COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ISABELA CULTURAL CORPORATION, respondent.

G.R. No. 135210 July 11, 2001 PANGANIBAN, J.:

A final demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer the immediate payment of a tax
deficiency assessment previously made, is tantamount to a denial of the taxpayer's request for reconsideration. Such
letter amounts to a final decision on a disputed assessment and is thus appealable to the Court of Tax Appeals (CTA).

The Case

Before this Court is a Petition for Review on Certiorari1 pursuant to Rule 45 of the Rules of Court, seeking to set aside
the August 19, 1998 Decision2 of the Court of Appeals3 (CA) in CA-GR SP No. 46383 and ultimately to affirm the
dismissal of CTA Case No. 5211. The dispositive portion of the assailed Decision reads as follows:

"WHEREFORE, the assailed decision is REVERSED and SET ASIDE. Accordingly, judgment is hereby
rendered REMANDING the case to the CTA for proper disposition."4

The Facts

The facts are undisputed. The Court of Appeals quoted the summary of the CTA as follows:

"As succinctly summarized by the Court of Tax appeals (CTA for brevity), the antecedent facts are as follows:

'In an investigation conducted on the 1986 books of account of [respondent, petitioner] had the
preliminary [finding] that [respondent] incurred a total income tax deficiency of P9,985,392.15, inclusive
of increments. Upon protest by [respondent's] counsel, the said preliminary assessment was reduced to
the amount of P325,869.44, a breakdown of which follows:

Deficiency Income Tax P321,022.68

Deficiency Expanded Withholding 4,846.76

Tax

Total P325,869.44

(pp. 187-189, BIR records)'

On February 23, 1990, [respondent] received from [petitioner] an assessment letter, dated February 9, 1990,
demanding payment of the amounts of P333,196.86 and P4,897.79 as deficiency income tax and expanded
withholding tax inclusive of surcharge and interest, respectively, for the taxable period from January 1, 1986 to
December 31, 1986. (pp. 204 and 205, BIR rec.)

In a letter, dated March 22, 1990, filed with the [petitioner's] office on March 23, 1990 (pp. 296-311, BIR rec.),
[respondent] requested x x x a reconsideration of the subject assessment.

Supplemental to its protest was a letter, dated April 2, 1990, filed with the [petitioner's] office on April 18, 1990
(pp. 224 & 225, BIR rec.), to which x x x were attached certain documents supportive of its protest, as well as a
Waiver of Statute of Limitation, dated April 17, 1990, where it was indicated that [petitioner] would only have until
April 5, 1991 within which to asses and collect the taxes that may be found due from [respondent] after the re-
investigation.

1
 On February 9, 1995, [respondent] received from [petitioner] a Final Notice Before Seizure, dated December 22,
1994 (p. 340, BIR rec.). In said letter, [petitioner] demanded payment of the subject assessment within ten (10)
days from receipt thereof. Otherwise, failure on its part would constrain [petitioner] to collect the subject
assessment through summary remedies.

[Respondent] considered said final notice of seizure as [petitioner's] final decision. Hence, the instant petition for
review filed with this Court on March 9, 1995.

The CTA having rendered judgment dismissing the petition, [respondent] filed the instant petition anchored on
the argument that [petitioner's] issuance of the Final Notice Before Seizure constitutes [its] decision on
[respondent's] request for reinvestigation, which the [respondent] may appeal to the CTA."5

Ruling of the Court of Appeals

In its Decision, the Court of Appeals reversed the Court of Tax Appeals. The CA considered the final notice sent by
petitioner as the latter's decision, which was appealable to the CTA. The appellate court reasoned that the final Notice
before seizure had effectively denied petitioner's request for a reconsideration of the commissioner's assessment. The
CA relied on the long-settled tax jurisprudence that a demand letter reiterating payment of delinquent taxes amounted
to a decision on a disputed assessment.

Hence, this recourse.6

Issues

In his Memorandum,7 petitioner presents for this Court's consideration a solitary issue:

"Whether or not the Final Notice Before Seizure dated February 9, 1995 signed by Acting Chief Revenue
Collection Officer Milagros Acevedo against ICC constitutes the final decision of the CIR appealable to the
CTA."8

The Court's Ruling

The Petition is not meritorious.

Sole Issue:
The Nature of the Final Notice Before Seizure

The Final Notice Before Seizure sent by the Bureau of Internal Revenue (BIR) to respondent reads as follows:

"On Feb. 9, 1990, [this] Office sent you a letter requesting you to settle the above-captioned assessment. To
date, however, despite the lapse of a considerable length of time, we have not been honored with a reply from
you.

In this connection, we are giving you this LAST OPPORTUNITY to settle the adverted assessment within ten
(10) days after receipt hereof. Should you again fail, and refuse to pay, this Office will be constrained to enforce
its collection by summary remedies of Warrant of Levy of Road Property, Distraint of Personal Property or
Warrant of Garnishment, and/or simultaneous court action.

Please give this matter your preferential attention.

2
 Very truly yours,

ISIDRO B. TECSON, JR.

Revenue District Officer

By:

(Signed)
MILAGROS M. ACEVEDO
Actg. Chief Revenue Collection Officer"9

Petitioner maintains that this Final Notice was a mere reiteration of the delinquent taxpayer's obligation to pay the taxes
due. It was supposedly a mere demand that should not have been mistaken for a decision on a protested assessment.
Such decision, the commissioner contends, must unequivocably indicate that it is the resolution of the taxpayer's
request for reconsideration and must likewise state the reason therefor.

Respondent, on the other hand, points out that the Final Notice Before Seizure should be considered as a denial of its
request for reconsideration of the disputed assessment. The Notice should be deemed as petitioner's last act, since
failure to comply with it would lead to the distraint and levy of respondent's properties, as indicated therein.

We agree with respondent. In the normal course, the revenue district officer sends the taxpayer a notice of delinquent
taxes, indicating the period covered, the amount due including interest, and the reason for the delinquency. If the
taxpayer disagrees with or wishes to protest the assessment, it sends a letter to the BIR indicating its protest, stating
the reasons therefor, and submitting such proof as may be necessary. That letter is considered as the taxpayer's
request for reconsideration of the delinquent assessment. After the request is filed and received by the BIR, the
assessment becomes a disputed assessment on which it must render a decision. That decision is appealable to the
Court of Tax Appeals for review.

Prior to the decision on a disputed assessment, there may still be exchanges between the commissioner of internal
revenue (CIR) and the taxpayer. The former may ask clarificatory questions or require the latter to submit additional
evidence. However, the CIR's position regarding the disputed assessment must be indicated in the final decision. It is
this decision that is properly appealable to the CTA for review. Indisputably, respondent received an assessment letter
dated February 9, 1990, stating that it had delinquent taxes due; and it subsequently filed its motion for reconsideration
on March 23, 1990. In support of its request for reconsideration, it sent to the CIR additional documents on April 18,
1990. The next communication respondent received was already the Final Notice Before Seizure dated November 10,
1994.

In the light of the above facts, the Final Notice Before Seizure cannot but be considered as the commissioner's decision
disposing of the request for reconsideration filed by respondent, who received no other response to its request. Not only
was the Notice the only response received; its content and tenor supported the theory that it was the CIR's final act
regarding the request for reconsideration. The very title expressly indicated that it was a final notice prior to seizure of
property. The letter itself clearly stated that respondent was being given "this LAST OPPORTUNITY" to pay; otherwise,
its properties would be subjected to distraint and levy. How then could it have been made to believe that its request for
reconsideration was still pending determination, despite the actual threat of seizure of its properties?

Furthermore, Section 228 of the National Internal Revenue Code states that a delinquent taxpayer may
nevertheless directly appeal a disputed assessment, if its request for reconsideration remains unacted upon 180 days
after submission thereof. We quote:

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 "Sec. 228. Protesting an Assessment. – x x x

Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to
respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative
shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation
within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by
implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting
documents shall have become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from
submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of
Tax Appeals within (30) days from receipt of the said decision, or from the lapse of the one hundred eighty
(180)-day period; otherwise the decision shall become final, executory and demandable."10

In this case, the said period of 180 days had already lapsed when respondent filed its request for reconsideration on
March 23, 1990, without any action on the part of the CIR.

Lastly, jurisprudence dictates that a final demand letter for payment of delinquent taxes may be considered a decision
on a disputed or protested assessment. In Commissioner of Internal Revenue v. Ayala Securities Corporation, this
Court held:

"The letter of February 18, 1963 (Exh. G), in the view of the Court, is tantamount to a denial of the
reconsideration or [respondent corporation's] x x x protest o[f] the assessment made by the petitioner,
considering that the said letter [was] in itself a reiteration of the demand by the Bureau of Internal Revenue for
the settlement of the assessment already made, and for the immediate payment of the sum of P758,687.04 in
spite of the vehement protest of the respondent corporation on April 21, 1961. This certainly is a clear indication
of the firm stand of petitioner against the reconsideration of the disputed assessment, in view of the continued
refusal of the respondent corporation to execute the waiver of the period of limitation upon the assessment in
question.

This being so, the said letter amount[ed] to a decision on a disputed or protested assessment and, there, the
court a quo did not err in taking cognizance of this case."11

Similarly, in Surigao Electric Co., Inc. v. Court of Tax Appeals12 and again in CIR v. Union Shipping Corp.,13 we ruled:

"x x x. The letter of demand dated April 29, 1963 unquestionably constitutes the final action taken by the
commissioner on the petitioner's several requests for reconsideration and recomputation. In this letter the
commissioner not only in effect demanded that the petitioner pay the amount of P11,533.53 but also gave
warning that in the event it failed to pay, the said commissioner would be constrained to enforce the collection
thereof by means of the remedies provided by law. The tenor of the letter, specifically the statement regarding
the resort to legal remedies, unmistakably indicate[d] the final nature of the determination made by the
commissioner of the petitioner's deficiency franchise tax liability."

As in CIR v. Union Shipping,14 petitioner failed to rule on the Motion for Reconsideration filed by private respondent, but
simply continued to demand payment of the latter's alleged tax delinquency. Thus, the Court reiterated the dictum that
the BIR should always indicate to the taxpayer in clear and unequivocal language what constitutes final action on a
disputed assessment. The object of this policy is to avoid repeated requests for reconsideration by the taxpayer,
thereby delaying the finality of the assessment and, consequently, the collection of the taxes due. Furthermore, the
taxpayer would not be groping in the dark, speculating as to which communication or action of the BIR may be the
decision appealable to the tax court.15

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In the instant case, the second notice received by private respondent verily indicated its nature – that it was final.
Unequivocably, therefore, it was tantamount to a rejection of the request for reconsideration.

Commissioner v. Algue16 is not in point here. In that case, the Warrant of Distraint and Levy, issued to the taxpayer
without any categorical ruling on its request for reconsideration, was not deemed equivalent to a denial of the request.
Because such request could not in fact be found in its records, the BIR cannot be presumed to have taken it into
consideration. The request was considered only when the taxpayer gave a copy of it, duly stamp-received by the BIR.
Hence, the Warrant was deemed premature.1âwphi1.nêt

In the present case, petitioner does not deny receipt of private respondent's protest letter. As a matter of fact, it
categorically relates the following in its "Statement of Relevant Facts":17

"3. On March 23, 1990, respondent ICC wrote the CIR requesting for a reconsideration of the assessment on
the ground that there was an error committed in the computation of interest and that there were expenses which
were disallowed (Ibid., pp. 296-311).

"4. On April 2, 1990, respondent ICC sent the CIR additional documents in support of its protest/reconsideration.
The letter was received by the BIR on April 18, 1990. Respondent ICC further executed a Waiver of Statute of
Limitation (dated April 17, 1990) whereby it consented to the BIR to assess and collect any taxes that may be
discovered in the process of reinvestigation, until April 3, 1991 (Ibid., pp. 296-311). A copy of the waiver is
hereto attached as Annex 'C'."

Having admitted as a fact private respondent's request for reconsideration, petitioner must have passed upon it prior to
the issuance of the Final Notice Before Seizure.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. SO ORDERED.

DIGEST:

FACTS:

 BIR disallowed Isabela Cultural Corp. deductible expenses for services which were rendered in 1984 and 1985
but only billed, paid and claimed as a deduction on 1986.
 After CA sent its demand letters, Isabela protested.
 CTA found it proper to be claimed in 1986 and affirmed by CA

ISSUE: W/N Isabela who uses accrual method can claim on 1986 only

HELD: case is remanded to the BIR for the computation of Isabela Cultural Corporation’s liability under Assessment
Notice No. FAS-1-86-90-000680.

NO

 The requisites for the deductibility of ordinary and necessary trade, business, or professional expenses, like
expenses paid for legal and auditing services, are:
o (a) the expense must be ordinary and necessary;

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 o (b) it must have been paid or incurred during the taxable year; - qualified by Section 45 of the National
Internal Revenue Code (NIRC) which states that: "[t]he deduction provided for in this Title shall be taken
for the taxable year in which ‘paid or accrued’ or ‘paid or incurred’, dependent upon the method of
accounting upon the basis of which the net income is computed
o (c) it must have been paid or incurred in carrying on the trade or business of the taxpayer; and
o (d) it must be supported by receipts, records or other pertinent papers.
 Revenue Audit Memorandum Order No. 1-2000, provides that under the accrual method of accounting, expenses
not being claimed as deductions by a taxpayer in the current year when they are incurred cannot be claimed as
deduction from income for the succeeding year. Thus, a taxpayer who is authorized to deduct certain expenses
and other allowable deductions for the current year but failed to do so cannot deduct the same for the next year.
 The accrual method relies upon the taxpayer’s right to receive amounts or its obligation to pay them, in
opposition to actual receipt or payment, which characterizes the cash method of accounting. Amounts of income
accrue where the right to receive them become fixed, where there is created an enforceable liability. Similarly,
liabilities are accrued when fixed and determinable in amount, without regard to indeterminacy merely of time of
payment.
o The accrual of income and expense is permitted when the all-events test has been met. This test requires:
(1) fixing of a right to income or liability to pay; and (2) the availability of the reasonable accurate
determination of such income or liability.
 The all-events test requires the right to income or liability be fixed, and the amount of such income
or liability be determined with reasonable accuracy. However, the test does not demand that the
amount of income or liability be known absolutely, only that a taxpayer has at his disposal the
information necessary to compute the amount with reasonable accuracy. The all-events test is
satisfied where computation remains uncertain, if its basis is unchangeable; the test is satisfied
where a computation may be unknown, but is not as much as unknowable, within the taxable year.
The amount of liability does not have to be determined exactly; it must be determined with
"reasonable accuracy." Accordingly, the term "reasonable accuracy" implies something less than
an exact or completely accurate amount.
o The propriety of an accrual must be judged by the facts that a taxpayer knew, or could reasonably be
expected to have known, at the closing of its books for the taxable year.
 Accrual method of accounting presents largely a question of fact; such that the taxpayer bears the burden of proof
of establishing the accrual of an item of income or deduction.
o In the instant case, the expenses for professional fees consist of expenses for legal and auditing services.
The expenses for legal services pertain to the 1984 and 1985 legal and retainer fees of the law firm
Bengzon Zarraga Narciso Cudala Pecson Azcuna & Bengson, and for reimbursement of the expenses of
said firm in connection with ICC’s tax problems for the year 1984. As testified by the Treasurer of ICC,
the firm has been its counsel since the 1960’s. - failed to prove the burden

SURIGAO ELECTRIC CO., INC., petitioner, vs. THE HONORABLE COURT OF TAX APPEALS and
COMMISSIONER OF INTERNAL REVENUE, respondents. G.R. No. L-25289 June 28, 1974 CASTRO, J.:p

The Court denies the present petition for review of the decision of the Court of Appeals dated October 1, 1965 in its
CTA Case No. 1438, which dismissed the appeal filed by the petitioner Surigao Electric Company, Inc. with the tax
court on August 1, 1963 on the ground that it was time-barred.

In November 1961 the petitioner Surigao Electric Co., Inc., grantee of a legislative electric franchise, received a warrant
of distraint and levy to enforce the collection from "Mainit Electric" of a deficiency franchise tax plus surcharge in the

6
total amount of P718.59. In a letter to the Commissioner of Internal Revenue, the petitioner contested this warrant,
stating that it did not have a franchise in Mainit, Surigao.

Thereafter the Commissioner, by letter dated April 2, 1961, advised the petitioner to take up the matter with the General
Auditing Office, enclosing a copy of the 4th Indorsement of the Auditor General dated November 23, 1960. This
indorsement indicated that the petitioner's liability for deficiency franchise tax for the period from September 1947 to
June 1959 was P21,156.06, excluding surcharge. Subsequently, in a letter to the Auditor General dated August 2,
1962, the petitioner asked for reconsideration of the assessment, admitting liability only for the 2% franchise tax in
accordance with its legislative franchise and not at the higher rate of 5% imposed by section 259 of the National Internal
Revenue Code, as amended, which latter rate the Auditor General used as basis in computing the petitioner's
deficiency franchise tax.

An exchange of correspondence between the petitioner, on the one hand, and the Commissioner and the Auditor
General, on the other, ensued, all on the matter of the petitioner's liability for deficiency franchise tax.

The controversy culminated in a revised assessment dated April 29, 1963 (received by the petitioner on May 8, 1963) in
the amount of P11,533.53, representing the petitioner's deficiency franchise-tax and surcharges thereon for the period
from April 1, 1956 to June 30, 1959. The petitioner then requested a recomputation of the revised assessment in a letter
to the Commissioner dated June 6, 1963 (sent by registered mail on June 7, 1963). The Commissioner, however, in a
letter dated June 28, 1963 (received by the petitioner on July 16, 1963), denied the request for recomputation.

On August 1, 1963 the petitioner appealed to the Court of Tax Appeals. The tax court dismissed the appeal on October
1, 1965 on the ground that the appeal was filed beyond the thirty-day period of appeal provided by section 11 of
Republic Act 1125.

Hence, the present recourse.

The case at bar raises only one issue: whether or not the petitioner's appeal to the Court of Tax Appeals was time-
barred. The parties disagree on which letter of the Commissioner embodies the decision or ruling appealable to the tax
court.

A close reading of the numerous letters exchanged between the petitioner and the Commissioner clearly discloses that
the letter of demand issued by the Commissioner on April 29, 1963 and received by the petitioner on May 8, 1963
constitutes the definite determination of the petitioner's deficiency franchise tax liability or the decision on the disputed
assessment and, therefore, the decision appealable to the tax court. This letter of April 29, 1963 was in response to the
communications of the petitioner, particularly the letter of August 2, 1962 wherein it assailed the 4th Indorsement's data
and findings on its deficiency, franchise tax liability computed at 5% (on the ground that its franchise precludes the
imposition of a rate higher than the 2% fixed in its legislative franchise), and the letter of April 24, 1963 wherein it again
questioned the assessment and requested for a recomputation (on the ground that the Government could make an
assessment only for the period from May 29, 1956 to June 30, 1959). Thus, as early as August 2, 1962, the petitioner
already disputed the assessment made by the Commissioner.

Moreover, the letter of demand dated April 29, 1963 unquestionably constitutes the final action taken by the
Commissioner on the petitioner's several requests for reconsideration and recomputation. In this letter, the
Commissioner not only in effect demanded that the petitioner pay the amount of P11,533.53 but also gave warning that
in the event it failed to pay, the said Commissioner would be constrained to enforce the collection thereof by means of
the remedies provided by law. The tenor of the letter, specifically, the statement regarding the resort to legal remedies,
unmistakably indicates the final nature of the determination made by the Commissioner of the petitioner's deficiency
franchise tax liability.

The foregoing-view accords with settled jurisprudence — and this despite the fact that nothing in Republic Act 1125,1 as
amended, even remotely suggests the element truly determinative of the appealability to the Court of Appeals of a
7
ruling of the Commissioner of Internal Revenue. Thus, this Court has considered the following communications sent by
the Commissioner to taxpayers as embodying rulings appealable to the tax court: (a) a letter which stated the result of
the investigation requested by the taxpayer and the consequent modification of the assessment; 2 (b) letter which denied
the request of the taxpayer for the reconsideration cancellation, or withdrawal of the original assessment; 3 (c) a letter
which contained a demand on the taxpayer for the payment of the revised or reduced assessment;4 and (d) a letter
which notified the taxpayer of a revision of previous assessments.5

To sustain the petitioner's contention that the Commissioner's letter of June 28, 1963 denying its request for further
amendment of the revised assessment constitutes the ruling appealable to the tax court and that the thirty-day period
should, therefore, be counted from July 16, 1963, the day it received the June 28, 1963 letter, would, in effect, leave
solely to the petitioner's will the determination of the commencement of the statutory thirty-day period, and place the
petitioner — and for that matter, any taxpayer — in a position, to delay at will and on convenience the finality of a tax
assessment. This absurd interpretation espoused by the petitioner would result in grave detriment to the interests of the
Government, considering that taxes constitute its life-blood and their prompt and certain availability is an imperative
need.6

The revised assessment embodied in the Commissioner's letter dated April 29, 1963 being, in legal contemplation, the
final ruling reviewable by the tax court, the thirty-day appeal period should be counted from May 8, 1963 (the day the
petitioner received a copy of the said letter). From May 8, 1963 to June 7, 1963 (the day the petitioner, by registered
mail, sent to the Commissioner its letter of June 6, 1963 requesting for further recomputation of the amount demanded
from it) saw the lapse of thirty days. The June 6, 1963 request for further recomputation, partaking of a motion for
reconsideration, tolled the running of the thirty-day period from June 7, 1963 (the day the petitioner sent its letter by
registered mail) to July 16, 1963 (the day the petitioner received the letter of the Commissioner dated June 28, 1963
turning down its request). The prescriptive period commenced to run again on July 16, 1963. The petitioner filed its
petition for review with the tax court on August 1, 1963 — after the lapse of an additional sixteen days. The petition for
review having been filed beyond the thirty-day period, we rule that the Court of Tax Appeals correctly dismissed the
same.

The thirty-day period prescribed by section 11 of Republic Act 1125, as amended, within which a taxpayer adversely
affected by a decision of the Commissioner of Internal Revenue should file his appeal with the tax court, is a
jurisdictional requirement,7 and the failure of a taxpayer to lodge his appeal within the prescribed period bars his appeal
and renders the questioned decision final and executory.8

Prescinding from all the foregoing, we deem it appropriate to state that the Commissioner of Internal Revenue should
always indicate to the taxpayer in clear and unequivocal language whenever his action on an assessment questioned
by a taxpayer constitutes his final determination on the disputed assessment, as contemplated by sections 7 and 11 of
Republic Act 1125, as amended. On the basis of this indicium indubitably showing that the Commissioner's
communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be able to
take recourse to the tax court at the opportune time. Without needless difficulty, the taxpayer would be able to
determine when his right to appeal to the tax court accrues. This rule of conduct would also obviate all desire and
opportunity on the part of the taxpayer to continually delay the finality of the assessment — and, consequently, the
collection of the amount demanded as taxes — by repeated requests for recomputation and reconsideration. On the
part of the Commissioner, this would encourage his office to conduct a careful and thorough study of every questioned
assessment and render a correct and definite decision thereon in the first instance. This would also deter the
Commissioner from unfairly making the taxpayer grope in the dark and speculate as to which action constitutes the
decision appealable to the tax court. Of greater import, this rule of conduct would meet a pressing need for fair play,
regularity, and orderliness in administrative action.

ACCORDINGLY, the decision of the Court of Tax Appeals dated October 1, 1965 is affirmed, at petitioner's cost.

Separate Opinions TEEHANKEE, J., concurring:

8
I concur in the disposition of the case affirming the tax court's dismissal of the appeal on the ground of its having been
filed beyond the statutory thirty-day period1 and in the main opinion's admonition that the internal revenue commissioner
(and other officials concerned2) should clearly and unequivocably state in their letter-decision — or ruling that the same
constitutes his final determination on the disputed assessment and that the tax-payer's next recourse (if he wishes to
avail thereof) is to file an appeal with the tax court "within thirty days after the receipt of such decision or ruling"3 ) as
provided by law.

Ordinarily, since petitioner's representation prior to the revised assessment dated April 29, 1963 had resulted in the
revision and reduction of the original assessment from P21,156.06 to P11,533.53, petitioner would have been entitled to
further request a reconsideration or revision of such revised assessment based on new facts or arguments arising
therefrom or calling attention to such facts or arguments, which although not new, might have been wrongly appreciated
or disregarded in the revised assessment and the thirty-day period for appeal would be counted only from the receipt of
the commissioner's denial dated June 28, 1963 (and received on July 16, 1963).

But since it appears that petitioner's request for recomputation dated June 6, 1963 of the revised assessment was but
a pro forma request of the revised assessment of April 9, 1963, I concur with the main opinion's affirmance of the
dismissal of the appeal on the strength of Filipinas Investment and Finance Corp. vs. Commissioner of Internal
Revenue4 wherein the Court likewise upheld a similar dismissal by the tax court on the ground that the request for
reconsideration of the disputed revised assessment was "a mere pro-forma request for reconsideration .... and did not
adduce new facts or arguments" and that "a taxpayer may not delay indefinitely a tax assessment by reiterating his
original defenses over and over again, without substantial variation."

DIGEST:

Surigao vs CTA 57 SCRA 523

Facts:
Petitioner Surigao Electric Co., grantee of a legislative electric franchise, contested a warrant of distraint and levy to enforce the
collection from "Mainit Electric" of a deficiency franchise tax plus surcharge. Thereafter the Commissioner, by letter dated April 2,
1961, advised the petitioner to take up the matter with the General Auditing Office, enclosing a copy of the 4th Indorsement of the
Auditor General dated November 23, 1960. This indorsement indicated that the petitioner's liability for deficiency franchise tax for
the period from September 1947 to June 1959 was P21,156.06, excluding surcharge. Subsequently, in a letter to the Auditor General
dated August 2, 1962, the petitioner asked for reconsideration of the assessment, admitting liability only for the 2% franchise tax in
accordance with its legislative franchise and not at the higher rate of 5% imposed by Sec. 259 of the NIRC, which latter rate the
Auditor General used as basis in computing the petitioner's deficiency franchise tax. An exchange of correspondence between the
petitioner, on the one hand, and the Commissioner and the Auditor General, on the other, ensued, all on the matter of the petitioner's
liability for deficiency franchise tax. The controversy culminated in a revised assessment dated April 29, 1963 in the amount of
P11,533.53, representing the petitioner's deficiency franchise-tax and surcharges thereon for the period from April 1, 1956 to June
30, 1959. The petitioner then requested a recomputation of the revised assessment in a letter to the Commissioner dated June 6,
1963. The Commissioner, however, in a letter dated June 28, 1963 denied the request for recomputation.

Petitioner appealed to the CTA which was subsequently dismised on the ground that the appeal was filed beyond the thirty-day
period of appeal provided by Sec. 11 of Republic Act 1125.

Issue:
WON the petitioner's appeal to the CTA was time-barred.

Ruling:

9
YES. To sustain the petitioner's contention that the Commissioner's letter of June 28, 1963 denying its request for further
amendment of the revised assessment constitutes the ruling appealable to the tax court and that the thirty-day period should,
therefore, be counted from July 16, 1963, the day it received the June 28, 1963 letter, would, in effect, leave solely to the petitioner's
will the determination of the commencement of the statutory thirty-day period, and place the petitioner — and for that matter, any
taxpayer — in a position, to delay at will and on convenience the finality of a tax assessment. This absurd interpretation espoused
by the petitioner would result in grave detriment to the interests of the Government, considering that taxes constitute its life-blood
and their prompt and certain availability is an imperative need.

ADVERTISING ASSOCIATES, INC., petitioner, vs. COURT OF APPEALS and COMMISSIONER OF

INTERNAL REVENUE, respondents. G.R. No. L-59758 December 26, 1984
AQUINO, J.:

This case is about the liability of Advertising Associates, lnc. for P382,700.16 as 3% contractor's percentage tax on its
rental income from the lease of neon signs and billboards imposed by section 191 of the Tax Code (as amended by
Republic Acts Nos. 1612 and 6110) on business agents and independent contractors. Parenthetically, it may be noted
that Presidential Decree No. 69, effective November 24, 1972, added paragraph 17 to section 191 by taxing lessors of
personal property.

Section 191 defines an independent contractor as including all persons whose activity consists essentially of the sale of
all kinds of services for a fee. Section 194(v) of the Tax Code defines a business agent as including persons who
conduct advertising agencies.

It should be noted that in Advertising Associates, Inc. vs. Collector of Internal Revenue, 97 Phil. 636, the taxpayer was
held liable as a manufacturer for the.90% sales tax on its sales of neon-tube signs under section 185(k) of the Tax
Code as amended. It paid P11,986.18 as sales tax for the 4th quarter of 1948 to 1951.

This Court rejected the taxpayer's contention that it was only a contractor of neon-tube signs and that it should pay only
the 3% contractor's tax under section 191 of the Tax Code.

In the instant case, Advertising Associates alleged that it sold in 1949 its advertising agency business to Philippine
Advertising Counsellors, that its business is limited to the making, construction and installation of billboards and electric
signs and making and printing of posters, signs, handbills, etc. (101 tsn). It contends that it is a media company, not an
advertising company,

It paid sales taxes for selling billboards, electric signs, calendars, posters, etc., realty dealer's tax for leasing billboards
and electric signs and 3% contractor's tax for repairing electric signs.

The billboards and electric signs manufactured by it are either sold or leased, As already stated, the Commissioner of
Internal Revenue subjected to 3% contractor's tax its rental income from billboards and electric signs (p. 10, Appellant's
brief ).

The Commissioner required Advertising Associates to pay P297,927.06 and P84,773.10 as contractor's tax for 1967-
1971 and 1972, respectively, including 25% surcharge (the latter amount includes interest) on its income from billboards
and neon signs.

The basis of the assessment is the fact that the taxpayer's articles of incorporation provide that its primary purpose is to
engage in general advertising business. Its income tax returns indicate that its business was advertising (Exh. 14 and
15, etc.).

10
It is supposed "to conduct a general advertising business, both as principal and agent, including the preparation and
arrangements of advertising devices and novelties; to erect, construct, purchase, lease or otherwise acquire fences,
billboards, signboards, buildings and other structures suitable for advertising purposes; to carry on the business of
printers, publishers, binders, and decorators in connection with advertising business and to make and carry out
contracts of every kind and character that may be necessary or conducive to the accomplishment of any of the
purposes of the company; to engage in and carry on a general advertising business by the circulation and distribution
and the display of cards, signs, posters, dodgers, handbills, programs, banners and flags to be placed in and on railroad
cars, street cars, steam boats, cabs, hacks, omnibuses, stages and any and all kinds of conveyances used for
passengers or for any other purposes; to display moveable or changeable signs, cards, pictures, designs, mottoes, etc.,
operated by clockwork, electricity or any other power; to use, place and display the same in depots, hotels, halls, and
other public places, to advertise in the air by airplanes, streamers, skywriting and other similar or dissimilar operation."
(Exh. 14-A, pp. 48-49, BIR Records, Vol. I).

Advertising Associates contested the assessments in its 'letters of June 25, 1973 (for the 1967-71 deficiency taxes) and
March 7, 1974 (for the 1972 deficiency). The Commissioner reiterated the assessments in his letters of July 12 and
September 16,1974 (p. 3, Rollo).

The taxpayer requested the cancellation of the assessments in its letters of September 13 and November 21, 1974 (p.
3, Rollo). Inexplicably, for about four years there was no movement in the case. Then, on March 31, 1978, the
Commissioner resorted to the summary remedy of issuing two warrants of distraint, directing the collection enforcement
division to levy on the taxpayer's personal properties as would be sufficient to satisfy the deficiency taxes (pp. 4, 29 and
30, Rollo). The warrants were served upon the taxpayer on April 18 and May 25, 1978.

More than a year later, Acting Commissioner Efren I. Plana wrote a letter dated May 23, 1979 in answer to the requests
of the taxpayer for the cancellation of the assessments and the withdrawal of the warrants of distraint (Annex C of
Petition, pp. 31-32, Rollo).

He justified the assessments by stating that the rental income of Advertising Associates from billboards and neon signs
constituted fees or compensation for its advertising services. He requested the taxpayer to pay the deficiency taxes
within ten days from receipt of the demand; otherwise, the Bureau would enforce the warrants of distraint. He closed his
demand letter with this paragraph:

This constitutes our final decision on the matter. If you are not agreeable, you may appeal to the Court of
Tax Appeals within 30 days from receipt of this letter.

Advertising Associates received that letter on June 18, 1979. Nineteen days later or on July 7, it filed its petition for
review. In its resolution of August 28, 1979, the Tax Court enjoined the enforcement of the warrants of distraint.

The Tax Court did not resolve the case on the merits. It ruled that the warrants of distraint were the
Commissioner's appealable decisions. Since Advertising Associates appealed from the decision of May 23, 1979, the
petition for review was filed out of time. It was dismissed. The taxpayer appealed to this Court.

We hold that the petition for review was filed on time. The reviewable decision is that contained in Commissioner
Plana's letter of May 23, 1979 and not the warrants of distraint.

No amount of quibbling or sophistry can blink the fact that said letter, as its tenor shows, embodies the Commissioner's
final decision within the meaning of section 7 of Republic Act No. 1125. The Commissioner said so. He even directed
the taxpayer to appeal it to the Tax Court. That was the same situation in St. Stephen's Association and St. Stephen's
Chinese Girl's School vs. Collector of Internal Revenue, 104 Phil. 314, 317-318.

The directive is in consonance with this Court's dictum that the Commissioner should always indicate to the taxpayer in
clear and unequivocal language what constitutes his final determination of the disputed assessment. That procedure is
11
demanded by the pressing need for fair play, regularity and orderliness in administrative action (Surigao Electric Co.,
Inc. vs. Court of Tax Appeals, L-25289, June 28, 1974, 57 SCRA 523).

On the merits of the case, the petitioner relies on the Collector's rulings dated September 12, 1960 and June 20, 1967
that it is neither an independent contractor nor a business agent (Exh. G and H).

As already stated, it considers itself a media company, like a newspaper or a radio broadcasting company, but not an
advertising agency in spite of the purpose stated in its articles of incorporation. It argues that its act of leasing its neon
signs and billboards does not make it a business agent or an independent contractor. It stresses that it is a mere lessor
of neon signs and billboards and does not perform advertising services.

But the undeniable fact is that neon signs and billboards are primarily designed for advertising. We hold that the
petitioner is a business agent and an independent contractor as contemplated in sections 191 and 194(v).

However, in view of the prior rulings that the taxpayer is not a business agent nor an independent contractor and in view
of the controversial nature of the deficiency assessments, the 25% surcharge should be eliminated (C. M. Hoskins &
Co., Inc. vs. Commissioner of Internal Revenue, L-28383, June 22, 1976, 71 SCRA 511, 519; Imus Electric Co., Inc. vs.
Commissioner of Internal Revenue, 125 Phil. 1084).

Petitioner's last contention is that the collection of the tax had already prescribed. Section 332 of the 1939 Tax Code,
now section 319 of the 1977 Tax Code, Presidential Decree No. 1158, effective on June 3, 1977, provides that the tax
may be collected by distraint or levy or by a judicial proceeding begun 'within five years after the assessment of the tax".

The taxpayer received on June 18, 1973 and March 5, 1974 the deficiency assessments herein. The warrants of
distraint were served upon it on April 18 and may 25,1978 or within five years after the assessment of the tax.
Obviously, the warrants were issued to interrupt the five-year prescriptive period. Its enforcement was not implemented
because of the pending protests of the taxpayer and its requests for withdrawal of the warrants which were eventually
resolved in Commissioner Plana's letter of May 23, 1979.

It should be noted that the Commissioner did not institute any judicial proceeding to collect the tax. He relied on the
warrants of distraint to interrupt the running of the statute of limitations. He gave the taxpayer ample opportunity to
contest the assessments but at the same time safeguarded the Government's interest by means of the warrants of
distraint.

WHEREFORE, the judgment of the Tax Court is reversed and set aside. The Commissioner's deficiency assessments
are modified by requiring the petitioner to pay the tax proper and eliminating the 25% surcharge, interest and penalty. In
case of non-payment, the warrants of distrant should be implemented. The preliminary injunction issued by the Tax
Court on August 28, 1979 restraining the enforcement of said warrants is lifted. No costs. SO ORDERED.

NO DIGEST

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. UNION SHIPPING CORPORATION and THE COURT OF
TAX APPEALS, respondents. G.R. No. L-66160 May 21, 1990 PARAS, J.:

This is a petition for review on certiorari of the December 9, 1983 decision * of the Court of Tax Appeals in CTA Case
No. 2989 reversing the Commissioner of Internal Revenue.

In a letter dated December 27, 1974 (Exhibit "A") herein petitioner Commissioner of Internal Revenue assessed against
Yee Fong Hong, Ltd. and/or herein private respondent Union Shipping Corporation, the total sum of P583,155.22 as

12
deficiency income taxes due for the years 1971 and 1972. Said letter was received on January 4, 1975, and in a letter
dated January 10, 1975 (Exhibit "B"), received by petitioner on January 13, 1975, private respondent protested the
assessment.

Petitioner, without ruling on the protest, issued a Warrant of Distraint and Levy (Exhibit "C"), which was served on
private respondent's counsel, Clemente Celso, on November 25, 1976.

In a letter dated November 27, 1976 (Exhibit "D"), received by petitioner on November 29, 1976 (Exhibit "D-1") private
respondent reiterated its request for reinvestigation of the assessment and for the reconsideration of the summary
collection thru the Warrant of Distraint and Levy.

Petitioner, again, without acting on the request for reinvestigation and reconsideration of the Warrant of Distraint and
Levy, filed a collection suit before Branch XXI of the then Court of First Instance of Manila and docketed as Civil Case
No. 120459 against private respondent. Summons (Exhibit "E") in the said collection case was issued to private
respondent on December 28, 1978.

On January 10, 1979, private respondent filed with respondent court its Petition for Review of the petitioner's
assessment of its deficiency income taxes in a letter dated December 27, 1974, docketed therein as CTA Case No.
2989 (Rollo, pp. 44-49), wherein it prays that after hearing, judgment be rendered holding that it is not liable for the
payment of the income tax herein involved, or which may be due from foreign shipowner Yee Fong Hong, Ltd.; to which
petitioner filed his answer on March 29, 1979 (Rollo, pp. 50-53).

Respondent Tax Court, in a decision dated December 9, 1983, ruled in favor of private respondent —

WHEREFORE, the decision of the Commissioner of Internal Revenue appealed from, assessing against
and demanding from petitioner the payment of deficiency income tax, inclusive of 50% surcharge,
interest and compromise penalties, in the amounts of P73,958.76 and P583,155.22 for the years 1971
and 1972, respectively, is reversed.

Hence, the instant petition.

The Second Division of this Court, after the filing of the required pleadings, in a resolution dated January 28, 1985,
resolved to give due course to the petition, and directed petitioner therein, to file his brief (Rollo, p. 145). In compliance,
petitioner filed his brief on May 10, 1985 (Rollo, p. 151). Respondents, on the other hand, filed their brief on June 6,
1985 (Rollo, p. 156).

The main issues in this case are: (a) on the procedural aspect, whether or not the Court of Tax Appeals has jurisdiction
over this case and (b) on the merits, whether or not Union Shipping Corporation acting as a mere "husbanding agent" of
Yee Fong Hong Ltd. is liable for payment of taxes on the gross receipts or earnings of the latter.

The main thrust of this petition is that the issuance of a warrant of distraint and levy is proof of the finality of an
assessment because it is the most drastic action of all media of enforcing the collection of tax, and is tantamount to an
outright denial of a motion for reconsideration of an assessment. Among others, petitioner contends that the warrant of
distraint and levy was issued after respondent corporation filed a request for reconsideration of subject assessment,
thus constituting petitioner's final decision in the disputed assessments (Brief for petitioner, pp. 9 and 12).

Petitioner argues therefore that the period to appeal to the Court of Tax Appeals commenced to run from receipt of said
warrant on November 25, 1976, so that on January 10, 1979 when respondent corporation sought redress from the Tax
Court, petitioner's decision has long become final and executory.

On this issue, this Court had already laid down the dictum that the Commissioner should always indicate to the taxpayer
in clear and unequivocal language what constitutes his final determination of the disputed assessment.
13
Specifically, this Court ruled:

. . . we deem it appropriate to state that the Commissioner of Internal Revenue should always indicate to
the taxpayer in clear and unequivocal language whenever his action on an assessment questioned by a
taxpayer constitutes his final determination on the disputed assessment, as contemplated by sections 7
and 11 of Republic Act 1125, as amended. On the basis of this statement indubitably showing that the
Commissioner's communicated action is his final decision on the contested assessment, the aggrieved
taxpayer would then be able to take recourse to the tax court at the opportune time. Without needless
difficulty, the taxpayer would be able to determine when his right to appeal to the tax court accrues. This
rule of conduct would also obviate all desire and opportunity on the part of the taxpayer to continually
delay the finality of the assessment — and, consequently, the collection of the amount demanded as
taxes — by repeated requests for recomputation and reconsideration. On the part of the Commissioner,
this would encourage his office to conduct a careful and thorough study of every questioned assessment
and render a correct and definite decision thereon in the first instance. This would also deter the
Commissioner from unfairly making the taxpayer grope in the dark and speculate as to which action
constitutes the decision appealable to the tax court. Of greater import, this rule of conduct would meet a
pressing need for fair play, regularity, and orderliness in administrative action. (Surigao Electric Co., Inc.
v. C.T.A., 57 SCRA 523, 528, [1974]).

