BERSAMIN TAXATION LAW CASES.pdf
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A CADEMICUS REVIEW CENTER Dean Ferdinand A. Tan
TAXATION LAW CASES (2012-2016) J. BERSAMIN H. Tambunting Pawnshop Inc. vs. Commissioner of Internal Revenue G.R. No . 173373, July 29, 2013 BERSAMIN, J.: To be entitled to claim a tax deduction, the taxpayer must competently establish the factual and documentary bases of its claim. FACTS: H. Tambunting Pawnshop, Inc., a domestic corporation duly licensed and authorized to engage in the pawnshop business, appeals the adverse decision promulgated on April 24, 2006, whereby the Court of Tax Appeals En Bane (CTA En Banc) affirmed the decision of the CTA First Division ordering it to pay deficiency income taxes in the amount of P4,536,687.15 for taxable year 1997, plus 20% delinquency interest computed from August 29, 2000 until full payment, but cancelling the compromise penalties for lack of basis. Bureau of Internal Revenue (BIR), through then Acting Regional Director Lucien E. Sayuno of Revenue Region No. 6 in Manila, issued assessment notices and demand letters, all numbered 32-1-97, assessing Tambunting for deficiency percentage tax, income tax and compromise penalties for taxable year 1997. Tambunting instituted an administrative protest against the assessment notices and demand letters with the Commissioner of Internal Revenue. Tambunting brought a petition for review in the CTA, pursuant to Section 228 of the National Internal Revenue Code of 1997, citing the inaction of the Commissioner of Internal Revenue on its protest within the 180-day period prescribed by law ISSUE: Whether or not petitioner is entitled to tax deductions RULING: No At the outset, the Court agrees with the CTA En Banc that because this case involved assessments relating to transactions incurred by Tambunting prior to the effectivity of Republic Act No. 8424 (National Internal Revenue Code of 1997, or NIRC of 1997), the provisions governing the propriety of the deductions was Presidential Decree 1158 (NIRC of 1977). The rule that tax deductions, being in the nature of tax exemptions, are to be construed in strictissimi juris against the taxpayer is well settled.20 Corollary to this rule is the principle that when a taxpayer claims a deduction, he must point to some specific provision of the statute in which that deduction is authorized and must be able to prove that he is entitled to the deduction which the law allows. An item of expenditure, therefore, must fall squarely within the language of the law in order to be deductible. A mere averment that the taxpayer has incurred a loss does not automatically warrant a deduction from its gross income. The requisites for the deductibility of ordinary and necessary trade or business expenses, like those paid for security and janitorial services, management and professional fees, and rental expenses, are that: (a) the expenses must be ordinary and necessary; (b) they must have been paid or incurred during the taxable year; (c) they must have been paid or incurred in carrying on the trade or business of the taxpayer; and (d) they must be supported by receipts, records or other pertinent papers. As the CTA En Banc held, Tambunting did not properly prove that it had incurred losses. The subasta books it presented were not the proper evidence of such losses from the auctions because they did not reflect the true amounts of the proceeds of the auctions due to certain items having been left unsold after the auctions. The rematado books did not also prove the amounts of capital because the figures reflected therein were only the amounts given to the pawnees. It is interesting to note, too, that the amounts received by the pawnees were not the actual values of the pawned articles but were only fractions of the real values. 1
Luzon Hydro Corp. vs. CIR G.R. No . 188260, November 13, 2013 BERSAMIN, J.: A claim for refund or tax credit for unutilized input VAT may be allowed only if the following requisites concur, namely: (a) the taxpayer is VAT-registered; (b) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (c) the input taxes are due or paid; (d) the input taxes are not transitional input taxes; (e) the input taxes have not been applied against output taxes during and in the succeeding quarters; (f) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; (g) for zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas; (h) where there are both zero-rated or effectively zerorated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and (i) the claim is filed within two years after the close of the taxable quarter when such sales were made. FACTS: The petitioner, a corporation duly organized under the laws of the Philippines, has been registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer under Taxpayer Identification No. 004-266-526. It was formed as a consortium of several corporations, namely: Northern Mini Hydro Corporation, Aboitiz Equity Ventures, Inc., Ever Electrical Manufacturing, Inc. and Pacific Hydro Limited. Pursuant to the Power Purchase Agreement entered into with the National Power Corporation (NPC), the