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PETRON CORPORATION, Petitioner, |
G.R. No. 180385
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- versus - COMMISSIONER
OF INTERNAL REVENUE,
Respondent. |
Present: Chairperson, VELASCO, JR., LEONARDO-DE
CASTRO, PEREZ, JJ. Promulgated: July 28, 2010 |
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PEREZ, J.:
Assailed in this petition for review
on certiorari filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure and Section 11 of Republic Act No.
9282[1] is
the Decision dated
The Facts
A corporation engaged in the
production of petroleum products, Petron is a Board of Investment (BOI)
registered enterprise in accordance with the provisions of the Omnibus
Investment Code, under Certificates of Registration No. 89-1037 and
D95-136. Pursuant to Deeds of
Assignment executed in its favor, Petron acquired Tax Credit Certificates (TCCs)
from, among others, the following BOI-registered entities, namely, Diamond
Knitting Corporation, Filstar Textile Industrial Corporation, Alliance Thread
Co., Inc., Fiber Tech. Corporation, Jantex Phils., Inc. and Master Colour
System Corporation.[4] Granted to the foregoing assignees pursuant
to Administrative Order No. 226, in relation to Executive Order No. 226,[5]
the TCCs were subject to the following conditions, to wit:
1. Post-audit
and subsequent adjustment in the event of computational discrepancy;
2. A
deduction for any outstanding account/obligation of claimant with the BIR
and/or BOC; and
3. Revalidation
with the Center in case the TCC is not utilized for payment within one (1) year
from the date of issuance/date of last utilization.
The assignments of the TCCs were duly approved by the Department of
Finance One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (the
Center), a tax credit window created under Administrative Order No. 226,[6]
dated February 7, 1992, composed of representatives from the Department of
Finance (DOF), the BOI, the Bureau of Customs (BOC) and the Bureau of Internal
Revenue (BIR). Issued DOF Tax Debit
Memos (DOF-TDMs) by the Center, Petron, as assignee of said TCCs, utilized the
same to pay its excise tax liabilities for the years 1993 to 1997. Upon Petron’s surrender of the DOF-TDMs, TCCs
and Deeds of Assignment, the corresponding Authorities to Accept Payment of
Excise Taxes (ATAPETs) were further issued by the BIR Collection Program
Division. Together with the aforesaid
documents, the ATAPETs were further submitted to the BIR Head Office which
issued BIR-TDMs signed by the Assistant Commissioner of Collection Service,
signifying acceptance of the TCCs as payment of Petron’s excise taxes.[7]
Pursuant to its undertaking under the aforesaid Deeds of Assignment, Petron
issued Credit Notes (CNs) in an equivalent amount in favor of its assignors
which, by themselves or thru their own assignees, used the same to avail of
fuel products from the former.[8] On the ground, however, that its use of TCCs
issued to said grantees was invalid for being violative of Rule IX of the Rules
and Regulations issued by the BOI to implement Presidential Decree No. 1789[9]
and Batas Pambansa Blg. 391,[10]
Petron received a collection letter dated April 22, 1998 from the BIR Revenue
District Office of South Makati, Metro Manila, demanding payment of the total
amount of P1,107,542,547.08 in unpaid taxes, surcharges and interests
for the years 1993 to 1997.[11] With the denial of its letters of protest to
the foregoing collection letter, Petron perfected an appeal which was docketed
as C.T.A. Case No. 5657 before the CTA.
Upholding Petron’s argument to the effect, among other matters, that its
status as a BOI-registered enterprise and its transactions with the original
grantees qualified it to be a transferee of the subject TCCs, the CTA rendered
a decision dated
WHEREFORE, in view of the foregoing, the instant
Petition for Review is hereby GRANTED.
The collection of the alleged delinquent excise taxes in the amount of P1,107,542,547.08
is hereby CANCELLED AND SET ASIDE for being contrary to law. Accordingly, Respondents are ENJOINED from
collecting the said amount of taxes against the petitioner.