There appears to be no dispute that petitioner did not rule on private respondent's motion for reconsideration but
contrary to the above ruling of this Court, left private respondent in the dark as to which action of the Commissioner is
the decision appealable to the Court of Tax Appeals. Had he categorically stated that he denies private respondent's
motion for reconsideration and that his action constitutes his final determination on the disputed assessment, private
respondent without needless difficulty would have been able to determine when his right to appeal accrues and the
resulting confusion would have been avoided.

Much later, this Court reiterated the above-mentioned dictum in a ruling applicable on all fours to the issue in the case
at bar, that the reviewable decision of the Bureau of Internal Revenue is that contained in the letter of its Commissioner,
that such constitutes the final decision on the matter which may be appealed to the Court of Tax Appeals and not the
warrants of distraint (Advertising Associates, Inc. v. Court of Appeals, 133 SCRA 769 [1984] emphasis supplied). It was
likewise stressed that the procedure enunciated is demanded by the pressing need for fair play, regularity and
orderliness in administrative action.

Under the circumstances, the Commissioner of Internal Revenue, not having clearly signified his final action on the
disputed assessment, legally the period to appeal has not commenced to run. Thus, it was only when private
respondent received the summons on the civil suit for collection of deficiency income on December 28, 1978 that the
period to appeal commenced to run.

The request for reinvestigation and reconsideration was in effect considered denied by petitioner when the latter filed a
civil suit for collection of deficiency income. So. that on January 10, 1979 when private respondent filed the appeal with
the Court of Tax Appeals, it consumed a total of only thirteen (13) days well within the thirty day period to appeal
pursuant to Section 11 of R.A. 1125.

On the merits, it was found fully substantiated by the Court of Tax Appeals that, respondent corporation is the
husbanding agent of the vessel Yee Fong Hong, Ltd. as follows:

Coming to the second issue, petitioner contended and was substantiated by satisfactory uncontradicted
testimonies of Clemente Celso, Certified Public Accountant, and Rodolfo C. Cabalquinto, President and
General Manager, of petitioner that it is actually and legally the husbanding agent of the vessel of Yee
Fong Hong, Ltd. as (1) it neither performed nor transacted any shipping business, for and in
representation, of Yee Fong Hong, Ltd. or its vessels or otherwise negotiated or procured cargo to be
loaded in the vessels of Yee Fong Hong, Ltd. (p. 21, t.s.n., July 16, 1980); (2) it never solicited or
14
 procured cargo or freight in the Philippines or elsewhere for loading in said vessels of Yee Fong Hong,
Ltd. (pp. 21 & 38, ibid.); (3) it had not collected any freight income or receipts for the said Yee Fong
Hong, Ltd. (pp. 22 & 38, ibid; pp. 46 & 48, t.s.n., Nov. 14, 1980.); (4) it never had possession or control,
actual or constructive, over the funds representing payment by Philippine shippers for cargo loaded on
said vessels (pp. 21 & 38, ibid; p. 48, ibid); petitioner never remitted to Yee Fong Hong, Ltd. any sum of
money representing freight incomes of Yee Fong Hong, Ltd. (p. 21, ibid.; p. 48, ibid); and (5) that the
freight payments made for cargo loaded in the Philippines for foreign destination were actually paid
directly by the shippers to the said Yee Fong Hong, Ltd. upon arrival of the goods in the foreign ports.
(Rollo, pp. 58-59).

On the same issue, the Commissioner of Internal Revenue Misael P. Vera, on query of respondent's counsel, opined
that respondent corporation being merely a husbanding agent is not liable for the payment of the income taxes due from
the foreign ship owners loading cargoes in the Philippines (Rollo, p. 63; Exhibit "I", Rollo, pp. 64-66).

Neither can private respondent be liable for withholding tax under Section 53 of the Internal Revenue Code since it is
not in possession, custody or control of the funds received by and remitted to Yee Fong Hong, Ltd., a non-resident
taxpayer. As correctly ruled by the Court of Tax Appeals, "if an individual or corporation like the petitioner in this case, is
not in the actual possession, custody, or control of the funds, it can neither be physically nor legally liable or obligated to
pay the so-called withholding tax on income claimed by Yee Fong Hong, Ltd." (Rollo, p. 67).

Finally, it must be stated that factual findings of the Court of Tax Appeals are binding on this Court (Industrial Textiles
Manufacturing Company of the Phil., Inc. (ITEMCOP) v. Commissioner of Internal Revenue, et al. (136 SCRA 549
[1985]). It is well-settled that in passing upon petitions for review of the decisions of the Court of Tax Appeals, this Court
is generally confined to questions of law. The findings of fact of said Court are not to be disturbed unless clearly shown
to be unsupported by substantial evidence (Commissioner of Internal Revenue v. Manila Machinery & Supply
Company, 135 SCRA 8 [1985]).

A careful scrutiny of the records reveals no cogent reason to disturb the findings of the Court of Tax Appeals.

PREMISES CONSIDERED, the instant petition is hereby DISMISSED and the assailed decision of the Court of Tax
Appeals is hereby AFFIRMED. SO ORDERED.

DIGEST:

n a letter dated December 27, 1974 petitioner assessed against Yee Fong
Hong, Ltd. and/or herein private respondent Union Shipping Corporation
for deficiency income taxes due for the years 1971 and 1972. Private
respondent protested the assessment.

Petitioner, without ruling on the protest, issued a Warrant of Distraint and

Levy. In a letter, private respondent reiterated its request for
reinvestigation. Petitioner, again, without acting on the request for
reinvestigation and reconsideration of the Warrant of Distraint and Levy,
filed a collection suit against private respondent.

In 1979, private respondent filed with respondent court a Petition for

Review. The CTA ruled in favor of private respondent. Hence, this is a
15
petition for review on certiorari

ISSUE: Whether or not the issuance of a warrant of distraint and levy

is proof of the finality of an assessment and is tantamount to an outright
denial of a motion for reconsideration of an assessment.

HELD: The Supreme Court had already laid down the dictum that the
Commissioner should always indicate to the taxpayer in clear and
unequivocal language what constitutes his final determination of the
disputed assessment.

There appears to be no dispute that petitioner did not rule on private

respondent's motion for reconsideration but contrary to the above ruling
of this Court, left private respondent in the dark as to which action of the
Commissioner is the decision appealable to the Court of Tax Appeals. Had
he categorically stated that he denies private respondent's motion for
reconsideration and that his action constitutes his final determination on
the disputed assessment, private respondent without needless difficulty
would have been able to determine when his right to appeal accrues and
the resulting confusion would have been avoided.

OCEANIC WIRELESS NETWORK, INC., Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, THE COURT
OF TAX APPEALS, and THE COURT OF APPEALS, Respondents. G.R. No. 148380 December 9, 2005
AZCUNA, J.:

This is a Petition for Review on Certiorari seeking to reverse and set aside the Decision of the Court of Appeals dated
October 31, 2000, and its Resolution dated May 3, 2001, in "Oceanic Wireless Network, Inc. v. Commissioner of
Internal Revenue" docketed as CA-G.R. SP No. 35581, upholding the Decision of the Court of Tax Appeals dismissing
the Petition for Review in CTA Case No. 4668 for lack of jurisdiction.

16
Petitioner Oceanic Wireless Network, Inc. challenges the authority of the Chief of the Accounts Receivable and Billing
Division of the Bureau of Internal Revenue (BIR) National Office to decide and/or act with finality on behalf of the
Commissioner of Internal Revenue (CIR) on protests against disputed tax deficiency assessments.

The facts of the case are as follows:

On March 17, 1988, petitioner received from the Bureau of Internal Revenue (BIR) deficiency tax assessments for the
taxable year 1984 in the total amount of ₱8,644,998.71, broken down as follows:

Kind of Tax Assessment No. Amount

Deficiency Income Tax FAR-4-1984-88-001130 ₱8,381,354.00

Penalties for late payment FAR-4-1984-88-001131 3,000.00

of income and failure to

file quarterly returns

Deficiency Contractor’s FAR-4-1984-88-001132 29,849.06

Tax

Deficiency Fixed Tax FAR-4--88-001133 12,083.65

Deficiency Franchise Tax FAR-4—84-88-001134 ___227,712.00

T o t a l -------- ₱8,644,998.71

Petitioner filed its protest against the tax assessments and requested a reconsideration or cancellation of the same in a
letter to the BIR Commissioner dated April 12, 1988.

Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts Receivable and Billing Division, Mr. Severino
B. Buot, reiterated the tax assessments while denying petitioner’s request for reinvestigation in a letter 1dated January
24, 1991, thus:

"Note: Your request for re-investigation has been denied for failure to submit the necessary supporting papers as per
endorsement letter from the office of the Special Operation Service dated 12-12-90."

Said letter likewise requested petitioner to pay the total amount of ₱8,644,998.71 within ten (10) days from receipt
thereof, otherwise the case shall be referred to the Collection Enforcement Division of the BIR National Office for the
issuance of a warrant of distraint and levy without further notice.

Upon petitioner’s failure to pay the subject tax assessments within the prescribed period, the Assistant Commissioner
for Collection, acting for the Commissioner of Internal Revenue, issued the corresponding warrants of distraint and/or
levy and garnishment. These were served on petitioner on October 10, 1991 and October 17, 1991, respectively.2

On November 8, 1991, petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) to contest the issuance
of the warrants to enforce the collection of the tax assessments. This was docketed as CTA Case No. 4668.

17
The CTA dismissed the petition for lack of jurisdiction in a decision dated September 16, 1994, declaring that said
petition was filed beyond the thirty (30)-day period reckoned from the time when the demand letter of January 24, 1991
by the Chief of the BIR Accounts Receivable and Billing Division was presumably received by petitioner, i.e., "within a
reasonable time from said date in the regular course of mail pursuant to Section 2(v) of Rule 131 of the Rules of
Court."3

The decision cited Surigao Electric Co., Inc. v. Court of Tax Appeals4 wherein this Court considered a mere demand
letter sent to the taxpayer after his protest of the assessment notice as the final decision of the Commissioner of
Internal Revenue on the protest. Hence, the filing of the petition on November 8, 1991 was held clearly beyond the
reglementary period.5

The court a quo likewise stated that the finality of the denial of the protest by petitioner against the tax deficiency
assessments was bolstered by the subsequent issuance of the warrants of distraint and/or levy and garnishment to
enforce the collection of the deficiency taxes. The issuance was not barred by prescription because the mere filing of
the letter of protest by petitioner which was given due course by the Bureau of Internal Revenue suspended the running
of the prescription period as expressly provided under the then Section 224 of the Tax Code:

SEC. 224. Suspension of Running of the Statute of Limitations. – The running of the Statute of Limitations provided
in Section 203 and 223 on the making of assessment and the beginning of distraint or levy or a proceeding in court for
collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner is prohibited
from making the assessment or beginning distraint or levy or a proceeding in court and for sixty (60) days
thereafter; when the taxpayer requests for a reinvestigation which is granted by the Commissioner; when the taxpayer
cannot be located in the address given by him in the return files upon which a tax is being assessed or
collected: Provided, That if the taxpayer inform the Commissioner of any change of address, the running of the statute
of limitations will not be suspended; when the warrant of distraint and levy is duly served upon the taxpayer, his
authorized representative, or a member of his household with sufficient discretion, and no property could located; and
when the taxpayer is out of the Philippines. 6 (Underscoring supplied.)

Petitioner filed a Motion for Reconsideration arguing that the demand letter of January 24, 1991 cannot be considered
as the final decision of the Commissioner of Internal Revenue on its protest because the same was signed by a mere
subordinate and not by the Commissioner himself.7

With the denial of its motion for reconsideration, petitioner consequently filed a Petition for Review with the Court of
Appeals contending that there was no final decision to speak of because the Commissioner had yet to make a personal
determination as regards the merits of petitioner’s case.8

The Court of Appeals denied the petition in a decision dated October 31, 2000, the dispositive portion of which reads:

"WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED."

Petitioner’s Motion for Reconsideration was likewise denied in a resolution dated May 3, 2001.

Hence, this petition with the following assignment of errors:9

THE HONORABLE RESPONDENT CA ERRED IN FINDING THAT THE DEMAND LETTER ISSUED BY THE (THEN)
ACCOUNTS RECEIVABLE/BILLING DIVISION OF THE BIR NATIONAL OFFICE WAS THE FINAL DECISION OF
THE RESPONDENT CIR ON THE DISPUTED ASSESSMENTS, AND HENCE CONSTITUTED THE DECISION
APPEALABLE TO THE HONORABLE RESPONDENT CTA; AND,
18
 II

THE HONORABLE RESPONDENT CA ERRED IN DECLARING THAT THE DENIAL OF THE PROTEST OF THE
SUBJECT ALLEGED DEFICIENCY TAX ASSESSMENTS HAD LONG BECOME FINAL AND EXECUTORY FOR
FAILURE OF THE PETITIONER TO INSTITUTE THE APPEAL FROM THE DEMAND LETTER OF THE CHIEF OF
THE ACCOUNTS RECEIVABLE/BILLING DIVISION, BIR NATIONAL OFFICE, TO THE HONORABLE RESPONDENT
CTA, WITHIN THIRTY (30) DAYS FROM RECEIPT THEREOF.

Thus, the main issue is whether or not a demand letter for tax deficiency assessments issued and signed by a
subordinate officer who was acting in behalf of the Commissioner of Internal Revenue, is deemed final and executory
and subject to an appeal to the Court of Tax Appeals.

We rule in the affirmative.

A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment.
The determination on whether or not a demand letter is final is conditioned upon the language used or the tenor of the
letter being sent to the taxpayer.

We laid down the rule that the Commissioner of Internal Revenue should always indicate to the taxpayer in clear and
unequivocal language what constitutes his final determination of the disputed assessment, thus:

. . . we deem it appropriate to state that the Commissioner of Internal Revenue should always indicate to the taxpayer in
clear and unequivocal language whenever his action on an assessment questioned by a taxpayer constitutes his final
determination on the disputed assessment, as contemplated by Sections 7 and 11 of Republic Act No. 1125, as
amended. On the basis of his statement indubitably showing that the Commissioner’s communicated action is his final
decision on the contested assessment, the aggrieved taxpayer would then be able to take recourse to the tax court at
the opportune time. Without needless difficulty, the taxpayer would be able to determine when his right to appeal to the
tax court accrues.

The rule of conduct would also obviate all desire and opportunity on the part of the taxpayer to continually delay the
finality of the assessment – and, consequently, the collection of the amount demanded as taxes – by repeated requests
for recomputation and reconsideration. On the part of the Commissioner, this would encourage his office to conduct a
careful and thorough study of every questioned assessment and render a correct and definite decision thereon in the
first instance. This would also deter the Commissioner from unfairly making the taxpayer grope in the dark and
speculate as to which action constitutes the decision appealable to the tax court. Of greater import, this rule of conduct
would meet a pressing need for fair play, regularity, and orderliness in administrative action. 10

In this case, the letter of demand dated January 24, 1991, unquestionably constitutes the final action taken by the
Bureau of Internal Revenue on petitioner’s request for reconsideration when it reiterated the tax deficiency assessments
due from petitioner, and requested its payment. Failure to do so would result in the "issuance of a warrant of distraint
and levy to enforce its collection without further notice."11 In addition, the letter contained a notation indicating that
petitioner’s request for reconsideration had been denied for lack of supporting documents.

The above conclusion finds support in Commissioner of Internal Revenue v. Ayala Securities Corporation,12 where we
held:

The letter of February 18, 1963 (Exh. G), in the view of the Court, is tantamount to a denial of the reconsideration or
[respondent corporation’s]…protest o[f] the assessment made by the petitioner, considering that the said letter [was] in
itself a reiteration of the demand by the Bureau of Internal Revenue for the settlement of the assessment already made,
and for the immediate payment of the sum of P758,687.04 in spite of the vehement protest of the respondent
corporation on April 21, 1961. This certainly is a clear indication of the firm stand of petitioner against the

19
reconsideration of the disputed assessment…This being so, the said letter amount[ed] to a decision on a disputed or
protested assessment, and, there, the court a quo did not err in taking cognizance of this case.

Similarly, in Surigao Electric Co., Inc v. Court of Tax Appeals,13 and in CIR v. Union Shipping Corporation,14 we held:

". . . In this letter, the commissioner not only in effect demanded that the petitioner pay the amount of ₱11,533.53 but
also gave warning that in the event it failed to pay, the said commissioner would be constrained to enforce the collection
thereof by means of the remedies provided by law. The tenor of the letter, specifically the statement regarding the resort
to legal remedies, unmistakably indicate[d] the final nature of the determination made by the commissioner of the
petitioner’s deficiency franchise tax liability."

The demand letter received by petitioner verily signified a character of finality. Therefore, it was tantamount to a
rejection of the request for reconsideration. As correctly held by the Court of Tax Appeals, "while the denial of the
protest was in the form of a demand letter, the notation in the said letter making reference to the protest filed by
petitioner clearly shows the intention of the respondent to make it as [his] final decision."15

This now brings us to the crux of the matter as to whether said demand letter indeed attained finality despite the fact
that it was issued and signed by the Chief of the Accounts Receivable and Billing Division instead of the BIR
Commissioner.

The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him by law to
Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted to him under the
National Internal Revenue Code (NIRC) enumerated in Section 7.

As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR Commissioner to delegate the powers
vested in him under the pertinent provisions of the Code to any subordinate official with the rank equivalent to a division
chief or higher, except the following:

(a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance;

(b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau;

(c) The power to compromise or abate under Section 204(A) and (B) of this Code, any tax deficiency: Provided,
however, that assessments issued by the Regional Offices involving basic deficiency taxes of five hundred thousand
pesos (P500,000) or less, and minor criminal violations as may be determined by rules and regulations to be
promulgated by the Secretary of Finance, upon the recommendation of the Commissioner, discovered by regional and
district officials, may be compromised by a regional evaluation board which shall be composed of the Regional Director
as Chairman, the Assistant Regional Director, heads of the Legal, Assessment and Collection Divisions and the
Revenue District Officer having jurisdiction over the taxpayer, as members; and

(d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are
produced or kept.

It is clear from the above provision that the act of issuance of the demand letter by the Chief of the Accounts Receivable
and Billing Division does not fall under any of the exceptions that have been mentioned as non-delegable.

Section 6 of the Code further provides:

"SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for Tax
Administration and Enforcement. –

20
(A) Examination of Returns and Determination of Tax Due. - After a return has been filed as required under the
provisions of this Code, the Commissioner or his duly authorized representative may authorize the examination of
any taxpayer and the assessment of the correct amount of tax; Provided, however, That failure to file a return shall not
prevent the Commissioner from authorizing the examination of any taxpayer.

The tax or any deficiency tax so assessed shall be paid upon notice and demand from the Commissioner or from his
duly authorized representative. . . ." (Emphasis supplied)

Thus, the authority to make tax assessments may be delegated to subordinate officers. Said assessment has the same
force and effect as that issued by the Commissioner himself, if not reviewed or revised by the latter such as in this
case.16

A request for reconsideration must be made within thirty (30) days from the taxpayer’s receipt of the tax deficiency
assessment, otherwise, the decision becomes final, unappealable and therefore, demandable. A tax assessment that
has become final, executory and enforceable for failure of the taxpayer to assail the same as provided in Section 228
can no longer be contested, thus:

"SEC. 228. Protesting of Assessment. – When the Commissioner or his duly authorized representative finds that
proper taxes should be assessed, he shall first notify the taxpayer of his findings…Such assessment may be protested
administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the
assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60)
days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment
shall become final.

If the protest is denied in whole or in part, or is not acted upon within one hundred (180) days from submission of
documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within
thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180) - day period;
otherwise, the decision shall become final, executory and demandable."

Here, petitioner failed to avail of its right to bring the matter before the Court of Tax Appeals within the reglementary
period upon the receipt of the demand letter reiterating the assessed delinquent taxes and denying its request for
reconsideration which constituted the final determination by the Bureau of Internal Revenue on petitioner’s protest.
Being a final disposition by said agency, the same would have been a proper subject for appeal to the Court of Tax
Appeals.

The rule is that for the Court of Tax Appeals to acquire jurisdiction, an assessment must first be disputed by the
taxpayer and ruled upon by the Commissioner of Internal Revenue to warrant a decision from which a petition for
review may be taken to the Court of Tax Appeals. Where an adverse ruling has been rendered by the Commissioner of
Internal Revenue with reference to a disputed assessment or a claim for refund or credit, the taxpayer may appeal the
same within thirty (30) days after receipt thereof.17

We agree with the factual findings of the Court of Tax Appeals that the demand letter may be presumed to have been
duly directed, mailed and was received by petitioner in the regular course of the mail in the absence of evidence to the
contrary. This is in accordance with Section 2(v), Rule 131 of the Rules of Court, and in this case, since the period to
appeal has commenced to run from the time the letter of demand was presumably received by petitioner within a
reasonable time after January 24, 1991, the period of thirty (30) days to appeal the adverse decision on the request for
reconsideration had already lapsed when the petition was filed with the Court of Tax Appeals only on November 8,
1991. Hence, the Court of Tax Appeals properly dismissed the petition as the tax delinquency assessment had long
become final and executory.

21
WHEREFORE, premises considered, the Decision of the Court of Appeals dated October 31, 2000 and its Resolution
dated May 3, 2001 in CA-G.R. SP No. 35581 are hereby AFFIRMED. The petition is accordingly DENIED for lack of
merit. SO ORDERED.

DIGEST:

n a letter dated December 27, 1974 petitioner assessed against Yee Fong
Hong, Ltd. and/or herein private respondent Union Shipping Corporation
for deficiency income taxes due for the years 1971 and 1972. Private
respondent protested the assessment.

Petitioner, without ruling on the protest, issued a Warrant of Distraint and

Levy. In a letter, private respondent reiterated its request for
reinvestigation. Petitioner, again, without acting on the request for
reinvestigation and reconsideration of the Warrant of Distraint and Levy,
filed a collection suit against private respondent.

In 1979, private respondent filed with respondent court a Petition for

Review. The CTA ruled in favor of private respondent. Hence, this is a
petition for review on certiorari

ISSUE: Whether or not the issuance of a warrant of distraint and levy

is proof of the finality of an assessment and is tantamount to an outright
denial of a motion for reconsideration of an assessment.

HELD: The Supreme Court had already laid down the dictum that the
Commissioner should always indicate to the taxpayer in clear and
unequivocal language what constitutes his final determination of the
disputed assessment.

There appears to be no dispute that petitioner did not rule on private

respondent's motion for reconsideration but contrary to the above ruling
of this Court, left private respondent in the dark as to which action of the
Commissioner is the decision appealable to the Court of Tax Appeals. Had
he categorically stated that he denies private respondent's motion for
22
reconsideration and that his action constitutes his final determination on
the disputed assessment, private respondent without needless difficulty
would have been able to determine when his right to appeal accrues and
the resulting confusion would have been avoided.

ALLIED BANKING CORPORATION, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.

G.R. No. 175097 DEL CASTILLO, J.:

The key to effective communication is clarity.

The Commissioner of Internal Revenue (CIR) as well as his duly authorized representative must indicate clearly and
unequivocally to the taxpayer whether an action constitutes a final determination on a disputed assessment. 1Words
must be carefully chosen in order to avoid any confusion that could adversely affect the rights and interest of the
taxpayer.

Assailed in this Petition for Review on Certiorari2 under Section 12 of Republic Act (RA) No. 9282,3 in relation to Rule 45
of the Rules of Court, are the August 23, 2006 Decision4 of the Court of Tax Appeals (CTA) and its October 17, 2006
Resolution5 denying petitioner’s Motion for Reconsideration.

Factual Antecedents

On April 30, 2004, the Bureau of Internal Revenue (BIR) issued a Preliminary Assessment Notice (PAN) to petitioner
Allied Banking Corporation for deficiency Documentary Stamp Tax (DST) in the amount of ₱12,050,595.60 and Gross
Receipts Tax (GRT) in the amount of ₱38,995,296.76 on industry issue for the taxable year 2001. 6 Petitioner received
the PAN on May 18, 2004 and filed a protest against it on May 27, 2004.7

On July 16, 2004, the BIR wrote a Formal Letter of Demand with Assessment Notices to petitioner, which partly reads
as follows:8

It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to
delinquency. This is our final decision based on investigation. If you disagree, you may appeal the final decision within
thirty (30) days from receipt hereof, otherwise said deficiency tax assessment shall become final, executory and
demandable.

Petitioner received the Formal Letter of Demand with Assessment Notices on August 30, 2004. 9

Proceedings before the CTA First Division

On September 29, 2004, petitioner filed a Petition for Review10 with the CTA which was raffled to its First Division and
docketed as CTA Case No. 7062.11

On December 7, 2004, respondent CIR filed his Answer.12 On July 28, 2005, he filed a Motion to Dismiss13 on the
ground that petitioner failed to file an administrative protest on the Formal Letter of Demand with Assessment Notices.
Petitioner opposed the Motion to Dismiss on August 18, 2005.14

23
On October 12, 2005, the First Division of the CTA rendered a Resolution15 granting respondent’s Motion to Dismiss. It
ruled:

Clearly, it is neither the assessment nor the formal demand letter itself that is appealable to this Court. It is the decision
of the Commissioner of Internal Revenue on the disputed assessment that can be appealed to this Court
(Commissioner of Internal Revenue vs. Villa, 22 SCRA 3). As correctly pointed out by respondent, a disputed
assessment is one wherein the taxpayer or his duly authorized representative filed an administrative protest against the
formal letter of demand and assessment notice within thirty (30) days from date [of] receipt thereof. In this case,
petitioner failed to file an administrative protest on the formal letter of demand with the corresponding assessment
notices. Hence, the assessments did not become disputed assessments as subject to the Court’s review under
Republic Act No. 9282. (See also Republic v. Liam Tian Teng Sons & Co., Inc., 16 SCRA 584.)

WHEREFORE, the Motion to Dismiss is GRANTED. The Petition for Review is hereby DISMISSED for lack of
jurisdiction. SO ORDERED.16

Aggrieved, petitioner moved for reconsideration but the motion was denied by the First Division in its Resolution dated
February 1, 2006.17

Proceedings before the CTA En Banc

On February 22, 2006, petitioner appealed the dismissal to the CTA En Banc.18 The case was docketed as CTA EB No.
167.

Finding no reversible error in the Resolutions dated October 12, 2005 and February 1, 2006 of the CTA First Division,
the CTA En Banc denied the Petition for Review19as well as petitioner’s Motion for Reconsideration.20

The CTA En Banc declared that it is absolutely necessary for the taxpayer to file an administrative protest in order for
the CTA to acquire jurisdiction. It emphasized that an administrative protest is an integral part of the remedies given to a
taxpayer in challenging the legality or validity of an assessment. According to the CTA En Banc, although there are
exceptions to the doctrine of exhaustion of administrative remedies, the instant case does not fall in any of the
exceptions.

Issue

Hence, the present recourse, where petitioner raises the lone issue of whether the Formal Letter of Demand dated July
16, 2004 can be construed as a final decision of the CIR appealable to the CTA under RA 9282.

Our Ruling

The petition is meritorious.

Section 7 of RA 9282 expressly provides that the CTA exercises exclusive appellate jurisdiction to review by appeal
decisions of the CIR in cases involving disputed assessments

The CTA, being a court of special jurisdiction, can take cognizance only of matters that are clearly within its
jurisdiction.21 Section 7 of RA 9282 provides:

Sec. 7. Jurisdiction. — The CTA shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:

24
 (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue;

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the
National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed
a denial; (Emphasis supplied)

The word "decisions" in the above quoted provision of RA 9282 has been interpreted to mean the decisions of the CIR
on the protest of the taxpayer against the assessments.22 Corollary thereto, Section 228 of the National Internal
Revenue Code (NIRC) provides for the procedure for protesting an assessment. It states:

SECTION 228. Protesting of Assessment. – When the Commissioner or his duly authorized representative finds that
proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, That a
preassessment notice shall not be required in the following cases:

(a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as
appearing on the face of the return; or

(b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the
withholding agent; or

(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable
period was determined to have carried over and automatically applied the same amount claimed against the
estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or

(d) When the excise tax due on excisable articles has not been paid; or

(e) When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles,
capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons.

The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the
assessment shall be void.

Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to
said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an
assessment based on his findings.

Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty
(30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and
regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been
submitted; otherwise, the assessment shall become final.

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of
documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within
thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period;
otherwise, the decision shall become final, executory and demandable.

25
In the instant case, petitioner timely filed a protest after receiving the PAN. In response thereto, the BIR issued a Formal
Letter of Demand with Assessment Notices. Pursuant to Section 228 of the NIRC, the proper recourse of petitioner was
to dispute the assessments by filing an administrative protest within 30 days from receipt thereof. Petitioner, however,
did not protest the final assessment notices. Instead, it filed a Petition for Review with the CTA. Thus, if we strictly apply
the rules, the dismissal of the Petition for Review by the CTA was proper.

The case is an exception to the

rule on exhaustion of administrative remedies

However, a careful reading of the Formal Letter of Demand with Assessment Notices leads us to agree with petitioner
that the instant case is an exception to the rule on exhaustion of administrative remedies, i.e., estoppel on the part of
the administrative agency concerned.

In the case of Vda. De Tan v. Veterans Backpay Commission,23 the respondent contended that before filing a petition
with the court, petitioner should have first exhausted all administrative remedies by appealing to the Office of the
President. However, we ruled that respondent was estopped from invoking the rule on exhaustion of administrative
remedies considering that in its Resolution, it said, "The opinions promulgated by the Secretary of Justice are advisory
in nature, which may either be accepted or ignored by the office seeking the opinion, and any aggrieved party has the
court for recourse". The statement of the respondent in said case led the petitioner to conclude that only a final judicial
ruling in her favor would be accepted by the Commission.

Similarly, in this case, we find the CIR estopped from claiming that the filing of the Petition for Review was premature
because petitioner failed to exhaust all administrative remedies.

The Formal Letter of Demand with Assessment Notices reads:

Based on your letter-protest dated May 26, 2004, you alleged the following:

1. That the said assessment has already prescribed in accordance with the provisions of Section 203 of the Tax
Code.

2. That since the exemption of FCDUs from all taxes found in the Old Tax Code has been deleted, the wording
of Section 28(A)(7)(b) discloses that there are no other taxes imposable upon FCDUs aside from the 10% Final
Income Tax.

Contrary to your allegation, the assessments covering GRT and DST for taxable year 2001 has not prescribed for [sic]
simply because no returns were filed, thus, the three year prescriptive period has not lapsed.

With the implementation of the CTRP, the phrase "exempt from all taxes" was deleted. Please refer to Section 27(D)(3)
and 28(A)(7) of the new Tax Code. Accordingly, you were assessed for deficiency gross receipts tax on onshore
income from foreign currency transactions in accordance with the rates provided under Section 121 of the said Tax
Code. Likewise, deficiency documentary stamp taxes was [sic] also assessed on Loan Agreements, Bills Purchased,
Certificate of Deposits and related transactions pursuant to Sections 180 and 181 of NIRC, as amended.

The 25% surcharge and 20% interest have been imposed pursuant to the provision of Section 248(A) and 249(b),
respectively, of the National Internal Revenue Code, as amended.

It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to
delinquency. This is our final decision based on investigation. If you disagree, you may appeal this final decision within
thirty (30) days from receipt hereof, otherwise said deficiency tax assessment shall become final, executory and
demandable.24 (Emphasis supplied)

26
It appears from the foregoing demand letter that the CIR has already made a final decision on the matter and that the
remedy of petitioner is to appeal the final decision within 30 days.

In Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue,25 we considered the language used and the
tenor of the letter sent to the taxpayer as the final decision of the CIR.

In this case, records show that petitioner disputed the PAN but not the Formal Letter of Demand with Assessment
Notices. Nevertheless, we cannot blame petitioner for not filing a protest against the Formal Letter of Demand with
Assessment Notices since the language used and the tenor of the demand letter indicate that it is the final decision of
the respondent on the matter. We have time and again reminded the CIR to indicate, in a clear and unequivocal
language, whether his action on a disputed assessment constitutes his final determination thereon in order for the
taxpayer concerned to determine when his or her right to appeal to the tax court accrues.26 Viewed in the light of the
foregoing, respondent is now estopped from claiming that he did not intend the Formal Letter of Demand with
Assessment Notices to be a final decision.

Moreover, we cannot ignore the fact that in the Formal Letter of Demand with Assessment Notices, respondent used
the word "appeal" instead of "protest", "reinvestigation", or "reconsideration". Although there was no direct reference for
petitioner to bring the matter directly to the CTA, it cannot be denied that the word "appeal" under prevailing tax laws
refers to the filing of a Petition for Review with the CTA. As aptly pointed out by petitioner, under Section 228 of the
NIRC, the terms "protest", "reinvestigation" and "reconsideration" refer to the administrative remedies a taxpayer may
take before the CIR, while the term "appeal" refers to the remedy available to the taxpayer before the CTA. Section 9 of
RA 9282, amending Section 11 of RA 1125,27 likewise uses the term "appeal" when referring to the action a taxpayer
must take when adversely affected by a decision, ruling, or inaction of the CIR. As we see it then, petitioner in appealing
the Formal Letter of Demand with Assessment Notices to the CTA merely took the cue from respondent. Besides, any
doubt in the interpretation or use of the word "appeal" in the Formal Letter of Demand with Assessment Notices should
be resolved in favor of petitioner, and not the respondent who caused the confusion.

To be clear, we are not disregarding the rules of procedure under Section 228 of the NIRC, as implemented by Section
3 of BIR Revenue Regulations No. 12-99.28 It is the Formal Letter of Demand and Assessment Notice that must be
administratively protested or disputed within 30 days, and not the PAN. Neither are we deviating from our
pronouncement in St. Stephen’s Chinese Girl’s School v. Collector of Internal Revenue,29 that the counting of the 30
days within which to institute an appeal in the CTA commences from the date of receipt of the decision of the CIR on
the disputed assessment, not from the date the assessment was issued.1avvphi1

What we are saying in this particular case is that, the Formal Letter of Demand with Assessment Notices which was not
administratively protested by the petitioner can be considered a final decision of the CIR appealable to the CTA
because the words used, specifically the words "final decision" and "appeal", taken together led petitioner to believe that
the Formal Letter of Demand with Assessment Notices was in fact the final decision of the CIR on the letter-protest it
filed and that the available remedy was to appeal the same to the CTA.

We note, however, that during the pendency of the instant case, petitioner availed of the provisions of Revenue
Regulations No. 30-2002 and its implementing Revenue Memorandum Order by submitting an offer of compromise for
the settlement of the GRT, DST and VAT for the period 1998-2003, as evidenced by a Certificate of Availment dated
November 21, 2007.30 Accordingly, there is no reason to reinstate the Petition for Review in CTA Case No. 7062.

WHEREFORE, the petition is hereby GRANTED. The assailed August 23, 2006 Decision and the October 17, 2006
Resolution of the Court of Tax Appeals are REVERSED and SET ASIDE. The Petition for Review in CTA Case No.
7062 is hereby DISMISSED based solely on the Bureau of Internal Revenue’s acceptance of petitioner’s offer of
compromise for the settlement of the gross receipts tax, documentary stamp tax and value added tax, for the years
1998-2003. SO ORDERED.

27
DIGEST:

On April 30, 2004, the Bureau of Internal Revenue (BIR) issued a Preliminary Assessment Notice (PAN) to petitioner Allied
Banking Corporation for deficiency Documentary Stamp Tax (DST) in the amount of P12,050,595.60 and Gross Receipts Tax
(GRT) in the amount of P38,995,296.76 on industry issue for the taxable year 2001. Petitioner received the PAN on May 18,
2004 and filed a protest against it on May 27, 2004.

On July 16, 2004, the BIR wrote a Formal Letter of Demand with Assessment Notices to petitioner, which partly reads as
follows; It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to
delinquency. This is our final decision based on investigation. If you disagree, you may appeal the final decision within thirty
(30) days from receipt hereof, otherwise said deficiency tax assessment shall become final, executory and demandable.

On September 29, 2004, petitioner filed a Petition for Review with the CTA which was raffled to its
On October 12, 2005, the First Division of the CTA rendered a Resolution granting respondent's Motion to Dismiss. Aggrieved,
petitioner moved for reconsideration but the motion was denied by the First Division in its Resolution dated February 1, 2006.
On February 22, 2006, petitioner appealed the dismissal to the CTA En Banc. The CTA En Banc declared that it is absolutely
necessary for the taxpayer to file an administrative protest in order for the CTA to acquire jurisdiction. It emphasized that an
administrative protest is an integral part of the remedies given to a taxpayer in challenging the legality or validity of an
assessment. According to the CTA En Banc, although there are exceptions to the doctrine of exhaustion of administrative
remedies, the instant case does not fall in any of the exceptions.

ISSUE
1. Whether or not the Formal Letter of Demand dated July 16, 2004 can be construed as a final decision of the CIR appealable
to the CTA under RA 9282.

RULING
The court found the petition meritorious
The CTA, being a court of special jurisdiction, can take cognizance only of matters that are clearly within its jurisdiction. The
taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment
shall be void. Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond
to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an
assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or
reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by
implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall
have been submitted; otherwise, the assessment shall become final.

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of
documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty
(30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the
decision shall become final, executory and demandable. In the instant case, petitioner timely filed a protest after receiving the
PAN. In response thereto, the BIR issued a Formal Letter of Demand with Assessment Notices. Pursuant to Section 228 of the
NIRC, the proper recourse of petitioner was to dispute the assessments by filing an administrative protest within 30 days from
receipt thereof. Petitioner, however, did not protest the final assessment notices. Instead, it filed a Petition for Review with the
CTA. Thus, if we strictly apply the rules, the dismissal of the Petition for Review by the CTA was proper.The case is an exception
to the rule on exhaustion of administrative remedies. Similarly, in this case, we find the CIR estopped from claiming that the
filing of the Petition for Review was premature because petitioner failed to exhaust all administrative remedies.

28
FISHWEALTH CANNING CORPORATION, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.
G.R. No. 179343 January 21, 2010 CARPIO MORALES, J.:

The Commissioner of Internal Revenue (respondent), by Letter of Authority dated May 16, 2000, 1 ordered the
examination of the internal revenue taxes for the taxable year 1999 of Fishwealth Canning Corp. (petitioner). The
investigation disclosed that petitioner was liable in the amount of ₱2,395,826.88 representing income tax, value added
tax (VAT), withholding tax deficiencies and other miscellaneous deficiencies. Petitioner eventually settled these
obligations on August 30, 2000.2

On August 25, 2000, respondent reinvestigated petitioner’s books of accounts and other records of internal revenue
taxes covering the same period for the purpose of which it issued a subpoena duces tecum requiring petitioner to
submit its records and books of accounts. Petitioner requested the cancellation of the subpoena on the ground that the
same set of documents had previously been examined.

As petitioner did not heed the subpoena, respondent thereafter filed a criminal complaint against petitioner for violation
of Sections 5 (c) and 266 of the 1997 Internal Revenue Code, which complaint was dismissed for insufficiency of
evidence.3

Respondent sent, on August 6, 2003, petitioner a Final Assessment Notice of income tax and VAT
deficiencies totaling ₱67,597,336.75 for the taxable year 1999,4 which assessment petitioner contested by letter of
September 23, 2003.5

Respondent thereafter issued a Final Decision on Disputed Assessment dated August 2, 2005, which petitioner
received on August 4, 2005, denying its letter of protest, apprising it of its income tax and VAT liabilities in the
amounts of "₱15,396,905.24 and ₱63,688,434.40 [sic], respectively, for the taxable year 1999,"6 and requesting the
immediate payment thereof, "inclusive of penalties incident to delinquency." Respondent added that if petitioner
disagreed, it may appeal to the Court of Tax Appeals (CTA) "within thirty (30) days from date of receipt hereof,
otherwise our said deficiency income and value-added taxes assessments shall become final, executory, and
demandable."7

Instead of appealing to the CTA, petitioner filed, on September 1, 2005, a Letter of Reconsideration dated August 31,
2005.8

By a Preliminary Collection Letter dated September 6, 2005, respondent demanded payment of petitioner’s tax
liabilities,9 drawing petitioner to file on October 20, 2005 a Petition for Review10 before the CTA.

In his Answer,11 respondent argued, among other things, that the petition was filed out of time which argument the First
Division of the CTA upheld and accordingly dismissed the petition.12

Petitioner filed a Motion for Reconsideration13 which was denied.14 The Resolution denying its motion for
reconsideration was received by petitioner on October 31, 2006.15

On November 21, 2006, petitioner filed a petition for review before the CTA En Banc16 which, by Decision17 of July 5,
2007, held that the petition before the First Division, as well as that before it, was filed out of time.

29
Hence, the present petition,18 petitioner arguing that the CTA En Banc erred in holding that the petition it filed before the
CTA First Division as well as that filed before it (CTA En Banc) was filed out of time.