electricity produced by the petitioner from its operation of the Bakun Hydroelectric Power Plant was to be sold exclusively to NPC. Relative to its sale to NPC, the petitioner was granted by the BIR a certificate for Zero Rate for VAT purposes in the periods from January 1, 2000 to December 31, 2000; February 1, 2000 to December 31, 2000 (Certificate No. Z-162-2000); and from January 2, 2001 to December 31, 2001 (Certificate No. 2001-269). The petitioner alleged herein that it had incurred input VAT in the amount of P9,795,427.89 on its domestic purchases of goods and services used in its generation and sales of electricity to NPC in the four quarters of 2001; and that it had declared the input VAT of P9,795,427.89 in its amended VAT returns for the four quarters on 2001. Petitioner filed a written claim for refund or tax credit relative to its unutilized input VAT for the period from October 1999 to October 2001 aggregating P14,557,004.38.7 Subsequently, on July 24, 2002, it amended the claim for refund or tax credit to cover the period from October 1999 to May 2002 for P20,609,047.56. Respondent Commissioner of Internal Revenue (Commissioner) did not ultimately act on the petitioner’s claim despite the favorable recommendation. Hence, on April 14, 2003, the petitioner filed its petition for review in the CTA, praying for the refund or tax credit certificate (TCC) corresponding to the unutilized input VAT paid for the four quarters of 2001 totalling P9,795,427.88, which was denied. ISSUE: Whether or not petitioner is entitled to tax refund RULING: No A claim for refund or tax credit for unutilized input VAT may be allowed only if the following requisites concur, namely: (a) the taxpayer is VAT-registered; (b) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (c) the input taxes are due or paid; (d) the input taxes are not transitional input taxes; (e) the input taxes have not been applied against output taxes during and in the succeeding quarters; (f) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; (g) for zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas; (h) where there are both zero-rated or effectively zerorated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and (i) the claim is filed within two years after the close of the taxable quarter when such sales were made. Petitioner did not produce evidence showing that it had zero-rated sales for the four quarters of taxable year 2001. As the CTA En Banc precisely found, the petitioner did not reflect any zero-rated sales from its power generation in its four quarterly VAT returns, which indicated that it had not made any sale of electricity. Had there been zero-rated sales, it would have reported them in the returns. Indeed, it carried the burden not only that it was entitled under the substantive law to the allowance of its claim for refund 2
or tax credit but also that it met all the requirements for evidentiary substantiation of its claim before the administrative official concerned, or in the de novo litigation before the CTA in Division. Although the petitioner has correctly contended here that the sale of electricity by a power generation company like it should be subject to zero-rated VAT under Republic Act No. 9136, its assertion that it need not prove its having actually made zero-rated sales of electricity by presenting the VAT official receipts and VAT returns cannot be upheld. It ought to be reminded that it could not be permitted to substitute such vital and material documents with secondary evidence like financial statements. We further see no reason to grant the prayer of the petitioner for the remand of this case to enable it to present before the CTA newly discovered evidence consisting in VAT official receipts. Ordinarily, the concept of newly discovered evidence is applicable to litigations in which a litigant seeks a new trial or the re-opening of the case in the trial court. Seldom is the concept appropriate when the litigation is already on appeal, particularly in this Court. The absence of a specific rule on newly discovered evidence at this late stage of the proceedings is not without reason. The propriety of remanding the case for the purpose of enabling the CTA to receive newly discovered evidence would undo the decision already on appeal and require the examination of the pieces of newly discovered evidence, an act that the Court could not do by virtue of its not being a trier of facts. Verily, the Court has emphasized in Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue that a judicial claim for tax refund or tax credit brought to the CTA is by no means an original action but an appeal by way of a petition for review of the taxpayer’s unsuccessful administrative claim; hence, the taxpayer has to convince the CTA that the quasi-judicial agency a quo should not have denied the claim, and to do so the taxpayer should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA, including whatever was required for the successful prosecution of the administrative claim as the means of demonstrating to the CTA that its administrative claim should have been granted in the first