SO ORDERED.[13]
During the pendency of the respondent’s appeal before the Court of
Appeals under docket of CA-G.R. No. 55330, the Center conducted a post-audit in
the premises. On October 24, 1999, the
Center cancelled TCCs worth P284,390,845.00 of the same TCCs[14]
acquired and used by Petron on the ground that they were fraudulently procured
and transferred. The cancellation was based on the following findings, viz.: (a) the grantees did not
manufacture and export at the volumes which served as bases for the grant of
the subject TCCs; and, (b) the grantees were not using fuel oil at the levels
which served as bases for the approval of the transfer of the same TCCs.[15] As a consequence of the cancellation,
respondent issued an Assessment dated November 15, 1999 (the Assessment),
directing Petron to pay deficiency excise taxes in the sum of P284,390,854.00
for the period 1995 to 1997, surcharges in the sum of P142,195,422.50
and interest in the sum of P224,747,996.42 or an aggregate amount of P651,334,263.92.[16]
In view of respondent’s inaction on the protest it filed to question the
factual and legal bases of the Assessment, Petron filed the
Served with summons, respondent filed its
At the pre-trial conference conducted in the case, the parties submitted
a Joint Stipulation of Facts and Issues dated
Subsequent to the parties’ filing of their respective memoranda[25]
and the submission of the case for decision, respondent filed a motion to
reopen the case for the purpose of presenting additional evidence.[26] With the grant of said motion in the
WHEREFORE, premises considered, this instant Petition
for Review is hereby DENIED for lack of merit.
Accordingly, petitioner is ORDERED TO PAY the respondent the amount of
FIVE HUNDRED EIGHTY MILLION TWO HUNDRED THIRTY SIX THOUSAND FIVE HUNDRED FIFTY
TWO AND 67/100 PESOS (P580,236,552.67), representing deficiency excise
taxes for the taxable years 1995 to 1997, computed as follows:
Basic Tax
P284,390,845.00
Add:
Late Payment
Surcharge (25%) P 71,097,711.25
Interest (20%) 224,747,996.42 295,847,707.67
P580,236,552.67
In addition, petitioner is ORDERED
TO PAY the respondent 20% delinquency interest per annum on the P580,236,552.67,
computed from
SO ORDERED.[32]
With the denial of its motion for
reconsideration of the foregoing decision[33]
for lack of merit in the CTA Second Division’s resolution dated
(a) The subsequent cancellation of the TCCs resulted
in the non-payment of the excise tax liabilities since the post-audit partook
the nature of a suspensive condition to the effectiveness of Petron’s use
thereof;
(b) The Center’s finding of fraud in the procurement
of the TCCs by the grantees rendered the same worthless, even in the hands of
an assignee like Petron;
(c) The evidence adduced in the case which showed
misrepresentation in the levels of fuel oil use by the grantees and the
non-delivery of petroleum products by Petron also indicate that fraud also
attended the transfer of the TCCs;
(d) The Center acted within its mandate in declaring
TCCs fraudulently issued and transferred; and
(e) The resultant delay in the payment of Petron’s
excise tax liabilities justified the imposition of the 25% surcharge and annual
interest of 20% pursuant to Sections 248A(3) and 249 of the Tax Code.
The Issues
Aggrieved, Petron filed the petition
for review on certiorari at bench, on the following grounds:
I. THE COURT OF TAX APPEALS EN BANC
COMMITTED GRAVE REVERSIBLE ERROR WHEN IT RULED THAT THE SUBSEQUENT CANCELLATION
BY THE DOF CENTER OF THE TAX CREDIT CERTIFICATES PREVIOUSLY USED TO PAY
PETRON’S TAX LIABILITIES HAD THE EFFECT OF NON-PAYMENT OF PETRON’S EXCISE TAXES
ALLEGEDLY BECAUSE THE SUBSEQUENT CANCELLATION OF THE TCCs RESULTS IN
NON-PAYMENT OF PETRON’S EXCISE TAX LIABILITIES CONSIDERING THAT:
A. POST-AUDIT OF THE TAX CREDIT CERTIFICATES
IS NOT IN THE NATURE OF A SUSPENSIVE CONDITION TO EFFECT PAYMENT.
B. THERE WAS NO FRAUD IN THE TRANSFER OF THE
SUBJECT TAX CREDIT CERTIFICATES.