The petition is bereft of merit.

Section 228 of the 1997 Tax Code provides that an assessment

x x x may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days
from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise,
the assessment shall become final.

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of
documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within
thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period;
otherwise, the decision shall become final, executory and demandable. (underscoring supplied)1avvphi1

In the case at bar, petitioner’s administrative protest was denied by Final Decision on Disputed Assessment dated
August 2, 2005 issued by respondent and which petitioner received on August 4, 2005. Under the above-quoted
Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal respondent’s denial of its protest to the CTA.

Since petitioner received the denial of its administrative protest on August 4, 2005, it had until September 3, 2005 to file
a petition for review before the CTA Division. It filed one, however, on October 20, 2005, hence, it was filed out of time.
For a motion for reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to
the CTA.

On petitioner’s final contention that it has a meritorious case in view of the dismissal of the above-mentioned criminal
case filed against it for violation of the 1997 Internal Revenue Code,19 the same fails. For the criminal complaint was
instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code.20

WHEREFORE, the petition is DISMISSED. Costs against petitioner. SO ORDERED.

DIGEST:

FACTS:

Petitioner was assessed for income tax, Value Added Tax and withholding tax. After Court of Tax Appeals issued a Final
Decision on Disputed Assessment, Petitioner filed a Letter of Reconsideration with the CIR instead of appealing the
same to the Court of Tax Appeals within 30 days. The CIR then issued a Preliminary Collection Letter which prompted
the Petitioner to file its Petition with the Court of Tax Appeals. CIR argued that the Petition with the Court of Tax
Appeals was filed out of time.

ISSUE:

Did the filing of a Reconsideration toll the running of the 30-day period to appeal to the Court of Tax Appeals?

HELD:

NO. A Motion for Reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to
the Court of Tax Appeals.
30
JUDY ANNE L. SANTOS, petitioner, vs. PEOPLE OF THE PHILIPPINES and BUREAU OF INTERNAL
REVENUE, respondents. G.R. No. 173176 August 26, 2008 CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court filed by petitioner
Judy Anne L. Santos (Santos) seeking the reversal and setting aside of the Resolution,2 dated 19 June 2006, of the
Court of Tax Appeals (CTA) en banc in C.T.A. EB. CRIM. No. 001 which denied petitioner’s Motion for Extension of
Time to File Petition for Review. Petitioner intended to file the Petition for Review with the CTA en banc to appeal the
Resolutions dated 23 February 20063 and 11 May 20064 of the CTA First Division in C.T.A. Crim. Case No. 0-012
denying, respectively, her Motion to Quash the Information filed against her for violation of Section 255, in relation to
Sections 254 and 248(B) of the National Internal Revenue Code (NIRC), as amended; and her Motion for
Reconsideration.

There is no controversy as to the facts that gave rise to the present Petition.

On 19 May 2005, then Bureau of Internal Revenue (BIR) Commissioner Guillermo L. Parayno, Jr. wrote to the
Department of Justice (DOJ) Secretary Raul M. Gonzales a letter5 regarding the possible filing of criminal charges
against petitioner. BIR Commissioner Parayno began his letter with the following statement:

I have the honor to refer to you for preliminary investigation and filing of an information in court if evidence so
warrants, the herein attached Joint Affidavit of RODERICK C. ABAD, STIMSON P. CUREG, VILMA V.
CARONAN, RHODORA L. DELOS REYES under Group Supervisor TEODORA V. PURINO, of the National
Investigation Division, BIR National Office Building, BIR Road, Diliman, Quezon City, recommending the criminal
prosecution of MS. JUDY ANNE LUMAGUI SANTOS for substantial underdeclaration of income, which
constitutes as prima facie evidence of false or fraudulent return under Section 248(B) of the NIRC and
punishable under Sections 254 and 255 of the Tax Code.

In said letter, BIR Commissioner Parayno summarized the findings of the investigating BIR officers that petitioner, in her
Annual Income Tax Return for taxable year 2002 filed with the BIR, declared an income of P8,033,332.70 derived from
her talent fees solely from ABS-CBN; initial documents gathered from the BIR offices and those given by petitioner’s
accountant and third parties, however, confirmed that petitioner received in 2002 income in the amount of at
least P14,796,234.70, not only from ABS-CBN, but also from other sources, such as movies and product
endorsements; the estimated tax liability arising from petitioner’s underdeclaration amounted to P1,718,925.52,
including incremental penalties; the non-declaration by petitioner of an amount equivalent to at least 84.18% of the
income declared in her return was considered a substantial underdeclaration of income, which constituted prima

31
facie evidence of false or fraudulent return under Section 248(B)6 of the NIRC, as amended; and petitioner’s failure to
account as part of her income the professional fees she received from sources other than ABS-CBN and her
underdeclaration of the income she received from ABS-CBN amounted to manifest violations of Sections 2547 and
255,8 as well as Section 248(B) of the NIRC, as amended.

After an exchange of affidavits and other pleadings by the parties, Prosecution Attorney Olivia Laroza-Torrevillas issued
a Resolution9 dated 21 October 2005 finding probable cause and recommending the filing of a criminal information
against petitioner for violation of Section 255 in relation to Sections 254 and 248(B) of the NIRC, as amended. The said
Resolution was approved by Chief State Prosecutor Jovencito R. Zuno.

Pursuant to the 21 October 2005 DOJ Resolution, an Information10 for violation of Section 255 in relation to Sections
254 and 248(B) of the NIRC, as amended, was filed with the CTA on 3 November 2005 and docketed as C.T.A. Crim.
Case No. 0-012. However, the CTA First Division, after noting several discrepancies in the Information filed, required
the State Prosecutor to clarify and explain the same, and to submit the original copies of the parties’ affidavits,
memoranda, and all other evidence on record.11

Consequently, Prosecution Attorney Torrevillas, on behalf of respondent People, submitted on 1 December 2005 a
Compliance with Ex Parte Motion to Admit Attached Information.12 Prosecution Attorney Torrevillas moved that the
documents submitted be admitted as part of the record of the case and the first Information be substituted by the
attached second Information. The second Information13 addressed the discrepancies noted by the CTA in the first
Information, by now reading thus:

The undersigned Prosecution Attorney of the Department of Justice hereby accuses JUDY ANNE SANTOS y
Lumagui of the offense of violation of Section 255, of Republic Act No. 8424, otherwise known as the "Tax
Reform Act of 1997," as amended, committed as follows:

"That on or about the 15th day of April, 2003, at Quezon City, Philippines, and within the jurisdiction of
this Honorable Court, the above-named accused did then and there, willfully, unlawfully, and feloniously
file a false and fraudulent income tax return for taxable year 2002 by indicating therein a gross income
of P8,033,332.70 when in truth and in fact her correct income for taxable year 2002 is P16,396,234.70 or
a gross underdeclaration/difference of P8,362,902 resulting to an income tax deficiency
of P1,395,116.24 excluding interest and penalties thereon of P1,319,500.94 or a total income tax
deficiency of P2,714,617.18 to the damage and prejudice of the government of the same amount.["]

In a Resolution14 dated 8 December 2005, the CTA First Division granted the People’s Ex Parte Motion and admitted
the second Information.

The CTA First Division then issued on 9 December 2005 a warrant for the arrest of petitioner. 15 The tax court lifted and
recalled the warrant of arrest on 21 December 2005 after petitioner voluntarily appeared and submitted herself to its
jurisdiction and filed the required bail bond in the amount of P20,000.00.16

On 10 January 2006, petitioner filed with the CTA First Division a Motion to Quash17 the Information filed in C.T.A. Crim.
Case No. 0-012 on the following grounds:

1. The facts alleged in the INFORMATION do not constitute an offense;

2. The officer who filed the information had no authority to do so;

3. The Honorable Court of Tax Appeals has no jurisdiction over the subject matter of the case; and

4. The information is void ab initio, being violative of due process, and the equal protection of the laws.

32
In a Resolution18 dated 23 February 2006, the CTA First Division denied petitioner’s Motion to Quash and accordingly
scheduled her arraignment on 2 March 2006 at 9:00 a.m. Petitioner filed a Motion for Reconsideration and/or
Reinvestigation,19 which was again denied by the CTA First Division in a Resolution20 dated 11 May 2006.

Petitioner received a copy of the 11 May 2006 Resolution of the CTA First Division on 17 May 2006. On 1 June 2006,
petitioner filed with the CTA en banc a Motion for Extension of Time to File Petition for Review, docketed as C.T.A. EB.
CRIM. No. 001. She filed her Petition for Review with the CTA en banc on 16 June 2006. However, in its
Resolution21 dated 19 June 2006, the CTA en banc denied petitioner’s Motion for Extension of Time to File Petition for
Review, ratiocinating that:

In the case before Us, the petitioner is asking for an extension of time to file her Petition for Review to appeal
the denial of her motion to quash in C.T.A. Crim. Case No. 0-012. As stated above, a resolution denying a
motion to quash is not a proper subject of an appeal to the Court En Banc under Section 11 of R.A. No. 9282
because a ruling denying a motion to quash is only an interlocutory order, as such, it cannot be made the
subject of an appeal pursuant to said law and the Rules of Court. Section 1 of Rule 41 of the Rules of Court
provides that "no appeal may be taken from an interlocutory order" and Section 1 (i) of Rule 50 provides for the
dismissal of an appeal on the ground that "the order or judgment appealed from is not appealable". Time and
again, the Supreme Court had ruled that the remedy of the accused in case of denial of a motion to quash is for
the accused to enter a plea, go to trial and after an adverse decision is rendered, to appeal therefrom in the
manner authorized by law.

Since a denial of a Motion to Quash is not appealable, granting petitioner’s Motion for Extension of Time to File
Petition for Review will only be an exercise in futility considering that the dismissal of the Petition for Review that
will be filed by way of appeal is mandated both by law and jurisprudence.22

Ultimately, the CTA en banc decreed:

WHEREFORE, premises considered, petitioner’s Motion for Extension of Time to File Petition for Review filed
on June 1, 2006 is hereby DENIED for lack of merit.23

Now comes petitioner before this Court raising the sole issue of:

WHETHER A RESOLUTION OF A CTA DIVISION DENYING A MOTION TO QUASH IS A PROPER SUBJECT

OF AN APPEAL TO THE CTA EN BANC UNDER SECTION 11 OF REPUBLIC ACT NO. 9282, AMENDING
SECTION 18 OF REPUBLIC ACT NO. 1125.24

Section 18 of Republic Act No. 1125,25 as amended by Republic Act No. 9282,26 provides:

SEC. 18. Appeal to the Court of Tax Appeals En Banc. – No civil proceedings involving matters 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.

Petitioner’s primary argument is that a resolution of a CTA Division denying a motion to quash is a proper subject of an
appeal to the CTA en banc under Section 18 of Republic Act No. 1125, as amended, because the law does not say that
only a resolution that constitutes a final disposition of a case may be appealed to the CTA en banc. If the interpretation
of the law by the CTA en banc prevails, a procedural void is created leaving the parties, such as petitioner, without any
remedy involving erroneous resolutions of a CTA Division.

33
The Court finds no merit in the petitioner’s assertion.

The petition for review under Section 18 of Republic Act No. 1125, as amended, may be new to the CTA, but it is
actually a mode of appeal long available in courts of general jurisdiction.

Petitioner is invoking a very narrow and literal reading of Section 18 of Republic Act No. 1125, as amended.

Indeed, the filing of a petition for review with the CTA en banc from a decision, resolution, or order of a CTA Division is
a remedy newly made available in proceedings before the CTA, necessarily adopted to conform to and address the
changes in the CTA.

There was no need for such rule under Republic Act No. 1125, prior to its amendment, since the CTA then was
composed only of one Presiding Judge and two Associate Judges.27 Any two Judges constituted a quorum and the
concurrence of two Judges was necessary to promulgate any decision thereof.28

The amendments introduced by Republic Act No. 9282 to Republic Act No. 1125 elevated the rank of the CTA to a
collegiate court, with the same rank as the Court of Appeals, and increased the number of its members to one Presiding
Justice and five Associate Justices.29 The CTA is now allowed to sit en banc or in two Divisions with each Division
consisting of three Justices. Four Justices shall constitute a quorum for sessions en banc, and the affirmative votes of
four members of the Court en banc are necessary for the rendition of a decision or resolution; while two Justices shall
constitute a quorum for sessions of a Division and the affirmative votes of two members of the Division shall be
necessary for the rendition of a decision or resolution.30

In A.M. No. 05-11-07-CTA, the Revised CTA Rules, this Court delineated the jurisdiction of the CTA en banc31 and in
Divisions.32 Section 2, Rule 4 of the Revised CTA Rules recognizes the exclusive appellate jurisdiction of the CTA en
banc to review by appeal the following decisions, resolutions, or orders of the CTA Division:

SEC. 2. Cases within the jurisdiction of the Court en banc. – The Court en banc shall exercise exclusive
appellate jurisdiction to review by appeal the following:

(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of
its exclusive appellate jurisdiction over:

(1) Cases arising from administrative agencies – Bureau of Internal Revenue, Bureau of Customs,
Department of Finance, Department of Trade and Industry, Department of Agriculture;

(2) Local tax cases decided by the Regional Trial Courts in the exercise of their original jurisdiction; and

(3) Tax collection cases decided by the Regional Trial Courts in the exercise of their original jurisdiction
involving final and executory assessments for taxes, fees, charges and penalties, where the principal
amount of taxes and penalties claimed is less than one million pesos;

(f) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in Division in the
exercise of its exclusive original jurisdiction over cases involving criminal offenses arising from violations of the
National Internal Revenue Code or the Tariff and Customs Code and other laws administered by the Bureau of
Internal Revenue or Bureau of Customs.

(g) Decisions, resolutions or order on motions for reconsideration or new trial of the Court in Division in the
exercise of its exclusive appellate jurisdiction over criminal offenses mentioned in the preceding subparagraph; x

34
Although the filing of a petition for review with the CTA en banc from a decision, resolution, or order of the CTA Division,
was newly made available to the CTA, such mode of appeal has long been available in Philippine courts of general
jurisdiction. Hence, the Revised CTA Rules no longer elaborated on it but merely referred to existing rules of procedure
on petitions for review and appeals, to wit:

RULE 7
PROCEDURE IN THE COURT OF TAX APPEALS

SEC. 1. Applicability of the Rules of the Court of Appeals. – The procedure in the Court en banc or in Divisions
in original and in appealed cases shall be the same as those in petitions for review and appeals before the Court
of Appeals pursuant to the applicable provisions of Rules 42, 43, 44 and 46 of the Rules of Court, except
as otherwise provided for in these Rules.

RULE 8
PROCEDURE IN CIVIL CASES

SEC. 4. Where to appeal; mode of appeal. –

(b) An appeal from a decision or resolution of the Court in Division on a motion for reconsideration or new trial
shall be taken to the Court by petition for review as provided in Rule 43 of the Rules of Court. The Court en
banc shall act on the appeal.

RULE 9
PROCEDURE IN CRIMINAL CASES

SEC. 1. Review of cases in the Court. – The review of criminal cases in the Court en banc or in Division shall be
governed by the applicable provisions of Rule 124 of the Rules of Court.

SEC. 9. Appeal; period to appeal. –

(b) An appeal to the Court en banc in criminal cases decided by the Court in Division shall be taken by filing a
petition for review as provided in Rule 43 of the Rules of Court within fifteen days from receipt of a copy of the
decision or resolution appealed from. The Court may, for good cause, extend the time for filing of the petition for
review for an additional period not exceeding fifteen days. (Emphasis ours.)

Given the foregoing, the petition for review to be filed with the CTA en banc as the mode for appealing a decision,
resolution, or order of the CTA Division, under Section 18 of Republic Act No. 1125, as amended, is not a totally new
remedy, unique to the CTA, with a special application or use therein. To the contrary, the CTA merely adopts the
procedure for petitions for review and appeals long established and practiced in other Philippine courts. Accordingly,
doctrines, principles, rules, and precedents laid down in jurisprudence by this Court as regards petitions for review and
appeals in courts of general jurisdiction should likewise bind the CTA, and it cannot depart therefrom.

General rule: The denial of a motion to quash is an interlocutory order which is not the proper subject of an
appeal or a petition for certiorari.

According to Section 1, Rule 41 of the Revised Rules of Court, governing appeals from the Regional Trial Courts
(RTCs) to the Court of Appeals, an appeal may be taken only from a judgment or final order that completely disposes of
the case or of a matter therein when declared by the Rules to be appealable. Said provision, thus, explicitly states that
no appeal may be taken from an interlocutory order.33

The Court distinguishes final judgments and orders from interlocutory orders in this wise:

35
 Section 2, Rule 41 of the Revised Rules of Court provides that "(o)nly final judgments or orders shall be subject
to appeal." Interlocutory or incidental judgments or orders do not stay the progress of an action nor are they
subject of appeal "until final judgment or order is rendered for one party or the other." The test to determine
whether an order or judgment is interlocutory or final is this: "Does it leave something to be done in the trial court
with respect to the merits of the case? If it does, it is interlocutory; if it does not, it is final". A court order is final in
character if it puts an end to the particular matter resolved or settles definitely the matter therein disposed of,
such that no further questions can come before the court except the execution of the order. The term "final"
judgment or order signifies a judgment or an order which disposes of the cause as to all the parties, reserving no
further questions or directions for future determination. The order or judgment may validly refer to the entire
controversy or to some definite and separate branch thereof. "In the absence of a statutory definition, a final
judgment, order or decree has been held to be x x x one that finally disposes of, adjudicates, or determines the
rights, or some right or rights of the parties, either on the entire controversy or on some definite and separate
branch thereof, and which concludes them until it is reversed or set aside." The central point to consider is,
therefore, the effects of the order on the rights of the parties. A court order, on the other hand, is merely
interlocutory in character if it is provisional and leaves substantial proceeding to be had in connection with its
subject. The word "interlocutory" refers to "something intervening between the commencement and the end of a
suit which decides some point or matter but is not a final decision of the whole controversy."34

In other words, after a final order or judgment, the court should have nothing more to do in respect of the relative rights
of the parties to the case. Conversely, "an order that does not finally dispose of the case and does not end the Court's
task of adjudicating the parties' contentions in determining their rights and liabilities as regards each other, but obviously
indicates that other things remain to be done by the Court, is interlocutory."35

The rationale for barring the appeal of an interlocutory order was extensively discussed in Matute v. Court of
Appeals,36 thus:

It is settled that an "interlocutory order or decree made in the progress of a case is always under the control of
the court until the final decision of the suit, and may be modified or rescinded upon sufficient grounds shown at
any time before final judgment . . ." Of similar import is the ruling of this Court declaring that "it is rudimentary
that such (interlocutory) orders are subject to change in the discretion of the court." Moreover, one of the
inherent powers of the court is "To amend and control its process and orders so as to make them conformable
to law and justice. In the language of Chief Justice Moran, paraphrasing the ruling in Veluz vs. Justice of the
Peace of Sariaya, "since judges are human, susceptible to mistakes, and are bound to administer justice in
accordance with law, they are given the inherent power of amending their orders or judgments so as to make
them conformable to law and justice, and they can do so before they lose their jurisdiction of the case, that is
before the time to appeal has expired and no appeal has been perfected." And in the abovecited Veluz case,
this Court held that "If the trial court should discover or be convinced that it had committed an error in its
judgment, or had done an injustice, before the same has become final, it may, upon its own motion or upon a
motion of the parties, correct such error in order to do justice between the parties. . . . It would seem to be the
very height of absurdity to prohibit a trial judge from correcting an error, mistake, or injustice which is called to
his attention before he has lost control of his judgment." Corollarily, it has also been held "that a judge of first
instance is not legally prevented from revoking the interlocutory order of another judge in the very litigation
subsequently assigned to him for judicial action."

Another recognized reason of the law in permitting appeal only from a final order or judgment, and not from an
interlocutory or incidental one, is to avoid multiplicity of appeals in a single action, which must necessarily suspend the
hearing and decision on the merits of the case during the pendency of the appeal. If such appeal were allowed, the trial
on the merits of the case would necessarily be delayed for a considerable length of time, and compel the adverse party
to incur unnecessary expenses, for one of the parties may interpose as many appeals as incidental questions may be
raised by him, and interlocutory orders rendered or issued by the lower court.37

36
There is no dispute that a court order denying a motion to quash is interlocutory. The denial of the motion to quash
means that the criminal information remains pending with the court, which must proceed with the trial to determine
whether the accused is guilty of the crime charged therein. Equally settled is the rule that an order denying a motion to
quash, being interlocutory, is not immediately appealable,38 nor can it be the subject of a petition for certiorari. Such
order may only be reviewed in the ordinary course of law by an appeal from the judgment after trial. 39

The Court cannot agree in petitioner’s contention that there would exist a procedural void following the denial of her
Motion to Quash by the CTA First Division in its Resolutions dated 23 February 2006 and 11 May 2006, leaving her
helpless. The remedy of an accused from the denial of his or her motion to quash has already been clearly laid down as
follows:

An order denying a Motion to Acquit (like an order denying a motion to quash) is interlocutory and not a final
order. It is, therefore, not appealable. Neither can it be the subject of a petition for certiorari. Such order of denial
may only be reviewed, in the ordinary course of law, by an appeal from the judgment, after trial. As stated
in Collins vs. Wolfe, and reiterated in Mill vs. Yatco, the accused, after the denial of his motion to quash, should
have proceeded with the trial of the case in the court below, and if final judgment is rendered against him, he
could then appeal, and, upon such appeal, present the questions which he sought to be decided by the
appellate court in a petition for certiorari.

In Acharon vs. Purisima, the procedure was well defined, thus:

"Moreover, when the motion to quash filed by Acharon to nullify the criminal cases filed against him was
denied by the Municipal Court of General Santos his remedy was not to file a petition for certiorari but to
go to trial without prejudice on his part to reiterate the special defenses he had invoked in his motion and,
if, after trial on the merits, an adverse decision is rendered, to appeal therefrom in the manner authorized
by law. This is the procedure that he should have followed as authorized by law and precedents. Instead,
he took the usual step of filing a writ of certiorari before the Court of First Instance which in our opinion is
unwarranted it being contrary to the usual course of law."40

Hence, the CTA en banc herein did not err in denying petitioner’s Motion for Extension of Time to File Petition for
Review, when such Petition for Review is the wrong remedy to assail an interlocutory order denying her Motion to
Quash.

While the general rule proscribes the appeal of an interlocutory order, there are also recognized exceptions to the
same. The general rule is not absolute. Where special circumstances clearly demonstrate the inadequacy of an appeal,
then the special civil action of certiorari or prohibition may exceptionally be allowed.41 This Court recognizes that under
certain situations, recourse to extraordinary legal remedies, such as a petition for certiorari, is considered proper to
question the denial of a motion to quash (or any other interlocutory order) in the interest of a "more enlightened and
substantial justice";42 or to promote public welfare and public policy;43 or when the cases "have attracted nationwide
attention, making it essential to proceed with dispatch in the consideration thereof";44 or when the order was rendered
with grave abuse of discretion.45 Certiorari is an appropriate remedy to assail an interlocutory order (1) when the tribunal
issued such order without or in excess of jurisdiction or with grave abuse of discretion; and (2) when the assailed
interlocutory order is patently erroneous, and the remedy of appeal would not afford adequate and expeditious relief. 46

Recourse to a petition for certiorari to assail an interlocutory order is now expressly recognized in the ultimate
paragraph of Section 1, Rule 41 of the Revised Rules of Court on the subject of appeal, which states:

In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an
appropriate special civil action under Rule 65.

As to whether the CTA en banc, under its expanded jurisdiction in Republic Act No. 9282, has been granted jurisdiction
over special civil actions for certiorari is not raised as an issue in the Petition at bar, thus, precluding the Court from
37
making a definitive pronouncement thereon. However, even if such an issue is answered in the negative, it would not
substantially affect the ruling of this Court herein, for a party whose motion to quash had been denied may still seek
recourse, under exceptional and meritorious circumstances, via a special civil action for certiorari with this Court,
refuting petitioner’s assertion of a procedural void.

The CTA First Division did not commit grave abuse of discretion in denying petitioner’s Motion to Quash.

Assuming that the CTA en banc, as an exception to the general rule, allowed and treated petitioner’s Petition for
Review in C.T.A. EB. CRIM. No. 001 as a special civil action for certiorari, 47 it would still be dismissible for lack of merit.

An act of a court or tribunal may only be considered as committed in grave abuse of discretion when the same was
performed in a capricious or whimsical exercise of judgment, which is equivalent to lack of jurisdiction. The abuse of
discretion must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a
duty enjoined by law or to act at all in contemplation of law, as where the power is exercised in an arbitrary and despotic
manner by reason of passion or personal hostility. In this connection, it is only upon showing that the court acted
without or in excess of jurisdiction or with grave abuse of discretion that an interlocutory order such as that involved in
this case may be impugned. Be that as it may, it must be emphasized that this practice is applied only under certain
exceptional circumstances to prevent unnecessary delay in the administration of justice and so as not to unduly burden
the courts.48

Certiorari is not available to correct errors of procedure or mistakes in the judge’s findings and conclusions of law and
fact. It is only in the presence of extraordinary circumstances evincing a patent disregard of justice and fair play where
resort to a petition for certiorari is proper. A party must not be allowed to delay litigation by the sheer expediency of filing
a petition for certiorari under Rule 65 of the Revised Rules of Court based on scant allegations of grave abuse.49

A writ of certiorari is not intended to correct every controversial interlocutory ruling: it is resorted to only to correct a
grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of jurisdiction. Its function is limited to
keeping an inferior court within its jurisdiction and to relieve persons from arbitrary acts – acts which courts or judges
have no power or authority in law to perform. It is not designed to correct erroneous findings and conclusions made by
the courts.50

The Petition for Review which petitioner intended to file before the CTA en banc relied on two grounds: (1) the lack of
authority of Prosecuting Attorney Torrevillas to file the Information; and (2) the filing of the said Information in violation
of petitioner’s constitutional rights to due process and equal protection of the laws.

Anent the first ground, petitioner argues that the Information was filed without the approval of the BIR Commissioner in
violation of Section 220 of NIRC, as amended, which provides:

SEC. 220. Form and Mode of Proceeding in Actions Arising under this Code. - Civil and criminal actions and
proceedings instituted in behalf of the Government under the authority of this Code or other law enforced by the
Bureau of Internal Revenue shall be brought in the name of the Government of the Philippines and shall be
conducted by legal officers of the Bureau of Internal Revenue but no civil or criminal action for the recovery of
taxes or the enforcement of any fine, penalty or forfeiture under this Code shall be filed in court without the
approval of the Commissioner.

Petitioner’s argument must fail in light of BIR Commissioner Parayno’s letter dated 19 May 2005 to DOJ Secretary
Gonzales referring "for preliminary investigation and filing of an information in court if evidence so warrants," the
findings of the BIR officers recommending the criminal prosecution of petitioner. In said letter, BIR Commissioner
Parayno already gave his prior approval to the filing of an information in court should the DOJ, based on the evidence
submitted, find probable cause against petitioner during the preliminary investigation. Section 220 of the NIRC, as
amended, simply requires that the BIR Commissioner approve the institution of civil or criminal action against a tax law
violator, but it does not describe in what form such approval must be given. In this case, BIR Commissioner Parayno’s
38
letter of 19 May 2005 already states his express approval of the filing of an information against petitioner and his
signature need not appear on the Resolution of the State Prosecutor or the Information itself.

Still on the purported lack of authority of Prosecution Attorney Torrevillas to file the Information, petitioner asserts that it
is the City Prosecutor under the Quezon City Charter, who has the authority to investigate and prosecute offenses
allegedly committed within the jurisdiction of Quezon City, such as petitioner’s case.

The Court is not persuaded. Under Republic Act No. 537, the Revised Charter of Quezon City, the City Prosecutor shall
have the following duties relating to the investigation and prosecution of criminal offenses:

SEC. 28. The City Attorney - His assistants - His duties. –

(g) He shall also have charge of the prosecution of all crimes, misdemeanors, and violations of city ordinances,
in the Court of First Instance and the municipal courts of the city, and shall discharge all the duties in respect to
the criminal prosecutions enjoined by law upon provincial fiscals.

(h) He shall cause to be investigated all charges of crimes, misdemeanors, and violations of ordinances and
have the necessary information or complaints prepared or made against the persons accused. He or any of his
assistants may conduct such investigations by taking oral evidence of reputable witnesses, and for this purpose
may issue subpoena, summon witnesses to appear and testify under oath before him, and the attendance or
evidence of an absent or recalcitrant witness may be enforced by application to the municipal court or the Court
of First Instance. No witness summoned to testify under this section shall be under obligation to give any
testimony which tend to incriminate himself.

Evident from the foregoing is that the City Prosecutor has the power to investigate crimes, misdemeanors, and
violations of ordinances committed within the territorial jurisdiction of the city, and which can be prosecuted before the
trial courts of the said city. The charge against petitioner, however, is already within the exclusive original jurisdiction of
the CTA,51 as the Information states that her gross underdeclaration resulted in an income tax deficiency
of P1,395,116.24, excluding interest and penalties. The City Prosecutor does not have the authority to appear before
the CTA, which is now of the same rank as the Court of Appeals.

In contrast, the DOJ is the principal law agency of the Philippine government which shall be both its legal counsel and
prosecution arm.52 It has the power to investigate the commission of crimes, prosecute offenders and administer the
probation and correction system.53 Under the DOJ is the Office of the State Prosecutor whose functions are described
as follows:

Sec. 8. Office of the Chief State Prosecutor. - The Office of the Chief State Prosecutor shall have the following
functions:

(1) Assist the Secretary in the performance of powers and functions of the Department relative to its role as the
prosecution arm of the government;

(2) Implement the provisions of laws, executive orders and rules, and carry out the policies, plans, programs and
projects of the Department relative to the investigation and prosecution of criminal cases;

(3) Assist the Secretary in exercising supervision and control over the National Prosecution Service as
constituted under P.D. No. 1275 and/or otherwise hereinafter provided; and

(4) Perform such other functions as may be provided by law or assigned by the Secretary. 54

As explained by CTA First Division in its Resolution dated 11 May 2006:

39
 [T]he power or authority of the Chief State Prosecutor Jovencito Zuño, Jr. and his deputies in the Department of
Justice to prosecute cases is national in scope; and the Special Prosecutor’s authority to sign and file
informations in court proceeds from the exercise of said person’s authority to conduct preliminary
investigations.55

Moreover, there is nothing in the Revised Quezon City Charter which would suggest that the power of the City
Prosecutor to investigate and prosecute crimes, misdemeanors, and violations of ordinances committed within the
territorial jurisdiction of the city is to the exclusion of the State Prosecutors. In fact, the Office of the State Prosecutor
exercises control and supervision over City Prosecutors under Executive Order No. 292, otherwise known as the
Administrative Code of 1987.

As regards petitioner’s second ground in her intended Petition for Review with the CTA en banc, she asserts that she
has been denied due process and equal protection of the laws when similar charges for violation of the NIRC, as
amended, against Regina Encarnacion A. Velasquez (Velasquez) were dismissed by the DOJ in its Resolution dated 10
August 2005 in I.S. No. 2005-330 for the reason that Velasquez’s tax liability was not yet fully determined when the
charges were filed.

The Court is unconvinced.

First, a motion to quash should be based on a defect in the information which is evident on its face.56The same cannot
be said herein. The Information against petitioner appears valid on its face; and that it was filed in violation of her
constitutional rights to due process and equal protection of the laws is not evident on the face thereof. As pointed out by
the CTA First Division in its 11 May 2006 Resolution, the more appropriate recourse petitioner should have taken, given
the dismissal of similar charges against Velasquez, was to appeal the Resolution dated 21 October 2005 of the Office
of the State Prosecutor recommending the filing of an information against her with the DOJ Secretary. 57

Second, petitioner cannot claim denial of due process when she was given the opportunity to file her affidavits and
other pleadings and submit evidence before the DOJ during the preliminary investigation of her case and before the
Information was filed against her. Due process is merely an opportunity to be heard. In addition, preliminary
investigation conducted by the DOJ is merely inquisitorial. It is not a trial of the case on the merits. Its sole purpose is to
determine whether a crime has been committed and whether the respondent therein is probably guilty of the crime. It is
not the occasion for the full and exhaustive display of the parties’ evidence. Hence, if the investigating prosecutor is
already satisfied that he can reasonably determine the existence of probable cause based on the parties’ evidence thus
presented, he may terminate the proceedings and resolve the case.58

Third, petitioner cannot likewise aver that she has been denied equal protection of the laws.

The equal protection clause exists to prevent undue favor or privilege. It is intended to eliminate discrimination and
oppression based on inequality. Recognizing the existence of real differences among men, the equal protection clause
does not demand absolute equality. It merely requires that all persons shall be treated alike, under like circumstances
and conditions, both as to the privileges conferred and liabilities enforced.59

Petitioner was not able to duly establish to the satisfaction of this Court that she and Velasquez were indeed similarly
situated, i.e., that they committed identical acts for which they were charged with the violation of the same provisions of
the NIRC; and that they presented similar arguments and evidence in their defense - yet, they were treated differently.

Furthermore, that the Prosecution Attorney dismissed what were supposedly similar charges against Velasquez did not
compel Prosecution Attorney Torrevillas to rule the same way on the charges against petitioner. In People v. Dela
Piedra,60 this Court explained that:

The prosecution of one guilty person while others equally guilty are not prosecuted, however, is not, by itself, a
denial of the equal protection of the laws. Where the official action purports to be in conformity to the statutory
40
 classification, an erroneous or mistaken performance of the statutory duty, although a violation of the statute, is
not without more a denial of the equal protection of the laws. The unlawful administration by officers of a statute
fair on its face, resulting in its unequal application to those who are entitled to be treated alike, is not a denial of
equal protection unless there is shown to be present in it an element of intentional or purposeful discrimination.
This may appear on the face of the action taken with respect to a particular class or person, or it may only be
shown by extrinsic evidence showing a discriminatory design over another not to be inferred from the action
itself. But a discriminatory purpose is not presumed, there must be a showing of "clear and intentional
discrimination." Appellant has failed to show that, in charging appellant in court, that there was a "clear and
intentional discrimination" on the part of the prosecuting officials.

The discretion of who to prosecute depends on the prosecution’s sound assessment whether the evidence
before it can justify a reasonable belief that a person has committed an offense. The presumption is that the
prosecuting officers regularly performed their duties, and this presumption can be overcome only by
proof to the contrary, not by mere speculation. Indeed, appellant has not presented any evidence to
overcome this presumption. The mere allegation that appellant, a Cebuana, was charged with the commission
of a crime, while a Zamboangueña, the guilty party in appellant’s eyes, was not, is insufficient to support a
conclusion that the prosecution officers denied appellant equal protection of the laws.

There is also common sense practicality in sustaining appellant’s prosecution.

While all persons accused of crime are to be treated on a basis of equality before the law, it does not
follow that they are to be protected in the commission of crime. It would be unconscionable, for instance, to
excuse a defendant guilty of murder because others have murdered with impunity. The remedy for unequal
enforcement of the law in such instances does not lie in the exoneration of the guilty at the expense of
society x x x. Protection of the law will be extended to all persons equally in the pursuit of their lawful
occupations, but no person has the right to demand protection of the law in the commission of a crime.

Likewise, [i]f the failure of prosecutors to enforce the criminal laws as to some persons should be converted into
a defense for others charged with crime, the result would be that the trial of the district attorney for nonfeasance
would become an issue in the trial of many persons charged with heinous crimes and the enforcement of law
would suffer a complete breakdown. (Emphasis ours.)

In the case at bar, no evidence of a clear and intentional discrimination against petitioner was shown, whether by
Prosecution Attorney Torrevillas in recommending the filing of Information against petitioner or by the CTA First Division
in denying petitioner’s Motion to Quash. The only basis for petitioner’s claim of denial of equal protection of the laws
was the dismissal of the charges against Velasquez while those against her were not.

And lastly, the Resolutions of the CTA First Division dated 23 February 2006 and 11 May 2006 directly addressed the
arguments raised by petitioner in her Motion to Quash and Motion for Reconsideration, respectively, and explained the
reasons for the denial of both Motions. There is nothing to sustain a finding that these Resolutions were rendered
capriciously, whimsically, or arbitrarily, as to constitute grave abuse of discretion amounting to lack or excess of
jurisdiction.

In sum, the CTA en banc did not err in denying petitioner’s Motion for Extension of Time to File Petition for Review.
Petitioner cannot file a Petition for Review with the CTA en banc to appeal the Resolution of the CTA First Division
denying her Motion to Quash. The Resolution is interlocutory and, thus, unappealable. Even if her Petition for Review is
to be treated as a petition for certiorari, it is dismissible for lack of merit.

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED. Costs against petitioner. SO
ORDERED.

DIGEST:
41
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court filed by petitioner
Judy Anne L. Santos (Santos) seeking the reversal and setting aside of the Resolution, dated 19 June 2006, of the Court
of Tax Appeals (CTA) en banc in C.T.A. EB. CRIM. No. 001 which denied petitioner’s Motion for Extension of Time to
File Petition for Review. Petitioner intended to file the Petition for Review with the CTA en banc to appeal the
Resolutions dated 23 February 2006 and 11 May 2006 of the CTA First Division in C.T.A. Crim. Case No. 0-012
denying, respectively, her Motion to Quash the Information filed against her for violation of Section 255, in relation to
Sections 254 and 248(B) of the National Internal Revenue Code (NIRC), as amended; and her Motion for
Reconsideration.

On 19 May 2005, then Bureau of Internal Revenue (BIR) Commissioner Guillermo L. Parayno, Jr. wrote to the
Department of Justice (DOJ) Secretary Raul M. Gonzales a letter regarding the possible filing of criminal charges against
petitioner. BIR Commissioner Parayno began his letter with the following statement:

I have the honor to refer to you for preliminary investigation and filing of an information in court if evidence so
warrants, the herein attached Joint Affidavit of RODERICK C. ABAD, STIMSON P. CUREG, VILMA V. CARONAN,
RHODORA L. DELOS REYES under Group Supervisor TEODORA V. PURINO, of the National Investigation
Division, BIR National Office Building, BIR Road, Diliman, Quezon City, recommending the criminal prosecution of
MS. JUDY ANNE LUMAGUI SANTOS for substantial underdeclaration of income, which constitutes as prima facie
evidence of false or fraudulent return under Section 248(B) of the NIRC and punishable under Sections 254 and 255 of
the Tax Code.

In said letter, BIR Commissioner Parayno summarized the findings of the investigating BIR officers that petitioner, in
her Annual Income Tax Return for taxable year 2002 filed with the BIR, declared an income of P8,033,332.70 derived
from her talent fees solely from ABS-CBN; initial documents gathered from the BIR offices and those given by
petitioner’s accountant and third parties, however, confirmed that petitioner received in 2002 income in the amount of at
least P14,796,234.70, not only from ABS-CBN, but also from other sources, such as movies and product endorsements;
the estimated tax liability arising from petitioner’s under declaration amounted to P1,718,925.52, including incremental
penalties; the non-declaration by petitioner of an amount equivalent to at least 84.18% of the income declared in her
return was considered a substantial under declaration of income, which constituted prima facie evidence of false or
fraudulent return under Section 248(B) of the NIRC, as amended; and petitioner’s failure to account as part of her
income the professional fees she received from sources other than ABS-CBN and her under declaration of the income
she received from ABS-CBN amounted to manifest violations of Sections 254 and 255, as well as Section 248(B) of the
NIRC, as amended.

As regards petitioner’s second ground in her intended Petition for Review with the CTA en banc, she asserts that she has
been denied due process and equal protection of the laws when similar charges for violation of the NIRC, as amended,
against Regina Encarnacion A. Velasquez (Velasquez) were dismissed by the DOJ in its Resolution dated 10 August
2005 in I.S. No. 2005-330 for the reason that Velasquez’s tax liability was not yet fully determined when the charges
were filed.

Issue: WON petitioner was denied of equal protection of law.

Held:

Petitioner cannot claim denial of due process when she was given the opportunity to file her affidavits and other
pleadings and submit evidence before the DOJ during the preliminary investigation of her case and before the
Information was filed against her. Due process is merely an opportunity to be heard. In addition, preliminary
investigation conducted by the DOJ is merely inquisitorial. It is not a trial of the case on the merits. Its sole purpose is

42
to determine whether a crime has been committed and whether the respondent therein is probably guilty of the crime. It
is not the occasion for the full and exhaustive display of the parties’ evidence. Hence, if the investigating prosecutor is
already satisfied that he can reasonably determine the existence of probable cause based on the parties’ evidence thus
presented, he may terminate the proceedings and resolve the case.

The equal protection clause exists to prevent undue favor or privilege. It is intended to eliminate discrimination and
oppression based on inequality. Recognizing the existence of real differences among men, the equal protection clause
does not demand absolute equality. It merely requires that all persons shall be treated alike, under like circumstances
and conditions, both as to the privileges conferred and liabilities enforced.

Petitioner was not able to duly establish to the satisfaction of this Court that she and Velasquez were indeed similarly
situated, i.e., that they committed identical acts for which they were charged with the violation of the same provisions of
the NIRC; and that they presented similar arguments and evidence in their defense - yet, they were treated differently.