place. Commissioner of Customs vs. Oilink International Corporation G.R. No. 161759, July 02, 2014 BERSAMIN, J.: FACTS: Union Refinery Corporation was established under the Corporation Code of the Philippines. In the course of its business undertakings, URC imported oil products into the country. On January 11, 1996, Oilink was incorporated, URC and Oilink having interlocking directors when Oilink started its business. In applying for and in expediting the transfer of the operator’s name for the Customs Bonded Warehouse then operated by URC, Esther Magleo, the Vice-President and General Manager of URC, sent a to manifest that URC and Oilink had the same Board of Directors and that Oilink was 100% owned by URC. Oscar Brillo, the District Collector of the Port of Manila, formally demanded that URC pay the taxes and duties on its oil imports. On April 16, 1998, Brillo made another demand letter to URC.URC, through its counsel, responded to the demands by seeking the landed computations of the assessments, and challenged the inconsistencies of the demands. Customs Commissioner Pedro C. Mendoza formally directed that URC pay the amount of P119,223,541.71 representing URC’s special duties, VAT, and Excise Taxes that it had failed to pay. On December 23, 1998, upon his assumption of office, Customs Commissioner Nelson Tan transmitted another demand letter to URC affirming the assessment of P99,216,580.10 by Commissioner Mendoza. Magleo, in behalf of URC, replied by letter to Commissioner Tan’s affirmance by denying liability, insisting instead that only P28,933,079.20 should be paid by way of compromise.Commissioner Tan responded by rejecting Magleo’s proposal. On May 24, 1999, Manuel Co, URC’s President, conveyed to Commissioner Tan URC’s willingness to pay only P94,216,580.10, of which the initial amount of P28,264,974.00 would be taken from the collectibles of Oilink from the National Power Corporation, and the balance to be paid in monthly installments over a period of three years to be secured with corresponding post-dated checks and its future available tax credits.On July 2, 1999, Commissioner Tan made a final demand for the total liability of P138,060,200.49 upon URC and Oilink. Also on July 8, 1999, Oilink formally protested the assessment on the ground that it was not the party liable for the assessed deficiency taxes. Commissioner Tan communicated in writing the detailed computation of the tax liability, stressing that the Bureau of Customs (BoC) would not issue any clearance to Oilink unless the amount of 3
P138, 060,200.49 demanded as Oilink’s tax liability be first paid. Thus, on July 30, 1999, Oilink appealed to the CTA. The CTA rendered its decision declaring as null and void the assessment of the Commissioner of Customs. Aggrieved, the Commissioner of Customs brought a petition for review in the CA. On the issue of the jurisdiction of the CTA, the CA found that the petitioner’s submission is untenable. As to whether or not the Commissioner of Customs could lawfully pierce the veil of corporate fiction in order to treat Oilink as the mere alter ego of URC, the CA concurred with the CTA. Hence, this appeal, whereby the Commissioner of Customs reiterates the raised in the CA. ISSUES: 1. Whether or not the CTA gravely erred in holding that it had jurisdiction over the subject matter; 2. Whether or not the CTA gravely erred in holding that Oilink had a cause of action; and 3. Whether or not the CTA gravely erred in holding that the Commissioner of Customs could not pierce the veil of corporate fiction. RULING: The CTA had jurisdiction over the controversy There is no question that the CTA had the jurisdiction over the case. Republic Act No. 1125, the law creating the CTA, defined the appellate jurisdiction of the CTA. Nonetheless, the Commissioner of Customs contends that the CTA should not take cognizance of the case because of the lapse of the 30-day period within which to appeal, arguing that on November 25, 1998 URC had already received the BoC’s final assessment demanding payment of the amount due within 10 days, but filed the petition only on July 30, 1999.alawred We rule against the Commissioner of Customs. The CTA correctly ruled that the reckoning date for Oilink’s appeal was July 12, 1999, not July 2, 1999, because it was on the former date that the Commissioner of Customs denied the protest of Oilink. Clearly, the filing of the petition on July 30, 1999 by Oilink was well within its reglementary period to appeal. The insistence by the Commissioner of Customs on reckoning the reglementary period to appeal from November 25, 1998, the date when URC received the final demand letter, is unwarranted. We note that the November 25, 1998 final demand letter of the BoC was addressed to URC, not to Oilink. As such, the final demand sent to URC did not bind Oilink unless the separate identities of the corporations were disregarded in order to consider them as one. NO. Oilink had a valid cause of action The Commissioner of Customs posits that Oilink did not exhaust its administrative remedies under Section 2308 of the Tariff and Customs Code by paying the assessment