C. BEING A PURCHASER IN GOOD FAITH, PETRON
CANNOT BE PREJUDICED BY A SUBSEQUENT FINDING OF FRAUD IN THE GRANT AND TRANSFER
OF THE TAX CREDIT CERTIFICATES.
II. THE COURT OF TAX APPEALS EN BANC
COMMITTED GRAVE REVERSIBLE ERROR WHEN IT RULED THAT THE TAX CREDIT CERTIFICATES
WERE FRAUDULENTLY TRANSFERRED FROM THE GRANTEES TO PETRON CONSIDERING THAT:
A. THE TCCS WERE ASSIGNED TO PETRON IN
ACCORDANCE WITH THE LAW AND THE ASSIGNMENTS WERE APPROVED BY THE APPROPRIATE
GOVERNMENT AGENCIES.
B. PETRON FULFILLED ITS OBLIGATION TO ISSUE
CREDIT NOTES UNDER THE DEEDS OF ASSIGNMENT.
C. THE CREDIT NOTES WERE AVAILED BY THE
ASSIGNORS AND FUEL AND OTHER PETROLEUM PRODUCTS WERE DELIVERED UPON THE ORDER
OF THE ASSIGNORS.
D. AFFIDAVITS OF GENERAL MANAGERS ATTACHED TO
THE CANCELLATION MEMORANDUM ALLEGEDLY DENYING DELIVERIES OF FUEL AND PETROLEUM
PRODUCTS ARE HEARSAY.
E. VALIDITY OF PETRON’S PAYMENTS OF EXCISE
TAXES THRU THE USE OF ASSIGNED TCCS UPHELD BY THE COURT OF TAX APPEALS IN CTA
CASE NO. 5657, ‘PETRON CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, ET
AL.’
III. THE COURT OF TAX APPEALS EN BANC
COMMITTED GRAVE REVERSIBLE ERROR WHEN IT RULED THAT THE DEPARTMENT OF FINANCE
CENTER IS THE COMPETENT AUTHORITY TO DECLARE THE TAX CREDIT CERTIFICATES AS
FRAUDULENTLY ISSUED AND TRANSFERRED.
IV. THE COURT OF TAX APPEALS EN BANC COMMITTED
GRAVE REVERSIBLE ERROR WHEN IT RULED THAT PETRON IS LIABLE TO PAY TWENTY-FIVE
PERCENT (25%) LATE PAYMENT SURCHARGE PURSUANT TO SECTION 28(A) OF THE NATIONAL
INTERNAL REVENUE CODE OF 1997 AND TWENTY PERCENT (20%) INTEREST PURSUANT TO
SECTIONS 248 AND 249 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997.[37]
The Court’s
Ruling
We find the petition impressed with
merit.
In urging the reversal of the assailed
Decision, Petron argues that, having been issued pursuant to Administrative
Order No. 226 in relation to Executive Order No. 226, the subject TCCs were
immediately effective and could be readily used by the grantees and/or their
transferees. Invoking this Court’s
ruling in the case of Pilipinas Shell
Petroleum Corporation vs. Commissioner of Internal Revenue[38]
to the effect, among other matters, that the post-audit of the TCCs was not
meant as a suspensive condition for their validity but pertained only to
computational discrepancies resulting from their transfer and utilization,
Petron maintains that respondent failed to prove the fraud which purportedly
attended the procurement of the subject TCCs.
Against Petron’s contention that its rights as a purchaser in good faith
cannot be prejudiced even in the face of the Center’s subsequent finding of fraud
in the grant of the TCCs,[39]
the Office of the Solicitor General, in representation of respondent, argues
that, the cancellation of the subject TCCs effectively avoided the payment of
the excise tax liabilities of Petron which, as assignee, could not acquire
rights better than the grantees-assignors.
As correctly pointed out by Petron, however, the issue about the
immediate validity of TCCs and the use thereof in payment of tax liabilities
and duties are not matters of first impression for this Court. Taking into consideration the definition and
nature of tax credits[40]
and TCCs,[41] this Court’s Second
Division definitively ruled in the aforesaid Pilipinas Shell case that the post audit is not a suspensive
condition for the validity of TCCs, thus:
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. 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.
x x x x
xxx (T)he 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 at
the back of the certificate and affix his signature on the column
provided.”