PHILIPPINE JOURNALISTS, INC., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent.

G.R. No. 162852 December 16, 2004 YNARES-SANTIAGO, J.:

This is a petition for review filed by Philippine Journalists, Incorporated (PJI) assailing the Decision1 of the Court of
Appeals dated August 5, 2003,2 which ordered petitioner to pay the assessed tax liability of P111,291,214.46 and the
Resolution3 dated March 31, 2004 which denied the Motion for Reconsideration.

The case arose from the Annual Income Tax Return filed by petitioner for the calendar year ended December 31, 1994
which presented a net income of P30,877,387.00 and the tax due of P10,807,086.00. After deducting tax credits for the
year, petitioner paid the amount of P10,247,384.00.

On August 10, 1995, Revenue District Office No. 33 of the Bureau of Internal Revenue (BIR) issued Letter of Authority
No. 871204 for Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine petitioner’s
books of account and other accounting records for internal revenue taxes for the period January 1, 1994 to December
31, 1994.

From the examination, the petitioner was told that there were deficiency taxes, inclusive of surcharges, interest and
compromise penalty in the following amounts:

Value Added Tax P 229,527.90

Income Tax 125,002,892.95

Withholding Tax 2,748,012.35

43
 Total P 127,980,433.20

In a letter dated August 29, 1997, Revenue District Officer Jaime Concepcion invited petitioner to send a representative
to an informal conference on September 15, 1997 for an opportunity to object and present documentary evidence
relative to the proposed assessment. On September 22, 1997, petitioner’s Comptroller, Lorenza Tolentino, executed a
"Waiver of the Statute of Limitation Under the National Internal Revenue Code (NIRC)".5 The document "waive[d] the
running of the prescriptive period provided by Sections 223 and 224 and other relevant provisions of the NIRC and
consent[ed] to the assessment and collection of taxes which may be found due after the examination at any time after
the lapse of the period of limitations fixed by said Sections 223 and 224 and other relevant provisions of the NIRC, until
the completion of the investigation".6

On July 2, 1998, Revenue Officer De Vera submitted his audit report recommending the issuance of an assessment
and finding that petitioner had deficiency taxes in the total amount of P136,952,408.97. On October 5, 1998, the
Assessment Division of the BIR issued Pre-Assessment Notices which informed petitioner of the results of the
investigation. Thus, BIR Revenue Region No. 6, Assessment Division/Billing Section, issued Assessment/Demand No.
33-1-000757-947 on December 9, 1998 stating the following deficiency taxes, inclusive of interest and compromise
penalty:

Income Tax P108,743,694.88

Value Added Tax 184,299.20

Expanded 2,363,220.38
Withholding Tax

Total P111,291,214.46

On March 16, 1999, a Preliminary Collection Letter was sent by Deputy Commissioner Romeo S. Panganiban to the
petitioner to pay the assessment within ten (10) days from receipt of the letter. On November 10, 1999, a Final Notice
Before Seizure8 was issued by the same deputy commissioner giving the petitioner ten (10) days from receipt to pay.
Petitioner received a copy of the final notice on November 24, 1999. By letters dated November 26, 1999, petitioner
asked to be clarified how the tax liability of P111,291,214.46 was reached and requested an extension of thirty (30)
days from receipt of the clarification within which to reply.9

The BIR received a follow-up letter from the petitioner asserting that its (PJI) records do not show receipt of Tax
Assessment/Demand No. 33-1-000757-94.10 Petitioner also contested that the assessment had no factual and legal
basis. On March 28, 2000, a Warrant of Distraint and/or Levy No. 33-06-04611 signed by Deputy Commissioner Romeo
Panganiban for the BIR was received by the petitioner.

Petitioner filed a Petition for Review12 with the Court of Tax Appeals (CTA) which was amended on May 12, 2000.
Petitioner complains: (a) that no assessment or demand was received from the BIR; (b) that the warrant of distraint
and/or levy was without factual and legal bases as its issuance was premature; (c) that the assessment, having been
made beyond the 3-year prescriptive period, is null and void; (d) that the issuance of the warrant without being given the
opportunity to dispute the same violates its right to due process; and (e) that the grave prejudice that will be sustained if
the warrant is enforced is enough basis for the issuance of the writ of preliminary injunction.

On May 14, 2002, the CTA rendered its decision,13 to wit:

As to whether or not the assessment notices were received by the petitioner, this Court rules in the affirmative.

44
 To disprove petitioner’s allegation of non-receipt of the aforesaid assessment notices, respondent presented a
certification issued by the Post Master of the Central Post Office, Manila to the effect that Registered Letter No.
76134 sent by the BIR, Region No. 6, Manila on December 15, 1998 addressed to Phil. Journalists, Inc. at
Journal Bldg., Railroad St., Manila was duly delivered to and received by a certain Alfonso Sanchez, Jr.
(Authorized Representative) on January 8, 1999. Respondent also showed proof that in claiming Registered
Letter No. 76134, Mr. Sanchez presented three identification cards, one of which is his company ID with herein
petitioner.

However, as to whether or not the Waiver of the Statute of Limitations is valid and binding on the petitioner is
another question. Since the subject assessments were issued beyond the three-year prescriptive period, it
becomes imperative on our part to rule first on the validity of the waiver allegedly executed on September 22,
1997, for if this court finds the same to be ineffective, then the assessments must necessarily fail.

After carefully examining the questioned Waiver of the Statute of Limitations, this Court considers the same to
be without any binding effect on the petitioner for the following reasons:

The waiver is an unlimited waiver. It does not contain a definite expiration date. Under RMO No. 20-90, the
phrase indicating the expiry date of the period agreed upon to assess/collect the tax after the regular three-year
period of prescription should be filled up…

Secondly, the waiver failed to state the date of acceptance by the Bureau which under the aforequoted RMO
should likewise be indicated…

Finally, petitioner was not furnished a copy of the waiver. It is to be noted that under RMO No. 20-90, the waiver
must be executed in three (3) copies, the second copy of which is for the taxpayer. It is likewise required that the
fact of receipt by the taxpayer of his/her file copy be indicated in the original copy. Again, respondent failed to
comply.

It bears stressing that RMO No. 20-90 is directed to all concerned internal revenue officers. The said RMO even
provides that the procedures found therein should be strictly followed, under pain of being administratively dealt
with should non-compliance result to prescription of the right to assess/collect…

Thus, finding the waiver executed by the petitioner on September 22, 1997 to be suffering from legal infirmities,
rendering the same invalid and ineffective, the Court finds Assessment/Demand No. 33-1-000757-94 issued on
December 5, 1998 to be time-barred. Consequently, the Warrant of Distraint and/or Levy issued pursuant
thereto is considered null and void.

WHEREFORE, in view of all the foregoing, the instant Petition for Review is hereby GRANTED. Accordingly, the
deficiency income, value-added and expanded withholding tax assessments issued by the respondent against
the petitioner on December 9, 1998, in the total amount of P111,291,214.46 for the year 1994 are hereby
declared CANCELLED, WITHDRAWN and WITH NO FORCE AND EFFECT. Likewise, Warrant of Distraint
and/or Levy No. 33-06-046 is hereby declared NULL and VOID. SO ORDERED.14

After the motion for reconsideration of the Commissioner of Internal Revenue was denied by the CTA in a Resolution
dated August 2, 2002, an appeal was filed with the Court of Appeals on August 12, 2002.

In its decision dated August 5, 2003, the Court of Appeals disagreed with the ruling of the CTA, to wit:

… The petition for review filed on 26 April 2000 with CTA was neither timely filed nor the proper remedy. Only
decisions of the BIR, denying the request for reconsideration or reinvestigation may be appealed to the CTA.
Mere assessment notices which have become final after the lapse of the thirty (30)-day reglementary period are
not appealable. Thus, the CTA should not have entertained the petition at all.
45
 …

… [T]he CTA found the waiver executed by Phil. Journalists to be invalid for the following reasons: (1) it does
not indicate a definite expiration date; (2) it does not state the date of acceptance by the BIR; and (3) Phil.
Journalist, the taxpayer, was not furnished a copy of the waiver. These grounds are merely formal in nature. The
date of acceptance by the BIR does not categorically appear in the document but it states at the bottom page
that the BIR "accepted and agreed to:"…, followed by the signature of the BIR’s authorized representative.
Although the date of acceptance was not stated, the document was dated 22 September 1997. This date could
reasonably be understood as the same date of acceptance by the BIR since a different date was not otherwise
indicated. As to the allegation that Phil. Journalists was not furnished a copy of the waiver, this requirement
appears ridiculous. Phil. Journalists, through its comptroller, Lorenza Tolentino, signed the waiver. Why would it
need a copy of the document it knowingly executed when the reason why copies are furnished to a party is to
notify it of the existence of a document, event or proceeding? …

As regards the need for a definite expiration date, this is the biggest flaw of the decision. The period of
prescription for the assessment of taxes may be extended provided that the extension be made in writing and
that it be made prior to the expiration of the period of prescription. These are the requirements for a valid
extension of the prescriptive period. To these requirements provided by law, the memorandum order adds that
the length of the extension be specified by indicating its expiration date. This requirement could be reasonably
construed from the rule on extension of the prescriptive period. But this requirement does not apply in the instant
case because what we have here is not an extension of the prescriptive period but a waiver thereof. These are
two (2) very different things. What Phil. Journalists executed was a renunciation of its right to invoke the defense
of prescription. This is a valid waiver. When one waives the prescriptive period, it is no longer necessary to
indicate the length of the extension of the prescriptive period since the person waiving may no longer use this
defense. WHEREFORE, the 02 August 2002 resolution and 14 May 2002 decision of the CTA are hereby SET
ASIDE. Respondent Phil. Journalists is ordered [to] pay its assessed tax liability of P111,291,214.46. SO
ORDERED.15

Petitioner’s Motion for Reconsideration was denied in a Resolution dated March 31, 2004. Hence, this appeal on the
following assignment of errors:

I.

The Honorable Court of Appeals committed grave error in ruling that it is outside the jurisdiction of the Court of
Tax Appeals to entertain the Petition for Review filed by the herein Petitioner at the CTA despite the fact that
such case inevitably rests upon the validity of the issuance by the BIR of warrants of distraint and levy contrary
to the provisions of Section 7(1) of Republic Act No. 1125.

II.

The Honorable Court of Appeals gravely erred when it ruled that failure to comply with the provisions of
Revenue Memorandum Order (RMO) No. 20-90 is merely a formal defect that does not invalidate the waiver of
the statute of limitations without stating the legal justification for such conclusion. Such ruling totally disregarded
the mandatory requirements of Section 222(b) of the Tax Code and its implementing regulation, RMO No. 20-90
which are substantive in nature. The RMO provides that violation thereof subjects the erring officer to
administrative sanction. This directive shows that the RMO is not merely cover forms.

III.

The Honorable Court of Appeals gravely erred when it ruled that the assessment notices became final and
unappealable. The assessment issued is void and legally non-existent because the BIR has no power to issue

46
 an assessment beyond the three-year prescriptive period where there is no valid and binding waiver of the
statute of limitation.

IV.

The Honorable Court of Appeals gravely erred when it held that the assessment in question has became final
and executory due to the failure of the Petitioner to protest the same. Respondent had no power to issue an
assessment beyond the three year period under the mandatory provisions of Section 203 of the NIRC. Such
assessment should be held void and non-existent, otherwise, Section 203, an expression of a public policy,
would be rendered useless and nugatory. Besides, such right to assess cannot be validly granted after three
years since it would arise from a violation of the mandatory provisions of Section 203 and would go against the
vested right of the Petitioner to claim prescription of assessment.

V.

The Honorable Court of Appeals committed grave error when it HELD valid a defective waiver by considering
the latter a waiver of the right to invoke the defense of prescription rather than an extension of the three year
period of prescription (to make an assessment) as provided under Section 222 in relation to Section 203 of the
Tax Code, an interpretation that is contrary to law, existing jurisprudence and outside of the purpose and intent
for which they were enacted.16

We find merit in the appeal.

The first assigned error relates to the jurisdiction of the CTA over the issues in this case. The Court of Appeals ruled
that only decisions of the BIR denying a request for reconsideration or reinvestigation may be appealed to the CTA.
Since the petitioner did not file a request for reinvestigation or reconsideration within thirty (30) days, the assessment
notices became final and unappealable. The petitioner now argue that the case was brought to the CTA because the
warrant of distraint or levy was illegally issued and that no assessment was issued because it was based on an invalid
waiver of the statutes of limitations.

We agree with petitioner. Section 7(1) of Republic Act No. 1125, the Act Creating the Court of Tax Appeals, provides for
the jurisdiction of that special court:

SEC. 7. Jurisdiction. – The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by
appeal, as herein provided –

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising
under the National Internal Revenue Code or other laws or part of law administered by the Bureau of
Internal Revenue; (Emphasis supplied).

The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the Commissioner of Internal
Revenue on matters relating to assessments or refunds. The second part of the provision covers other cases that arise
out of the NIRC or related laws administered by the Bureau of Internal Revenue. The wording of the provision is clear
and simple. It gives the CTA the jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid
and to rule if the Waiver of Statute of Limitations was validly effected.

This is not the first case where the CTA validly ruled on issues that did not relate directly to a disputed assessment or a
claim for refund. In Pantoja v. David,17 we upheld the jurisdiction of the CTA to act on a petition to invalidate and annul
the distraint orders of the Commissioner of Internal Revenue. Also, in Commissioner of Internal Revenue v. Court of
Appeals,18 the decision of the CTA declaring several waivers executed by the taxpayer as null and void, thus
invalidating the assessments issued by the BIR, was upheld by this Court.
47
The second and fifth assigned errors both focus on Revenue Memorandum Circular No. 20-90 (RMO No. 20-90) on the
requisites of a valid waiver of the statute of limitations. The Court of Appeals held that the requirements and procedures
laid down in the RMO are only formal in nature and did not invalidate the waiver that was signed even if the
requirements were not strictly observed.

The NIRC, under Sections 203 and 222,19 provides for a statute of limitations on the assessment and collection of
internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable
investigation.20Unreasonable investigation contemplates cases where the period for assessment extends indefinitely
because this deprives the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes
after the expiration of a reasonable period of time. As was held in Republic of the Phils. v. Ablaza:21

The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the
Government and to its citizens; to the Government because tax officers would be obliged to act promptly in the
making of assessment, and to citizens because after the lapse of the period of prescription citizens would have
a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of
taxpayers, not to determine the latter’s real liability, but to take advantage of every opportunity to molest
peaceful, law-abiding citizens. Without such a legal defense taxpayers would furthermore be under obligation to
always keep their books and keep them open for inspection subject to harassment by unscrupulous tax
agents. The law on prescription being a remedial measure should be interpreted in a way conducive to
bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation
of the Commission which recommend the approval of the law. (Emphasis supplied)

RMO No. 20-90 implements these provisions of the NIRC relating to the period of prescription for the assessment and
collection of taxes. A cursory reading of the Order supports petitioner’s argument that the RMO must be strictly
followed, thus:

In the execution of said waiver, the following procedures should be followed:

1. The waiver must be in the form identified hereof. This form may be reproduced by the Office concerned but
there should be no deviation from such form. The phrase "but not after __________ 19___" should be
filled up…

2. …

Soon after the waiver is signed by the taxpayer, the Commissioner of Internal Revenue or the revenue
official authorized by him, as hereinafter provided, shall sign the waiver indicating that the Bureau has
accepted and agreed to the waiver. The date of such acceptance by the Bureau should be indicated…

3. The following revenue officials are authorized to sign the waiver.

A. In the National Office

3. Commissioner For tax cases

involving more than
P1M

B. In the Regional Offices

1. The Revenue District Officer with respect to tax cases still pending investigation and the period
to assess is about to prescribe regardless of amount.

48
 …

5. The foregoing procedures shall be strictly followed. Any revenue official found not to
have complied with this Order resulting in prescription of the right to assess/collect shall
be administratively dealt with. (Emphasis supplied)22

A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the taxpayers’ right to
security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. 23 The
waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription as erroneously held
by the Court of Appeals. It is an agreement between the taxpayer and the BIR that the period to issue an assessment
and collect the taxes due is extended to a date certain. The waiver does not mean that the taxpayer relinquishes the
right to invoke prescription unequivocally particularly where the language of the document is equivocal. For the purpose
of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a
statute of limitations in the collection of taxes. Thus, the law on prescription, being a remedial measure, should be
liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should
perforce be strictly construed.24 RMO No. 20-90 explains the rationale of a waiver:

... The phrase "but not after _________ 19___" should be filled up. This indicates the expiry date of the period
agreed upon to assess/collect the tax after the regular three-year period of prescription. The period agreed
upon shall constitute the time within which to effect the assessment/collection of the tax in addition to
the ordinary prescriptive period. (Emphasis supplied)

As found by the CTA, the Waiver of Statute of Limitations, signed by petitioner’s comptroller on September 22, 1997 is
not valid and binding because it does not conform with the provisions of RMO No. 20-90. It did not specify a definite
agreed date between the BIR and petitioner, within which the former may assess and collect revenue taxes. Thus,
petitioner’s waiver became unlimited in time, violating Section 222(b) of the NIRC.

The waiver is also defective from the government side because it was signed only by a revenue district officer, not the
Commissioner, as mandated by the NIRC and RMO No. 20-90. The waiver is not a unilateral act by the taxpayer or the
BIR, but is a bilateral agreement between two parties to extend the period to a date certain. The conformity of the BIR
must be made by either the Commissioner or the Revenue District Officer. This case involves taxes amounting to more
than One Million Pesos (P1,000,000.00) and executed almost seven months before the expiration of the three-year
prescription period. For this, RMO No. 20-90 requires the Commissioner of Internal Revenue to sign for the BIR.

The case of Commissioner of Internal Revenue v. Court of Appeals,25 dealt with waivers that were not signed by the
Commissioner but were argued to have been given implied consent by the BIR. We invalidated the subject waivers and
ruled:

Petitioner’s submission is inaccurate…

The Court of Appeals itself also passed upon the validity of the waivers executed by Carnation, observing thus:

We cannot go along with the petitioner’s theory. Section 319 of the Tax Code earlier quoted is clear and
explicit that the waiver of the five-year26 prescriptive period must be in writing and signed by both the BIR
Commissioner and the taxpayer.

Here, the three waivers signed by Carnation do not bear the written consent of the BIR Commissioner as
required by law.

We agree with the CTA in holding "these ‘waivers’ to be invalid and without any binding effect on
petitioner (Carnation) for the reason that there was no consent by the respondent (Commissioner of
Internal Revenue)."
49
 For sure, no such written agreement concerning the said three waivers exists between the petitioner and
private respondent Carnation.

What is more, the waivers in question reveal that they are in no wise unequivocal, and therefore necessitates for
its binding effect the concurrence of the Commissioner of Internal Revenue…. On this basis neither implied
consent can be presumed nor can it be contended that the waiver required under Sec. 319 of the Tax
Code is one which is unilateral nor can it be said that concurrence to such an agreement is a mere
formality because it is the very signatures of both the Commissioner of Internal Revenue and the
taxpayer which give birth to such a valid agreement.27 (Emphasis supplied)

The other defect noted in this case is the date of acceptance which makes it difficult to fix with certainty if the waiver
was actually agreed before the expiration of the three-year prescriptive period. The Court of Appeals held that the date
of the execution of the waiver on September 22, 1997 could reasonably be understood as the same date of acceptance
by the BIR. Petitioner points out however that Revenue District Officer Sarmiento could not have accepted the waiver
yet because she was not the Revenue District Officer of RDO No. 33 on such date. Ms. Sarmiento’s transfer and
assignment to RDO No. 33 was only signed by the BIR Commissioner on January 16, 1998 as shown by the Revenue
Travel Assignment Order No. 14-98.28 The Court of Tax Appeals noted in its decision that it is unlikely as well that Ms.
Sarmiento made the acceptance on January 16, 1998 because "Revenue Officials normally have to conduct first an
inventory of their pending papers and property responsibilities."29

Finally, the records show that petitioner was not furnished a copy of the waiver. Under RMO No. 20-90, the waiver must
be executed in three copies with the second copy for the taxpayer. The Court of Appeals did not think this was
important because the petitioner need not have a copy of the document it knowingly executed. It stated that the reason
copies are furnished is for a party to be notified of the existence of a document, event or proceeding.

The flaw in the appellate court’s reasoning stems from its assumption that the waiver is a unilateral act of the taxpayer
when it is in fact and in law an agreement between the taxpayer and the BIR. When the petitioner’s comptroller signed
the waiver on September 22, 1997, it was not yet complete and final because the BIR had not assented. There is
compliance with the provision of RMO No. 20-90 only after the taxpayer received a copy of the waiver accepted by the
BIR. The requirement to furnish the taxpayer with a copy of the waiver is not only to give notice of the existence of the
document but of the acceptance by the BIR and the perfection of the agreement.

The waiver document is incomplete and defective and thus the three-year prescriptive period was not tolled or extended
and continued to run until April 17, 1998. Consequently, the Assessment/Demand No. 33-1-000757-94 issued on
December 9, 1998 was invalid because it was issued beyond the three (3) year period. In the same manner, Warrant of
Distraint and/or Levy No. 33-06-046 which petitioner received on March 28, 2000 is also null and void for having been
issued pursuant to an invalid assessment.

WHEREFORE, premises considered, the instant petition for review is GRANTED. The Decision of the Court of Appeals
dated August 5, 2003 and its Resolution dated March 31, 2004 are REVERSED and SET ASIDE. The Decision of the
Court of Tax Appeals in CTA Case No. 6108 dated May 14, 2002, declaring Warrant of Distraint and/or Levy No. 33-06-
046 null and void, is REINSTATED. SO ORDERED.

DIGEST:

The case arose from the Annual Income Tax Return filed by petitioner for the calendar year ended December 31, 1994 which
presented a net income of P30,877,387.00 and the tax due of P10,807,086.00. After deducting tax credits for the year,
petitioner paid the amount of P10,247,384.00. On August 10, 1995, Revenue District Office No. 33 of the Bureau of Internal

50
Revenue (BIR) issued Letter of Authority No. 87120 for Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio
Gapasin to examine petitioner's books of account and other accounting records for internal revenue taxes for the period
January 1, 1994 to December 31, 1994. On July 2, 1998, Revenue Officer De Vera submitted his audit report recommending
the issuance of an assessment and finding that petitioner had deficiency taxes in the total amount of P136,952,408.97. On
October 5, 1998, the Assessment Division of the BIR issued Pre-Assessment Notices which informed petitioner of the results of
the investigation. Thus, BIR Revenue Region No. 6, Assessment Division/Billing Section, issued Assessment/Demand No. 33-1-
000757-94 on December 9, 1998 stating the following deficiency taxes, inclusive of interest and compromise penalty

Petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) which was amended on May 12, 2000. Petitioner
complains: (a) that no assessment or demand was received from the BIR; (b) that the warrant of distraint and/or levy was
without factual and legal bases as its issuance was premature; (c) that the assessment, having been made beyond the 3-year
prescriptive period, is null and void; (d) that the issuance of the warrant without being given the opportunity to dispute the
same violates its right to due process; and (e) that the grave prejudice that will be sustained if the warrant

After the motion for reconsideration of the Commissioner of Internal Revenue was denied by the CTA in a Resolution dated
August 2, 2002, an appeal was filed with the Court of Appeals on August 12, 2002. In its decision dated August 5, 2003, the
Court of Appeals disagreed with the ruling of the CTA.

Petitioner's Motion for Reconsideration was denied in a Resolution dated March 31, 2004. Hence, this appeal

ISSUES

1. Whether or not The Honorable Court of Appeals committed grave error in ruling that it is outside the jurisdiction of the
Court of Tax Appeals to entertain the Petition for Review filed by the herein Petitioner at the CTA despite the fact that such case
inevitably rests upon the validity of the issuance by the BIR of warrants of distraint and levy contrary to the provisions of
Section 7(1) of Republic Act No. 1125.

2. Whether or not The Honorable Court of Appeals gravely erred when it ruled that failure to comply with the provisions of
Revenue Memorandum Order (RMO) No. 20-90 is merely a formal defect that does not invalidate the waiver of the statute of
limitations without stating the legal justification for such conclusion. Such ruling totally disregarded the mandatory
requirements of Section 222(b) of the Tax Code and its implementing regulation, RMO No. 20-90 which are substantive in
nature. The RMO provides that violation thereof subjects the erring officer to administrative sanction. This directive shows that
the RMO is not merely cover forms.

3. The Honorable Court of Appeals gravely erred when it ruled that the assessment notices became final and unappealable. The
assessment issued is void and legally non-existent because the BIR has no power to issue an assessment beyond the three-
year prescriptive period where there is no valid and binding waiver of the statute of limitation.

4. The Honorable Court of Appeals gravely erred when it held that the assessment in question has became final and executory
due to the failure of the Petitioner to protest the same. Respondent had no power to issue an assessment beyond the three
year period under the mandatory provisions of Section 203 of the NIRC. Such assessment should be held void and non-
existent, otherwise, Section 203, an expression of a public policy, would be rendered useless and nugatory. Besides, such right
to assess cannot be validly granted after three years since it would arise from a violation of the mandatory provisions of Section
203 and would go against the vested right of the Petitioner to claim prescription of assessment.

5. The Honorable Court of Appeals committed grave error when it HELD valid a defective waiver by considering the latter a
waiver of the right to invoke the defense of prescription rather than an extension of the three year period of prescription (to
make an assessment) as provided under Section 222 in relation to Section 203 of the Tax Code, an interpretation that is
contrary to law, existing jurisprudence and outside of the purpose and intent for which they were enacted.

RULING

The court found merit in the appeal.The first assigned error relates to the jurisdiction of the CTA over the issues in this case.
The Court of Appeals ruled that only decisions of the BIR denying a request for reconsideration or reinvestigation may be
appealed to the CTA. Since the petitioner did not file a request for reinvestigation or reconsideration within thirty (30) days, the
assessment notices became final and unappealable. The petitioner now argue that the case was brought to the CTA because the
warrant of distraint or levy was illegally issued and that no assessment was issued because it was based on an invalid waiver of
the statutes of limitations.

51
The second and fifth assigned errors both focus on Revenue Memorandum Circular No. 20-90 (RMO No. 20-90) on the
requisites of a valid waiver of the statute of limitations. The Court of Appeals held that the requirements and procedures laid
down in the RMO are only formal in nature and did not invalidate the waiver that was signed even if the requirements were not
strictly observed.

The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its
citizens; to the Government because tax officers would be obliged to act promptly in the making of assessment, and to citizens
because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents
who will always find an excuse to inspect the books of taxpayers, not to determine the latter's real liability, but to take
advantage of every opportunity to molest peaceful, law-abiding citizens. Without such a legal defense taxpayers would
furthermore be under obligation to always keep their books and keep them open for inspection subject to harassment by
unscrupulous tax agents. The law on prescription being a remedial measure should be interpreted in a way conducive
to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the
Commission which recommend the approval of the law.

The waiver document is incomplete and defective and thus the three-year prescriptive period was not tolled or extended and
continued to run until April 17, 1998. Consequently, the Assessment/Demand No. 33-1-000757-94 issued on December 9, 1998
was invalid because it was issued beyond the three (3) year period. In the same manner, Warrant of Distraint and/or Levy No.
33-06-046 which petitioner received on March 28, 2000 is also null and void for having been issued pursuant to an invalid
assessment.

COMMISSIONER OF INTERNAL REVENUE petitioner, vs. JOSEFINA LEAL, respondent.

G.R. No. 113459 November 18, 2002 SANDOVAL-GUTIERREZ, J.:

Pursuant to Section 116 of Presidential Decree No. 1158,1 (The National Internal Revenue Code of 1977, as amended
[Tax Code for brevity]), which provides:

"SEC. 116. Percentage tax on dealers in securities; lending investors. – Dealers in securities shall pay a tax equivalent
to six (6%) per centum of their gross income. Lending investors shall pay a tax equivalent to five (5%) per cent of their
gross income." (emphasis added)

the Commissioner of Internal Revenue, petitioner, issued Revenue Memorandum Order (RMO) No. 15-91 dated March
11, 1991,2 imposing 5% lending investor’s tax on pawnshops based on their gross income and requiring all investigating
units of the Bureau of Internal Revenue (BIR) to investigate and assess the lending investor’s tax due from them. The
issuance of RMO No. 15-91 was an offshoot of petitioner’s evaluation that the nature of pawnshop business is akin to
that of "lending investors," which term is defined in Section 157 (u) of the Tax Code in this wise:

"(u) Lending investors include all persons who make a practice of lending money for themselves or others at interests."

Subsequently, petitioner issued Revenue Memorandum Circular (RMC) No. 43-91 dated May 27, 1992,3subjecting the
pawn ticket to the documentary stamp tax as prescribed in Title VII of the Tax Code.

Adversely affected by those revenue orders, herein respondent Josefina Leal, owner and operator of Josefina’s
Pawnshop in San Mateo, Rizal, asked for a reconsideration of both RMO No. 15-91 and RMC No. 43-91 but the same
was denied with finality by petitioner in its BIR Ruling No. 221-91 dated October 30, 1991.4

Consequently, on March 18, 1992, respondent filed with the Regional Trial Court (RTC), Branch 75, San Mateo, Rizal, a
petition for prohibition, docketed as Civil Case No. 849-92,5 seeking to prohibit petitioner from implementing the revenue
orders.

Petitioner, through the Office of the Solicitor General, filed a motion to dismiss6 the petition on the ground that the RTC
has no jurisdiction to review the questioned revenue orders and to enjoin their implementation. Petitioner contends that
52
the subject revenue orders were issued pursuant to his power "to make rulings or opinions in connection with the
implementation of the provisions of internal revenue laws."7 Thus, the case falls within the exclusive appellate
jurisdiction of the Court of Tax Appeals, citing Section 7 (1) of Republic Act No. 1125.8

The RTC, through then Presiding Judge Andres B. Reyes, Jr.,9 issued an order on April 27, 199210 denying the motion
to dismiss, holding that the revenue orders are not assessments to implement a Tax Code provision, but are "in effect
new taxes (against pawnshops) which are not provided for under the Code," and which only Congress is empowered to
impose.

Petitioner then filed with the Court of Appeals a petition for certiorari and prohibition under Rule 65 of the Revised Rules
of Court (now 1997 Rules of Civil Procedure, as amended), docketed as CA-G.R. SP No. 28824. Petitioner alleged that
in denying the motion to dismiss, the RTC Judge acted without or in excess of his jurisdiction, or with grave abuse of
discretion. In its Decision dated December 23, 1993, the Court of Appeals dismissed the petition "for lack of legal
basis"11 and ruled that "the (RTC) order denying the motion to dismiss is subject to immediate challenge before the
Supreme Court (not the Court of Appeals), which is the sole authority to determine and resolve an issue purely of law
pursuant to Section 5, Article VIII of the 1987 Constitution."12 Nonetheless, the Court of Appeals resolved the case on
the merits, sustaining the RTC ruling that the questioned revenue orders are "new additional measures which only
Congress is empowered to impose."13

Hence, the instant petition for review on certiorari under Rule 45 of the Rules of Court raising the following issues:

1. WHETHER THE COURT OF APPEALS HAS JURISDICTION OVER A PETITION FOR CERTIORARI
UNDER RULE 65 OF THE RULES OF COURT WHERE THE AUTHORITY OF THE REGIONAL TRIAL COURT
TO REVIEW THE SUBJECT REVENUE ORDERS IS BEING QUESTIONED;

2. WHETHER IT IS THE RTC OR THE COURT OF TAX APPEALS WHICH HAS JURISDICTION OVER THE
INSTANT CASE.

Anent the first issue, petitioner contends that the Court of Appeals has "original jurisdiction to issue writs of mandamus,
prohibition, certiorari, habeas corpus and quo warranto, and auxiliary writs or processes, whether or not in aid of its
appellate jurisdiction," pursuant to Section 9(1) of Batas Pambansa Blg. 129. Petitioner thus claims that his petition for
certiorari filed with the Court of Appeals pursuant to Rule 65 of the Rules of Court is the proper recourse to assail the
RTC order denying his motion to dismiss.

Petitioner’s contention is meritorious. The Court of Appeals erred in holding that it has no jurisdiction over petitioner’s
special civil action for certiorari under Rule 65 of the Rules. While this Court exercises original jurisdiction to issue the
extraordinary writ of certiorari (as well as the writs of prohibition, mandamus, quo warranto, and habeas corpus), 14 such
power is not exclusive to this Court but is concurrent with the Court of Appeals15 and the Regional Trial Courts.16 We
reiterate our pronouncement on this issue in Morales vs. Court of Appeals:17

"Under Section 9 (1) of B.P. Blg. 129, the Court of Appeals has concurrent original jurisdiction with the Supreme Court
pursuant to Section 5 (1) of Article VIII of the Constitution and Section 17 (1) of the Judiciary Act of 1948, and with the
Regional Trial Court pursuant to Section 21 (1) of B.P. Blg. 129 to issue writs of certiorari, mandamus, prohibition,
habeas corpus, and quo warranto. These are original actions, not modes of appeals.

"Since what the petitioner filed in CA-G.R. SP No. 40670 was a special civil action for certiorari under Rule 65, the
original jurisdiction of the Court of Appeals thereon is beyond doubt.

"This error of the Court of Appeals was due to its misapplication of Section 5 (2) (c) of Article VIII of the Constitution and
of that portion of Section 17 of the Judiciary Act of 1948 vesting upon the Supreme Court exclusive jurisdiction to
review, revise, reverse, modify, or affirm on certiorari as the law or rules of court may provide, final judgments and
decrees of inferior courts in all cases in which the jurisdiction of any inferior court is in issue. It forgot that this
53
constitutional and statutory provisions pertain to the appellate – not original – jurisdiction of the Supreme Court, as
correctly maintained by the petitioner. An appellate jurisdiction refers to a process which is but a continuation of the
original suit, not a commencement of a new action, such as that of a special civil action for certiorari. The general rule is
that a denial of a motion to dismiss or to quash in criminal cases is interlocutory and cannot be the subject of an appeal
or of a special civil action for certiorari. Nevertheless, this Court has allowed a special civil action for certiorari where a
lower court has acted without or in excess of jurisdiction or with grave abuse of discretion in denying a motion to
dismiss or to quash. The petitioner believed that the RTC below did so; hence, the special civil action for certiorari
before the Court of Appeals appeared to be the proper remedy." (emphasis added)

Such concurrence of original jurisdiction among the Regional Trial Court, the Court of Appeals and this Court, however,
does not mean that the party seeking any of the extraordinary writs has the absolute freedom to file his petition in the
court of his choice. The hierarchy of courts in our judicial system determines the appropriate forum for these petitions.
Thus, petitions for the issuance of the said writs against the first level (inferior) courts must be filed with the Regional
Trial Court and those against the latter, with the Court of Appeals. A direct invocation of this Court’s original jurisdiction
to issue these writs should be allowed only where there are special and important reasons therefor, specifically and
sufficiently set forth in the petition. This is the established policy to prevent inordinate demands upon the Court’s time
and attention, which are better devoted to matters within its exclusive jurisdiction, and to prevent further over-crowding
of the Court’s docket.18 Thus, it was proper for petitioner to institute the special civil action for certiorari with the Court of
Appeals assailing the RTC order denying his motion to dismiss based on lack of jurisdiction.

While the Court of Appeals correctly took cognizance of the petition for certiorari, however, let it be stressed that the
jurisdiction to review the rulings of the Commissioner of Internal Revenue pertains to the Court of Tax Appeals, not to
the RTC.

The questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the Commissioner implementing
the Tax Code on the taxability of pawnshops. This is clear from petitioner’s RMO No. 15-91, pertinent portion of which
reads:

"A restudy of P.D. 114 (the Pawnshop Regulation Act) shows that the principal activity of pawnshops is lending money
at interest and incidentally accepting a ‘pawn’ of personal property delivered by the pawner to the pawnee as security
for the loan (Sec. 3, ibid.). Clearly, this makes pawnshop business akin to lending investor’s business activity which is
broad enough to encompass the business of lending money at interest by any person whether natural or juridical. Such
being the case, pawnshops shall be subject to the 5% lending investor’s tax based on their gross income pursuant to
Section 116 of the Tax Code, as amended."19

Such revenue orders were issued pursuant to petitioner's powers under Section 245 of the Tax Code, which states:

"SEC. 245. Authority of the Secretary of Finance to promulgate rules and regulations. – The Secretary of Finance, upon
recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement
of the provisions of this Code.

"The authority of the Secretary of Finance to determine articles similar or analogous to those subject to a rate of sales
tax under certain category enumerated in Section 163 and 165 of this Code shall be without prejudice to the power of
the Commissioner of Internal Revenue to make rulings or opinions in connection with the implementation of the
provisions of internal revenue laws, including ruling on the classification of articles of sales and similar purposes."
(emphasis added)

Under Republic Act No. 1125 (An Act Creating the Court of Tax Appeals [CTA for brevity]), as amended, such rulings of
the Commissioner of Internal Revenue are appealable to that court, thus:

"SEC. 7. Jurisdiction. – The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as
herein provided -
54
 (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising
under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal
Revenue;

"SEC. 11. Who may appeal; effect of appeal. – Any person, association or corporation adversely affected by a
decision or ruling of the Commissioner of Internal Revenue, or the Commissioner of Customs or any provincial
or city Board of Assessment Appeals may file an appeal in the Court of Tax Appeals within thirty days after the
receipt of such decision or ruling.

"SEC. 18. x x x. – No judicial proceedings against the Government involving matters arising under the National
Internal Revenue Code, the Customs Law or the Assessment Law shall be maintained, except as herein
provided, until and unless an appeal has been previously filed with the Court of Tax Appeals and disposed of in
accordance with the provisions of this Act.

This Court, in Rodriguez, etc. vs. Blaquera, etc.,20 ruled:

"Plaintiff maintains that this is not an appeal from a ruling of the Collector of Internal Revenue, but merely an
attempt to nullify General Circular No. V-148, which does not adjudicate or settle any controversy, and that,
accordingly, this case is not within the jurisdiction of the Court of Tax Appeals.

"We find no merit in this pretense. General Circular No. V-148 directs the officers charged with the collection of
taxes and license fees to adhere strictly to the interpretation given by the defendant to the statutory provisions
abovementioned, as set forth in the Circular. The same incorporates, therefore, a decision of the Collector of
Internal Revenue (now Commissioner of Internal Revenue) on the manner of enforcement of the said statute,
the administration of which is entrusted by law to the Bureau of Internal Revenue. As such, it comes within the
purview of Republic Act No. 1125, Section 7 of which provides that the Court of Tax Appeals ‘shall exercise
exclusive appellate jurisdiction to review by appeal x x x decisions of the Collector of Internal Revenue in x x x
matters arising under the National Internal Revenue Code or other law or part of the law administered by the
Bureau of Internal Revenue.’ x x x." (emphasis added)

In the same vein, we held in Meralco Securities Corporation vs. Savellano,21 thus:

"Respondent judge has no jurisdiction to take cognizance of the case because the subject matter thereof clearly falls
within the scope of cases now exclusively within the jurisdiction of the Court of Tax Appeals. Section 7 of Republic Act
No. 1125, enacted June 16, 1954, granted to the Court of Tax Appeals exclusive appellate jurisdiction to review by
appeal, among others, decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising
under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue.
The law transferred to the Court of Tax Appeals jurisdiction over all cases involving said assessments previously
cognizable by Courts of First Instance, and even those already pending in said courts. The question of whether of not to
impose a deficiency tax assessment on Meralco Securities Corporation undoubtedly comes within the purview of the
words "disputed assessments" or of "other matters arising under the National Internal Revenue Code…." In the case of
Blaquera, etc. vs. Rodriguez, etc.(103 Phil. 511 [1958]), this Court ruled that ‘the determination of the correctness or
incorrectness of a tax assessment to which the taxpayer is not agreeable, falls within the jurisdiction of the Court of Tax
Appeals and not of the Court of First Instance, for under the provisions of Section 7 of Republic Act No. 1125, the Court
of Tax Appeals has exclusive appellate jurisdiction to review, on appeal, any decision of the Collector of Internal
Revenue in cases involving disputed assessments and other matters arising under the National Internal Revenue Code
or other law or part of law administered by the Bureau of Internal Revenue.’"

Here, as earlier mentioned, respondent Josefina Leal, being a pawnshop owner, is assailing the revenue orders
imposing 5% lending investor’s tax on pawnshops issued by petitioner. Clearly then, she should have filed her petition
55
with the Court of Tax Appeals, not the RTC. Indeed, the Court of Appeals erred in holding that the RTC order should
have been challenged before this Court.

WHEREFORE, the petition is GRANTED. Accordingly: (1) the assailed Decision dated December 23, 1993 of the Court
of Appeals in CA-G.R. SP No. 28824 is SET ASIDE; (2) the Order dated April 27, 1992 and the Writ of Preliminary
Injunction dated May 21, 1992 both issued by the RTC, Branch 75, San Mateo, Rizal in Civil Case No. 849-92, are
declared NULL and VOID for having been issued without jurisdiction; and (3) Civil Case No. 849-92 is ordered
DISMISSED. SO ORDERED.

