby REINSTATED. The assessment of
respondent for deficiency excise taxes against petitioner for 1992 and 1994 to
1997 inclusive contained in the April 22, 1998 letter of respondent is canceled
and declared without force and effect for lack of legal basis. No pronouncement
as to costs.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate
Justice
WE
CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
ANTONIO T.
CARPIO CONCHITA
CARPIO MORALES
Associate Justice Associate Justice
DANTE O. TINGA
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
C E R T I F
I C A T I O N
Pursuant to Section 13, Article VIII of the
Constitution, and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
REYNATO
S. PUNO
Chief Justice
[1] Rollo, pp. 109-130. Penned by Associate
Justice Erlinda P. Uy and concurred in by Associate Justices Juanito C.
Castañeda, Jr., Caesar A. Casanova and Olga Palanca-Enriquez; with Dissenting
Opinion of Associate Justice Lovell R. Bautista, concurred in by Presiding
Justice Ernesto D. Acosta, id. at 131-145.
[2]
[3]
[4]
[5] CA
rollo, pp. 19-40. Penned by Associate Justice Amancio Q. Saga and
concurred in by Presiding Justice Ernesto D. Acosta and Associate Justice Ramon
O. De Veyra.
[6]
[7] Rollo,
pp. 511-526.
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
“An Act Expanding the Jurisdiction of the Court of Tax Appeals, Elevating its
Rank to the Level of a
[16]
Enacted on June 16, 1954.
[17]
Supra note 3.
[18] Rollo, p. 1741.
[19]
[20] The Omnibus
Investments Code of 1987, as Amended.
[21] Section 11. Section 18 of [RA 1125] is hereby amended as
follows:
SEC. 18.
Appeal to the Court of Tax Appeals En Banc.––No civil proceeding
involving matter arising under the National Internal Revenue Code, the Tariff
and Customs Code or the Local Government Code shall be maintained, except as
herein provided, until and unless an appeal has been previously filed with the
CTA and disposed of in accordance with the provisions of this Act.
A party adversely affected by a resolution of a
Division of the CTA on a motion for reconsideration or new trial, may file a
petition for review with the CTA en banc.
SEC. 19.
Review by Certiorari.––A party adversely affected by a decision or
ruling of the CTA en banc may file with the Supreme Court a verified petition
for review on certiorari pursuant to Rule 45 of the 1997 Rules of Civil
Procedure.
[22] Rollo,
pp. 1768-1863, dated March 28, 2005.
[23]
Supra note 2.
[24] Rollo, p. 129.
[25]
No. L-20569, August 23, 1974, 58 SCRA 519.
[26] Rollo,
pp. 26-27. Original in boldface.
[27]
[29] RA 8424 as
amended by RAs 8761 and 9010. Likewise,
the term “tax credit” is not defined in PD 1158, otherwise known as the National Internal Revenue Code of 1977,
as amended.
[30]
Garner, ed., Black’s
Law Dictionary 1501 (8th ed., 1999).
[31]
Smith, West’s
Tax Law Dictionary 177-178 (1993).
[32]
[33]
“Prescribing the Regulations Governing the Manner of the Issuance of Tax Credit
Certificates, and the Conditions for their Use, Revalidation and Transfer,”
issued by then Secretary of Finance Jose T. Pardo on July 19, 2000.
[34]
[35]
[36] Rollo,
pp. 1731-1732.
[37]
[38]
[39]
[40]
[41] See Sec. 204 in relation to Sec. 230 of
the NIRC.
[42] See Commissioner of Internal Revenue
v. Proctor and Gamble PMC, G.R. No. L-66838, April 15, 1988, 160 SCRA 560.
[44]
RR 12-99, Sec. 3, par. 3.1.1 states:
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.
[45]
RR 12-99, Sec. 3, par. 3.1.2 states:
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. 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.
[46]
No. L-25043, April 26, 1968, 23 SCRA 276, 282.