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 x x x.”[42]
Considered in the light of the foregoing pronouncements, Petron correctly
argues that the CTA En Banc
reversibly erred in holding that the result of the post-audit conducted by the
Center partook the nature of a suspensive condition for the validity of the
subject TCCs and the use thereof as payment of its tax liabilities or
duties. Limited only to computational
discrepancies arising from the use or transfer of TCCs, the post-audit
conducted by the Center would, if at all, only give rise to an adjustment of
the monetary value of the TCCs subjected thereto. Issued pursuant to Article 39 (k) of
Executive Order No. 226[43]
and subject to the aforequoted Guidelines and Instructions printed at the back
thereof, the subject TCCs were, consequently, valid upon their issuance in
favor of the original grantees which had the right to use them in payment of
their tax liabilities and/or transfer them in favor of assignees like Petron
which could, in turn, utilize them as payment of its own tax liabilities.
Not being privy to the issuance of the subject TCCs and having already
used them in paying its own tax liabilities, Petron also correctly points out
that it cannot be prejudiced by the fraud which supposedly attended the
issuance of the same. More so, when it
is borne in mind that, as ground for the cancellation of said TCCs, fraud was
not adequately established by respondent with clear and convincing evidence
showing that the grantees had not, indeed, manufactured and exported at the
volumes which served as bases for the grant of the subject TCCs. Rather than presenting oral and documentary
evidence to prove said material fact, the record shows that respondent simply
relied on the findings and conclusions the Center cited in support of the
cancellation of the TCCs[44]
as well as those embodied in the Report of the Senate Committee on Ways and
Means and Committee on Accountability of Public Officers and Investigation
which jointly delved into the irregularities reported to have attended the
Center’s issuance of TCCs in favor of corporations in the textile industry,
including petitioner’s assignors.[45]
While the CTA is not governed strictly by technical rules of evidence on
the principle that rules of procedure are not ends in themselves but are
primarily intended as tools in the administration of justice,[46] respondent’s
presentation of evidence to prove the fraud which attended the issuance of the
subject TCCs is not a mere procedural technicality which may be disregarded
considering that it is the very basis for the claim that Petron’s payment of
its excise tax liabilities had been avoided. It cannot be over-emphasized that
fraud is a question of fact[47] which
cannot be presumed and must be proven by clear and convincing evidence[48]
by the party alleging the same. Without
even presenting the documents which served as bases for the issuance of the
subject TCCs from 1994 to 1997, respondent miserably failed in discharging his
evidentiary burden with the presentation of the Center’s cancellation memoranda
to which were simply annexed some of the grantees’ original registration
documents[49] and their Financial
Statements for an average of two years.[50]
On the other hand, the transferability of the TCCs issued in favor of the
original grantees is primarily governed by Article 21 of EO 226 which provides
that, “the tax credit certificates issued by the Board (of Investments)
pursuant to laws repealed by this Code but without in any way diminishing the
scope of negotiability under their laws of issue are transferable under such
conditions as may be determined by the Board after consultation with the
Department of Finance.” In turn, the Implementing
Rules and Regulations (IRR) of EO 226 incorporated the October 5, 1982 Memorandum
of Agreement (MOA) between the Ministry of Finance (MOF) and the BOI, which
pertinently provides the following guidelines for the transfer of said TCCs, to
wit:
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.
As a BOI-registered enterprise under Certificates of Registration No.
89-1037 and D95-136, Petron is undoubtedly a qualified transferee of the TCCs
originally issued in favor of its assignors.