DIGEST:

Facts:

Pursuant to Sec. 116 of the Tax Code which imposes percentage tax on dealers in securities and lending investors, the
Commissioner of Internal Revenue issued Memorandum Order (RMO) No. 15-91 dated March 11, 1991, imposing five
percent (5%) lending investor’s tax on pawnshops based on their gross income and requiring all investigating units of the
Bureau to investigate and assess the lending investor’s tax due from them. The issuance of RMO No. 15-91 was an
offshoot of petitioner’s evaluation that the nature of pawnshop business is akin to that of lending investors.
Subsequently, petitioner issued Revenue Memorandum Circular No. 43-91 dated May 27, 1992, subjecting the pawn
ticket to the documentary stamp tax as prescribed in Title VII of the Tax Code.
Adversely affected by those revenue orders, herein respondent Josefina Leal, owner and operator of Josefina Pawnshop
in San Mateo, Rizal, asked for a reconsideration of both RMO No. 15-91 and RMC No. 43-91 but the same was denied
with finality by petitioner in October 30, 1991.
Consequently, on March 18, 1992, respondent filed with the RTC a petition for prohibition seeking to prohibit petitioner
from implementing the revenue orders.
Petitioner, through the Office of the Solicitor-General, filed a motion to dismiss the petition on the ground that the RTC
has no jurisdiction to review the questioned revenue orders and to enjoin their implementation. Petitioner contends that
the subject revenue orders were issued pursuant to his power “to make rulings or opinions in connection with the
Implementation of the provisions of internal revenue laws.” Thus, the case falls within the exclusive appellate
jurisdiction of the Court of Tax Appeals, citing Sec. 7(1) of RA 1125.
The RTC issued an order denying the motion to dismiss holding that the revenue orders are not assessments to
implement a Tax Code provision, but are “in effect new taxes (against pawnshops) which are not provided for under the
Code,” and which only Congress is empowered to impose. The Court of Appeals affirmed the order issued by the RTC.

Issue:

Whether or not the Court of Tax Appeals has jurisdiction to review rulings of the Commissioner implementing the Tax
Code.

Held:

The jurisdiction to review rulings of the Commissioner pertains to the Court of Tax Appeals and NOT to the RTC. The
questioned RMO and RMC are actually rulings or opinions of the Commissioner implementing the Tax Code on the
taxability of the Pawnshops.
Under RA 1125, An Act Creating the Court of Tax Appeals, such rulings of the Commissioner of Internal Revenue are
appealable to that court:
Sec. 7 Jurisdiction – The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as
herein provided—
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
56
revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National
Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue

ASIA INTERNATIONAL AUCTIONEERS, INC. and SUBIC BAY MOTORS CORPORATION, petitioners, vs. HON.
GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of the Bureau of Internal Revenue (BIR), THE
REGIONAL DIRECTOR, BIR, Region III, THE REVENUE DISTRICT OFFICER, BIR, Special Economic Zone, and
OFFICE OF THE SOLICITOR GENERAL, respondents. G.R. No. 163445 December 18, 2007 PUNO, C.J.:

At bar is a petition for review on certiorari seeking the reversal of the decision1 of the Court of Appeals (CA) in CA-G.R.
SP No. 79329 declaring the Regional Trial Court (RTC) of Olongapo City, Branch 74, without jurisdiction over Civil Case
No. 275-0-2003.

The facts are undisputed.

Congress enacted Republic Act (R.A.) No. 7227 creating the Subic Special Economic Zone (SSEZ) and extending a
number of economic or tax incentives therein. Section 12 of the law provides:

(a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent
provisions of the Local Government Code, the [SSEZ] shall be developed into a self-sustaining, industrial,
commercial, financial and investment center to generate employment opportunities in and around the zone and
to attract and promote productive foreign investments;

(b) The [SSEZ] shall be operated and managed as a separate customs territory ensuring free flow or movement
of goods and capital within, into and exported out of the [SSEZ], as well as provide incentives such as tax and
duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods
from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs
duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;

(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and
national, shall be imposed within the [SSEZ]. In lieu of paying taxes, three percent (3%) of the gross income
earned by all businesses and enterprise within the [SSEZ] shall be remitted to the National Government, one
percent (1%) each to the local government units affected by the declaration of the zone in proportion to their
population area, and other factors. In addition, there is hereby established a development fund of one percent
(1%) of the gross income earned by all business and enterprise within the [SSEZ] to be utilized for the
development of municipalities outside the City of Olongapo and the Municipality of Subic, and other
municipalities contiguous to the base areas.

In case of conflict between national and local laws with respect to tax exemption privileges in the [SSEZ], the
same shall be resolved in favor of the latter;

(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and
future shall be allowed and maintained in the [SSEZ]; (emphasis supplied)

On January 24, 1995, then Secretary of Finance Roberto F. De Ocampo, through the recommendation of then
Commissioner of Internal Revenue (CIR) Liwayway Vinzons-Chato, issued Revenue Regulations [Rev. Reg.] No. 1-
95,2 providing the "Rules and Regulations to Implement the Tax Incentives Provisions Under Paragraphs (b) and (c) of
Section 12, [R.A.] No. 7227, [o]therwise known as the Bases Conversion and Development Act of 1992." Subsequently,
Rev. Reg. No. 12-973 was issued providing for the "Regulations Implementing Sections 12(c) and 15 of [R.A.] No. 7227

57
and Sections 24(b) and (c) of [R.A.] No. 7916 Allocating Two Percent (2%) of the Gross Income Earned by All
Businesses and Enterprises Within the Subic, Clark, John Hay, Poro Point Special Economic Zones and other Special
Economic Zones under PEZA." On September 27, 1999, Rev. Reg. No. 16-994 was issued "Amending [RR] No. 1-95,
as amended, and other related Rules and Regulations to Implement the Provisions of paragraphs (b) and (c) of Section
12 of [R.A.] No. 7227, otherwise known as the ‘Bases Conversion and Development Act of 1992’ Relative to the Tax
Incentives Granted to Enterprises Registered in the Subic Special Economic and Freeport Zone."

On June 3, 2003, then CIR Guillermo L. Parayno, Jr. issued Revenue Memorandum Circular (RMC) No. 31-2003
setting the "Uniform Guidelines on the Taxation of Imported Motor Vehicles through the Subic Free Port Zone and Other
Freeport Zones that are Sold at Public Auction." The assailed portions of the RMC read:

II. Tax treatments on the transactions involved in the importation of motor vehicles through the SSEFZ and other
legislated Freeport zones and subsequent sale thereof through public auction.—Pursuant to existing revenue
issuances, the following are the uniform tax treatments that are to be adopted on the different transactions involved in
the importation of motor vehicles through the SSEFZ and other legislated Freeport zones that are subsequently sold
through public auction:

A. Importation of motor vehicles into the freeport zones

1. Motor vehicles that are imported into the Freeport zones for exclusive use within the zones are, as a general
rule, exempt from customs duties, taxes and other charges, provided that the importer-consignee is a registered
enterprise within such freeport zone. However, should these motor vehicles be brought out into the customs
territory without returning to the freeport zones, the customs duties, taxes and other charges shall be paid to the
BOC before release thereof from its custody.

3. For imported motor vehicles that are imported by persons that are not duly registered enterprises of the
freeport zones, or that the same are intended for public auction within the freeport zones, the importer-
consignee/auctioneer shall pay the value-added tax (VAT) and excise tax to the BOC before the registration
thereof under its name with the LTO and/or the conduct of the public auction.

B. Subsequent sale/public auction of the motor vehicles

1. Scenario One – The public auction is conducted by the consignee of the imported motor vehicles within the
freeport zone

1.2. In case the consignee-auctioneer is a registered enterprise and/or locator not entitled to the
preferential tax treatment or if the same is entitled from such incentive but its total income from the
customs territory exceeds 30% of its entire income derived from the customs territory and the freeport
zone, the income derived from the public auction shall be subjected to the regular internal revenue taxes
imposed by the Tax Code.

1.4. In the event that the winning bidder shall bring the motor vehicles into the customs territory, the
winning bidder shall be deemed the importer thereof and shall be liable to pay the VAT and excise tax, if
applicable, based on the winning bid price. However, in cases where the consignee-auctioneer has
already paid the VAT and excise tax on the motor vehicles before the registration thereof with LTO and
the conduct of public auction, the additional VAT and excise tax shall be paid by winning bidder resulting
from the difference between the winning bid price and the value used by the consignee-auctioneer in
payment of such taxes. For excise tax purposes, in case the winning bid price is lower than the total
costs to import, reconditioning/rehabilitation of the motor vehicles, and other administrative and selling
expenses, the basis for the computation of the excise tax shall be the total costs plus ten percent (10%)
thereof. The additional VAT and excise taxes shall be paid to the BIR before the auctioned motor
vehicles are registered with the LTO.
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 1.5 In case the services of a professional auctioneer is employed for the public auction, the final
withholding tax of 25%, in case he/she is a non-resident citizen or alien, or the expanded withholding tax
of 20%, in case he/she is a resident citizen or alien, shall be withheld by the consignee-auctioneer from
the amount of consideration to be paid to the professional auctioneer and shall be remitted accordingly to
the BIR.

This was later amended by RMC No. 32-2003,5 to wit:

II. The imported motor vehicles after its release from Customs custody are sold through public
auction/negotiated sale by the consignee within or outside of the Freeport Zone:

A. The gross income earned by the consignee-seller from the public auction/negotiated sale of the
imported vehicles shall be subject to the preferential tax rate of five percent (5%) in lieu of the internal
revenue taxes imposed by the National Internal Revenue Code of 1997, provided that the following
conditions are present:

1.That the consignee-seller is a duly registered enterprise entitled to such preferential tax rate as
well as a registered taxpayer with the Bureau of Internal Revenue (BIR).

2.That the total income generated by the consignee-seller from sources within the customs
territory does not exceed thirty percent (30%) of the total income derived from all sources.

B. In case the consignee-seller is a registered enterprise and/or locator not entitled to the preferential tax
treatment or if the same is entitled from such incentive but its total income from the customs territory
exceeds thirty percent (30%) of its entire income derived from the customs territory and the freeport
zone, the sales or income derived from the public auction/negotiated sale shall be subjected to the
regular internal revenue taxes imposed by the Tax Code. The consignee-seller shall also observe the
compliance requirements prescribed by the Tax Code. When public auction or negotiated sale is
conducted within or outside of the freeport zone, the following tax treatment shall be observed:

1. Value Added Tax (VAT)/ Percentage Tax (PT) – VAT or PT shall be imposed on every public
auction or negotiated sale.

2. Excise Tax – The imposition of excise tax on public auction or negotiated sale shall be held in
abeyance pending verification that the importer’s selling price used as a basis by the Bureau of
Customs in computing the excise tax is correctly determined.

Petitioners Asia International Auctioneers, Inc. (AIAI) and Subic Bay Motors Corporation are corporations organized
under Philippine laws with principal place of business within the SSEZ. They are engaged in the importation of mainly
secondhand or used motor vehicles and heavy transportation or construction equipment which they sell to the public
through auction.

Petitioners filed a complaint before the RTC of Olongapo City, praying for the nullification of RMC No. 31-2003 for being
unconstitutional and an ultra vires act. The complaint was docketed as Civil Case No. 275-0-2003 and raffled to Branch
74. Subsequently, petitioners filed their "First Amended Complaint to Declare Void, Ultra Vires, and Unconstitutional
[RMC] No. 31-2003 dated June 3, 2003 and [RMC] No. 32-2003 dated June 5, 2003, with Application for a Writ of
Temporary Restraining Order and Preliminary Injunction"6 to enjoin respondents from implementing the questioned
RMCs while the case is pending. Particularly, they question paragraphs II(A)(1) and (3), II(B)(1.2), (1.4) and (1.5) of
RMC No. 31-2003 and paragraphs II(A)(2) and (B) of RMC No. 32-2003. Before a responsive pleading was filed,
petitioners filed their Second Amended Complaint7 to include Rev. Reg. Nos. 1-95, 12-97 and 16-99 dated January 24,
1995, August 7, 1997 and September 27, 1999, respectively, which allegedly contain some identical provisions as the
questioned RMCs, but without changing the cause of action in their First Amended Complaint.
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The Office of the Solicitor General (OSG) submitted its "Comment (In Opposition to the Application for Issuance of a
Writ of Preliminary Injunction)."8 Respondents CIR, Regional Director and Revenue District Officer submitted their joint
"Opposition (To The Prayer for Preliminary Injunction and/or Temporary Restraining Order by Petitioners)."9

Then Secretary of Finance Jose Isidro N. Camacho filed a Motion to Dismiss the case against him, alleging that he is
not a party to the suit and petitioners have no cause of action against him.10 Respondents CIR, BIR Regional Director
and BIR Revenue District Officer also filed their joint Motion to Dismiss on the grounds that "[t]he trial court has no
jurisdiction over the subject matter of the complaint" and "[a] condition precedent, that is, exhaustion of administrative
remedies, has not been complied with."11 Petitioners filed their "Motion to Expunge from the Records the Respondents[’]
Motion to Dismiss"12 for allegedly failing to comply with Section 4, Rule 15 of the Rules of Court. To this, the
respondents filed their Opposition.13

Meantime, BIR Revenue District Officer Rey Asterio L. Tambis sent a 10-Day Preliminary Notice14 to the president of
petitioner AIAI for unpaid VAT on auction sales conducted on June 6-8, 2003, as per RMC No. 32-2003.

On August 1, 2003, the trial court issued its order15 granting the application for a writ of preliminary injunction. The
dispositive portion of the order states:

WHEREFORE, premises considered, petitioners’ application for the issuance of a writ of preliminary injunction is
hereby GRANTED. Let the writ issue upon the filing and approval by the court of an injunction bond in the
amount of Php 1 Million. SO ORDERED.16

Consequently, respondents CIR, the BIR Regional Director of Region III, the BIR Revenue District Officer of the SSEZ,
and the OSG filed with the CA a petition for certiorari under Rule 65 of the Rules of Court with prayer for the issuance of
a Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the trial court from exercising jurisdiction
over the case.17

Meantime, BIR Regional Director Danilo A. Duncano sent a Preliminary Assessment Notice18 to the President of AIAI,
informing him of the VAT due from the company for the auction sales conducted on June 6-8, 2003 as per RMC No. 32-
2003, plus surcharge, interest and compromise penalty. Thereafter, a Formal Letter of Demand19was sent to the
President of petitioner AIAI by the Officer-in-Charge of the BIR Office of the Regional Director.

On March 31, 2004, the CA issued its assailed decision, the dispositive portion of which states:

WHEREFORE, the petition is GRANTED. Public respondent Regional Trial Court, Branch 74, of Olongapo City
is hereby declared bereft of jurisdiction to take cognizance of Civil Case No. 275-0-2003. Accordingly, said Civil
Case No. 275-0-2003 is hereby DISMISSED and the assailed Order dated August 1,
2003, ANNULLED and SET ASIDE. SO ORDERED.20

Hence, this Petition for Review on Certiorari21 with an application for a temporary restraining order and a writ of
preliminary injunction to enjoin respondents "from pursuing sending letters of assessments to petitioners." Petitioners
raise the following issues:

[a] [W]hether a petition for certiorari under Rule 65 of the New Rules is proper where the issue raised therein
has not yet been resolved at the first instance by the Court where the original action was filed, and, necessarily,
without first filing a motion for reconsideration;

[b] [W]hich Court- the regular courts of justice established under Batas Pambansa Blg. 129 or the Court of Tax
Appeals – is the proper court of jurisdiction to hear a case to declare Revenue Memorandum Circulars
unconstitutional and against an existing law where the challenge does not involve the rate and figures of the
imposed taxes;

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 [c] [D]ependent on an affirmative resolution of the second issue in favor of the regular courts of justice, whether
the writ of preliminary injunction granted by the Court at Olongapo City was properly and legally issued. 22

Petitioners contend that there were fatal procedural defects in respondents’ petition for certiorari with the CA. They point
out that the CA resolved the issue of jurisdiction without waiting for the lower court to first rule on the issue. Also,
respondents did not file a motion for reconsideration of the trial court’s order granting the writ of preliminary injunction
before filing the petition with the CA.

The arguments are unmeritorious.

Jurisdiction is defined as the power and authority of a court to hear, try and decide a case.23 The issue is so basic that it
may be raised at any stage of the proceedings, even on appeal.24 In fact, courts may take cognizance of the issue even
if not raised by the parties themselves.25 There is thus no reason to preclude the CA from ruling on this issue even if
allegedly, the same has not yet been resolved by the trial court.

As to respondents’ failure to file a motion for reconsideration, we agree with the ruling of the CA, which states:

It is now settled that the filing of a motion for reconsideration is not always sine qua non before availing of the
remedy of certiorari.26 Hence, the general rule of requiring a motion for reconsideration finds no application in a
case where what is precisely being assailed is lack of jurisdiction of the respondent court. 27And considering also
the urgent necessity for resolving the issues raised herein, where further delay could prejudice the interests of
the government,28 the haste with which the Solicitor General raised these issues before this Court becomes
understandable.29

Now, to the main issue: does the trial court have jurisdiction over the subject matter of this case?

Petitioners contend that jurisdiction over the case at bar properly pertains to the regular courts as this is "an action to
declare as unconstitutional, void and against the provisions of [R.A. No.] 7227" the RMCs issued by the CIR. They
explain that they "do not challenge the rate, structure or figures of the imposed taxes, rather they challenge the authority
of the respondent Commissioner to impose and collect the said taxes." They claim that the challenge on the authority of
the CIR to issue the RMCs does not fall within the jurisdiction of the Court of Tax Appeals (CTA).

Petitioners’ arguments do not sway.

R.A. No. 1125, as amended, states:

Sec. 7. Jurisdiction.—The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by
appeal, as herein provided—

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters
arising under the National Internal Revenue Code or other laws or part of law administered by the
Bureau of Internal Revenue; x x x (emphases supplied)

We have held that RMCs are considered administrative rulings which are issued from time to time by the CIR.30

Rodriguez v. Blaquera31 is in point. This case involves Commonwealth Act No. 466, as amended by R.A. No. 84,
which imposed upon firearm holders the duty to pay an initial license fee of P15 and an annual fee of P10 for each
firearm, with the exception that in case of "bona fide and active members of duly organized gun clubs and accredited by
the Provost Marshal General," the annual fee is reduced to P5 for each firearm. Pursuant to this, the CIR issued
General Circular No. V-148 which stated that "bona fide and active members of duly organized gun clubs and

61
accredited by the Provost Marshal General… shall pay an initial fee of fifteen pesos and an annual fee of five pesos for
each firearm held on license except caliber .22 revolver or rifle." The General Circular further provided that "[m]ere
membership in the gun club does not, as a matter of right, entitle the member to the reduced rates prescribed by law.
The licensee must be accredited by the Chief of Constabulary… [and] the firearm covered by the license of the member
must be of the target model in order that he may be entitled to the reduced rates." Rodriguez, as manager of the
Philippine Rifle and Pistol Association, Inc., a duly accredited gun club, in behalf of the members who have paid under
protest the regular annual fee of P10, filed an action in the Court of First Instance (now RTC) of Manila for the
nullification of the circular and the refund of P5. On the issue of jurisdiction, plaintiff similarly contended that the action
was not an appeal from a ruling of the CIR but merely an attempt to nullify General Circular No. V-148, hence, not
within the jurisdiction of the CTA. The Court, in finding this argument unmeritorious, explained:

We find no merit in this pretense. General Circular No. V-148 directs the officers charged with the collection of
taxes and license fees to adhere strictly to the interpretation given by the defendant to the statutory provision
above mentioned, as set forth in the circular. The same incorporates, therefore, a decision of the Collector of
Internal Revenue (now Commissioner of Internal Revenue) on the manner of enforcement of said statute, the
administration of which is entrusted by law to the Bureau of Internal Revenue. As such, it comes within the
purview of [R.A.] No. 1125, section 7 of which provides that the [CTA] "shall exercise exclusive appellate
jurisdiction to review by appeal * * * decisions of the Collector of Internal Revenue in * * * matters arising under
the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue."
Besides, it is plain from plaintiff’s original complaint that one of its main purposes was to secure an order for the
refund of the sums collected in excess of the amount he claims to be due by way of annual fee from the gun
club members, regardless of the class of firearms they have. Although the prayer for reimbursement has been
eliminated from his amended complaint, it is only too obvious that the nullification of General Circular No. V-148
is merely a step preparatory to a claim for refund.

Similarly, in CIR v. Leal,32 pursuant to Section 116 of Presidential Decree No. 1158 (The National Internal Revenue
Code, as amended) which states that "[d]ealers in securities shall pay a tax equivalent to six (6%) per centum of their
gross income. Lending investors shall pay a tax equivalent to five (5%) per cent, of their gross income," the CIR issued
Revenue Memorandum Order (RMO) No. 15-91 imposing 5% lending investor’s tax on pawnshops based on their gross
income and requiring all investigating units of the BIR to investigate and assess the lending investor’s tax due from
them. The issuance of RMO No. 15-91 was an offshoot of the CIR’s finding that the pawnshop business is akin to that
of "lending investors" as defined in Section 157(u) of the Tax Code. Subsequently, the CIR issued RMC No. 43-91
subjecting pawn tickets to documentary stamp tax. Respondent therein, Josefina Leal, owner and operator of Josefina’s
Pawnshop, asked for a reconsideration of both RMO No. 15-91 and RMC No. 43-91, but the same was denied by
petitioner CIR. Leal then filed a petition for prohibition with the RTC of San Mateo, Rizal, seeking to prohibit petitioner
CIR from implementing the revenue orders. The CIR, through the OSG, filed a motion to dismiss on the ground of lack
of jurisdiction. The RTC denied the motion. Petitioner filed a petition for certiorari and prohibition with the CA which
dismissed the petition "for lack of basis." In reversing the CA, dissolving the Writ of Preliminary Injunction issued by the
trial court and ordering the dismissal of the case before the trial court, the Supreme Court held that "[t]he questioned
RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the Commissioner implementing the Tax Code
on the taxability of pawnshops." They were issued pursuant to the CIR’s power under Section 24533 of the Tax Code "to
make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, including
ruling on the classification of articles of sales and similar purposes." The Court held that under R.A. No. 1125 (An Act
Creating the Court of Tax Appeals), as amended, such rulings of the CIR are appealable to the CTA.

In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually rulings or opinions
of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ to implement Section 12 of R.A.
No. 7227 which provides that "exportation or removal of goods from the territory of the [SSEZ] to the other parts of the
Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant
tax laws of the Philippines." They were issued pursuant to the power of the CIR under Section 4 of the National Internal
Revenue Code,34 viz:

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 Section 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases.-- The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof
administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive
appellate jurisdiction of the Court of Tax Appeals. (emphases supplied)

Petitioners point out that the CA based its decision on Section 7 of R.A. No. 1125 that the CTA "shall exercise exclusive
appellate jurisdiction to review by appeal…" decisions of the CIR. They argue that in the instant case, there is no
decision of the respondent CIR on any disputed assessment to speak of as what is being questioned is purely the
authority of the CIR to impose and collect value-added and excise taxes.

Petitioners’ failure to ask the CIR for a reconsideration of the assailed revenue regulations and RMCs is another reason
why the instant case should be dismissed. It is settled that the premature invocation of the court's intervention is fatal to
one's cause of action. If a remedy within the administrative machinery can still be resorted to by giving the
administrative officer every opportunity to decide on a matter that comes within his jurisdiction, then such remedy must
first be exhausted before the court’s power of judicial review can be sought.35 The party with an administrative remedy
must not only initiate the prescribed administrative procedure to obtain relief but also pursue it to its appropriate
conclusion before seeking judicial intervention in order to give the administrative agency an opportunity to decide the
matter itself correctly and prevent unnecessary and premature resort to the court. 36

Petitioners’ insistence for this Court to rule on the merits of the case would only prove futile. Having declared the court a
quo without jurisdiction over the subject matter of the instant case, any further disquisition would be obiter dictum.

IN VIEW WHEREOF, the petition is DENIED. SO ORDERED.

NO DIGEST

THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY, Petitioner, vs. THE SECRETARY OF
FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, Respondents.
G.R. No. 210987 November 24, 2014 VELASCO, JR., J.:

Nature of the Case

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing and seeking the
reversal of the Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 127984, dated May 23, 20131 and January
21, 2014, which dismissed outright the petitioner's appeal from the Secretary of Finance's review of BIR Ruling No. 015-
122 for lack of jurisdiction.

The Facts

Petitioner The Philippine American Life and General Insurance Company (Philamlife) used to own 498,590 Class A
shares in Philam Care Health Systems, Inc. (PhilamCare), representing 49.89% of the latter's outstanding capital stock.
In 2009, petitioner, in a bid to divest itself of its interests in the health maintenance organization industry, offered to sell
its shareholdings in PhilamCare through competitive bidding. Thus, on September 24, 2009, petitioner's Class A shares
were sold for USD 2,190,000, or PhP 104,259,330 based on the prevailing exchange rate at the time of the sale, to STI
Investments, Inc., who emerged as the highest bidder.3

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After the sale was completed and the necessary documentary stamp and capital gains taxes were paid, Philamlife filed
an application for a certificate authorizing registration/tax clearance with the Bureau of Internal Revenue (BIR) Large
Taxpayers Service Division to facilitate the transfer of the shares. Months later, petitioner was informed that it needed to
secure a BIR ruling in connection with its application due to potential donor’s tax liability. In compliance, petitioner, on
January 4, 2012, requested a ruling4 to confirm that the sale was not subject to donor’s tax, pointing out, in its request,
the following: that the transaction cannot attract donor’s tax liability since there was no donative intent and,ergo, no
taxable donation, citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009;5 that the shares were sold at their
actual fair market value and at arm’s length; that as long as the transaction conducted is at arm’s length––such that a
bona fide business arrangement of the dealings is done inthe ordinary course of business––a sale for less than an
adequate consideration is not subject to donor’s tax; and that donor’s tax does not apply to saleof shares sold in an
open bidding process.

On January 4, 2012, however, respondent Commissioner on Internal Revenue (Commissioner) denied Philamlife’s
request through BIR Ruling No. 015-12. As determined by the Commissioner, the selling price of the shares thus sold
was lower than their book value based on the financial statements of PhilamCare as of the end of 2008.6 As such, the
Commisioner held, donor’s tax became imposable on the price difference pursuant to Sec. 100 of the National Internal
Revenue Code (NIRC), viz:

SEC. 100. Transfer for Less Than Adequate and full Consideration.- Where property, other than real property referred
to in Section 24(D), is transferred for less than an adequate and full consideration in money or money’s worth, then the
amount by which the fair market value of the property exceeded the value of the consideration shall, for the purpose of
the tax imposed by this Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during
the calendar year.

The afore-quoted provision, the Commissioner added, is implemented by Revenue Regulation 6-2008 (RR 6-2008),
which provides:

SEC. 7. SALE, BARTER OR EXCHANGE OF SHARES OF STOCK NOT TRADED THROUGH A LOCAL STOCK
EXCHANGE PURSUANT TO SECS. 24(C), 25(A)(3), 25(B), 27(D)(2), 28(A)(7)(c), 28(B)(5)(c) OF THE TAX CODE, AS
AMENDED. —

(c) Determination of Amount and Recognition of Gain or Loss –

(c.1) In the case of cash sale, the selling price shall be the consideration per deed of sale.

(c.1.4) In case the fair market value of the shares of stock sold, bartered, or exchanged is greater than the amount of
money and/or fair market value of the property received, the excess of the fair market value of the shares of stock sold,
bartered or exchanged overthe amount of money and the fair market value of the property, if any, received as
consideration shall be deemed a gift subject to the donor’stax under Section 100 of the Tax Code, as amended.

(c.2) Definition of ‘fair market value’of Shares of Stock. – For purposes of this Section, ‘fair market value’ of the share
of stock sold shall be:

(c.2.2) In the case of shares of stock not listed and traded in the local stock exchanges, the book value of the shares of
stock as shown in the financial statements duly certified by an independent certified public accountant nearest to the
date of sale shall be the fair market value.

In view of the foregoing, the Commissioner ruled that the difference between the book value and the selling price in the
sales transaction is taxable donation subject to a 30% donor’s tax under Section 99(B) of the NIRC. 7Respondent
Commissioner likewise held that BIR Ruling [DA-(DT-065) 715-09], on which petitioner anchored its claim, has already
been revoked by Revenue Memorandum Circular (RMC) No. 25-2011.8

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Aggrieved, petitioner requested respondent Secretary of Finance (Secretary) to review BIR Ruling No. 015-12, but to no
avail. For on November 26, 2012, respondent Secretary affirmed the Commissioner’s assailed ruling in its entirety. 9

Ruling of the Court of Appeals

Not contented with the adverse results, petitioner elevated the case to the CA via a petition for review under Rule 43,
assigning the following errors:10

A.

The Honorable Secretary of Finance gravely erred in not finding that the application of Section 7(c.2.2) of RR 06-08 in
the Assailed Ruling and RMC 25-11 is void insofar as it altersthe meaning and scope of Section 100 of the Tax Code.

B.

The Honorable Secretary of Finance gravely erred in finding that Section 100 of the Tax Code is applicable tothe sale of
the Sale of Shares.

1.

The Sale of Shares were sold at their fair market value and for fair and full consideration in money or money’s
worth.

2.

The sale of the Sale Shares is a bona fide business transaction without any donative intent and is therefore
beyond the ambit of Section 100 of the Tax Code.

3.

It is superfluous for the BIR to require an express provision for the exemption of the sale of the Sale Shares from
donor’s tax since Section 100 of the Tax Code does not explicitly subject the transaction to donor’s tax.

C.

The Honorable Secretary of Finance gravely erred in failing to find that in the absence of any of the grounds mentioned
in Section 246 of the Tax Code, rules and regulations, rulings or circulars – such as RMC 25-11 – cannot be given
retroactive application to the prejudice of Philamlife.

On May 23, 2013, the CA issued the assailed Resolution dismissing the CA Petition, thusly:

WHEREFORE, the Petition for Review dated January 9, 2013 is DISMISSED for lack of jurisdiction. SO ORDERED.

In disposing of the CA petition, the appellate court ratiocinated that it is the Court of Tax Appeals (CTA), pursuant to
Sec. 7(a)(1) of Republic Act No. 1125 (RA 1125),11 as amended, which has jurisdiction over the issues raised. The
outright dismissal, so the CA held, is predicated on the postulate that BIR Ruling No. 015-12 was issued in the exercise
of the Commissioner’s power to interpret the NIRC and other tax laws. Consequently, requesting for its review can be
categorized as "other matters arising under the NIRC or other laws administered by the BIR," which is under the
jurisdiction of the CTA, not the CA.

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Philamlife eventually sought reconsideration but the CA, in its equally assailed January 21, 2014 Resolution, maintained
its earlier position. Hence, the instant recourse.

Issues

Stripped to the essentials, the petition raises the following issues in both procedure and substance:

1. Whether or not the CA erred in dismissing the CA Petition for lack of jurisdiction; and

2. Whether or not the price difference in petitioner’s adverted sale of shares in PhilamCare attracts donor’s tax.

Procedural Arguments

a. Petitioner’s contentions

Insisting on the propriety of the interposed CA petition, Philamlife, while conceding that respondent Commissioner
issued BIR Ruling No. 015-12 in accordance with her authority to interpret tax laws, argued nonetheless that such ruling
is subject to review by the Secretary of Finance under Sec. 4 of the NIRC, to wit:

SECTION 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. – The power to interpret the
provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner,
subject to review by the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed
in relation thereto, or other matters arising under this Code orother laws or portions thereof administered by the Bureau
of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax
Appeals. Petitioner postulates that there is a need to differentiate the rulings promulgated by the respondent
Commissioner relating to those rendered under the first paragraph of Sec. 4 of the NIRC, which are appealable to the
Secretary of Finance, from those rendered under the second paragraph of Sec. 4 of the NIRC, which are subject to
review on appeal with the CTA.

This distinction, petitioner argues, is readily made apparent by Department Order No. 7-02,12 as circularized by RMC
No. 40-A-02.

Philamlife further averred that Sec.7 of RA 1125, as amended, does not find application in the case at bar since it only
governs appeals from the Commissioner’s rulings under the second paragraph and does not encompass rulings from
the Secretary of Finance in the exercise of his power of review under the first, as what was elevated to the CA. It added
that under RA 1125, as amended, the only decisions of the Secretary appealable to the CTA are those rendered in
customs cases elevated to him automatically under Section 2315 of the Tariff and Customs Code. 13

There is, thus, a gap in the law when the NIRC, as couched, and RA 1125, as amended, failed to supply where the
rulings of the Secretary in its exercise of its power of review under Sec. 4 of the NIRC are appealable to. This gap,
petitioner submits, was remedied by British American Tobacco v. Camacho14 wherein the Court ruled that where what is
assailed is the validity or constitutionality of a law, or a rule or regulation issued by the administrative agency, the
regular courts have jurisdiction to pass upon the same.

In sum, appeals questioning the decisions of the Secretary of Finance in the exercise of its power of review under Sec.
4 of the NIRC are not within the CTA’s limited special jurisdiction and, according to petitioner, are appealable to the CA
via a Rule 43 petition for review.

b. Respondents’ contentions

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Before the CA, respondents countered petitioner’s procedural arguments by claiming that even assuming arguendo that
the CTA does not have jurisdiction over the case, Philamlife, nevertheless,committed a fatal error when it failed to
appeal the Secretary of Finance’s ruling to the Office of the President (OP). As made apparent by the rules, the
Department of Finance is not among the agencies and quasi-judicial bodies enumerated under Sec. 1, Rule 43 of the
Rules of Court whose decisions and rulings are appealable through a petition for review.15 This is in stark contrast to the
OP’s specific mention under the same provision, so respondents pointed out.

To further reinforce their argument, respondents cite the President’s power of review emanating from his power of
control as enshrined under Sec. 17 of Article VII of the Constitution, which reads:

Section 17.The President shall have control of all the executive departments, bureaus, and offices. He shall ensure that
the laws be faithfully executed.

The nature and extent of the President’s constitutionally granted power of control have beendefined in a plethora of
cases, most recently in Elma v. Jacobi,16 wherein it was held that:

x x x This power of control, which even Congress cannot limit, let alone withdraw, means the power of the Chief
Executive to review, alter, modify, nullify, or set aside what a subordinate, e.g., members of the Cabinet and heads of
line agencies, had done in the performance of their duties and to substitute the judgment of the former for that of the
latter.

In their Comment on the instant petition, however, respondents asseverate that the CA did not err in its holding
respecting the CTA’s jurisdiction over the controversy.

The Court’s Ruling

The petition is unmeritorious.

Reviews by the Secretary of Finance pursuant to Sec. 4 of the NIRC are appealable to the CTA

To recapitulate, three different, if not conflicting, positions as indicated below have been advanced by the parties and by
the CA as the proper remedy open for assailing respondents’ rulings:

1. Petitioners: The ruling of the Commissioner is subject to review by the Secretary under Sec. 4 of the NIRC,
and that of the Secretary to the CA via Rule 43;

2. Respondents: The ruling of the Commissioner is subject to review by the Secretary under Sec. 4 of the NIRC,
and that of the Secretary to the Office of the President before appealing to the CA via a Rule 43 petition; and

3. CA: The ruling of the Commissioner is subject to review by the CTA.

We now resolve.

Preliminarily, it bears stressing that there is no dispute that what is involved herein is the respondent Commissioner’s
exercise of power under the first paragraph of Sec. 4 of the NIRC––the power to interpret tax laws. This, in fact, was
recognized by the appellate court itself, but erroneously held that her action in the exercise of such power is appealable
directly to the CTA. As correctly pointed out by petitioner, Sec. 4 of the NIRC readily provides that the Commissioner’s
power to interpret the provisions of this Code and other tax laws is subject to review by the Secretary of Finance. The
issue that now arises is this––where does one seek immediate recourse from the adverse ruling of the Secretary of
Finance in its exercise of its power of review under Sec. 4?

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Admittedly, there is no provision in law that expressly provides where exactly the ruling of the Secretary of Finance
under the adverted NIRC provision is appealable to. However, We find that Sec. 7(a)(1) of RA 1125, as amended,
addresses the seeming gap in the law asit vests the CTA, albeit impliedly, with jurisdiction over the CA petition as "other
matters" arising under the NIRC or other laws administered by the BIR. As stated:

Sec. 7. Jurisdiction.- The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal
Revenue or other laws administered by the Bureau of Internal Revenue. (emphasis supplied)

Even though the provision suggests that it only covers rulings of the Commissioner, We hold that it is, nonetheless,
sufficient enough to include appeals from the Secretary’s review under Sec. 4 of the NIRC.

It is axiomatic that laws should be given a reasonable interpretation which does not defeat the very purpose for which
they were passed.17 Courts should not follow the letter of a statute when to do so would depart from the true intent of
the legislature or would otherwise yield conclusions inconsistent with the purpose of the act.18 This Court has, in many
cases involving the construction of statutes, cautioned against narrowly interpreting a statute as to defeat the purpose
of the legislator, and rejected the literal interpretation of statutes if todo so would lead to unjust or absurd results. 19

Indeed, to leave undetermined the mode of appeal from the Secretary of Finance would be an injustice to taxpayers
prejudiced by his adverse rulings. To remedy this situation, Weimply from the purpose of RA 1125 and its amendatory
laws that the CTA is the proper forum with which to institute the appeal. This is not, and should not, in any way, be
taken as a derogation of the power of the Office of President but merely as recognition that matters calling for technical
knowledge should be handled by the agency or quasi-judicial body with specialization over the controversy. As the
specialized quasi-judicial agency mandated to adjudicate tax, customs, and assessment cases, there can be no other
court of appellate jurisdiction that can decide the issues raised inthe CA petition, which involves the tax treatment of the
shares of stocks sold. Petitioner, though, nextinvites attention to the ruling in Ursal v. Court of Tax Appeals 20 to argue
against granting the CTA jurisdiction by implication, viz:

Republic Act No. 1125 creating the Court of Tax Appeals did not grant it blanket authority to decide any and all tax
disputes. Defining such special court’s jurisdiction, the Act necessarily limited its authority to those matters enumerated
therein. Inline with this idea we recently approved said court’s order rejecting an appeal to it by Lopez & Sons from the
decision of the Collector ofCustoms, because in our opinion its jurisdiction extended only to a review of the decisions of
the Commissioner of Customs, as provided bythe statute — and not to decisions of the Collector of Customs. (Lopez &
Sons vs. The Court of Tax Appeals, 100 Phil., 850, 53 Off. Gaz., [10] 3065).

x x x Republic Act No. 1125 is a complete law by itself and expressly enumerates the matters which the Court of Tax
Appeals may consider; such enumeration excludes all others by implication. Expressio unius est exclusio alterius.

Petitioner’s contention is untenable. Lest the ruling in Ursalbe taken out of context, but worse as a precedent, it must be
noted that the primary reason for the dismissal of the said case was that the petitioner therein lacked the personality to
file the suit with the CTA because he was not adversely affected by a decision or ruling of the Collector of Internal
Revenue, as was required under Sec. 11 of RA 1125.21 As held:

We share the view that the assessor had no personality to resort to the Court of Tax Appeals. The rulings of the Board
of Assessment Appeals did not "adversely affect" him. At most it was the City of Cebu that had been adversely affected
in the sense that it could not thereafter collect higher realty taxes from the abovementioned property owners. His
opinion, it is true had been overruled; but the overruling inflicted no material damage upon him or his office. And the
Court of Tax Appeals was not created to decide mere conflicts of opinion between administrative officers or agencies.
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Imagine an income tax examiner resorting to the Court of Tax Appeals whenever the Collector of Internal Revenue
modifies, or lower his assessment on the return of a tax payer!22

The appellate power of the CTA includes certiorari

Petitioner is quick to point out, however, that the grounds raised in its CA petition included the nullity of Section 7(c.2.2)
of RR 06-08 and RMC 25-11. In an attempt to divest the CTA jurisdiction over the controversy, petitioner then cites
British American Tobacco, wherein this Court has expounded on the limited jurisdiction of the CTA in the following wise:

While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not include cases
where the constitutionality of a law or rule is challenged. Where what is assailed is the validity or constitutionality of a
law, or a rule or regulation issued by the administrative agency in the performance of its quasi legislative function, the
regular courts have jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules
issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts.
Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation inthe courts, including the regional
trial courts. This is within the scope of judicial power, which includes the authority of the courts to determine inan
appropriate action the validity of the acts of the political departments. Judicial power includes the duty of the courts of
justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government.23

Vis-a-vis British American Tobacco, it bears to stress what appears to be a contrasting ruling in Asia International
Auctioneers, Inc. v. Parayno, Jr., to wit:

Similarly, in CIR v. Leal, pursuant to Section 116 of Presidential Decree No. 1158 (The National Internal Revenue
Code, as amended) which states that "[d]ealers in securities shall pay a tax equivalent to six (6%) per centum of their
gross income. Lending investors shall pay a tax equivalent to five (5%) per cent, of their gross income," the CIR issued
Revenue Memorandum Order (RMO) No. 15-91 imposing 5% lending investor’s tax on pawnshops based on their gross
income and requiring all investigating units of the BIR to investigate and assess the lending investor’s tax due from
them. The issuance of RMO No. 15-91 was an offshoot of the CIR’s finding that the pawnshop business is akin to that
of "lending investors" as defined in Section 157(u) of the Tax Code. Subsequently, the CIR issued RMC No. 43-91
subjecting pawn tickets to documentary stamp tax. Respondent therein, Josefina Leal, owner and operator of Josefina’s
Pawnshop, asked for a reconsideration of both RMO No. 15-91 and RMC No. 43-91, but the same was denied by
petitioner CIR. Leal then filed a petition for prohibition with the RTC of San Mateo, Rizal, seeking to prohibit petitioner
CIR from implementing the revenue orders. The CIR, through the OSG, filed a motion to dismiss on the ground of lack
of jurisdiction. The RTC denied the motion. Petitioner filed a petition for certiorari and prohibition with the CA which
dismissed the petition "for lack of basis." In reversing the CA, dissolving the Writ of Preliminary Injunction issued by the
trial court and ordering the dismissal of the case before the trial court, the Supreme Court held that "[t]he questioned
RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the Commissioner implementing the Tax Code
on the taxability of pawnshops." They were issued pursuant to the CIR’s power under Section 245 of the Tax Code "to
make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, including
ruling on the classification of articles of sales and similar purposes."The Court held that under R.A. No. 1125 (An Act
Creating the Court of Tax Appeals), as amended, such rulings of the CIR are appealable to the CTA.