under protest. The position of the Commissioner of Customs lacks merit. The CA correctly held that the principle of non-exhaustion of administrative remedies was not an iron-clad rule because there were instances in which the immediate resort to judicial action was proper. This was one such exceptional instance when the principle did not apply. As the records indicate, the Commissioner of Customs already decided to deny the protest by Oilink on July 12, 1999, and stressed then that the demand to pay was final. In that instance, the exhaustion of administrative remedies would have been an exercise in futility because it was already the Commissioner of Customs demanding the payment of the deficiency taxes and duties. NO. There was no ground to pierce the veil of corporate existence A corporation, upon coming into existence, is invested by law with a personality separate and distinct from those of the persons composing it as well as from any other legal entity to which it may be related. The separate and distinct personality of the corporation is, however, a mere fiction established by law for convenience and to promote the ends of justice. It may not be used or invoked for ends that subvert the policy and purpose behind its establishment, or intended by law to which the corporation owes its being. This is true particularly when the fiction is used to defeat public convenience, to justify wrong, to protect fraud, to defend crime, to confuse legitimate legal or judicial issues, to perpetrate deception or otherwise to circumvent the law. In such instances, the veil of corporate entity will be pierced or disregarded with reference to the particular transaction involved. Indeed, the doctrine of piercing the corporate veil has no application here because the Commissioner of Customs did not establish that Oilink had been set up to avoid the payment of taxes or duties, or for purposes that would defeat public convenience, justify wrong, protect fraud, defend crime, confuse legitimate legal or judicial issues, perpetrate deception or otherwise circumvent the law. It is also 4
noteworthy that from the outset the Commissioner of Customs sought to collect the deficiency taxes and duties from URC, and that it was only on July 2, 1999 when the Commissioner of Customs sent the demand letter to both URC and Oilink. That was revealing, because the failure of the Commissioner of Customs to pursue the remedies against Oilink from the outset manifested that its belated pursuit of Oilink was only an afterthought.
Agriex Co. Ltd. Vs. Hon. Titus Villanueva G.R. No. 158150, September 10, 2014 BERSAMIN, J.: Although RA No. 7227 is silent as to the person or entity vested with the authority to seize and forfeit or detain goods and articles entering the Subic Bay Freeport, the implementing rules and regulations (IRR) of RA No. 7227 provides that customs officers may seize any article found during a Customs search upon entering or leaving the SBF to be in violation of any provision of the customs laws for which a seizure is authorized, and such seizure shall be disposed of according to the customs laws. Articles which are prohibited or excluded from the SBF under the rules and regulations of the SBMA which are found by the Customs officials during an audit, examination or check within the SBF may be seized by them and turned over to the SBMA for disposition. FACTS: The petitioner, a foreign corporation whose principal office was in Bangkok, Thailand, entered into a contract of sale with PT. Gloria Mitra Niagatama International of Surabaya, Indonesia for 180,000 bags of Thai white rice. Later on, it entered into another contract of sale with R&C Agro Trade of Cebu City for 20,000 bags of Thai white rice. It chartered the vessel MV Hung Yen to transport the 200,000 bags of Thai white rice to the Subic Free Port for transshipment to their designated consignees in the Fiji Islands and Indonesia (for the 180,000 bags), and in Cebu City (for the 20,000 bags). The MV Hung Yen arrived at the Subic Free Port on August 20, 2001 with the inward foreign manifest indicating the final destinations of the shipment. However, the Sea Port Department of the Subic Bay Metropolitan Authority allowed the vessel to berth only 22 days later, or on September 11, 2001. SBMA advised the vessel agent to secure from the National Food Authority an amendment of the import permit issued in favor of R&C Agro Trade to change the discharging port from the Port of Cebu to the Port of Subic. Due to the delay in the berthing and unloading of the cargo from the vessel, the petitioner, through its agent in Subic, applied for a vessel exit clearance to allow the MV Hung Yen to sail for the Labuan Free Port in Malaysia which was granted by the Bureau of Customs. Despite the issuance of the clearance, the MV Hung Yen did not set sail for the Labuan Free Port. On September 10, 2001, the petitioner requested permission from the Bureau of Customs to unload the entire shipment of 200,000 bags of Thai white rice because the MV Hung Yen must return to Vietnam. Upon the recommendation of Atty. Enriquez and Atty. Heraldo, respondent