In finding that the assignments of the TCCs in favor of Petron were
likewise fraudulent, however, the CTA En
Banc ruled that the aforesaid October 5, 1982 MOA between the MOF and the
BOI was amended by the said agencies’ August 29, 1989 MOA which additionally
required that the TCC-assignee should be a “domestic
capital equipment supplier or a raw material and/or component supplier of the
transferor.” Underscoring the fact
that the assignments were approved upon the representation that the TCCs were
to be used as payment for oil products purchased from Petron, the CTA En Banc found that the grantees’
Financial Statements indicated that they could not have consumed fuels at the
levels represented to the Center and that Petron had not, in fact, delivered
petroleum products in consideration of the assignment of the TCCs.[51]
As held in the Pilipinas Shell
case, however, said P284,390,845.00.[53] In the absence of showing of any legal
prohibition thereon, we find that Petron cannot be faulted for honoring the
grantees’ further assignment of said credit notes in favor of third parties.
For a party charged with the burden of proving the same, respondent did
not even come close to establishing the fraud which purportedly attended both
the issuance of the subject TCCs and the transfer thereof in favor of Petron.
That respondent’s reliance of the Center’s cancellation memoranda was misplaced
and misguided is evident from the following admissions in the parties’ June 22,
2001 Joint Stipulation of Facts and Issues, to wit:
3. That the available records at the DOF Center upon
which the findings and conclusions of the Cancellation Memorandum (Exhibit “2”,
“3”, “4”, “5”, “6”, “7” and “8”) were based had not been explained nor
confirmed by the issuer, signatory or parties to the said records;
4. That respondent’s witness, Beverly M. Taneza has no
actual knowledge that Petron actually delivered fuel and other petroleum products
in fulfillment of, and in accordance with, its agreement or instructions of the
assignors, namely, Diamond Knitting, Alliance Thread, Filstar Textile, Fiber
Tech., Jantex Phils. and Master Colour which assigned their TCCs to Petron in
consideration or payment of the delivery and supply of fuel and other petroleum
products;
5. That the statement in the ‘Recommendation’ on the
Cancellation Memorandum (Exhibit “2”, “3”, “4”, “5”, “6”, “7” and “8”) that the
TCC grantees Diamond Knitting, Alliance Thread, Filstar Textile, Fiber Tech.,
Jantex Phils. and Master Colour have concurred in their findings on the
issuance and transfer of the TCCs to the oil companies is based on the
Affidavits of the General Managers of the said TCC grantees marked as Exhibit
‘2-G’ (Virgilio Pinon of Alliance Thread), ‘3-F’ (Reynato G. Andaya of Diamond
Knitting), ‘5-G’ (Carmencita C. Camara of Fiber Tech.), ‘6-G’ (Rodel P.
Rodriguez of Filstar Textile), ‘7-G’ (Angel T. Chua of Jantex Phils.) and ‘8-G’
(Margaret A. De Luna of Master Colour).[54]
In finding that the assignments of the TCCs in favor of Petron were
fraudulent, we find that the CTA En Banc
reversibly erred in relying on the abovementioned affidavits executed by the
grantees’ former general managers/officers who, after disavowing knowledge of
the assignment of the subject TCCs and Petron’s delivery of bunker fuel oil in
consideration thereof, requested the cancellation of the TCCs.[55] Without said erstwhile general
managers/officers being presented on the witness stand to affirm the truth and
veracity of their statements, the affidavits they executed are, however,
correctly impugned by Petitioner as hearsay for lack of opportunity to
cross-examine said affiants. Almost always incomplete and often inaccurate,
sometimes from partial suggestion, or for want of suggestion and inquiries,[56]
the infirmity of affidavits as species of evidence is a matter of judicial
experience and are thus considered
inferior to the testimony given in open court.[57]
Unless the affiant is placed on the
witness stand to testify thereon, the rule is settled that affidavits are
inadmissible as evidence under the hearsay rule.[58]
Having proven the valuable consideration for the grantees’ transfer of
the TCCs in its favor, it also bears pointing out that Petron has more than
amply proved its good faith by complying with the procedures laid down for the
transfer and use thereof. With its
approval of the Deeds of Assignment executed by the grantees, the Center
unequivocally affirmed not only the validity of the TCCs but also the transfer