In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually rulings or opinions
of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ to implement Section 12 of R.A.
No. 7227 which provides that "exportation or removal of goods from the territory of the [SSEZ] to the other parts of the
Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Codeand other relevant
tax laws of the Philippines." They were issued pursuant to the power of the CIR under Section 4 of the National Internal
Revenue Code x x x.24 (emphasis added)

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The respective teachings in British American Tobacco and Asia International Auctioneers, at first blush, appear to bear
no conflict––that when the validity or constitutionality of an administrative rule or regulation is assailed, the regular
courts have jurisdiction; and if what is assailed are rulings or opinions of the Commissioner on tax treatments,
jurisdiction over the controversy is lodged with the CTA. The problem with the above postulates, however, is that they
failed to take into consideration one crucial point––a taxpayer can raise both issues simultaneously.

Petitioner avers that there is now a trend wherein both the CTA and the CA disclaim jurisdiction over tax cases: on the
one hand, mere prayer for the declaration of a tax measure’s unconstitutionality or invalidity before the CTA can result
in a petition’s outright dismissal, and on the other hand, the CA will likewise dismiss the same petition should it find that
the primary issue is not the tax measure’s validity but the assessment or taxability of the transaction or subject involved.
To illustrate this point, petitioner cites the assailed Resolution, thusly: Admittedly, in British American Tobacco vs.
Camacho, the Supreme Court has ruled that the determination of whether a specific rule or set of rules issued by an
administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts, not the CTA.

Petitioner essentially questions the CIR’s ruling that Petitioner’s sale of shares is a taxable donation under Sec. 100 of
the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely questioned incidentally since it
was used by the CIR as bases for its unfavourable opinion. Clearly, the Petition involves an issue on the taxability of the
transaction rather than a direct attack on the constitutionality of Sec. 100, Sec.7 (c.2.2.) of RR 06-08 and RMC 25-11.
Thus, the instant Petition properly pertains to the CTA under Sec. 7 of RA 9282.

As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers are now at a quandary on
what mode of appeal should be taken, to which court or agency it should be filed, and which case law should be
followed.

Petitioner’s above submission is specious.

In the recent case of City of Manila v. Grecia-Cuerdo,25 the Court en banc has ruled that the CTA now has the power of
certiorari in cases within its appellate jurisdiction. To elucidate:

The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of original jurisdiction which
must be expressly conferred by the Constitution or by law and cannot be implied from the mere existence of appellate
jurisdiction. Thus, x x x this Court has ruled against the jurisdiction of courts or tribunals over petitions for certiorari on
the ground that there is no law which expressly gives these tribunals such power. Itmust be observed, however, that x x
x these rulings pertain not to regular courts but to tribunals exercising quasijudicial powers. With respect tothe
Sandiganbayan, Republic Act No. 8249 now provides that the special criminal court has exclusive original jurisdiction
over petitions for the issuance of the writs of mandamus, prohibition, certiorari, habeas corpus, injunctions, and other
ancillary writs and processes in aid of its appellate jurisdiction.

In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme Court, in the
exercise of its original jurisdiction, to issue writs of certiorari, prohibition and mandamus. With respect to the Court of
Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the appellate court, also in the exercise of its
original jurisdiction, the power to issue, among others, a writ of certiorari, whether or not in aid of its appellate
jurisdiction. As to Regional Trial Courts, the power to issue a writ of certiorari, in the exercise of their original jurisdiction,
is provided under Section 21 of BP 129.

The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA, Section 1,
Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested in one Supreme Court and
in such lower courts as may be established by law and that judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.

70
On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the CTA includes that
of determining whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of the RTC in issuing an interlocutory order in cases falling within the exclusive appellate jurisdiction of the tax
court. It, thus, follows that the CTA, by constitutional mandate, is vested with jurisdiction to issue writs of certiorari in
these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the authority to
issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed tax cases to the CTA, it can
reasonably be assumed that the law intended to transfer also such power as is deemed necessary, if not indispensable,
in aid of such appellate jurisdiction. There is no perceivable reason why the transfer should only be considered as
partial, not total. (emphasis added)

Evidently, City of Manilacan be considered as a departure from Ursal in that in spite of there being no express grant in
law, the CTA is deemed granted with powers of certiorari by implication. Moreover, City of Manila diametrically opposes
British American Tobacco to the effect that it is now within the power of the CTA, through its power of certiorari, to rule
on the validity of a particular administrative ruleor regulation so long as it is within its appellate jurisdiction. Hence, it can
now rule not only on the propriety of an assessment or tax treatment of a certain transaction, but also on the validity of
the revenue regulation or revenue memorandum circular on which the said assessment is based.

Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition not only contested the
applicability of Sec. 100 of the NIRC over the sales transaction but likewise questioned the validity of Sec. 7 (c.2.2) of
RR 06-08 and RMC 25-11 does not divest the CTA of its jurisdiction over the controversy, contrary to petitioner's
arguments.

The price difference is subject to donor's tax

Petitioner's substantive arguments are unavailing. The absence of donative intent, if that be the case, does not exempt
the sales of stock transaction from donor's tax since Sec. 100 of the NIRC categorically states that the amount by which
the fair market value of the property exceeded the value of the consideration shall be deemed a gift.1âwphi1 Thus,
even if there is no actual donation, the difference in price is considered a donation by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters for
determining the "fair market value" of a sale of stocks. Such issuance was made pursuant to the Commissioner's power
to interpret tax laws and to promulgate rules and regulations for their implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being applied
retroactively in contravention to Sec. 246 of the NIRC.26 Instead, it merely called for the strict application of Sec. 100,
which was already in force the moment the NIRC was enacted.

WHEREFORE, the petition is hereby DISMISSED. The Resolutions of the Court of Appeals in CA-G.R. SP No. 127984
dated May 23, 2013 and January 21, 2014 are hereby AFFIRMED. SO ORDERED.

DIGEST:

hilam Life sold its shares in Philam Care Health Systems to STI Investments Inc., the highest bidder. After the sale
was completed, Philam life applied for a tax clearance and was informed by BIR that there is a need to secure a
BIR Ruling due to a potential donor’s tax liability on the sold shares.

ISSUE on DONOR’S TAX:

W/N the sales of shares sold for less than an adequate consideration be subject to donor’s tax?

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PETITIONER’S CONTENTION:
The transaction cannot attract donor’s tax liability since there was no donative intent and, ergo, no taxable
donation, citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009; that the shares were sold at their
actual fair market value and at arm’s length; that as long as the transaction conducted is at arm’s length––such
that a bonafide business arrangement of the dealings is done in the ordinary course of business––a sale for less
than an adequate consideration is not subject to donor’s tax; and that donor’s tax does not apply to sale of shares
sold in an open bidding process.

CIR DENYING THE REQUEST:

Through BIR Ruling No. 015-12. As determined by the Commissioner, the selling price of the shares thus sold was
lower than their book value based on the financial statements of Philam Care as of the end of 2008. The
Commissioner held donor’s tax became imposable on the price difference pursuant to Sec. 100 of the National
Internal Revenue Code (NIRC):

SEC. 100. Transfer for Less Than Adequate and full Consideration. - Where property, other than real property
referred to in Section 24(D), is transferred for less than an adequate and full consideration in money or money’s
worth, then the amount by which the fair market value of the property exceeded the value of the consideration
shall, for the purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in computing the
amount of gifts made during the calendar year.

RULING:
The price difference is subject to donor’s tax.

Petitioner’s substantive arguments are unavailing. The absence of donative intent, if that be the case, does not
exempt the sales of stock transaction from donor’s tax since Sec. 100 of the NIRC categorically states that the
amount by which the fair market value of the property exceeded the value of the consideration shall be deemed a
gift. Thus, even if there is no actual donation, the difference in price is considered a donation by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters for
determining the “fair market value” of a sale of stocks. Such issuance was made pursuant to the Commissioner’s
power to interpret tax laws and to promulgate rules and regulations for their implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being applied
retroactively in contravention to Sec. 246 of the NIRC.26 Instead, it merely called for the strict application of Sec.
100, which was already in force the moment the NIRC was enacted.

ISSUE on TAX REMEDIES:

The issue that now arises is this––where does one seek immediate recourse from the adverse ruling of the
Secretary of Finance in its exercise of its power of review under Sec. 4?

Petitioner essentially questions the CIR’s ruling that Petitioner’s sale of shares is a taxable donation under Sec.
100 of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely questioned
incidentally since it was used by the CIR as bases for its unfavourable opinion. Clearly, the Petition involves an
issue on the taxability of the transaction rather than a direct attack on the constitutionality of Sec. 100, Sec.7
(c.2.2.) of RR 06-08 and RMC 25-11. Thus, the instant Petition properly pertains to the CTA under Sec. 7 of RA
9282.

72
As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers are now at a quandary
on what mode of appeal should be taken, to which court or agency it should be filed, and which case law should be
followed.

Petitioner’s above submission is specious (erroneous).

CTA, through its power of certiorari, to rule on the validity of a particular administrative rule or regulation so long
as it is within its appellate jurisdiction. Hence, it can now rule not only on the propriety of an assessment or tax
treatment of a certain transaction, but also on the validity of the revenue regulation or revenue memorandum
circular on which the said assessment is based.

Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition not only contested the
applicability of Sec. 100 of the NIRC over the sales transaction but likewise questioned the validity of Sec. 7(c.2.2)
of RR 06-08 and RMC 25-11 does not divest the CTA of its jurisdiction over the controversy, contrary to petitioner’s
arguments.

THE CITY OF MANILA, represented by MAYOR JOSE L. ATIENZA, JR., and MS. LIBERTY M. TOLEDO, in her
capacity as the City Treasurer of Manila, Petitioners, vs. HON. CARIDAD H. GRECIA-CUERDO, in her capacity as
Presiding Judge of the Regional Trial Court, Branch 112, Pasay City; SM MART, INC.; SM PRIME HOLDINGS,
INC.; STAR APPLIANCES CENTER; SUPERVALUE, INC.; ACE HARDWARE PHILIPPINES, INC.; WATSON
PERSONAL CARE STORES, PHILS., INC.; JOLLIMART PHILS., CORP.; SURPLUS MARKETING CORPORATION
and SIGNATURE LINES, Respondents. G.R. No. 175723 February 4, 2014 PERALTA, J.:

Before the Court is a special civil action for certiorari under Rule 65 of the Rules of Court seeking to reverse and set
aside the Resolutions1 dated April 6, 2006 and November 29, 2006 of the Court of Appeals (CA) in CA-G.R. SP No.
87948.

The antecedents of the case, as summarized by the CA, are as follows:

The record shows that petitioner City of Manila, through its treasurer, petitioner Liberty Toledo, assessed taxes for the
taxable period from January to December 2002 against private respondents SM Mart, Inc., SM Prime Holdings, Inc.,
Star Appliances Center, Supervalue, Inc., Ace Hardware Philippines, Inc., Watsons Personal Care Stores Phils., Inc.,
Jollimart Philippines Corp., Surplus Marketing Corp. and Signature Lines. In addition to the taxes purportedly due from
private respondents pursuant to Section 14, 15, 16, 17 of the Revised Revenue Code of Manila (RRCM), said
assessment covered the local business taxes petitioners were authorized to collect under Section 21 of the same Code.
Because payment of the taxes assessed was a precondition for the issuance of their business permits, private
respondents were constrained to pay the ₱19,316,458.77 assessment under protest.

On January 24, 2004, private respondents filed [with the Regional Trial Court of Pasay City] the complaint denominated
as one for "Refund or Recovery of Illegally and/or Erroneously-Collected Local Business Tax, Prohibition with Prayer to
Issue TRO and Writ of Preliminary Injunction"
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which was docketed as Civil Case No. 04-0019-CFM before public respondent's sala [at Branch 112]. In the amended
complaint they filed on February 16, 2004, private respondents alleged that, in relation to Section 21 thereof, Sections
14, 15, 16, 17, 18, 19 and 20 of the RRCM were violative of the limitations and guidelines under Section 143 (h) of
Republic Act. No. 7160 [Local Government Code] on double taxation. They further averred that petitioner city's
Ordinance No. 8011 which amended pertinent portions of the RRCM had already been declared to be illegal and
unconstitutional by the Department of Justice.2

In its Order3 dated July 9, 2004, the RTC granted private respondents' application for a writ of preliminary injunction.

Petitioners filed a Motion for Reconsideration4 but the RTC denied it in its Order5 dated October 15, 2004.

Petitioners then filed a special civil action for certiorari with the CA assailing the July 9, 2004 and October 15, 2004
Orders of the RTC.6

In its Resolution promulgated on April 6, 2006, the CA dismissed petitioners' petition for certiorari holding that it has no
jurisdiction over the said petition. The CA ruled that since appellate jurisdiction over private respondents' complaint for
tax refund, which was filed with the RTC, is vested in the Court of Tax Appeals (CTA), pursuant to its expanded
jurisdiction under Republic Act No. 9282 (RA 9282), it follows that a petition for certiorari seeking nullification of an
interlocutory order issued in the said case should, likewise, be filed with the CTA.

Petitioners filed a Motion for Reconsideration,7 but the CA denied it in its Resolution dated November 29, 2006.

Hence, the present petition raising the following issues:

I- Whether or not the Honorable Court of Appeals gravely erred in dismissing the case for lack of jurisdiction.

II- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion amounting to lack or excess
of jurisdiction in enjoining by issuing a Writ of Injunction the petitioners, their agents and/or authorized
representatives from implementing Section 21 of the Revised Revenue Code of Manila, as amended, against
private respondents.

III- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion amounting to lack or
excess of jurisdiction in issuing the Writ of Injunction despite failure of private respondents to make a written
claim for tax credit or refund with the City Treasurer of Manila.

IV- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion amounting to lack or
excess of jurisdiction considering that under Section 21 of the Manila Revenue Code, as amended, they are
mere collecting agents of the City Government.

V- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion amounting to lack or
excess of jurisdiction in issuing the Writ of Injunction because petitioner City of Manila and its constituents would
result to greater damage and prejudice thereof. (sic)8

Without first resolving the above issues, this Court finds that the instant petition should be denied for being moot and
academic.

Upon perusal of the original records of the instant case, this Court discovered that a Decision9 in the main case had
already been rendered by the RTC on August 13, 2007, the dispositive portion of which reads as follows:

74
WHEREFORE, in view of the foregoing, this Court hereby renders JUDGMENT in favor of the plaintiff and against the
defendant to grant a tax refund or credit for taxes paid pursuant to Section 21 of the Revenue Code of the City of Manila
as amended for the year 2002 in the following amounts:

To plaintiff SM Mart, Inc. - P 11,462,525.02

To plaintiff SM Prime Holdings, Inc. - 3,118,104.63

To plaintiff Star Appliances Center - 2,152,316.54

To plaintiff Supervalue, Inc. - 1,362,750.34

To plaintiff Ace Hardware Phils., Inc. - 419,689.04

To plaintiff Watsons Personal Care Health - 231,453.62

Stores Phils., Inc.

To plaintiff Jollimart Phils., Corp. - 140,908.54

To plaintiff Surplus Marketing Corp. - 220,204.70

To plaintiff Signature Mktg. Corp. - 94,906.34

TOTAL: - P 19,316,458.77

Defendants are further enjoined from collecting taxes under Section 21, Revenue Code of Manila from herein plaintiff.

SO ORDERED.10

The parties did not inform the Court but based on the records, the above Decision had already become final and
executory per the Certificate of Finality11 issued by the same trial court on October 20, 2008. In fact, a Writ of
Execution12 was issued by the RTC on November 25, 2009. In view of the foregoing, it clearly appears that the issues
raised in the present petition, which merely involve the incident on the preliminary injunction issued by the RTC, have
already become moot and academic considering that the trial court, in its decision on the merits in the main case, has
already ruled in favor of respondents and that the same decision is now final and executory. Well entrenched is the rule
that where the issues have become moot and academic, there is no justiciable controversy, thereby rendering the
resolution of the same of no practical use or value.13

In any case, the Court finds it necessary to resolve the issue on jurisdiction raised by petitioners owing to its
significance and for future guidance of both bench and bar. It is a settled principle that courts will decide a question
otherwise moot and academic if it is capable of repetition, yet evading review.14

75
However, before proceeding, to resolve the question on jurisdiction, the Court deems it proper to likewise address a
procedural error which petitioners committed.

Petitioners availed of the wrong remedy when they filed the instant special civil action for certiorari under Rule 65 of the
Rules of Court in assailing the Resolutions of the CA which dismissed their petition filed with the said court and their
motion for reconsideration of such dismissal. There is no dispute that the assailed Resolutions of the CA are in the
nature of a final order as they disposed of the petition completely. It is settled that in cases where an assailed judgment
or order is considered final, the remedy of the aggrieved party is appeal. Hence, in the instant case, petitioner should
have filed a petition for review on certiorari under Rule 45, which is a continuation of the appellate process over the
original case.15

Petitioners should be reminded of the equally-settled rule that a special civil action for certiorari under Rule 65 is an
original or independent action based on grave abuse of discretion amounting to lack or excess of jurisdiction and it will
lie only if there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law. 16 As such, it
cannot be a substitute for a lost appeal.17

Nonetheless, in accordance with the liberal spirit pervading the Rules of Court and in the interest of substantial justice,
this Court has, before, treated a petition for certiorari as a petition for review on certiorari, particularly (1) if the petition
for certiorari was filed within the reglementary period within which to file a petition for review on certiorari; (2) when
errors of judgment are averred; and (3) when there is sufficient reason to justify the relaxation of the
rules.18 Considering that the present petition was filed within the 15-day reglementary period for filing a petition for
review on certiorari under Rule 45, that an error of judgment is averred, and because of the significance of the issue on
jurisdiction, the Court deems it proper and justified to relax the rules and, thus, treat the instant petition for certiorari as
a petition for review on certiorari.

Having disposed of the procedural aspect, we now turn to the central issue in this case. The basic question posed
before this Court is whether or not the CTA has jurisdiction over a special civil action for certiorari assailing an
interlocutory order issued by the RTC in a local tax case.

This Court rules in the affirmative.

On June 16, 1954, Congress enacted Republic Act No. 1125 (RA 1125) creating the CTA and giving to the said court
jurisdiction over the following:

(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the
National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue;

(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other
money charges; seizure, detention or release of property affected fines, forfeitures or other penalties imposed in
relation thereto; or other matters arising under the Customs Law or other law or part of law administered by the
Bureau of Customs; and

(3) Decisions of provincial or City Boards of Assessment Appeals in cases involving the assessment and
taxation of real property or other matters arising under the Assessment Law, including rules and regulations
relative thereto.

On March 30, 2004, the Legislature passed into law Republic Act No. 9282 (RA 9282) amending RA 1125 by expanding
the jurisdiction of the CTA, enlarging its membership and elevating its rank to the level of a collegiate court with special
jurisdiction. Pertinent portions of the amendatory act provides thus:

Sec. 7. Jurisdiction. - The CTA shall exercise:

76
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue or other laws administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the
National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed
a denial;

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved
by them in the exercise of their original or appellate jurisdiction;

4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money
charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto,
or other matters arising under the Customs Law or other laws administered by the Bureau of Customs;

5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases
involving the assessment and taxation of real property originally decided by the provincial or city board of
assessment appeals;

6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from
decisions of the Commissioner of Customs which are adverse to the Government under Section 2315 of the
Tariff and Customs Code;

7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or article,
and the Secretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and
countervailing duties under Section 301 and 302, respectively, of the Tariff and Customs Code, and safeguard
measures under Republic Act No. 8800, where either party may appeal the decision to impose or not to impose
said duties.

b. Jurisdiction over cases involving criminal offenses as herein provided:

1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National Internal Revenue
Code or Tariff and Customs Code and other laws administered by the Bureau of Internal Revenue or the Bureau
of Customs: Provided, however, That offenses or felonies mentioned in this paragraph where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos
(₱1,000,000.00) or where there is no specified amount claimed shall be tried by the regular Courts and the
jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court to the contrary
notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability for taxes
and penalties shall at all times be simultaneously instituted with, and jointly determined in the same proceeding
by the CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action,
and no right to reserve the filing of such civil action separately from the criminal action will be recognized.

2. Exclusive appellate jurisdiction in criminal offenses:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases originally decided by
them, in their respected territorial jurisdiction.

77
b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the exercise of their
appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in their respective jurisdiction.

c. Jurisdiction over tax collection cases as herein provided:

1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees,
charges and penalties: Provides, however, that collection cases where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is less than One million pesos (₱1,000,000.00) shall be tried by the
proper Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court.

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection cases originally
decided by them, in their respective territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the Exercise of their
appellate jurisdiction over tax collection cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts, in their respective jurisdiction.19

A perusal of the above provisions would show that, while it is clearly stated that the CTA has exclusive appellate
jurisdiction over decisions, orders or resolutions of the RTCs in local tax cases originally decided or resolved by them in
the exercise of their original or appellate jurisdiction, there is no categorical statement under RA 1125 as well as the
amendatory RA 9282, which provides that th e CTA has jurisdiction over petitions for certiorari assailing interlocutory
orders issued by the RTC in local tax cases filed before it.

The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of original jurisdiction which
must be expressly conferred by the Constitution or by law and cannot be implied from the mere existence of appellate
jurisdiction.20 Thus, in the cases of Pimentel v. COMELEC,21 Garcia v. De Jesus,22 Veloria v. COMELEC,23 Department
of Agrarian Reform Adjudication Board v. Lubrica,24 and Garcia v. Sandiganbayan,25 this Court has ruled against the
jurisdiction of courts or tribunals over petitions for certiorari on the ground that there is no law which expressly gives
these tribunals such power.26 It must be observed, however, that with the exception of Garcia v.
Sandiganbayan,27 these rulings pertain not to regular courts but to tribunals exercising quasi-judicial powers. With
respect to the Sandiganbayan, Republic Act No. 824928 now provides that the special criminal court has exclusive
original jurisdiction over petitions for the issuance of the writs of mandamus, prohibition, certiorari, habeas corpus,
injunctions, and other ancillary writs and processes in aid of its appellate jurisdiction.

In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme Court, in the
exercise of its original jurisdiction, to issue writs of certiorari, prohibition and mandamus. With respect to the Court of
Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the appellate court, also in the exercise of its
original jurisdiction, the power to issue, among others, a writ of certiorari,whether or not in aid of its appellate
jurisdiction. As to Regional Trial Courts, the power to issue a writ of certiorari, in the exercise of their original jurisdiction,
is provided under Section 21 of BP 129.

The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA, Section 1,
Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested in one Supreme Court and
in such lower courts as may be established by law and that judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.

78
On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the CTA includes that
of determining whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of the RTC in issuing an interlocutory order in cases falling within the exclusive appellate jurisdiction of the tax
court. It, thus, follows that the CTA, by constitutional mandate, is vested with jurisdiction to issue writs of certiorari in
these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the authority to
issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed tax cases to the CTA, it can
reasonably be assumed that the law intended to transfer also such power as is deemed necessary, if not indispensable,
in aid of such appellate jurisdiction. There is no perceivable reason why the transfer should only be considered as
partial, not total.

Consistent with the above pronouncement, this Court has held as early as the case of J.M. Tuason & Co., Inc. v.
Jaramillo, et al.29 that "if a case may be appealed to a particular court or judicial tribunal or body, then said court or
judicial tribunal or body has jurisdiction to issue the extraordinary writ of certiorari, in aid of its appellate
jurisdiction."30 This principle was affirmed in De Jesus v. Court of Appeals,31 where the Court stated that "a court may
issue a writ of certiorari in aid of its appellate jurisdiction if said court has jurisdiction to review, by appeal or writ of error,
the final orders or decisions of the lower court."32 The rulings in J.M. Tuason and De Jesus were reiterated in the more
recent cases of Galang, Jr. v. Geronimo33 and Bulilis v. Nuez.34

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law, jurisdiction is conferred on a
court or judicial officer, all auxiliary writs, processes and other means necessary to carry it into effect may be employed
by such court or officer.

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies with the CA, this
Court would be confirming the exercise by two judicial bodies, the CA and the CTA, of jurisdiction over basically the
same subject matter – precisely the split-jurisdiction situation which is anathema to the orderly administration of
justice.35 The Court cannot accept that such was the legislative motive, especially considering that the law expressly
confers on the CTA, the tribunal with the specialized competence over tax and tariff matters, the role of judicial review
over local tax cases without mention of any other court that may exercise such power. Thus, the Court agrees with the
ruling of the CA that since appellate jurisdiction over private respondents' complaint for tax refund is vested in the CTA,
it follows that a petition for certiorari seeking nullification of an interlocutory order issued in the said case should,
likewise, be filed with the same court. To rule otherwise would lead to an absurd situation where one court decides an
appeal in the main case while another court rules on an incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to split jurisdiction to
conclude that the intention of the law is to divide the authority over a local tax case filed with the RTC by giving to the
CA or this Court jurisdiction to issue a writ of certiorari against interlocutory orders of the RTC but giving to the CTA the
jurisdiction over the appeal from the decision of the trial court in the same case. It is more in consonance with logic and
legal soundness to conclude that the grant of appellate jurisdiction to the CTA over tax cases filed in and decided by the
RTC carries with it the power to issue a writ of certiorari when necessary in aid of such appellate jurisdiction. The
supervisory power or jurisdiction of the CTA to issue a writ of certiorari in aid of its appellate jurisdiction should co-exist
with, and be a complement to, its appellate jurisdiction to review, by appeal, the final orders and decisions of the RTC,
in order to have complete supervision over the acts of the latter.36

A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it effectively, to make
all orders that will preserve the subject of the action, and to give effect to the final determination of the appeal. It carries
with it the power to protect that jurisdiction and to make the decisions of the court thereunder effective. The court, in aid
of its appellate jurisdiction, has authority to control all auxiliary and incidental matters necessary to the efficient and
proper exercise of that jurisdiction.1âwphi1 For this purpose, it may, when necessary, prohibit or restrain the
performance of any act which might interfere with the proper exercise of its rightful jurisdiction in cases pending before
it.37
79
Lastly, it would not be amiss to point out that a court which is endowed with a particular jurisdiction should have powers
which are necessary to enable it to act effectively within such jurisdiction. These should be regarded as powers which
are inherent in its jurisdiction and the court must possess them in order to enforce its rules of practice and to suppress
any abuses of its process and to defeat any attempted thwarting of such process.

In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as the CA and shall possess all the
inherent powers of a court of justice.

Indeed, courts possess certain inherent powers which may be said to be implied from a general grant of jurisdiction, in
addition to those expressly conferred on them. These inherent powers are such powers as are necessary for the
ordinary and efficient exercise of jurisdiction; or are essential to the existence, dignity and functions of the courts, as
well as to the due administration of justice; or are directly appropriate, convenient and suitable to the execution of their
granted powers; and include the power to maintain the court's jurisdiction and render it effective in behalf of the
litigants.38

Thus, this Court has held that "while a court may be expressly granted the incidental powers necessary to effectuate its
jurisdiction, a grant of jurisdiction, in the absence of prohibitive legislation, implies the necessary and usual incidental
powers essential to effectuate it, and, subject to existing laws and constitutional provisions, every regularly constituted
court has power to do all things that are reasonably necessary for the administration of justice within the scope of its
jurisdiction and for the enforcement of its judgments and mandates."39 Hence, demands, matters or questions ancillary
or incidental to, or growing out of, the main action, and coming within the above principles, may be taken cognizance of
by the court and determined, since such jurisdiction is in aid of its authority over the principal matter, even though the
court may thus be called on to consider and decide matters which, as original causes of action, would not be within its
cognizance.40

Based on the foregoing disquisitions, it can be reasonably concluded that the authority of the CTA to take cognizance of
petitions for certiorari questioning interlocutory orders issued by the RTC in a local tax case is included in the powers
granted by the Constitution as well as inherent in the exercise of its appellate jurisdiction.

Finally, it would bear to point out that this Court is not abandoning the rule that, insofar as quasi-judicial tribunals are
concerned, the authority to issue writs of certiorari must still be expressly conferred by the Constitution or by law and
cannot be implied from the mere existence of their appellate jurisdiction. This doctrine remains as it applies only to
quasi-judicial bodies. WHEREFORE, the petition is DENIED. SO ORDERED.

DIGEST:

NATURE:
This is a special civil action for certiorari under Rule 65 of the Rules of Court seeking to reverse and set aside
the Resolutions1 dated April 6, 2006 and November 29, 2006 of the Court of Appeals.

FACTS:
Petitioner City of Manila, through its treasurer, petitioner Liberty Toledo, assessed taxes for the taxable period
from January to December 2002 against the private respondents.In addition to the taxes purportedly due from
private respondents pursuant to Section 14, 15, 16, 17 of the Revised Revenue Code of Manila (RRCM),
said assessment covered the local business taxes. private respondents were constrained to pay the P
19,316,458.77 assessment under protest.

On January 24, 2004, private respondents filed before the RTC of Pasay City the complaint denominated as
one for “Refund or Recovery of Illegally and/or Erroneously–Collected Local Business Tax, Prohibition with
Prayer to Issue TRO and Writ of Preliminary Injunction

80
The RTC granted private respondents’ application for a writ of preliminary injunction.

Petitioners filed a Motion for Reconsideration4 but the RTC denied. Petitioners then filed a special civil action
for certiorari with the CA but the CA dismissed petitioners’ petition for certiorari holding that it has no
jurisdiction over the said petition. The CA ruled that since appellate jurisdiction over private respondents’
complaint for tax refund, which was filed with the RTC, is vested in the Court of Tax Appeals (CTA), pursuant
to its expanded jurisdiction under Republic Act No. 9282 (RA 9282), it follows that a petition
for certiorari seeking nullification of an interlocutory order issued in the said case should, likewise, be filed
with the CTA.

Petitioners filed a Motion for Reconsideration,7 but the CA denied it in its Resolution hence, this petition

ISSUE:
Whether or not the CTA has jurisdiction over a special civil action for certiorari assailing an interlocutory order
issued by the RTC in a local tax case.

HELD:
The CTA has jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by the
RTC in a local tax case. In order for any appellate court to effectively exercise its appellate jurisdiction, it must
have the authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over
appealed tax cases to the CTA, it can reasonably be assumed that the law intended to transfer also such
power as is deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There is no
perceivable reason why the transfer should only be considered as partial, not total.
Consistent with the above pronouncement, the Court has held as early as the case of J.M. Tuason & Co., Inc.
v. Jaramillo, et al. [118 Phil. 1022 (1963)] that “if a case may be appealed to a particular court or judicial
tribunal or body, then said court or judicial tribunal or body has jurisdiction to issue the extraordinary writ of
certiorari, in aid of its appellate jurisdiction.” This principle was affirmed in De Jesus v. Court of Appeals (G.R.
No. 101630, August 24, 1992) where the Court stated that “a court may issue a writ of certiorari in aid of its
appellate jurisdiction if said court has jurisdiction to review, by appeal or writ of error, the final orders or
decisions of the lower court.

FALLO: petition is denied

CLARK INVESTORS AND LOCATORS ASSOCIATION INC., Petitioner, vs. SECRETARY OF FINANCE AND
COMMISSIONER OF INTERNAL REVENUE, Respondents. G.R. No. 200670 July 6, 2015 VILLARAMA, JR., J.:

This is a petition for certiorari with a prayer for the issuance of a temporary restraining order and/or writ of preliminary
injunction to annul and set aside Revenue Regulations No. 2-2012 (RR 2-2012) issued by the Department of Finance
(DOF) on February 17, 2012 upon recommendation of the Bureau of Internal Revenue (BIR). Petitioner Clark Investors
and Locators Association, Inc. claims that RR 2-2012, which imposes Value Added Tax (VAT) and excise tax on the
importation of petroleum and petroleum products from abroad into the Freeport or Economic Zones, is void and contrary
to Republic Act (RA) No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, as amended
by RA No. 9400.

The salient facts follow.

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On March 13, 1992, Congress enacted RA No. 7227 which mandated the accelerated conversion of the Clark and
Subic military reservations into special economic zones. Section 12 thereof provides for the creation of the Subic
Special Economic Zone:

SEC. 12. Subic Special Economic Zone. - Subject to the concurrence by resolution of the sangguniang panlungsod of
the City of Olongapo 'and the sangguniang bayan of the Municipalities of Subic, Morong and Hermosa, there is hereby
created a Special Economic and Free-port Zone consisting of the City of Olongapo and the Municipality of Subic,
Province of Zambales, the lands occupied by the Subic Naval Base and its contiguous extensions as embraced,
covered, and defined by the 1947 Military Bases Agreement between the Philippines and the United states of America
as amended, and within the territorial jurisdiction of the Municipalities of Morong and Hermosa, Province of Bataan,
hereinafter referred to as the Subic Special Economic Zone whose metes and bounds shall be delineated in a
proclamation to be issued by the President of the Philippines. Within thirty (30) days after the approval of this Act, each
local government unit shall submit its resolution of concurrence to join the Subic Special Economic Zone to the Office of
the President. Thereafter, the President of the Philippines shall issue a proclamation defining the metes and bounds of
the zone as provided herein.

The abovementioned zone shall be subject to the following policies:

(a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent
provisions of the Local Government Code, the Subic Special Economic Zone shall be developed into a self-
sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and
around the zone and to attract and promote productive foreign investments;

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory
ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special
Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials,
capital and equipment. However, exportation or removal of goods from the territory of the Subic Special
Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes
under the Customs and Tariff Code and other relevant tax laws of the Philippines;

(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local
and national, shall be imposed within the Subic Special Economic Zone. In lieu of paying taxes, three
percent (3%) of the gross income earned by all businesses and enterprises within the Subic Special
Economic Zone to be remitted to the National Government, one percent (1%) each to the local
government units affected by the declaration of the zone in proportion to their population area, and
other factors. In addition, there is hereby established a development fund of one percent (1 %) of the
gross income earned by all businesses and enterprises within the Subic Special Economic Zone to be
utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic
and other municipalities contiguous to the base areas.

In case of conflict between national and local laws with respect to tax exemption privileges in the Subic
Special Economic Zone, the same shall be resolved in favor of the latter;

(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and
futures shall be allowed and maintained in the Subic Special Economic Zone;

(e) The Central Bank, through the Monetary Board, shall supervise and regulate the operation of banks and
other financial institutions within the Subic Special Economic Zone;

(f) Banking and finance shall be liberalized with the establishment of foreign currency depository units of local
commercial banks and offshore banking units of foreign banks with minimum Central Bank regulation;

82
 (g) Any investor within the Subic Special Economic Zone whose continuing investment shall not be less than
Two hundred fifty thousand dollars ($250,000), his/her spouse and dependent children under twenty one (21)
years of age, shall be granted permanent resident status within theSubic Special Economic Zone. They shall
have freedom of ingress and egress to and from the Subic Special Economic Zone without any need of special
authorization from the Bureau of Immigration and Deportation. The Subic Bay Metropolitan Authority referred to
in Section 13 of this Act may also issue working visas renewable every two (2) years to foreign executives and
other aliens possessing highly-technical skills which no Filipino within the Subic Special Economic Zone
possesses, as certified by the Department of Labor and Employment. The names of aliens granted permanent
residence status and working visas by the Subic Bay Metropolitan Authority shall be reported to the Bureau of
Immigration and Deportation within thirty (30) days after issuance thereof;

(h) The defense of the zone and the security of its perimeters shall be the responsibility of the National
Government in coordination with the Subic Bay Metropolitan Authority. The Subic Bay Metropolitan Authority
shall provide and establish its own internal security and fire-fighting forces; and

(i) Except as herein provided, the local government units comprising the Subic Special Economic Zone shall
retain their basic autonomy and identity.1âwphi1 The cities shall be governed by their respective charters and
the municipalities shall operate and function in accordance with Republic Act No. 7160, otherwise known as the
Local Government Code of 1991. (Emphasis supplied)

Based on Section 12 (c) above, in lieu of national and local taxes, all businesses and enterprises operating within the
Subic Special Economic Zone shall pay a preferential gross income tax rate of five percent (5%). In addition, Section 12
(b) also provides that such businesses and enterprises shall be exempt from the payment of all taxes and duties on the
importation of raw materials, capital, and equipment into the Subic Special Economic Zone.

Meanwhile, on March 20, 2007, Congress enacted RA No. 9400 which extended the aforementioned tax and fiscal
incentives under RA No. 7227 to the Clark Freeport Zone. By way of amendment, Section 2 thereof provides:

SEC. 2. Section 15 of Republic Act No. 7227, as amended, is hereby amended to read as follows:

"SEC. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport Zone (CFZ). - Subject to the concurrence by
resolution of the local government units directly affected, the President is hereby authorized to create by executive
proclamation a Special Economic Zone covering the lands occupied by the Clark military reservations and its
contiguous extensions as embraced, covered and defined by the 194 7 Military Bases Agreement between the
Philippines and the United States of America, as amended, located within the territorial jurisdiction of Angeles City,
municipalities of Mabalacat and Porac, Province of Pampanga, and the municipalities of Capas and Bamban, Province
of Tarlac, in accordance with the provision as herein provided insofar as applied to the Clark military reservations. The
Clark Air Base proper with an area of not more than four thousand four hundred hectares (4,400 has.), with the
exception of the twenty-two-hectare commercial area situated near the main gate and the Bayanihan Park consisting of
seven and a half hectares (7.5 has.) located outside the main gate of the Clark Special Economic Zone, is hereby
declared a freeport zone.

"The CFZ shall be operated and managed as a separate customs territory ensuring free flow or movement of
goods and capital equipment within, into and exported out of the CFZ, as well as provide incentives such as tax
and duty-free importation of raw materials and capital equipment. However, exportation or removal of goods
from the territory of the CFZ to the other parts of the Philippine territory shall be subject to customs duties and
taxes under the Tariff and Customs Code of the Philippines, as amended, the National Internal Revenue Code
of 1997, as amended, and other relevant tax laws of the Philippines.

"The provisions of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall
be imposed on registered business enterprises within the CFZ. In lieu of said taxes, a five percent (5%) tax on gross
income earned shall be paid by all registered business enterprises within the CFZ and shall be directly remitted as
83
follows: three percent (3%) to the National Government, and two percent (2%) to the treasurer's office of the
municipality or city where they are located.

"The governing body of the Clark Special Economic Zone shall likewise be established by executive proclamation with
such powers and functions exercised by the Export Processing Zone Authority pursuant to Presidential Decree No. 66,
as amended: Provided, That it shall have no regulatory authority over public utilities, which authority pertains to the
regulatory agencies created by law for the purpose, such as the Energy Regulatory Commission created under
Republic Act No. 9136 and the National Telecommunications Commission created under Republic Act No. 7925.

"x x x

"Subject to the concurrence by resolution of the local government units directly affected and upon recommendation of
the Philippine Economic Zone Authority (PEZA), the President is hereby authorized to create by executive proclamation
Special Economic Zones covering the City of Balanga and the municipalities of Limay, Mariveles, Morong, Hermosa,
and Dinalupihan, Province of Bataan.

"Subject to the concurrence by resolution of the local government units directly affected and upon recommendation of
the PEZA, the President is hereby authorized to create by executive proclamation Special Economic Zones covering
the municipalities of Castillejos, San Marcelino, and San Antonio, Province of Zambales.

"Duly registered business enterprises that will operate in the Special Economic Zones to be created shall be entitled to
the same tax and duty incentives as provided for under Republic Act No. 7916, as amended: Provided that for the
purpose of administering these incentives, the PEZA shall register, regulate, and supervise all registered enterprises
within the Special Economic Zones."

Thus, the businesses and enterprises within the Clark Freeport Zone are similarly exempt from the payment of all taxes
and duties on the importation of raw materials, capital and equipment.