Commissioner Villanueva issued his 1st Indorsement directing respondent Collector of Customs Bibit to issue a Warrant of Seizure and Detention (WSD) against the 20,000 bags of Thai white rice consigned to R&C Agro Trade. Accordingly, Collector Bibit issued WSD No. 2001-13 against the 20,000 bags of Thai white rice consigned to R&C Agro Trade notwithstanding that no bag of rice had yet been unloaded from the vessel. After the unloading, transfer and storage of the rice shipment at SBMA’s warehouse, Collector Bibit issued amended WSDs to cover the MV Hung Yen and the remaining 180,000 bags of Thai white rice intended for transshipment. On October 4, 2001, the petitioner filed with the Bureau of Customs in the Port of Subic an Urgent Motion to Quash Warrant of Seizure, inclusive of WSD No. 2001-13 and WSD No. 200113B.Collector Bibit quashed WSD No. 2001-13A over the MV Hung Yen on the ground that the vessel was not chartered or leased. Pending hearing of the seizure proceedings vis-à-vis the rice shipments, Collector Bibit issued a Notice of Sale setting therein the auction sale of the 200,000 bags of Thai white rice. The petitioner filed a Manifestation and Urgent Motion for Reconsideration but Collector Bibit did not act on the motion. Consequently, the petitioner instituted the petition for certiorari and prohibition in the CA on November 12, 2001 (with prayer for the issuance of a temporary restraining order and/or writ of injunction). Accordingly, Commissioner Villanueva issued his memorandum dated directing Collector Bibit not to proceed with the scheduled auction of the 180,000 bags of Thai white rice until further orders from his office. 5
On November 22, 2001, the CA issued a temporary restraining order enjoining the respondents to desist from holding the scheduled public auction. Meanwhile, on November 14, 2001, Collector Bibit denied the motion for the quashal of the warrant of seizure issued against the rice shipments, and ordered their forfeiture in favor of the Government. The petitioner appealed the November 14, 2001 ruling by Collector Bibit to Commissioner Villanueva, the latter granted the motion for settlement and accordingly order the release of the 20,000 bags of Thai rice to claimants. On July 22, 2002, Commissioner Antonio M. Bernardo, who had meanwhile succeeded Commissioner Villanueva, released the 2nd Indorsement directing the sale of the 180,000 bags of Thai white rice at public auction. Eventually, the auction sale went on as scheduled, and the proceeds were deposited in the Land Bank of the Philippines, Subic Branch, under Bureau of Customs Trust Fund II Account No. 1572100800. On November 18, 2002, the CA rendered its assailed judgment denying the petition for certiorari and prohibition. The petitioner moved for reconsideration, but the CA denied the motion. Hence, this petition for review. ISSUES: 1. Whether or not the CA erred in not declaring the seizure proceedings null and void for lack of jurisdiction over petitioner’s rice shipment. 2. Whether or not the CA erred in finding that the petitioner’s remedy is an appeal to the Court of Tax Appeals. RULING: The Subic Special Economic Zone, or the Subic Bay Freeport, was established pursuant to Section 12 of Republic Act No. 7227 (The Bases Conversion and Development Act of 1992), to be operated and managed as a special customs territory. On the other hand, the Subic Bay Metropolitan Authority (SBMA) was created under Section 13 of RA No. 7227 to serve “as an operating and implementing arm of the Conversion Authority” within the SBF. The petitioner claims that the Collector of Customs had no jurisdiction to issue WSD No. 2001-13B and the Notice of Sale concerning the 180,000 bags of Thai white rice, which had entered the SBF only for transshipment to other countries. It insists that the auction sale of the 180,000 bags was null and void for failing to comply with Executive Order No. 272, which required presidential approval when the amount to be generated from the sale was at least P50 Million. The Court declares that the Collector of Customs was authorized to institute seizure proceedings and to issue WSDs in the Subic Bay Freeport, subject to the review by the Commissioner of Customs. Accordingly, the proper remedy to question the order or resolution of the Commissioner of Customs was an appeal to the CTA, not to the CA. Although RA No. 7227 is silent as to the person or entity vested with the authority to seize and forfeit or detain goods and articles entering the Subic Bay Freeport, the implementing rules and regulations (IRR) of RA No. 7227 provides that customs officers may seize any article found during a Customs search upon entering or leaving the SBF to be in violation of any provision of the customs laws for which a seizure is authorized, and such seizure shall be disposed of according to the customs laws. Articles which are prohibited or excluded from the SBF under the rules and regulations of the SBMA which are found by the Customs officials during an audit, examination or check within the SBF may be seized by them and turned over to the SBMA for disposition. Customs Administrative