thereof in favor of Petron to whom it issued the requisite DOF-TDMs. On the
other hand, upon surrender of the Deeds of Assignment, the TCCs and the DOF-TDMs,
the BIR Collection Program Division issued the corresponding ATAPETs which,
together with said documents, were further submitted to the BIR Head Office. It was only after further authentication and
verification of the documents thus submitted that Petron was eventually issued BIR
TDMs which bore the signature of the BIR Assistant Commissioner of Collection
Service and signified acceptance of the TCCs as payment of the excise taxes due
from the former.[59]
Under RR 5-2000, a TDM or a Tax Debit Memo “shall serve as the official
receipt from the BIR evidencing a taxpayer’s payment or satisfaction of his tax
obligation.” Until the Center’s
cancellation of the TCCs assigned in its favor, Petron was, in fact, never
questioned nor assessed for deficiency or delinquency in the payment of its
excise taxes thru the use of the same TCCs.[60] Even prescinding from the CTA July 23, 1999
decision in C.T.A. Case No. 5657 which remains on appeal before the Court of
Appeals, we find that Petron had every right to rely on the validity of the
subject TCCs, the Center’s approval of the deeds of assignment the grantees
executed over the same and the BIR’s acceptance of its use thereof in payment
of its excise taxes. While the
Government cannot, concededly, be estopped from collecting taxes by the
mistake, negligence, or omission of its agents,[61] the Court’s ruling in the Pilipinas Shell case is to the effect
that an assignee’s status as a transferee in good faith and for value provides
ample protection from the adverse findings subsequently made by the Center.[62]
In urging the affirmance of the assailed decision, respondent calls our
attention to the pronouncement in the case of Proton Pilipinas Corporation vs. Republic of the Philippines[63]
that the resultant non-payment of customs duties and taxes by reason of the
cancellation of the TCCs for having been found as fake and spurious is the
obligation of the taxpayer. Rather than
the legal implications and consequences of the cancellation of TCCs, however,
the Proton Pilipinas case dealt with
procedural matters such as the effect of the Sandiganbayan’s jurisdiction over
the criminal case involving the issuance of the TCCs to the collection case
instituted by the government before the Regional Trial Court (RTC), the
existence of litis pendentia as a
consequence of the pendency of the criminal and civil cases filed under the
circumstances and the prejudicial question arising therefrom. Sharing the same
factual and legal milieu as the case at bench, more in point is the Pilipinas Shell case which ruled that
the rights of a transferee in good faith cannot be prejudiced by the Center’s
turnaround from its previous approval of the assignments of the TCCs.
Once a case has been decided one way, the rule is settled that
any other case involving exactly the same point at issue should be decided in
the same manner[64]
under the principle stare decisis et
non quieta movere. Fealty to the same
principle impels us to discount merit from respondent’s reliance on the
Liability Clause at the dorsal portion of the TCCs which provides that 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 the TCC.
Expounding on the practical and legal significance of said Liability
Clause in the Pilipinas Shell case, this Court ruled as follows:
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.[65]
In
addition to its lack of participation in the procurement of the subject TCCs as
admitted in the parties’ March 29, 2001 Joint Stipulation of Facts and Issues,
Petron was not shown to have had a hand in or knowledge of the fraud which
purportedly attended the issuance of the same TCCs. Qualified to be a transferee as a
BOI-registered enterprise under October 5, 1982 MOA between the MOF and the BOI, Petron went through the multi-tiered
prescribed procedures for the transfer of said TCCs and use thereof in payment
of its tax obligations. Relying on the
validity of the TCCs, the Center’s approval of the transfer thereof and the
BIR’s acceptance of the same as payment for its excise tax obligations, Petron
issued credit notes by way of consideration for the TCCs and delivered
petroleum products in the total sum of P284,390,845.00
in favor of the grantees and/or their assignees. As a transferee in good faith and for value,
Petron cannot, therefore, be said to have incurred any liability insofar as the
transfers of the subject TCCs are concerned.