On February 17, 2012, the DOF, upon recommendation of the BIR, issued RR 2-2012 which imposed VAT and excise
tax on the importation of petroleum and petroleum products from abroad and into the Freeport or Economic Zones.
Section 3 thereof partly provides:

SECTION 3. TAX TREATMENT OF ALL PETROLEUM AND PETROLEUM PRODUCTS IMPORTED AND ITS
SUBSEQUENT EXPORTATION OR SALES TO FREEPORT AND ECONOMIC ZONE LOCATORS OR OTHER
PERSONS/ENTITIES; REFUND OF TAXES PAID; AUTHORITY TO RELEASE IMPORTED GOODS (ATRIG) AND
OTHER ADMINISTRATIVE REQUIREMENTS. - The Value-Added and Excise taxes which are due on all petroleum
and petroleum products that are imported and/or brought directly from abroad to the Philippines, including Freeport and
Economic zones, shall be paid by the importer thereof to the Bureau of Customs (BOC).

The subsequent exportation or sale/delivery of these petroleum or petroleum products to registered enterprises
enjoying tax privileges within the Freeport and Economic zones, as well as the sale of said goods to persons engaged
in international shipping or international air transport operations, shall be subject to 0% VAT. With respect to the VAT
paid on petroleum or petroleum products by the importer on account of aforesaid 0% VAT transactions/entities and the
Excise taxes paid on account of sales to international carriers of Philippine or Foreign Registry for use or consumption
outside the Philippines or exempt entities or agencies covered by tax treaties, conventions and international
agreements for their use or consumption (covered by Certification in such entity's favor), as well as entities which are by
law exempt from indirect taxes, the importer may file a claim for credit or refund with the BOC, which shall process the
claim for refund, subject to the favorable endorsement of the BIR, in accordance with existing rules and procedures:
Provided, that no claim for refund shall be granted unless it is properly shown to the satisfaction of the BIR that said
petroleum or petroleum products have been sold to a duly registered locator and have been utilized in the registered
activity/operation of the locator, or that such have been sold and have been used for international shipping or air

84
transport operations, or that the entities to which the said goods were sold are statutorily zero-rated for VAT, and/or
exempt from Excise taxes.

On March 8, 2012, petitioner, which represents the businesses and enterprises within the Clark Freeport Zone, filed the
instant petition alleging that respondents acted with grave abuse of discretion in issuing RR 2-2012. It argues that by
imposing the VAT and excise tax on the importation of petroleum and petroleum products from abroad and into the
Freeport or Economic Zones, RR 2-2012 unilaterally revoked the tax exemption granted by RA No. 7227 and RA No.
9400 to the businesses and enterprises operating within the Subic Special Economic Zone and Clark Freeport Zone.

Respondents, through the Office of the Solicitor General (OSG), contend that the petition must be denied outright
because the special civil action for certiorari cannot be used to assail RR 2-2012 which was issued by the respondents
in the exercise of their quasi-legislative or rule-making powers. According to the OSG, certiorari can only be used
against a public officer exercising judicial or quasi-judicial powers. In addition, the OSG invokes the doctrine of
hierarchy of courts and claims that a petition for certiorari cannot be filed directly to this Court absent highly exceptional
reasons which the petitioner failed to adduce. Finally, the OSG opposes the argument of petitioner that RR 2-2012
unilaterally revoked the tax exemption granted by RA No. 7227 and RA No. 9400 to the businesses and enterprises
operating within the Subic Special Economic Zone and Clark Freeport Zone by referring to the tax refund under Section
3 of RR 2-2012. It points out that Section 3 allows the businesses and enterprises operating within the Subic Special
Economic Zone and Clark Freeport Zone to claim for a tax refund upon submission of competent proof that they used
the imported fuel exclusively within the Subic Special Economic Zone and Clark Freeport Zone. Thus, the OSG claimed
that RR 2-2012 is consistent with RA No. 7227 and RA No. 9400.

We deny the petition for being an improper remedy.

Firstly, respondents did not act in any judicial or quasi-judicial capacity. A petition for certiorari under Rule 65 of the
1997 Rules of Civil Procedure, as amended, is a special civil action that may be invoked only against a tribunal, board,
or officer exercising judicial or quasi-judicial functions.

Section 1, Rule 65 of the 1997 Rules of Civil Procedure, as amended, provides:

SECTION 1. Petition for certiorari. - When any tribunal, board or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that
judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.

For a special civil action for certiorari to prosper, the following requisites must concur: ( 1) it must be directed against a
tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have acted
without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3)
there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law.1

A respondent is said to be exercising judicial function where he has the power to determine what the law is and what
the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon the rights of
the parties.2 Quasi-judicial function, on the other hand, is "a term which applies to the action, discretion, etc., of public
administrative officers or bodies x x x required to investigate facts, or ascertain the existence of facts, hold hearings,
and draw conclusions from them, as a basis for their official action and to exercise discretion of a judicial
nature."3 before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there be a
law that gives rise to some specific rights of persons or property under which adverse claims to such rights are made,
and the controversy ensuing therefrom is brought before a tribunal, board, or officer clothed with power and authority to
determine the law and adjudicate the respective rights of the contending parties.4

85
Respondents do not fall within the ambit of a tribunal, board, or officer exercising judicial or quasi-judicial functions.
They issued RR 2-2012 in the exercise of their quasi-legislative or rule-making powers, and not judicial or quasi-judicial
functions. Verily, respondents did not adjudicate or determine the rights of the parties.

In order to determine whether a Revenue Regulation is quasilegislative in nature, we must examine the legal basis of
the Secretary of Finance in the issuance thereof. In BPI Leasing Corporation v. Court of Appeals. 5 we ruled that
Revenue Regulation 19-86 was quasi-legislative in nature because it was issued by the Secretary of Finance in the
exercise of his rule-making powers under Section 244 of the National Internal Revenue Code (NIRC):

The Court finds the questioned revenue regulation to be legislative in nature. Section 1 of Revenue Regulation 19-86
plainly states that it was promulgated pursuant to Section 277 of the NIRC. Section 277 (now Section 244) is an
express grant of authority to the Secretary of Finance to promulgate all needful rules and regulations for the effective
enforcement of the provisions of the NIRC. In Paper Industries Corporation of the Philippines v. Court of Appeals, the
Court recognized that the application of Section 277 calls for none other than the exercise of quasi-legislative or rule-
making authority. Verily, it cannot be disputed that Revenue Regulation 19-86 was issued pursuant to the rule-making
power of the Secretary of Finance, thus making it legislative and not interpretative as alleged by BLC. 6

Similarly, in the case at bar, RR 2-2012 was also issued by the Secretary of Finance based on Section 244 of the NIRC.
Section 1 of RR 2-2012 provides:

SECTION 1. SCOPE - Pursuant to Section 244, in relation to Section 245, of the National Internal Revenue Code
(NIRC) of 1997, as amended, these Regulations are hereby promulgated in order to prescribe:

1) the tax administration treatment of all petroleum and petroleum products imported into the Philippines, including
those coming in through Freeport zones or Economic Zones; and 2) the refund of Value-Added Tax (VAT) and Excise
taxes paid for transactions statutorily zero-rated or exempt therefrom; and to provide administrative guidelines on the
operation and maintenance of storage tanks, facilities, depots or terminals where commodities for commercial use can
be stored.

Relevantly, Section 244 of the NIRC provides:

SEC. 244. Authority of Secretary of Finance to Promulgate Rules and Regulations. -The Secretary of Finance, upon
recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement
of the provisions of this Code.

Conformably with our ruling in BPI Leasing Corporation that the application of Section 244 of the NIRC is an exercise of
quasi-legislative or rule-making powers of the Secretary of Finance, and since RR 2-2012 was issued by the Secretary
of Finance based on Section 244 of the NIRC, such administrative issuance is therefore quasi-legislative in nature
which is outside the scope of a petition for certiorari. issued by the Secretary of Finance based on Section 244 of the
NIRC, such administrative issuance is therefore quasi-legislative in nature which is outside the scope of a petition for
certiorari.

Secondly, while this case is styled as a petition for certiorari, there is, however, no denying the fact that, in essence, it
seeks the declaration by this Court of the unconstitutionality and illegality of the questioned rule, thus partaking the
nature, in reality, of one for declaratory relief over which this Court has only appellate, not original, jurisdiction. 7 Section
5, Article VIII of the 1987 Philippine Constitution provides:

Sec. 5. The Supreme Court shall have the following powers:

(1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over
petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.

86
 (2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may
provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential
decree, proclamation, order, instruction, ordinance, or regulation is in question.

Accordingly, this petition must fail because this Court does not have original jurisdiction over a petition for declaratory
relief even if only questions of law are involved.8 The special civil action of declaratory relief falls under the exclusive
jurisdiction of the Regional Trial Courts. 9 The Rules of Court is explicit that such action shall be brought before the
appropriate Regional Trial Court. Section 1, Rule 63 of the Rules of Court provides:

SECTION 1. Who may file petition. - Any person interested under a deed, will, contract or other written instrument,
whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation
may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any
question of construction or validity arising, and for a declaration of his rights or duties, thereunder.

Lastly, although this Court, the Court of Appeals and the Regional Trial Courts have concurrent jurisdiction to issue
writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence does not give
the petitioner unrestricted freedom of choice of court forum.10 In Heirs of Bertuldo Hinog v. Hon. Melicor, 11 citing People
v. Cuaresma, 12 we held:

This Court's original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court with Regional Trial
Courts and with the Court of Appeals. This concurrence of jurisdiction is not, however, to be taken as according to
parties seeking any of the writs an absolute, unrestrained freedom of choice of the court to which application therefor
will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and also
serves as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for
that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level
("inferior") courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A
direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only when there are
special and important reasons therefor, clearly and specifically set out in the petition. This is [an] established policy. It is
a policy necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those
matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket.

The rationale for this rule is two-fold: (1) it would be an imposition upon the precious time of this Court; and (2) it would
cause an inevitable and resultant delay, intended or otherwise, in the adjudication of cases, which in some instances
had to be remanded or referred to the lower court as the proper forum under the rules of procedure, or as better
equipped to resolve the issues because this Court is not a trier of facts. 13

We thus affirm the judicial policy that we shall not entertain a direct resort to this Court unless the remedy cannot be
obtained in the apporiate courts, and exceptional and compelling circumstances, such as cases of national interest and
of serious implications, justify the availment of the extraordinary remedy of writ of certiorari. 14

15
In Chamber of Real Estate and Builders Association, Inc (CREBA) v. Secretary of Agrarian Reform, we provided
examples of such exceptional and compelling circumstances, to wit:

Exceptional and compelling circumstances were held present in the following cases (a) Chavez v. Romulo, on
citizens 9 right to bear arms ;(b) Government of [the] United States of America v. Hon. Purganan, on bail in extradition
remedy of writ of certiorari.

15
In Chamber of Real Estate and Builders Association, Inc.(CREBA) v. Secretary of Agrarian Reform, we provided
examples of such exceptional and compelling circumstances, to wit:

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Exceptional and compelling circumstances were held present in the following cases: (a) Chavez v. Romulo, on citizens'
right to bear arms; (b) Government of[the] United States of America v. Hon Purganan, on bail in extradition
proceedings; (c) Commission on Elections v.Judge Quijano- Padilla, on government contract involving modernization
and computerization of voters' registration list;(d) Buklod ng Kawaning EJIB v. Hon Sec. Zamora, on status and
existence of a public office; and (e) Hon. Fortich v. Hon. Corona, on the so-called "Win-Win Resolution" of the Office of
the President which modified the approval of the conversion to agro-industrial area. 16

In the case at bar, petitioner failed to allege such exceptional and compelling circumstances which justify a direct resort
to this Court.

In view of the serious procedural and technical defects of the petition, we see no need for this Court to resolve the other
issues raised by the petitioner.

WHEREFORE, premises considered, the petition is DISMISSED. With costs against the petitioner. SO ORDERED.

DIGEST:

• On March 13, 1992, Congress enacted RA No. 7227 which mandated the accelerated conversion of the Clark
and Subic military reservations into special economic zones. Based on Section 12 (c) of the said law, in lieu of national
and local taxes, all businesses and enterprises operating within the Subic Special Economic Zone shall pay a
preferential gross income tax rate of five percent (5%). In addition, Section 12 (b) also provides that such businesses
and enterprises shall be exempt from the payment of all taxes and duties on the importation of raw materials, capital,
and equipment into the Subic Special Economic Zone. This tax and fiscal incentives under RA No. 7227was further
extended to the Clark Freeport Zone upon enactment of RA No. 9400 on March 20, 2007. This made the businesses
and enterprises within the Clark Freeport Zone exempt from the payment of all taxes and duties on the importation of
raw materials, capital and equipment.

• On February 17, 2012, the Dept. of Finance, upon recommendation of the BIR, issued RR 2-2012 which
imposed VAT and excise tax on the importation of petroleum and petroleum products from abroad and into the Freeport
or Economic Zones. Herein petitioner, which represents the businesses and enterprises within the Clark Freeport Zone,
filed the instant petition alleging that respondents acted with grave abuse of discretion in issuing RR 2-2012. It argues
that by imposing the VAT and excise tax on the importation of petroleum and petroleum products from abroad and into
the Freeport or Economic Zones, RR 2-2012 unilaterally revoked the tax exemption granted by RA No. 7227 and RA
No. 9400 to the businesses and enterprises operating within the Subic Special Economic Zone and Clark Freeport
Zone.

• This petition for certiorari prays for the issuance of a TRO and/or writ of preliminary injunction to annul and set
aside RR 2-2012 issued by the Department of Finance upon recommendation of the BIR.

ISSUE:

Whether or not The Secretary of Finance acted with grave abuse of discretion in issuing RR 2-2012 that imposes VAT
and excise tax on the importation of petroleum and petroleum products from abroad and into Freeport or Economic
Zones, as it is claimed to have unilaterally revoked tax exemption granted by RA 7227 and RA 9400?

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RULING:

The Court denied the petition for being an improper remedy.

FIRSTLY, a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, is a special civil
action that may be invoked ONLY against a tribunal, board, or officer exercising judicial or quasi-judicial functions.
Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there be a law that
gives rise to some specific rights of persons or property under which adverse claims to such rights are made, and the
controversy ensuing therefrom is brought before a tribunal, board, or officer clothed with power and authority to
determine the law and adjudicate the respective rights of the contending parties.

In determining whether a Revenue Regulation is quasi-legislative in nature, the legal basis of the Secretary of Finance
in the issuance thereof must be examined. RR 2-2012 was issued by the Secretary of Finance based on Section 244 of
the NIRC. Section 244 is an express grant of authority to the Secretary of Finance to promulgate all needful rules and
regulations for the effective enforcement of the provisions of the NIRC. And since RR 2-2012 was issued by the
Secretary of Finance based on Section 244 of the NIRC, such administrative issuance is therefore quasi-legislative in
nature which is outside the scope of a petition for certiorari.

SECONDLY, Supreme Court explained that it could not be denied that even if the petition is filed as a certiorari, in real
essence, it seeks the declaration by the High Court of the unconstitutionality and illegality of the questioned rule, thus
partaking the nature, in reality, of one for declaratory relief over which the SC has only appellate, not original,
jurisdiction. LASTLY, although the SC, the CA and the RTC have concurrent jurisdiction to issue writs of certiorari,
prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence does not give the petitioner
unrestricted freedom of choice of court forum, as hierarchy of courts must be respected. That hierarchy is determinative
of the venue of appeals, and also serves as a general determinant of the appropriate forum for petitions for the
extraordinary writs. A direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed
only when there are special and important reasons therefore, clearly and specifically set out in the petition. This is [an]
established policy. It is a policy necessary to prevent inordinate demands upon the Court's time and attention which are
better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's
docket.

COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. COURT OF TAX APPEALS and CBK POWER
COMPANY LIMITED, Respondents. G R. Nos. 203054-55 July 29, 2015 PERALTA, J.:

Before us is a petition for certiorari under Rule 65 which seeks to annul and set aside the Resolutions of the Court of
Tax Appeals (CTA) dated December 23, 2011,1 April 19, 2012,2 and June 13, 20123 issued in CTA Case Nos. 8246 and
8302.

Private respondent CBK Power Company Limited is a special purpose entity engaged in all aspects of (1) design,
financing, construction, testing, commissioning, operation, maintenance, management, and ownership of Kalayaan II
pumped storage hydroelectric power plant, the new Caliraya Spillway in Laguna; and (2) the rehabilitation, expansion,
commissioning, operation, maintenance and management of the Caliraya, Botocan, and Kalayaan I hydroelectric power
plants and their related facilities in Laguna. Petitioner is the duly appointed Commissioner of Internal Revenue vested

89
with authority to act as such, inter alia, the power to decide, approve and grant refunds or tax credit of erroneously or
illegally collected internal revenue taxes as provided by law.

On March 30, 2011, private respondent filed with the CTA a judicial claim for the issuance of a tax credit certificate in
the amount of Seventeen Million Seven Hundred Eighty-Four Thousand Nine Hundred Sixty-Eight and 91/100 Pesos
(₱17,784,968.91), representing unutilized input taxes on its local purchases and importations of goods other than
capital goods, local purchases of services, payment of services rendered by non-residents, including unutilized
amortized input taxes on capital goods exceeding one million for the period of January 1, 2009 to March 31, 2009, all
attributable to zero rated sales for the same period, pursuant to Section 112 (A) of the 1997 Tax Code. The case was
docketed as CTA Case No. 8246.

On May 30, 2011, petitioner received summons requiring it to answer. Petitioner through counsel, Atty. Christopher C.
Sandico, complied and filed the Answer. On June 29, 2011, petitioner received a notice of pre-trial conference set on
July 21, 2011. Petitioner filed its pre-trial brief.

Earlier, on June 28, 2011, private respondent filed another judicial claim for the issuance of a tax credit certificate in the
amount of Thirty-One Million Six Hundred Eighty Thousand Two Hundred Ninety and 87 II 00 Pesos (₱31,680,290.87),
representing unutilized input taxes on its local purchases and importations of goods other than capital goods, local
purchases of services, including unutilized amortized input taxes on capital goods exceeding one million for the period
of April 1, 2009 to June 30, 2009, all attributable to the zero rated sales for the same period. The case was docketed as
CTA Case No. 8302.

Subsequently, private respondent filed a motion for consolidation and postponement of the pre-trial conference
scheduled for CTA Case No. 8246.

On July 19, 2011 petitioner received summons requiring it to answer the petition for review on CTA Case No. 8302.
Petitioner's lawyer, Atty. Leo D. Mauricio, filed his Answer. The pre-trial conference for CTA Case No. 8302 was set on
September 29, 2011. Thus, private respondent filed a motion for consolidation and postponement of the pre-trial
conference for CTA Case No. 8302.

In a Resolution4 dated October 14, 2011, the CTA granted the motion for consolidation and set the pre-trial conference
on November 3, 2011. Atty. Mauricio failed to appear at the scheduled pre-trial conference as he was on leave for
health reasons from October to December 2011. The pretrial was reset to December 1, 2011. Petitioner's counsel, Atty.
Sandico, who was then assigned to handle the consolidated cases, filed his consolidated pre-trial brief on November
15, 2011. However, on the December 1, 2011 pre-trial conference, Atty. Sandico failed to appear, thus private
respondent moved that petitioner be declared in default.

On December 23, 2011, the CTA issued the first assailed Resolution, the dispositive portion of which reads:

WHEREFORE, petitioner is hereby allowed to present its evidence ex parte. Let the ex-parte presentation of evidence
for the petitioner to be set on January 26, 2012, at 1:30 p.m. Atty. Danilo B. Fernando is hereby appointed Court
Commissioner to receive the evidence for the petitioner.5

On January 6, 2012, petitioner filed a Motion to Lift Order of Default6 alleging that the failure to attend the pre-trial
conference on November 3, 2011 was due to confusion in office procedure in relation to the consolidation of CTA Case
No. 8246 with CTA Case No. 8302 since the latter was being handled by a different lawyer; that when the pre-trial
conference was reset to December 1, 2011, petitioner's counsel, Atty. Sandico, had to attend the hearing of another
case in the CTA's First Division also at 9:00 a.m., hence, he unintentionally missed the pre-trial conference of the
consolidated cases. Private respondent was ordered to file its comment on the motion to lift order of default but failed to
do so.

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On April 19, 2012, the CTA issued the second assailed Resolution denying the motion to lift order of default, stating
among others:

Section 5 of Rule 18 of the Revised Rules of Court, provides:

Sec. 5. Effect of failure to appear. -The failure of the plaintiff to appear when so required pursuant to the next preceding
section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless otherwise ordered by the
court. A similar failure on the part of the defendant shall be cause to allow the plaintiff to present his evidence ex parte
and the court to render judgment on the basis thereof.

While the respondent elaborated on the confusion and negligence leading to the failure to appear at the pre-trial
conference, the rule on this matter is clear.

In view of the foregoing, respondent's "Motion to Lift Order of Default" is hereby DENIED.7 Petitioner filed a motion for
reconsideration on April 27, 2012. The CTA directed private respondent to file its Comment thereto but failed to do so.

In a Resolution dated June 13, 2012, the CTA denied the motion for reconsideration.

Petitioner files the instant petition for certiorari raising the following grounds for the allowance of the petition.

(A) THERE IS NO PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW BUT
THE FILING OF A PETITION FOR CERTIORARI UNDER RULE 65; (B) PUBLIC RESPONDENT GRAVELY
ABUSED ITS DISCRETION WHEN IT DECLARED PETITIONER IN DEFAULT WHEN CLEARLY
PETITIONER'S COUNSEL HAS BEEN ACTIVELY DEFENDING HER CAUSE; [and]

(C) PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION WHEN IT DECLARED PETITIONER IN
DEFAULT AS THERE WAS NO INTENTION ON THE PART OF PETITIONER TO DEFY OR REFUSE THE
ORDER OF THE PUBLIC RESPONDENT.8

We first address the procedural issue raised by private respondent in its Comment. Private respondent claims that
petitioner chose an erroneous remedy when it filed a petition for certiorari with us since the proper remedy on any
adverse resolution of any division of the CTA is an appeal by way of a petition for review with the CTA en bane; that it is
provided under Section 2 (a)(l) of Rule 4 of the Revised Rules of the Court of Tax Appeals (RRCTA) that the Court en
bane shall exercise exclusive appellate jurisdiction to review by appeal the decision or resolutions on motions for
reconsideration or new trial of the Court in division in the exercise of its exclusive appellate jurisdiction over cases
arising from administrative agencies such as the Bureau of Internal Revenue.

We are not persuaded.

In Santos v. People, et al.9 where petitioner argues that a resolution of a CTA Division denying a motion to quash, an
interlocutory order, is a proper subject of an appeal to the CTA en bane under Section 18 of Republic Act No. 1125, as
amended, we ruled in the negative and disposed the argument as follows:

Petitioner is invoking a very narrow and literal reading of Section 18 of Republic Act No. 1125, as amended.

Indeed, the filing of a petition for review with the CTA en bane from a decision, resolution, or order of a CTA Division is
a remedy newly made available in proceedings before the CTA, necessarily adopted to conform to and address the
changes in the CTA.

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There was no need for such rule under Republic Act No. 1125, prior to its amendment, since the CTA then was
composed only of one Presiding Judge and two Associate Judges. Any two Judges constituted a quorum and the
concurrence of two Judges was necessary to promulgate any decision thereof.

The amendments introduced by Republic Act No. 9282 to Republic Act No. 1125 elevated the rank of the CTA to a
collegiate court, with the same rank as the Court of Appeals, and increased the number of its members to one Presiding
Justice and five Associate Justices. The CTA is now allowed to sit en bane or in two Divisions with each Division
consisting of three Justices. Four Justices shall constitute a quorum for sessions en bane, and the affirmative votes of
four members of the Court en bane are necessary for the rendition of a decision or resolution; while two Justices shall
constitute a quorum for sessions of a Division and the affirmative votes of two members of the Division shall be
necessary for the rendition of a decision or resolution.

In A.M. No. 05-11-07-CTA, the Revised CTA Rules, this Court delineated the jurisdiction of the CTA en bane and in
Divisions. Section 2, Rule 4 of the Revised CTA Rules recognizes the exclusive appellate jurisdiction of the CTA en
bane to review by appeal the following decisions, resolutions, or orders of the CTA Division:

SEC. 2. Cases within the jurisdiction of the Court en bane.-The Court en bane shall exercise exclusive appellate
jurisdiction to review by appeal the following:

(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of
its exclusive appellate jurisdiction over:

(1) Cases arising from administrative agencies – Bureau of Internal Revenue, Bureau of Customs,
Department of Finance, Department of Trade and Industry, Department of Agriculture;

(2) Local tax cases decided by the Regional Trial Courts in the exercise of their original jurisdiction; and

(3) Tax collection cases decided by the Regional Trial Courts in the exercise of their original jurisdiction
involving final and executory assessments for taxes, fees, charges and penalties, where the principal
amount of taxes and penalties claimed is less than one million pesos;

(f) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in Division in the
exercise of its exclusive original jurisdiction over cases involving criminal offenses arising from violations of the
National Internal Revenue Code or the Tariff and Customs Code and other laws administered by the Bureau of
Internal Revenue or Bureau of Customs.

(g) Decisions, resolutions or order on motions for reconsideration or new trial of the Court in Division in the
exercise of its exclusive appellate jurisdiction over criminal offenses mentioned in the preceding subparagraph; x
x x.

Although the filing of a petition for review with the CTA en bane from a decision, resolution, or order of the CTA
Division, was newly made available to the CTA, such mode of appeal has long been available in Philippine courts of
general jurisdiction. Hence, the Revised CTA Rules no longer elaborated on it but merely referred to existing rules of
procedure on petitions for review and appeals, to wit:

RULE 7 PROCEDURE IN THE COURT OF TAX APPEALS

SEC. 1. Applicability of the Rules of the Court of Appeals. - The procedure in the Court en bane or in Divisions in
original and in appealed cases shall be the same as those in petitions for review and appeals before the Court of
Appeals pursuant to the applicable provisions of Rules 42, 43, 44 and 46 of the Rules of Court, except as otherwise
provided for in these Rules.

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RULE 8 PROCEDURE IN CIVIL CASES

SEC. 4. Where to appeal; mode of appeal. –

(b) An appeal from a decision or resolution of the Court in Division on a motion for reconsideration or new trial shall be
taken to the Court by petition for review as provided in Rule 4 3 of the Rules of Court. The Court en bane shall act on
the appeal.

RULE 9 PROCEDURE IN CRIMINAL CASES

SEC. l. Review of cases in the Court. - The review of criminal cases in the Court en bane or in Division shall be
governed by the applicable provisions of Rule 124 of the Rules of Co mi.

SEC. 9. Appeal; period to appeal. –

(b) An appeal to the Court en bane in criminal cases decided by the Court in Division shall be taken by filing a petition
for review as provided in Rule 43 of the Rules of Court within fifteen days from receipt of a copy of the decision or
resolution appealed from. The Court may, for good cause, extend the time for filing of the petition for review for an
additional period not exceeding fifteen days.

Given the foregoing, the petition for review to be filed with the CTA en bane as the mode for appealing a decision,
resolution, or order of the CTA Division, under Section 18 of Republic Act No. 1125, as amended, is not a totally new
remedy, unique to the CTA, with a special application or use therein. To the contrary, the CTA merely adopts the
procedure for petitions for review and appeals long established and practiced in other Philippine courts. Accordingly,
doctrines, principles, rules, and precedents laid down in jurisprudence by this Court as regards petitions for review and
appeals in courts of general jurisdiction should likewise bind the CTA, and it cannot depart therefrom.

According to Section 1, Rule 41 of the Revised Rules of Court, governing appeals from the Regional Trial Courts
(RTCs) to the Court of Appeals, an appeal may be taken only from a judgment or final order that completely disposes of
the case or of a matter therein when declared by the Rules to be appealable. Said provision, thus, explicitly states that
no appeal may be taken from an interlocutory order.10

It is, therefore, clear that the CTA en bane has jurisdiction over final order or judgment but not over interlocutory orders
issued by the CTA in division. In Denso (Phils.), Inc. v. Intermediate Appellate Court,11 we expounded on the differences
between a "final judgment" and an "interlocutory order," to wit:

x x x A "final" judgment or order is one that finally disposes of a case, leaving nothing more to be done by the Court in
respect thereto, e.g., an adjudication on the merits which, on the basis of the evidence presented at the trial, declares
categorically what the rights and obligations of the parties are and which party is in the right; or a judgment or order that
dismisses an action on the ground, for instance, of res judicata or prescription. Once rendered, the task of the Court is
ended, as far as deciding the controversy or determining the rights and liabilities of the litigants is concerned. Nothing
more remains to be done by the Court except to await the parties' next move x x x and ultimately, of course, to cause
the execution of the judgment once it becomes "final" or, to use the established and more distinctive term, "final and
executory."

Conversely, an order that does not finally dispose of the case, and does not end the Court's task of adjudicating the
parties' contentions and determining their rights and liabilities as regards each other, but obviously indicates that other
things remain to be done by the Court, is "interlocutory," e.g., an order denying a motion to dismiss under Rule 16 of the
Rules x x x. Unlike a "final" judgment or order, which is appealable, as above pointed out, an "interlocutory" order may
not be questioned on appeal except only as part of an appeal that may eventually be taken from the final judgment
rendered in the case.12

93
Given the differences between a final judgment and an interlocutory order, there is no doubt that the CTA Order dated
December 23, 2011 granting private respondent's motion to declare petitioner as in default and allowing respondent to
present its evidence ex parte, is an interlocutory order as it did not finally dispose of the case on the merits but will
proceed for the reception of the former's evidence to determine its entitlement to its judicial claim for tax credit
certificates. Even the CTA's subsequent orders denying petitioner's motion to lift order of default and denying
reconsideration thereof are all interlocutory orders since they pertain to the order of default.

Since the CTA Orders are merely interlocutory, no appeal can be taken therefrom. Section 1, Rule 41 of the 1997 Rules
of Civil Procedure, as amended, which applies suppletorily to proceedings before the Court of Tax Appeals, provides:

Section 1. Subject of appeal. - An appeal may be taken from a judgment or final order that completely disposes of the
case, or of a paiticular matter therein when declared by these Rules to be appealable.

No appeal may be taken from:

(c) An interlocutory order

In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an
appropriate special civil action under Rule 65.

Hence, petitioner's filing of the instant petition for certiorari assailing the interlocutory orders issued by the CTA is in
conformity with the above-quoted provision.1âwphi1

As to the merit of the petition, petitioner argues that the order declaring it as in default and allowing the ex-parte
presentation of private respondent's evidence was excessive as it has no intention of defying the scheduled pre-trial
conferences.

In Calalang v. Court of Appeals,13 we held that unless a party's conduct is so negligent, irresponsible, contumacious, or
dilatory as to provide substantial grounds for dismissal for non-appearance, the courts should consider lesser sanctions
which would still amount into achieving the desired end. We apply the same criteria on a defendant who fails to appear
at a pre-trial conference.

In this case, there is no showing that petitioner intentionally disregarded the CTA's authority. CTA Case Nos. 8246 and
8302 were filed on different dates and were handled by different lawyers, i.e., Atty. Sandico and Atty. Mauricio,
respectively. The cases were later on consolidated per private respondent's motion and the pre-trial was set on
November 3, 2011 but petitioner's counsel, Atty. Mauricio, was not able to attend for health reasons; and Atty. Sandico
to whom the consolidated cases were later on assigned was not able to attend the pre-trial on time on December 1,
2011 as he was attending another case in another division of the CTA. We find nothing to show that petitioner had
acted with the deliberate intention of delaying the proceedings as petitioner had timely filed its pre-trial brief for the
consolidated cases.

Also, after petitioner's receipt of the default Order dated December 23, 2011, petitioner, on January 6, 2012,
immediately filed a Motion to lift the order of default, i.e., 20 days before the scheduled ex-parte presentation of private
respondent's evidence on January 26, 2012.1avvphi1 The CTA should have been persuaded to reconsider its earlier
order of default as its lifting would not in any way prejudice or deprive private respondent of any substantive right,
especially so considering that the latter did not file any opposition or comment to petitioner's motion to lift order of
default or to the motion for reconsideration of the denial thereof.

It is not to say, however, that adherence to the Rules could be dispensed with lightly, but that, rather, exigencies and
situations might occasionally demand flexibility in their application.14 It is within the CTA's sound judicial discretion to
give party-litigants every opportunity to properly present their conflicting claims on the merits of the controversy without
resorting to technicalities.15 It should always be predicated on the consideration that more than the mere convenience of
94
the courts or of the parties of the case, the ends of justice and fairness would be served thereby. Courts should be
liberal in setting aside orders of default, for default judgments are frowned upon, and unless it clearly appears that the
reopening of the case is intended for delay, it is best that trial courts give both parties every chance to fight their case
fairly and in the open, without resort to technicality.16

Moreover, Section 2, Rule 1 of the RRCTA expressly provides that:

SEC. 2. Liberal construction.- The Rules shall be liberally construed in order to promote their objective of securing a
just, speedy, and inexpensive determination of every action and proceeding before the Court. (RCTA, Rule I, sec. 2a)

It appears, however, that the CTA proceeded with the ex-parte reception of private respondent's evidence and had
already rendered its decision on the merits on June 10, 2014 ordering petitioner to issue a tax certificate in favor of
private respondent in the reduced amount of ₱22, 126,419.93 representing unutilized input VAT incurred in relation to
its zero rated sales of electricity to the NPC for the first and second quarters of 2009. Petitioner filed a motion for
reconsideration which the CTA had also denied. Petitioner then filed a petition for review ad cautelam with the CTA En
Banc which is now pending before it.

Considering our foregoing discussions, we find a need to give petitioner the opportunity to properly present her claims
on the merits of the case without resorting to technicalities. WHEREFORE, the petition for certiorari is GRANTED. The
Resolutions dated December 23, 2011, April 19, 2012 and June 13, 2012 issued by the Court of Tax Appeals in CTA
Case Nos. 8246 and 8302 are hereby SET ASIDE. The consolidated cases are hereby REMANDED to the CTA Third
Division to give petitioner the chance to present evidence, rebuttal and sur rebuttal evidence, if needed. SO ORDERED.

SMART COMMUNICATIONS, INC., Petitioner, vs. MUNICIPALITY OF MALVAR, BATANGAS, Respondent.

G.R. No. 204429 February 18, 2014 CARPIO, J.:

This petition for review1 challenges the 26 June 2012 Decision2 and 13 November 2012 Resolution3 of the Court of Tax.
Appeals (CTA) En Banc. Th e CTA En Banc affirmed the 17 December 2010 Decision4 and 7 April 2011 Resolution5 of
the CTA First Division, which in turn affirmed the 2 December 2008 Decision6 and 21 May 2009 Order7 of the Regional
Trial Court of Tanauan City, Batangas, Branch 6. The trial court declared void the assessment imposed by respondent
Municipality of Malvar, Batangas against petitioner Smart Communications, Inc. for its telecommunications tower for
2001 to July 2003 and directed respondent to assess petitioner only for the period starting 1 October 2003.

The Facts

Petitioner Smart Communications, Inc. (Smart) is a domestic corporation engaged in the business of providing
telecommunications services to the general public while respondent Municipality of Malvar, Batangas (Municipality) is a
local government unit created by law. In the course of its business, Smart constructed a telecommunications tower
within the territorial jurisdiction of the Municipality. The construction of the tower was for the purpose of receiving and
transmitting cellular communications within the covered area. On 30 July 2003, the Municipality passed Ordinance No.
18, series of 2003, entitled "An Ordinance Regulating the Establishment of Special Projects." On 24 August 2004,
Smart received from the Permit and Licensing Division of the Office of the Mayor of the Municipality an assessment
letter with a schedule of payment for the total amount of ₱389,950.00 for Smart’s telecommunications tower. The letter
reads as follows: This is to formally submit to your good office your schedule of payments in the Municipal Treasury of
the Local Government Unit of Malvar, province of Batangas which corresponds to the tower of your company built in the
premises of the municipality, to wit:

TOTAL PROJECT COST: PHP

11,000,000.00

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 For the Year 2001-2003

50% of 1% of the total project cost Php55,000.00

Add: 45% surcharge 24,750.00

Php79,750.00

Multiply by 3 yrs. (2001, 2002, 2003) Php239,250.00

For the year 2004

1% of the total project cost Php110,000.00

37% surcharge 40,700.00

==========

Php150,700.00

TOTAL Php389,950.00

Hoping that you will give this matter your preferential attention.8

Due to the alleged arrears in the payment of the assessment, the Municipality also caused the posting of a closure
notice on the telecommunications tower.

On 9 September 2004, Smart filed a protest, claiming lack of due process in the issuance of the assessment and
closure notice. In the same protest, Smart challenged the validity of Ordinance No. 18 on which the assessment was
based.

In a letter dated 28 September 2004, the Municipality denied Smart’s protest.

On 17 November 2004, Smart filed with Regional Trial Court of Tanauan City, Batangas, Branch 6, an "Appeal/Petition"
assailing the validity of Ordinance No. 18. The case was docketed as SP Civil Case No. 04-11-1920.

On 2 December 2008, the trial court rendered a Decision partly granting Smart’s Appeal/Petition. The trial court
confined its resolution of the case to the validity of the assessment, and did not rule on the legality of Ordinance No. 18.
The trial court held that the assessment covering the period from 2001 to July 2003 was void since Ordinance No. 18
was approved only on 30 July 2003. However, the trial court declared valid the assessment starting 1 October 2003,
citing Article 4 of the Civil Code of the Philippines,9 in relation to the provisions of Ordinance No. 18 and Section 166 of
Republic Act No. 7160 or the Local Government Code of 1991 (LGC).10 The dispositive portion of the trial court’s
Decision reads:

96
WHEREFORE, in light of the foregoing, the Petition is partly GRANTED. The assessment dated August 24, 2004
against petitioner is hereby declared null and void insofar as the assessment made from year 2001 to July 2003 and
respondent is hereby prohibited from assessing and collecting, from petitioner, fees during the said period and the
Municipal Government of Malvar, Batangas is directed to assess Smart Communications, Inc. only for the period
starting October 1, 2003. No costs. SO ORDERED.11

The trial court denied the motion for reconsideration in its Order of 21 May 2009.

On 8 July 2009, Smart filed a petition for review with the CTA First Division, docketed as CTA AC No. 58.

On 17 December 2010, the CTA First Division denied the petition for review. The dispositive portion of the decision
reads:

WHEREFORE, the Petition for Review is hereby DENIED, for lack of merit. Accordingly, the assailed Decision dated
December 2, 2008 and the Order dated May 21, 2009 of Branch 6 of the Regional Trial Court of Tanauan City,
Batangas in SP. Civil Case No. 04-11-1920 entitled "Smart Communications, Inc. vs. Municipality of Malvar, Batangas"
are AFFIRMED. SO ORDERED.12

On 7 April 2011, the CTA First Division issued a Resolution denying the motion for reconsideration.

Smart filed a petition for review with the CTA En Banc, which affirmed the CTA First Division’s decision and resolution.
The dispositive portion of the CTA En Banc’s 26 June 2012 decision reads:

WHEREFORE, premises considered, the present Petition for Review is hereby DISMISSED for lack of merit.1âwphi1
Accordingly, the assailed Decision dated December 17, 2010 and Resolution dated April 7, 2011 are hereby
AFFIRMED. SO ORDERED.13

The CTA En Banc denied the motion for reconsideration.

Hence, this petition.

The Ruling of the CTA En Banc

The CTA En Banc dismissed the petition on the ground of lack of jurisdiction. The CTA En Banc declared that it is a
court of special jurisdiction and as such, it can take cognizance only of such matters as are clearly within its jurisdiction.
Citing Section 7(a), paragraph 3, of Republic Act No. 9282, the CTA En Banc held that the CTA has exclusive appellate
jurisdiction to review on appeal, decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally
resolved by them in the exercise of their original or appellate jurisdiction. However, the same provision does not confer
on the CTA jurisdiction to resolve cases where the constitutionality of a law or rule is challenged.

The Issues

The petition raises the following arguments:

1. The [CTA En Banc Decision and Resolution] should be reversed and set aside for being contrary to law and
jurisprudence considering that the CTA En Banc should have exercised its jurisdiction and declared the
Ordinance as illegal.

2. The [CTA En Banc Decision and Resolution] should be reversed and set aside for being contrary to law and
jurisprudence considering that the doctrine of exhaustion of administrative remedies does not apply in [this
case].
97
 3. The [CTA En Banc Decision and Resolution] should be reversed and set aside for being contrary to law and
jurisprudence considering that the respondent has no authority to impose the so-called "fees" on the basis of the
void ordinance.14

The Ruling of the Court

The Court denies the petition.

On whether the CTA has jurisdiction over the present case

Smart contends that the CTA erred in dismissing the case for lack of jurisdiction. Smart maintains that the CTA has
jurisdiction over the present case considering the "unique" factual circumstances involved.

The CTA refuses to take cognizance of this case since it challenges the constitutionality of Ordinance No. 18, which is
outside the province of the CTA.