Order No. 4-93 (CAO 4-93), also known as the Rules and Regulations for Customs Operations in the Subic Special Economic and Freeport Zone, similarly provides; Any prohibited or excluded articles found upon search, or through any examination, audit or check of articles in the Zone by Customs may be seized by Customs for violations of Tariff and Customs Code of the Philippines as amended and disposed of in accordance with law. Under these statutory provisions, both the SBMA and the Bureau of Customs have the power to seize and forfeit goods or articles entering the Subic Bay Freeport, except that SBMA’s authority to seize and forfeit goods or articles entering the Subic Bay Freeport has been limited only to cases involving violations of RA No. 7227 or its IRR. There is no question therefore, that the authority of the Bureau of Customs is larger in scope because it covers cases concerning violations of the customs laws. The authority of the Bureau of Customs to seize and forfeit goods and articles entering the Subic Bay Freeport does not contravene the nature of the Subic Bay Freeport as a separate customs authority. Indeed, the investors can generally and freely engage in any kind of business as well as import into and export out goods with minimum interference from the Government. In this case, an examination of the shipment by the customs officials pursuant to Mission Order No. 06-2001 initially revealed no cause to 6
hold the release of the 180,000 bags of rice. However, further investigation led to the discovery that the consignees of the 180,000 bags of rice in Indonesia were non-existent, and the consignee in the Fiji Islands denied being involved in the importation of rice. The findings constituted sufficient probable cause, as required by Section 2535 of the Tariff and Customs Code, that violations of the customs laws, particularly Section 102(k) and Section 2530, (a), (f) and (l), par. 3, 4, and 5 of the Tariff and Customs Code,had been committed. For that reason, the institution of the seizure proceedings and the issuance of WSD No. 2001-13B by the Collector of Customs were well within the jurisdiction of the Bureau of Customs. It is well settled that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise thereof or stifle or put it at naught. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. Regional trial courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the BOC and to enjoin or otherwise interfere with these proceedings. Regional trial courts are precluded from assuming cognizance over such matters even through petitions for certiorari, prohibition or mandamus. Verily, the rule is that from the moment imported goods are actually in the possession or control of the Customs authorities, even if no warrant for seizure or detention had previously been issued by the Collector of Customs in connection with the seizure and forfeiture proceedings, the BOC acquires exclusive jurisdiction over such imported goods for the purpose of enforcing the customs laws, subject to appeal to the Court of Tax Appeals whose decisions are appealable to this Court. The issuance of the October 18, 2001 Notice of Sale was merely an incident of the seizure proceedings commenced by the Collector of Customs. Consequently, the correctness of its issuance was necessarily subsumed to the determination of the propriety of the seizure proceedings, a matter that was within the exclusive jurisdiction of the Bureau of Customs. In that context, the proper recourse of the petitioner from the Consolidated Order of Commissioner Villanueva, which reviewed the November 14, 2001 action of Collector Bibit, was an appeal in due course to the CTA, in accordance with Section 7(4) of RA No. 1125, as amended, in relation to Section 2402 of the Tariff and Customs Code within 30 days after the receipt of the order. Without the appeal having been timely filed in the CTA, the February 4, 2002 Consolidated Order became final and executory. Chevron Philippines Inc. vs. Commissioner of Internal Revenue G.R. No. 210836, September 1, 2015 BERSAMIN, J.: Excise tax on petroleum products is essentially a tax on property, the direct liability for which pertains to the statutory taxpayer (i.e., manufacturer, producer or importer). Any excise tax paid by the statutory taxpayer on petroleum products sold to any of the entities or agencies named in Section 135 of the National Internal Revenue Code (NIRC) exempt from excise tax is deemed illegal or erroneous, and should be credited or refunded to the payor pursuant to Section 204 of the NIRC. This is because the exemption granted under Section 135 of the NIRC must be construed in favor of the property itself, that is, the petroleum products. FACTS: Chevron sold and delivered petroleum products to CDC in the period from August 2007 to December 2007. Chevron did not pass on to CDC the excise taxes paid on the importation of the petroleum products sold to CDC in taxable year 2007; hence, on June 26, 2009, it filed an administrative claim for tax refund or issuance of tax credit certificate in the amount of P6,542,400.00. Considering that respondent Commissioner of Internal Revenue (CIR) did not act on the administrative claim for tax refund or tax credit, Chevron elevated its claim to the CTA by petition for review on June 29, 2009. The case, docketed as CTA Case No. 7939, was raffled to the CTA’s First Division. The CTA First Division denied Chevron’s judicial claim for tax refund or tax credit. ISSUE: whether Chevron was entitled to the tax refund or the tax credit for the excise taxes paid on the importation of petroleum products that it had sold to CDC in 2007