As for the government agency vested with the authority to cancel the
subject TCCs, the ruling in the Pilipinas
Shell is to the effect that, pursuant to Section 3 (a), (g) and (l) of AO 226,[66]
the Center has concurrent authority to do so alongside the BIR and the BOC. Given the nature of the TCC’s immediate
effectiveness and validity, however, said authority may only be exercised
before the TCC has been fully utilized by a transferee which had no
participation in the perpetration of fraud in the issuance, transfer and
utilization thereof.[67] Once accepted by the BIR and applied towards
the satisfaction of such a tranferee’s tax obligations, a TCC is effectively
used up, debited and canceled such that there is nothing left to avoid or to
cancel anew.[68] Considering the protection afforded to
transferees in good faith and for value, it was held that the remedy of the
Government is to go after the grantees alleged to have perpetrated fraud in the
procurement of the subject TCCs.[69]
Viewed in the light of the foregoing disquisition, respondent had no
legal basis to once again assess the excise taxes Petron already paid with the
use of the TCCs assigned in its favor, much less to impose the 25% late payment
surcharge pursuant to Section 248 (A)[70]
of the National Internal Revenue Code of
1997 and the 20% interest provided under Section 249[71]
of the same Code. Admitted to have
filed it tax returns in accordance with law,[72]
Petron was never questioned nor assessed for deficiency delinquency in the
payment of its excise taxes from 1992 to 1997, thru the use of the TCCs
assigned by the original grantees.[73] In receipt of the November 15, 1999
Assessment subsequent to the Center’s cancellation of the subject TCCs, Petron
filed the petition for review docketed before the CTA Second Division as CTA
Case No. 6136 as a consequence of respondent’s inaction on its protest. Although the
WHEREFORE, premises considered, the petition is GRANTED and the October 30, 2007 CTA En Banc Decision in CTA EB No. 238 is,
accordingly, REVERSED and SET ASIDE. In lieu thereof, another is entered
invalidating respondent’s Assessment of petitioner’s deficiency excise taxes
for the years 1995 to 1997 for lack of legal bases. No pronouncement as to
costs.
|
SO ORDERED. JOSE
Associate Justice |
|
|
WE CONCUR: RENATO C.
CORONA Chief Justice Chairperson |
|
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PRESBITERO J. VELASCO, JR. Associate Justice |
TERESITA J. LEONARDO-DE
CASTRO Associate Justice |
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MARIANO C.
Associate Justice |
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C E R T I F I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution, I certify that the conclusions
in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
RENATO C. CORONA
Chief Justice
[1] An Act Expanding the Jurisdiction of the Court of Tax Appeals.
[2] CTA EB No. 238, records, pp. 1069-1098
[3] CTA Case. No. 6136, records, pp. 1448-1468
[4] Exhibits “V73” -“D74”, “E74”-“P74”. “Q74”-“X74”, “Y74”-“E75”; “F75”-“K75”, “L75”-“M75”, Id. at 648-673; 671-712; 717-739; 744-762; 766-783; 786-791
[5] Omnibus Investment Code of 1987
[6] Creating A One-Stop-Shop Inter-Agency Tax Credit and Duty Drawback Center For the Processing of All Tax Credits and Duty Drawbacks Defining Its Powers, Duties and Functions, and For Other Purposes
[7] TSN, April 23, 2003, pp. 32-34.
[8] Exhibit “A”.
[9] A Decree to Revise, Amend and Codify the Investment, Agricultural and Export Incentives Acts to be Known as the Omnibus Investment Code.
[10] An Act Declaring the 1983 Investment Incentives Policy by Modifying the System on the Grant of Investments Incentives.
[11] CTA Case No. 6136, records, p. 89.
[12]
[13]
[14] CTA Case No. 6136, records, pp. 183-185.
[15] Exhibits “2” to “8” and submarkings.
[16] CTA Case No. 6136, records, p. 182.
[17]
[18]
[19]
[20]
[21]
[22]
[23]
[24] CTA Case No. 6136, records, pp. 445-643; 992-994.
[25]
[26]
[27]
[28] TSN, July 13, 2005, pp. 4-10.
[29] CTA Case No. 6136, records, pp. 1205-1215; 1240-1244.
[30]
[31]
[32]
[33]
[34]
[35] Record, CTA E.B. No. 238, pp. 37-97.
[36]
[37]
[38] Pilipinas
Shell Petroleum Corp. v. Commissioner of Internal Revenue, G.R. No. 172598,
541 SCRA 316,
[39] Rollo, pp. 790-816.