RULING: Under Section 12917 of the NIRC, as amended, excise taxes are imposed on two kinds of goods, namely: (a) goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition; and (b) things imported. Undoubtedly, the excise tax imposed under Section 129 of the NIRC is a tax on property. With respect to imported things, Section 131 of the NIRC declares that excise taxes on imported things shall be paid by the owner or importer to the Customs officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customs house, unless the imported things are exempt from excise taxes and the person found to be in possession of the same is other than those legally entitled to such tax exemption. For this purpose, the statutory taxpayer is the importer of the things subject to excise tax. Chevron, being the statutory taxpayer, paid the excise taxes on its importation of the petroleum products. Pursuant to Section 135(c), supra, petroleum products sold to entities that are by law exempt from direct and indirect taxes are exempt from excise tax. The phrase which are by law exempt from direct and indirect taxes describes the entities to whom the petroleum products must be sold in order to render the exemption operative. Section 135(c) should thus be construed as an exemption in favor of the petroleum products on which the excise tax was levied in the first place. The exemption cannot be granted to the buyers – that is, the entities that are by law exempt from direct and indirect taxes – because they are not under any legal duty to pay the excise tax. Inasmuch as its liability for the payment of the excise taxes accrued immediately upon importation and prior to the removal of the petroleum products from the customshouse, Chevron was bound to pay, and actually paid such taxes. But the status of the petroleum products as exempt from the excise taxes would be confirmed only upon their sale to CDC in 2007 (or, for that matter, to any of the other entities or agencies listed in Section 135 of the NIRC). Before then, Chevron did not have any legal basis to claim the tax refund or the tax credit as to the petroleum products. Payment of the excise taxes by Chevron upon its importation of petroleum products was deemed illegal and erroneous upon the sale of the petroleum products to CDC Tridharma Marketing Corporation vs. Court of Tax Appeals G.R. No. 215950, June 20, 2016 BERSAMIN, J.: CTA may order the suspension of the collection of taxes provided that the taxpayer either: (1) deposits the amount claimed; or (2) files a surety bond for not more than double the amount. FACTS: Petitioner received a Preliminary Assessment Notice (PAN) from the Bureau of Internal Revenue (BIR) assessing it with various deficiency taxes -income tax (IT), value-added tax (VAT), withholding tax on compensation (WTC), expanded withholding tax (EWT) and documentary stamp tax (DST) -totalling P4,640,394,039.97, inclusive surcharge and interest. A substantial portion of the deficiency income tax and VAT arose from the complete disallowance by the BIR of the petitioner's purchases from Etheria Trading in 2010 amounting to P4,942,937,053.82. The petitioner replied to the PAN. Petitioner received from the BIR a Formal Letter of Demand assessing it with deficiency taxes for the taxable year ending December 31, 2010 amounting to P4,697,696,275.25, inclusive of surcharge and interest. It filed a protest against the formal letter of demand. Respondent Commissioner of Internal Revenue (CIR) required the petitioner to submit additional documents in support of its protest, and the petitioner complied. Petitioner received a Final Decision on Disputed Assessment worth P4,473,228,667.87. petitioner filed with the CIR a protest through a Request for Reconsideration. However, the CIR rendered a decision denying the request for reconsideration. ISSUE: Did the CTA in Division commit grave abuse of discretion in requiring the petitioner to file a surety bond despite the supposedly patent illegality of the assessment that was beyond the petitioner's net worth but equivalent to the deficiency assessment for IT and VAT? RULING: CTA may order the suspension of the collection of taxes provided that the taxpayer either: (1) deposits the amount claimed; or (2) files a surety bond for not more than double the amount. The surety bond amounting to P4,467,391,881.76 imposed by the CTA was within the parameters delineated in Section 11 of R.A. 1125, as amended. The Court holds, however, that the CTA in Division gravely abused its discretion under Section 11 because it fixed the amount of the bond at nearly five times the net worth of 8
the petitioner without conducting a preliminary hearing to ascertain whether there were grounds to suspend the collection of the deficiency assessment on the ground that such collection would jeopardize the interests of the taxpayer. Although the amount of P4,467,391,881.76 was itself the amount of the assessment, it behoved the CTA in Division to consider other factors recognized by the law itself towards suspending the collection of the assessment, like whether or not the assessment would jeopardize the interest of the taxpayer, or whether the means adopted by the CIR in determining the liability of the taxpayer was legal and valid. Simply prescribing such high amount of the bond like the initial 150% of the deficiency assessment of P4,467,391,881.76 (or P6,701,087,822.64), or later on even reducing the amount of the bond to equal the deficiency assessment would practically deny to the petitioner the meaningful opportunity to contest the validity of the assessments, and would likely even impoverish it as to force it out of business. Section 11 of R.A. 1125, as amended, indicates that the requirement of the bond as a condition precedent to suspension of the collection applies only in cases where the processes by which the collection sought to be made by means thereof are carried out in consonance with the law, not when the processes are in plain violation of the law that they have to be suspended for jeopardizing the interests of the taxpayer. The Court is not in the position to rule on the correctness of the deficiency assessment, which is a matter still pending in the CTA. Conformably with the pronouncement in Pacquiao v. Court of Tax Appeals, First Division, and the Commissioner of Internal Revenue, a ruling that has precedential value herein, the Court deems it best to remand the matter involving the petitioner's plea against the correctness of the deficiency assessment to the CTA for the conduct of a preliminary hearing in order to determine whether the required surety bond should be dispensed with or reduced. Coral Bay Nickel Corporation vs. Commissioner of Internal Revenue G.R. No. 190506, June 13, 2016 BERSAMIN, J.: Section 8 of Republic Act No. 7916 mandates that PEZA shall manage and operate the ECOZONE as a separate customs territory. The provision thereby establishes the fiction that an ECOZONE is a foreign territory separate and distinct from the customs territory. FACTS: The petitioner, a domestic corporation engaged in the manufacture of nickel and/or cobalt mixed sulphide, is a VAT entity registered with the Bureau of Internal Revenue (BIR). It is also registered with the Philippine Economic Zone Authority (PEZA) as an Ecozone Export Enterprise at the Rio Tuba Export Processing Zone under PEZA Certificate of Registration. Petitioner filed its Amended VAT Return declaring unutilized input tax from its domestic purchases of capital goods, other than capital goods and services, for its third and fourth quarters of 2002 totalling P50,124,086.75. On June 14, 2004, it filed with Revenue District Office No. 36 in Palawan its Application for Tax Credits/Refund (BIR Form 1914) together with supporting documents. Due to the alleged inaction of the respondent, the petitioner elevated its claim to the CTA on July 8, 2004 by petition for review, praying for the refund of the aforesaid input VAT. ISSUE: Was the petitioner, an entity located within an ECOZONE, entitled to the refund of its unutilized input taxes incurred before it became a PEZA-registered entity? RULING: With the issuance of RMC 74-99, the distinction under the old rule was disregarded and the new circular took into consideration the two important principles of the Philippine VAT system: the Cross Border Doctrine and the Destination Principle. Section 8 of Republic Act No. 7916 mandates that PEZA shall manage and operate the ECOZONE as a separate customs territory. The provision thereby establishes the fiction that an ECOZONE is a foreign territory separate and distinct from the customs territory. Accordingly, the sales made by suppliers from a customs territory to a purchaser located within an ECOZONE will be considered as exportations. Following the Philippine VAT system's adherence to the Cross Border Doctrine and Destination Principle, the VAT implications are that "no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority". The petitioner's principal office was located in Barangay Rio Tuba, Bataraza, Palawan. Its plant site was specifically located inside the Rio Tuba Export Processing Zone -a special economic zone (ECOZONE) created by Proclamation No. 304, Series of 2002, in relation to Republic Act No. 7916. As such, the 9
purchases of goods and services by the petitioner that were destined for consumption within the ECOZONE should be free of VAT; hence, no input VAT should then be paid on such purchases, rendering the petitioner not entitled to claim a tax refund or credit. Verily, if the petitioner had paid the input VAT, the CTA was correct in holding that the petitioner's proper recourse was not against the Government but against the seller who had shifted to it the output VAT following RMC No. 42-03