[40] A tax credit is an allowance against
the tax itself (citing Smith, West’s Tax Law Dictionary 177-178 [1993]) or a
deduction from what is owed (citing
[41] 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 (Sec. 1, B, RR 5-200).
[42]
[43] (k) Every BOI registered enterprise shall enjoy a tax credit equivalent to the national internal revenue taxes and customs duties paid on the supplies, raw materials and semi-manufactured products used in the manufacture, processing or production of its export products and forming part thereof, exported directly or indirectly by the registered enterprise, Provided, however, That the taxes on the supplies, raw materials and semi-manufactured products domestically purchased are indicated as a separate item in the sales invoice.
[44] Supra, see Note 15.
[45] Exhibit “12”.
[46] Dizon v. Court of
Tax Appeals, G.R. No. 140944. 553 SCRA 111, 129,
[47] South
Pacific Plastic Manufacturing Corporation vs. Manila Electric Company, G.R.
No.144300, 493 SCRA 114, 123,
[48] Commissioner of Internal Revenue v. Court of Appeals, 327 Phil. 1, 34 (1996).
[49] Exhibits “2-I”, “5-I”, “6-I”, “7-I”, “8-I”.
[50] 1994/1995 for Alliance Thread Company, Inc. (Exhibit “2-H” and submarkings); 1995/1996 for Filstar Textile Industrial Corp. (Exhibit “4-B”, “6-H” and submarkings); Fiber Technology Corporation (Exhibit “5-H” and submarkings); Jantex Phils., Inc. (Exhibit “7-H” and submarkings); and Master Colours Systems, Inc. (Exhibit “8-H” and submarkings) .
[51] CTA Case No. 6136, records, pp. 1088-1093.
[52] Pilipinas Shell Petroleum Corp. v. Commissioner of Internal Revenue, Supra at 345-346.
[53] Exhibits “A-13”, “A-15”, “A-16 and submarkings.
[54] CTA Case No. 6136, records, pp. 209-211.
[55] Exhibits “2-G”, “3-F”, “5-G”, “6-G”, “7-G” and “8-G”.
[56] Yu Eng Cho vs. Pan American World Airways, Inc.,G.R. No. 123560, 385 Phil. 453, 465-466.
[57] People vs. Diaz, 331 Phil. 240, 252 (1996).
[58] D.M. Consunji, Inc. vs. Court of Appeals, 409 Phil. 275, 293 (2001).
[59] TSN, April 23, 2003, pp. 32-34.
[60] CTA Case No. 6136, records, pp. 182-190.
[61] Philippine National Oil Company v. Court of Appeals, 496 Phil. 506, 577 (2005).
[62] Pilipinas Shell Petroleum Corp. v. Commissioner of Internal Revenue, Supra at 349.
[63] Proton Pilipinas Corporation v. Republic of the Phils., Represented by the Bureau of Customs, G.R. No. 165027, 504 SCRA 528, October 16, 2006.
[64] Commissioner
of Internal Revenue v. Trustworthy Pawnshop, Inc., G.R. No. 149834, 488
SCRA 538, 545,
[65] Pilipinas Shell Petroleum Corp. v. Commissioner of Internal Revenue, Supra at 346-347.
[66] 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
b. 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.
[67] Pilipinas
Shell Petroleum Corp. v. Commissioner of Internal Revenue, Supra at 354-356,
[68]
[69]
[70] Section 248, Civil Penalties –
(A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five percent (25%) of the amount due in the following cases:
x x x x
(3) Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment.
x x x x
[71] Section 249. Interest –
(A) In General – There shall be assessed and collected on any amount of tax, interest at the rate of twenty percent (20%) per annum or such higher rate as may be prescribed by the rules and regulations, from the date prescribed for payment until the amount is fully paid.
(B) Deficiency Interest – Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof.
(C) Delinquency Interest. – In case of failure to pay:
x x x x
3) A deficiency tax or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner, there shall be assessed and collected on the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid, which interest shall form part of the tax.
x x x x .
[72] Record, CTA Case No. 6136, p. 188.
[73]