Jurisdiction is conferred by law. Republic Act No. 1125, as amended by Republic Act No. 9282, created the Court of
Tax Appeals. Section 7, paragraph (a), sub-paragraph (3)15 of the law vests the CTA with the exclusive appellate
jurisdiction over "decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or
resolved by them in the exercise of their original or appellate jurisdiction."

The question now is whether the trial court resolved a local tax case in order to fall within the ambit of the CTA’s
appellate jurisdiction This question, in turn, depends ultimately on whether the fees imposed under Ordinance No. 18
are in fact taxes.

Smart argues that the "fees" in Ordinance No. 18 are actually taxes since they are not regulatory, but revenue-raising.
Citing Philippine Airlines, Inc. v. Edu,16 Smart contends that the designation of "fees" in Ordinance No. 18 is not
controlling.

The Court finds that the fees imposed under Ordinance No. 18 are not taxes.

Section 5, Article X of the 1987 Constitution provides that "each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue
exclusively to the local government."

Consistent with this constitutional mandate, the LGC grants the taxing powers to each local government unit.
Specifically, Section 142 of the LGC grants municipalities the power to levy taxes, fees, and charges not otherwise
levied by provinces. Section 143 of the LGC provides for the scale of taxes on business that may be imposed by
municipalities17 while Section 14718 of the same law provides for the fees and charges that may be imposed by
municipalities on business and occupation.

The LGC defines the term "charges" as referring to pecuniary liability, as rents or fees against persons or property,
while the term "fee" means "a charge fixed by law or ordinance for the regulation or inspection of a business or
activity."19

In this case, the Municipality issued Ordinance No. 18, which is entitled "An Ordinance Regulating the Establishment of
Special Projects," to regulate the "placing, stringing, attaching, installing, repair and construction of all gas mains,
electric, telegraph and telephone wires, conduits, meters and other apparatus, and provide for the correction,
condemnation or removal of the same when found to be dangerous, defective or otherwise hazardous to the welfare of
the inhabitant[s]."20 It was also envisioned to address the foreseen "environmental depredation" to be brought about by

98
these "special projects" to the Municipality.21 Pursuant to these objectives, the Municipality imposed fees on various
structures, which included telecommunications towers.

As clearly stated in its whereas clauses, the primary purpose of Ordinance No. 18 is to regulate the "placing, stringing,
attaching, installing, repair and construction of all gas mains, electric, telegraph and telephone wires, conduits, meters
and other apparatus" listed therein, which included Smart’s telecommunications tower. Clearly, the purpose of the
assailed Ordinance is to regulate the enumerated activities particularly related to the construction and maintenance of
various structures. The fees in Ordinance No. 18 are not impositions on the building or structure itself; rather, they are
impositions on the activity subject of government regulation, such as the installation and construction of the structures. 22

Since the main purpose of Ordinance No. 18 is to regulate certain construction activities of the identified special
projects, which included "cell sites" or telecommunications towers, the fees imposed in Ordinance No. 18 are primarily
regulatory in nature, and not primarily revenue-raising. While the fees may contribute to the revenues of the
Municipality, this effect is merely incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes.

In Progressive Development Corporation v. Quezon City,23 the Court declared that "if the generating of revenue is the
primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the
fact that incidentally revenue is also obtained does not make the imposition a tax."

In Victorias Milling Co., Inc. v. Municipality of Victorias,24 the Court reiterated that the purpose and effect of the
imposition determine whether it is a tax or a fee, and that the lack of any standards for such imposition gives the
presumption that the same is a tax.

We accordingly say that the designation given by the municipal authorities does not decide whether the imposition is
properly a license tax or a license fee. The determining factors are the purpose and effect of the imposition as may be
apparent from the provisions of the ordinance. Thus, "[w]hen no police inspection, supervision, or regulation is provided,
nor any standard set for the applicant to establish, or that he agrees to attain or maintain, but any and all persons
engaged in the business designated, without qualification or hindrance, may come, and a license on payment of the
stipulated sum will issue, to do business, subject to no prescribed rule of conduct and under no guardian eye, but
according to the unrestrained judgment or fancy of the applicant and licensee, the presumption is strong that the power
of taxation, and not the police power, is being exercised."

Contrary to Smart’s contention, Ordinance No. 18 expressly provides for the standards which Smart must satisfy prior to
the issuance of the specified permits, clearly indicating that the fees are regulatory in nature.

These requirements are as follows:

SECTION 5. Requirements and Procedures in Securing Preliminary Development Permit.

The following documents shall be submitted to the SB Secretary in triplicate:

a) zoning clearance

b) Vicinity Map

c) Site Plan

d) Evidence of ownership

e) Certificate true copy of NTC Provisional Authority in case of Cellsites, telephone or telegraph line, ERB in
case of gasoline station, power plant, and other concerned national agencies

99
 f) Conversion order from DAR is located within agricultural zone.

g) Radiation Protection Evaluation.

h) Written consent from subdivision association or the residence of the area concerned if the special projects is
located within the residential zone.

i) Barangay Council Resolution endorsing the special projects.

SECTION 6. Requirement for Final Development Permit – Upon the expiration of 180 days and the proponents of
special projects shall apply for final [development permit] and they are require[d] to submit the following:

a) evaluation from the committee where the Vice Mayor refers the special project

b) Certification that all local fees have been paid.

Considering that the fees in Ordinance No. 18 are not in the nature of local taxes, and Smart is questioning the
constitutionality of the ordinance, the CTA correctly dismissed the petition for lack of jurisdiction. Likewise, Section 187
of the LGC,25 which outlines the procedure for questioning the constitutionality of a tax ordinance, is inapplicable,
rendering unnecessary the resolution of the issue on non-exhaustion of administrative remedies.

On whether the imposition of the fees in Ordinance No. 18 is ultra vire Smart argues that the Municipality exceeded its
power to impose taxes and fees as provided in Book II, Title One, Chapter 2, Article II of the LGC. Smart maintains that
the mayor’s permit fees in Ordinance No. 18 (equivalent to 1% of the project cost) are not among those expressly
enumerated in the LGC.

As discussed, the fees in Ordinance No.18 are not taxes. Logically, the imposition does not appear in the enumeration
of taxes under Section 143 of the LGC.

Moreover, even if the fees do not appear in Section 143 or any other provision in the LGC, the Municipality is
empowered to impose taxes, fees and charges, not specifically enumerated in the LGC or taxed under the Tax Code or
other applicable law. Section 186 of the LGC, granting local government units wide latitude in imposing fees, expressly
provides:

Section 186. Power To Levy Other Taxes, Fees or Charges. - Local government units may exercise the power to levy
taxes, fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the
provisions of the National Internal Revenue Code, as amended, or other applicable laws: Provided, That the taxes,
fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy:
Provided, further, That the ordinance levying such taxes, fees or charges shall not be enacted without any prior public
hearing conducted for the purpose.

Smart further argues that the Municipality is encroaching on the regulatory powers of the National Telecommunications
Commission (NTC). Smart cites Section 5(g) of Republic Act No. 7925 which provides that the National
Telecommunications Commission (NTC), in the exercise of its regulatory powers, shall impose such fees and charges
as may be necessary to cover reasonable costs and expenses for the regulation and supervision of the operations of
telecommunications entities. Thus, Smart alleges that the regulation of telecommunications entities and all aspects of
its operations is specifically lodged by law on the NTC.

To repeat, Ordinance No. 18 aims to regulate the "placing, stringing, attaching, installing, repair and construction of all
gas mains, electric, telegraph and telephone wires, conduits, meters and other apparatus" within the Municipality. The
fees are not imposed to regulate the administrative, technical, financial, or marketing operations of telecommunications

100
entities, such as Smart’s; rather, to regulate the installation and maintenance of physical structures – Smart’s cell sites
or telecommunications tower. The regulation of the installation and maintenance of such physical structures is an
exercise of the police power of the Municipality. Clearly, the Municipality does not encroach on NTC’s regulatory
powers.

The Court likewise rejects Smart’s contention that the power to fix the fees for the issuance of development permits and
locational clearances is exercised by the Housing and Land Use Regulatory Board (HLURB). Suffice it to state that the
HLURB itself recognizes the local government units’ power to collect fees related to land use and development.
Significantly, the HLURB issued locational guidelines governing telecommunications infrastructure.1âwphi1 Guideline
No. VI relates to the collection of locational clearance fees either by the HLURB or the concerned local government unit,
to wit:

VI. Fees

The Housing and Land Use Regulatory Board in the performance of its functions shall collect the locational clearance
fee based on the revised schedule of fees under the special use project as per Resolution No. 622, series of 1998 or by
the concerned LGUs subject to EO 72.26

On whether Ordinance No. 18 is valid and constitutional

Smart contends that Ordinance No. 18 violates Sections 130(b)(3)27 and 186 of the LGC since the fees are unjust,
excessive, oppressive and confiscatory. Aside from this bare allegation, Smart did not present any evidence
substantiating its claims. In Victorias Milling Co., Inc. v. Municipality of Victorias,28 the Court rejected the argument that
the fees imposed by respondent therein are excessive for lack of evidence supporting such claim, to wit:

An ordinance carries with it the presumption of validity. The question of reasonableness though is open to judicial
inquiry. Much should be left thus to the discretion of municipal authorities. Courts will go slow in writing off an ordinance
as unreasonable unless the amount is so excessive as to be prohibitive, arbitrary, unreasonable, oppressive, or
confiscatory. A rule which has gained acceptance is that factors relevant to such an inquiry are the municipal conditions
as a whole and the nature of the business made subject to imposition.

Plaintiff, has however not sufficiently proven that, taking these factors together, the license taxes are unreasonable. The
presumption of validity subsists. For, plaintiff has limited itself to insisting that the amounts levied exceed the cost of
regulation and the municipality has adequate funds for the alleged purposes as evidenced by the municipality’s cash
surplus for the fiscal year ending 1956.

On the constitutionality issue, Smart merely pleaded for the declaration of unconstitutionality of Ordinance No. 18 in the
Prayer of the Petition, without any argument or evidence to support its plea. Nowhere in the body of the Petition was
this issue specifically raised and discussed. Significantly, Smart failed to cite any constitutional provision allegedly
violated by respondent when it issued Ordinance No. 18.

Settled is the rule that every law, in this case an ordinance, is presumed valid. To strike down a law as unconstitutional,
Smart has the burden to prove a clear and unequivocal breach of the Constitution, which Smart miserably failed to do.
In Lawyers Against Monopoly and Poverty (LAMP) v. Secretary of Budget and Management, 29 the Court held, thus:

To justify the nullification of the law or its implementation, there must be a clear and unequivocal, not a doubtful, breach
of the Constitution. In case of doubt in the sufficiency of proof establishing unconstitutionality, the Court must sustain
legislation because "to invalidate [a law] based on xx x baseless supposition is an affront to the wisdom not only of the
legislature that passed it but also of the executive which approved it." This presumption of constitutionality can be
overcome only by the clearest showing that there was indeed an infraction of the Constitution, and only when such a
conclusion is reached by the required majority may the Court pronounce, in the discharge of the duty it cannot escape,
that the challenged act must be struck down.WHEREFORE, the Court DENIES the petition. SO ORDERED.
101
DIGEST:

 Respondent CBK Power Company Limited is a special purpose entity engaged in all aspects of (1) design,
 financing, construction, testing,

commissioning, operation, maintenance, management, and ownership of Kalayaan II pumped storage

hydroelectric power plant, the new Caliraya Spillway in Laguna; and (2) the rehabilitation,

expansion,commissioning,

operation, maintenance and management of the Caliraya,

Botocan, and Kalayaan I hydroelectric power plants and their related facilities in Laguna.

Respondent filed with the CTA a judicial claim for the issuance of a tax credit certificate in the amount of P17,784,968.91,
representing unutilized input taxes on its local purchases and importations of goods other than capital goods, local purchases
of services, payment of services rendered by non-residents, including unutilized amortized input taxes on capital goods
exceeding one million for the period of January 1, 2009 to March 31, 2009, all attributable to zero rated sales for the same
period, pursuant to Section 112 (A) of the 1997 Tax Code. The case was docketed as CTA Case No. 8246.

 Respondent filed another judicial claim for the issuance of a tax credit certificate in the amount of

P31,680,290.87, representing unutilized input taxes on its local purchases and importations of goods other than
capital goods, local purchases of services, including unutilized amortized input taxes on capital goods exceeding one
million for the period of April 1, 2009 to June 30, 2009, all attributable to the zero rated sales for the same period.
The case was docketed as CTA Case No. 8302.

 Respondent filed a motion for consolidation.



 The CTA granted the motion for consolidation and set the pre-trial conference on November 3, 2011. Atty. Mauricio
failed to appear at the scheduled pre-trial conference as he was on leave for health reasons from October to
December 2011. The pretrial was reset to December 1, 2011. Petitioner's counsel, Atty. Sandico, who was then
assigned to handle the consolidated cases, filed his consolidated pre-trial brief on November 15, 2011. However, on
the December 1, 2011 pre-trial conference, Atty. Sandico failed to appear, thus private respondent moved that
petitioner be declared in default.

Petitioner filed a Motion to Lift Order of Default alleging that the failure to attend the pre-trial conference on
November 3, 2011 was due to confusion in office procedure in relation to the consolidation of CTA Case No.
8246 with CTA Case No. 8302 since the latter was being handled by a different lawyer; that when the pre-trial

102
 conference was reset to December 1, 2011, petitioner's counsel, Atty. Sandico, had to attend the hearing of another
case in the CTA's First Division also at 9:00 a.m., hence, he unintentionally missed the pre-trial conference of the
consolidated cases.

 CTA issued the second assailed Resolution denying the motion to lift order of default.


 Petitioner filed a motion for reconsideration on April 27, 2012. The CTA denied the motion for reconsideration.
Petitioner files the instant petition for certiorari

ISSUE:

Whether or not there is no plain, speedy and adequate remedy in the ordinary course of law but the filing of a
petition for certiorari under Rule 65 of the Rules of Court?

RULING:

Private respondent claims that petitioner chose an erroneous remedy when it filed a petition for certiorari with us since
the proper remedy on any adverse resolution of any division of the CTA is an appeal by way of a petition for review with the
CTA en bane; that it is provided under Section 2 (a)(l) of Rule 4 of the Revised Rules of the Court of Tax Appeals (RRCTA)
that the Court en bane shall exercise exclusive appellate jurisdiction to review by appeal the decision or resolutions on
motions for reconsideration or new trial of the Court in division in the exercise of its exclusive appellate jurisdiction over
cases arising from administrative agencies such as the Bureau of Internal Revenue. The court is not persuaded.


There is no doubt that the CTA Order dated December 23, 2011 granting private respondent's motion to declare
petitioner as in default and allowing respondent to present its evidence ex parte, is an interlocutory order as it did not finally
dispose of the case on the merits but will proceed for the reception of the former's evidence to determine its entitlement to its
judicial claim for tax credit certificates. Even the CTA's subsequent orders denying petitioner's motion to lift order of default
and denying reconsideration thereof are all interlocutory orders since they pertain to the order of default.

Since the CTA Orders are merely interlocutory, no appeal can be taken therefrom. Section 1, Rule 41 of the 1997
Rules of Civil Procedure, as amended, which applies suppletorily to proceedings before the Court of Tax Appeals,
provides:

Section 1. Subject of appeal. - An appeal may be taken from a judgment or final order that completely disposes of the case, or of a
paiticular matter therein when declared by these Rules to be appealable.

No appeal may be taken from:

103
 xxxx

(c) An interlocutory order

Hence, petitioner's filing of the instant petition for certiorari assailing the interlocutory orders issued by the CTA
is in conformity with the above-quoted provision.

As to the merit of the petition, petitioner argues that the order declaring it as in default and allowing the ex-parte
presentation of private respondent's evidence was excessive as it has no intention of defying the scheduled pre-trial
conferences.

The petition for certiorari is granted. The consolidated cases are hereby remanded to the CTA Third
Division to give petitioner the chance to present evidence.

104
MITSUBISHI MOTORS PHILIPPINES CORPORATION, Petitioner, vs. BUREAU OF CUSTOMS, Respondents.
G.R. No. 209830 June 17, 2015 PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Resolutions dated June 7, 20132 and November 4, 20133of the
Court of Appeals (CA) in CA-G.R. CV No. 99594, which referred the records of the instant case to the Court of Tax
Appeals (CTA) for proper disposition of the appeal taken by respondent Bureau of Customs (respondent).

The Facts

The instant case arose from a collection suit4 for unpaid taxes and customs duties in the aggregate amount of
₱46,844,385.00 filed by respondent against petitioner Mitsubishi Motors Philippines Corporation (petitioner) before the
Regional Trial Court of Manila, Branch 17 (RTC),

docketed as Civil Case No. 02-103763 (collection case).

Respondent alleged that from 1997 to1998, petitioner was able to secure tax credit certificates (TCCs) from various
transportation companies; after which, it made several importations and utilized said TCCs for the payment of various
customs duties and taxes in the aggregate amount of ₱46,844,385.00.5 Believing the authenticity of the TCCs,
respondent allowed petitioner to use the same for the settlement of such customs duties and taxes. However, a post-
audit investigation of the Department of Finance revealed that the TCCs were fraudulently secured with the use of fake
commercial and bank documents, and thus, respondent deemed that petitioner never settled its taxes and customs
duties pertaining to the aforesaid importations.6 Thereafter, respondent demanded that petitioner pay its unsettled tax
and customs duties, but to no avail. Hence, it was constrained to file the instant complaint.7

In its defense,8 petitioner maintained, inter alia, that it acquired the TCCs from their original holders in good faith and
that they were authentic, and thus, their remittance to respondent should be considered as proper settlement of the
taxes and customs duties it incurred in connection with the aforementioned importations.9

Initially, the RTC dismissed10 the collection case due to the continuous absences of respondent’s counsel during
trial.11 On appeal to the CA,12 and eventually the Court,13 the said case was reinstated and trial on the merits continued
before the RTC.14

After respondent’s presentation of evidence, petitioner filed a Demurrer to Plaintiff’s Evidence15 on February 10, 2012,
essentially contending that respondent failed to prove by clear and convincing evidence that the TCCs were fraudulently
procured,16 and thus, prayed for the dismissal of the complaint.17 In turn, respondent filed an Opposition18 dated March
7, 2012 refuting petitioner’s contentions.

The RTC Ruling

In an Order19 dated April 10, 2012, the RTC granted petitioner’s Demurrer to Plaintiff’s Evidence, and accordingly,
dismissed respondent’s collection case on the ground of insufficiency of evidence.20 It found that respondent had not
shown any proof or substantial evidence of fraud or conspiracy on the part of petitioner in the procurement of the
TCCs.21 In this connection, the RTC opined that fraud is never presumed and must be established by clear and
convincing evidence, which petitioner failed to do, thus, necessitating the dismissal of the complaint.22

Respondent moved for reconsideration,23 which was, however, denied in an Order24 dated August 3, 2012. Dissatisfied,
it appealed25 to the CA.

105
 The CA Ruling

In a Resolution 26dated June 7, 2013, the CA referred the records of the collection case to the CTA for proper
disposition of the appeal taken by respondent.1âwphi1 While the CA admitted that it had no jurisdiction to take
cognizance of respondent’s appeal, as jurisdiction is properly lodged with the CTA, it nevertheless opted to relax
procedural rules in not dismissing the appeal outright.27 Instead, the CA deemed it appropriate to simply refer the matter
to the CTA, considering that the government stands to lose the amount of ₱46,844,385.00 in taxes and customs duties
which can then be used for various public works and projects.28

Aggrieved, petitioner filed a motion for reconsideration29 on June 23, 2013, arguing that since the CA does not have
jurisdiction over respondent’s appeal, it cannot perform any action on it except to order its dismissal. 30 The said motion
was, however, denied in a Resolution31 dated November 4, 2013, hence, this petition.

The Issue Before the Court

The core issue for the Court’s resolution is whether or not the CA correctly referred the records of the collection case to
the CTA for proper disposition of the appeal taken by respondent.

The Court's Ruling

The petition is meritorious.

Jurisdiction is defined as the power and authority of a court to hear, try, and decide a case.32 In order for the court or an
adjudicative body to have authority to dispose of the case on the merits, it must acquire, among others, jurisdiction over
the subject matter.33 It is axiomatic that jurisdiction over the subject matter is the power to hear and determine the
general class to which the proceedings in question belong; it is conferred by law and not by the consent or
acquiescence of any or all of the parties or by erroneous belief of the court that it exists.34 Thus, when a court has no
jurisdiction over the subject matter, the only power it has is to dismiss the action.35

Guided by the foregoing considerations and as will be explained hereunder, the Court finds that the CA erred in
referring the records of the collection case to the CTA for proper disposition of the appeal taken by respondent.

Section 7 of Republic Act No. (RA) 1125,36 as amended by RA 9282,37 reads:

Sec. 7. Jurisdiction. – The CTA shall exercise:

c. Jurisdiction over tax collection cases as herein provided:

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection cases originally
decided by them in their respective territorial jurisdiction.

Similarly, Section 3, Rule 4 of the Revised Rules of the Court of Tax Appeals, as amended,38 states:

Sec. 3. Cases within the jurisdiction of the Court in Divisions. – The Court in Divisions shall exercise:

c. Exclusive jurisdiction over tax collections cases, to wit:

2. Appellate jurisdiction over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax
collection cases originally decided by them within their respective territorial jurisdiction.
106
Verily, the foregoing provisions explicitly provide that the CTA has exclusive appellate jurisdiction over tax collection
cases originally decided by the RTC.

In the instant case, the CA has no jurisdiction over respondent’s appeal; hence, it cannot perform any action on the
same except to order its dismissal pursuant to Section 2, Rule 5039 of the Rules of Court. Therefore, the act of the CA in
referring respondent’s wrongful appeal before it to the CTA under the guise of furthering the interests of substantial
justice is blatantly erroneous, and thus, stands to be corrected. In Anderson v. Ho,40 the Court held that the invocation
of substantial justice is not a magic wand that would readily dispel the application of procedural rules, 41 viz.:

x x x procedural rules are designed to facilitate the adjudication of cases. Courts and litigants alike are enjoined to abide
strictly by the rules.1âwphi1 While in certain instances, we allow a relaxation in the application of the rules, we never
intend to forge a weapon for erring litigants to violate the rules with impunity. The liberal interpretation and application of
rules apply only in proper cases of demonstrable merit and under justifiable causes and circumstances. While it is true
that litigation is not a game of technicalities, it is equally true that every case must be prosecuted in accordance with the
prescribed procedure to ensure an orderly and speedy administration of justice. Party litigants and their counsels are
well advised to abide by rather than flaunt, procedural rules for these rules illumine the path of the law and rationalize
the pursuit of justice.42 (Emphasis and underscoring supplied)

Finally, in view of respondent’s availment of a wrong mode of appeal via notice of appeal stating that it was elevating
the case to the CA – instead of appealing by way of a petition for review to the CTA within thirty (30) days from receipt
of a copy of the RTC’s August 3, 2012 Order, as required by Section 11 of RA 1125, as amended by Section 9 of RA
928243 – the Court is constrained to deem the RTC's dismissal of respondent's collection case against petitioner final
and executory. It is settled that the perfection of an appeal in the manner and within the period set by law is not only
mandatory, but jurisdictional as well, and that failure to perfect an appeal within the period fixed by law renders the
judgment appealed from final and executory.44 The Court's pronouncement in Team Pacific Corporation v. Daza45 is
instructive on this matter, to wit:46

Although appeal is an essential part of our judicial process, it has been held, time and again, that the right thereto is not
a natural right or a part of due process but is merely a statutory privilege. Thus, the perfection of an appeal in the
manner and within the period prescribed by law is not only mandatory but also jurisdictional and failure of a party to
conform to the rules regarding appeal will render the judgment final and executory. Once a decision attains finality, it
becomes the law of the case irrespective of whether the decision is erroneous or not and no court - not even the
Supreme Court - has the power to revise, review, change or alter the same. The basic rule of finality of judgment is
grounded on the fundamental principle of public policy and sound practice that, at the risk of occasional error, the
judgment of courts and the award of quasi-judicial agencies must become final at some definite date fixed by law.

WHEREFORE, the petition is GRANTED. Accordingly, the Resolutions dated June 7, 2013 and November 4, 2013 of
the Court of Appeals (CA) in CA-G.R. CV No. 99594 are hereby REVERSED and SET ASIDE. Accordingly, a new one
is entered DISMISSING the appeal of respondent Bureau of Customs to the Court of Appeals. SO ORDERED.

DIGEST:

 The instant case arose from a collection suit for unpaid taxes and customs duties in the aggregate amount of
 P46,844,385.00 filed by

respondent against petitioner Mitsubishi Motors Philippines Corporation.



  Respondent alleged that from 1997 to1998, petitioner was able to secure tax credit certificates (TCCs)

from various transportation companies; after which, it made several importations and utilized said TCCs for the
payment of
107
 various customs duties and taxes in

the aggregate amount of P46,844,385.00. Believing the

authenticity of the TCCs, respondent allowed petitioner to use the same for the settlement of such customs duties and
taxes. However,

post-audit investigation of the Department of Finance revealed that the TCCs were fraudulently secured with the use of
fake commercial and bank documents, and thus, respondent deemed that petitioner never settled its taxes and customs
duties pertaining to the aforesaid importations.

  Initially, the RTC dismissed the collection case due to the

continuous absences of respondent’s counsel during trial.


On appeal to the CA, and eventually the Court, the said case was reinstated and trial on the merits continued
before the RTC.


  The RTC Ruling: the RTC granted petitioner’s Demurrer to Plaintiff’s

Evidence, and accordingly, dismissed respondent’s collection case on the ground of insufficiency of evidence.
The RTC opined that fraud is never presumed and must be established by clear and

convincing evidence, which petitioner failed to do, thus, necessitating the dismissal of the complaint.

 The CA Ruling: The CA referred the records of the collection case to the CTA for proper disposition of the
appeal taken by respondent while the CA admitted that it had no jurisdiction to take cognizance of respondent’s
appeal, as jurisdiction is properly lodged with the CTA, it nevertheless opted to relax procedural rules in not
dismissing the appeal outright.

ISSUE:

Whether or not the Court of Appeals correctly referred the records of the collection case to the Court of Tax
Appeals for proper disposition of the appeal taken by respondent?

RULING:

108
 The Court finds that the CA erred in referring the records of the collection case to the CTA for proper disposition
of the appeal taken by respondent.
When a court has no jurisdiction over the subject matter, the only power it has is to dismiss the action.

Section 7 of Republic Act No. (RA) 1125, as amended by RA 9282, reads:

Sec. 7. Jurisdiction. – The CTA shall exercise:

xxxx

c. Jurisdiction over tax collection cases as herein

provided:

xxxx

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection cases originally decided by
them in their respective territorial jurisdiction.

Section 3, Rule 4 of the Revised Rules of the Court of Tax Appeals, as amended, states:

Sec. 3. Cases within the jurisdiction of the Court in Divisions. – The Court in Divisions shall exercise: x x x x

c. Exclusive jurisdiction over tax collections cases,

to wit:

xxxx

2. Appellate jurisdiction over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection cases
originally decided by them within their respective territorial jurisdiction.

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

Finally, in view of respondent’s availment of a wrong mode of appeal via notice of appeal stating that it was elevating
the case to the CA – instead of appealing by way of a petition for review to the CTA within thirty (30) days from receipt of a

109
copy of the RTC’s August 3, 2012 Order, as required by Section 11 of RA 1125, as amended by Section 9 of RA 9282 – the
Court is constrained to deem the RTC's dismissal of respondent's collection case.

CHINA BANKING CORPORATION, Petitioner, vs. CITY TREASURER OF MANILA, Respondent.

G.R. No. 204117 July 1, 2015 MENDOZA, J.:

Before this Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court filed by petitioner China
Banking Corporation (CBC), assailing the April 17, 2012 Decision2 and the October 18, 2012 Resolution3 of the Court of
Tax Appeals En Banc (CTA En Banc), in CTA EB Case No. 738, which affirmed the October 1, 2010 Decision4 and the
February 22, 2011 Resolution5 of the Third Division of the Court of Tax Appeals (CTA Division) in CTA AC No. 66.
Through the assailed rulings, the claim by petitioner CBC for the refund of ₱154,398.50 collected by respondent City
Treasurer of Manila (City Treasurer)under Section 216 of Ordinance Nos. 79887 and 80118 was dismissed.

The facts, as chronicled by the CTA Division, are undisputed:

On January 2007, on the basis of the reported income of respondent CBC's Sto. Cristo Branch, Binondo, Manila,
amounting to ₱34,310,777.34 for the year ending December 31, 2006, respondent CBC was assessed the amount of
₱267,128.70 by petitioner City Treasurer of Manila, consisting of local business tax, business permits, and other fees
for taxable year 2007, broken down as follows:

Particulars Amount of Discount Amount

Taxes and
Fees Due

Tax on Coml ₱102,932.33 ₱10,293.33 ₱92,639.10

Bank

Tax on Rentals 54.00 5.40 48.60

of Equipt

Business 3,215.00 - 3,215.00

Permit Fee
(0801)

Business 1,200.00 - 1,200.00

Permit Fee
(079926)

Business 3,000.00 - 3,000.00

Permit Fee
(0802)

Sanitary 400.00 - 400.00

Inspection Fee

110
 Garbage Svcs 3,500.00 - 3,500.00
Charges

Occupational 2,880.00 - 2,880.00

Tax

OCC/PC/HC 5,640.00 - 5,640.00

Plumbing Insp 7.50 - 7.50

Fee

Electrical Insp 50.00 - 50.00

Fee

Building Insp 50.00 - 50.00

Fee

Signboard Insp 40.00 - 40.00

Fee

SEC 21 171,553.89 17,155.39 154,398.50

Business 60.00 - 60.00

Registration
Stick

TOTAL ₱294,582.72 ₱27,454.02 ₱267,128.70

On January 15, 2007, respondent CBC paid the amount of ₱267,128.70 and protested, thru a Letter dated January 12,
2007, the imposition of business tax under Section 21 of the Manila Revenue Code in the amount of ₱154,398.50, on
the ground that it is not liable of said additional business tax and the same constitutes double taxation.

On February 8, 2007, petitioner acknowledged receipt of respondent CBC 's payment under protest of the assessed
amount and further informed respondent that she will await for respondent’s formal protest.

On March 27, 2007, respondent CBC wrote a letter-reply to [respondent's] petitioner’s Letter dated February 8, 2007,
reiterating that respondent already protested the additional assessment under Section 21 of the Manila Revenue Code
in its Letter dated January 12, 2007. In the same Letter, respondent averred that pursuant to Section 195 of the Local
Government Code ("LGC ''), petitioner had until March 16, 2007 within which to decide the protest, and considering that
respondent received the Letter dated February 8, 2007, four days after the deadline to decide and petitioner did not
even resolve the protest, respondent formally demanded the refund of the amount of ₱154,398.50, representing the
business tax collected under Section 21 of the Manila Revenue Code.

On April 17, 2007, respondent CBC filed a Petition for Review with the RTC of Manila, Branch 173, entitled "China
Banking Corporation vs. Hon. Liberty M. Toledo in her capacity as City Treasurer of Manila," docketed as Civil Case No.
111
07-117075, raising the sole issue of whether or not respondent is subject to the local business tax imposed under
Section 21 of the Manila Revenue Code.

Decision of the Regional Trial Court

On August 28, 2008, the Regional Trial Court, Branch 173, Manila (RTC),rendered its decision9 granting the petition
filed by CBC and ordered the City Treasurer to refund the amount of ₱154,398.50, representing the assessment paid by
it under Section 21 of Manila Ordinance No. 7988,10 as amended by Tax Ordinance No. 8011.11

The RTC found that the City Treasurer had no basis to collect the amount of ₱154,398.50 because the Department of
Justice (DOJ) was of the opinion that Ordinance Nos. 7988 and 8011 were unconstitutional. It also considered the
decision in the case of Coca-Cola Bottlers Philippines, Inc. v. City of Manila,12 (Coca-Cola)and the Memorandum of
Rafaelito M. Garayblas,13 Secretary of the then Mayor of Manila, noting the unconstitutionality of Ordinance Nos. 7988
and 8011 and directing the City Treasurer to cease and desist from assessing and collecting the imposed taxes under
Section 21 of the said ordinances.

On March 29, 2010, the RTC resolved to deny the motion for reconsideration filed by the City Treasurer.14

Decision of the CTA Division

On October 1, 2010, the CTA Division15 reversed the decision of the RTC, effectively dismissing CBC’s protest against
the disputed assessment. Although the CTA Division dismissed the City Treasurer’s contention that CBC’s petition for
review should have been filed with the Metropolitan Trial Court (MeTC),nevertheless it found that the RTC did not have
jurisdiction over the said petition for because it was filed out of time. The CTA Division noted that the petition for review
was filed one (1) day beyond the reglementary period allowed by Section 195 of the Local Government Code16 (LGC)to
taxpayers who wished to appeal a denial of a protest due to the inaction of the City Treasurer. Consequently, the CTA
Division ruled that the City Treasurer’s assessment against CBC had attained finality.

CBC sought reconsideration of the decision, but its motion was denied by the CTA Division. 17 Aggrieved, CBC elevated
the matter to the CTA En Banc.

Decision of the CTA En Banc

On appeal, the CTA En Banc affirmed the ruling of the CTA Division in toto, reiterating that the petition for review was
filed out of time. It explained that from January 15, 2007, the date when CBC filed its protest, it had sixty (60) days or
until March 16, 2007 to await the decision of the City Treasurer. Considering that no action was taken by the City
Treasurer, CBC had until April 16, 2007 or 30 days from March 16, 2007,(April 15, 2007 being a Sunday), within which
to appeal the inaction of the City Treasurer with the RTC, pursuant to Section 195 of the LGC. Upon examination,
however, the CTA En Banc found that when CBC filed its petition for review before the RTC, it was already one day
late. Thus, it lost its right to appeal and the assessment, dated January 11, 2007, became conclusive and
unappealable. The CTA En Banc then concluded that CBC was precluded from interposing the defense of legality or
validity of the assessment.

CBC filed its motion for reconsideration of the said decision but the CTA En Banc denied the same.

On January 30, 2013, the Court denied the petition.18 Upon motion for reconsideration by CBC, the Court reinstated the
petition.19 Eventually, it was given due course and the parties were directed to file their respective memoranda.20

Hence, this petition.

ISSUE

112
THE HONORABLE COURT OF TAX APPEALS GRAVELY ERRED IN DISREGARDING THE LAW AND INTEREST
OF SUBSTANTIAL JUSTICE BY REVERSING THE RULING OF THE TRIAL COURT SOLELY BECAUSE OF ITS
ASSUMED PRONOUNCEMENT THAT THE ORIGINAL PETITION WAS FILED ONE (1) DAY BEYOND THE
REGLEMENTARY PERIOD?21

CBC asserts that it filed the proper written protest but for lack of any action from the City Treasurer, it was prompted to
file its petition for review with the RTC.22 The petitioner insists on the invalidity of the City Treasurer’s assessment. It
pointed out that the basis of the assessment, Ordinance Nos. 7988 and 8011, had been declared unconstitutional by
the Court in Coca-Cola, and that the Office of the Mayor of Manila even directed the City Treasurer to cease and desist
from assessing and imposing Section 21 of the said ordinances.23

For CBC, its one (1) day delay in filing its appeal with the RTC should have been excused by the CTA because the
delay was "not much of a heavy harm and was due to[the] honest mistake and excusable negligence"24 of its former
counsel.

In its Memorandum,25 CBC insisted on the invalidity of the City Treasurer’s assessment, this time, claiming that its
petition for review filed with the RTC was timely filed. It explained that the 60-day period within which the City Treasurer
should have acted on the protest, and the consequent 30-day period within which it had to appeal the inaction of the
City Treasurer should have been reckoned not from January 15, 2007, when it filed its letter questioning the imposition
and paid the assessed amount, but from March 27, 2007, the day it filed the letter reiterating its objection to the City
Treasurer imposition of ₱154,398.50 and demanding the return of the said amount. With the reckoning point being
March 27, 2007, CBC argued that the petition for review was filed well within the reglementary period because it had
until June 25, 2007 to file the said appeal.

CBC then reiterated its contention that even if it was guilty of delay, the same should have been excused because the
basis of the City Treasurer’s assessment, Ordinance Nos. 7988 and 8011, had been declared unconstitutional by the
Court in its decision in Coca-Cola.

For her part, the City Treasurer filed her Memorandum for the Respondent26 where she contended that CBC never filed
a formal letter of protest to state the grounds for its objection while admitting that it had paid the assessed amount
under protest. She claimed that CBC simply filed a petition for review with the RTC without filing a formal letter of
protest. Without a formal letter of protest, the City Treasurer argued that its claim for refund should be dismissed
because Section 195 of the Local Government Code stated that "No case or proceeding shall be maintained in any
court for recovery of any tax, fee or charged erroneously or illegally collected until a written claim for refund has been
filed with the local treasurer."

The City Treasurer also questioned the jurisdiction of the RTC in entertaining the petition for review filed before it as
well as the timeliness of the filing of the petitioner’s appeal.

The Court's Ruling

Protest validly filed

The petition lacks merit.

Under the current state of law, there can be no doubt that the law does not prescribe any formal requirement to
constitute a valid protest. To constitute a valid protest, it is sufficient if what has been filed contains the spontaneous
declaration made to acquire or keep some right or to prevent an impending damage.27 Accordingly, a protest is valid so
long as it states the taxpayer’s objection to the assessment and the reasons therefor.

In this case, the Court finds that the City Treasurer’s contention that CBC was not able to properly protest the
assessment to be without merit. The Court is of the view that CBC was able to properly file its protest against the
113
assessment of the City Treasurer when it filed its letter on January 15, 2007, questioning the imposition while paying
the assessed amount. In the said letter, the petitioner was unequivocal in its objection, stating that it took exception to
the assessment made by the City Treasurer under Section 21 of the city’s revenue code, arguing that it was not liable to
pay the additional tax imposed under the subject ordinance and that the imposition "constitute[d] double taxation" and,
for said reason, invalid. Despite its objection, it remitted the total amount of ₱267,128.70 under protest "to avoid
penalties/surcharges and any threat of closure."28

The Court, however, is of the view that the period within which the City Treasurer must act on the protest, and the
consequent period to appeal a "denial due to inaction," should be reckoned from January 15, 2007, the date CBC filed
its protest, and not March 27, 2007. Consequently, the Court finds that the CTA En Banc did not err in ruling that CBC
had lost its right to challenge the City Treasurer’s "denial due to inaction." On this matter, Section 195 of the LGC is
clear:

SECTION 195. Protest of Assessment. -When the local treasurer or his duly authorized representative finds that correct
taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee or
charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from the receipt of the
notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment;
otherwise, the assessment shall become final and executory. The local treasurer shall decide the protest within sixty
(60) days from the time of its filing . If the local treasurer finds the protest to be wholly or partly meritorious, he shall
issue a notice canceling wholly or partially the assessment. However, if the local treasurer finds the assessment to be
wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have
thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60)-day period prescribed
herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive
and unappealable.

Time and again, it has been held that the perfection of an appeal in the manner and within the period laid down by law
is not only mandatory but also jurisdictional. The failure to perfect an appeal as required by the rules has the effect of
defeating the right to appeal of a party and precluding the appellate court from acquiring jurisdiction over the case. At
the risk of being repetitious, the Court declares that the right to appeal is not a natural right nor a part of due process. It
is merely a statutory privilege, and may be exercised only in the manner and in accordance with the provisions of the
law.29

CBC’s Inconsistent Position on Late Filing

It bears pointing that when CBC first sought aid from this Court, it recognized the belated filing of its appeal with the
RTC when it sought the Court’s leniency in the application of the rules on appeal. In its petition for review before this
Court, CBC posited that under the circumstances obtaining in this case, the rules on appeal should not have been
applied so rigorously, especially since the delay of one (1) day was due solely to "the honest mistake and excusable
negligence" of its former counsel.30

As stated above, however, CBC, in its Memorandum, now asserts that its appeal was filed on time. The Court cannot
help but frown upon CBC’s vain attempt to confuse the Court, by varying its position and raising the argument for the
first time in its memorandum that its appeal was timely filed.

RTC has no jurisdiction

At any rate, even if the Court considers CBC’s appeal from the "denial due to inaction" by the City Treasurer to have
been timely filed, the same must be dismissed because it was not filed with a court of competent jurisdiction. In its
decision, it appears that the CTA Division relied heavily on the case of Yamane v. BA Lepanto Condominium
Corporation31 (Yamane) in sustaining CBC’s assertion that the RTC had jurisdiction to entertain its appeal. A reading of
the Court’s decision in Yamane discloses that it cannot be cited as authority.

114
In Yamane, respondent BA Lepanto Condominium Corporation (BLCC)sought to recover ₱1,601,013.77 (within the
jurisdictional amount of the RTC), representing the amount it paid to petitioner Luz R. Yamane (petitioner Yamane), the
City Treasurer of Makati for city business taxes, fees and charges it owed for the years 1995 to 1997. With the rejection
by petitioner Yamane and the RTC of its claim, BLCC appealed to the CA via a petition for review under Rule 42. As
petitioner Yamane questioned the mode of appeal taken by BLCC, one of the issues raised before this Court was the
nature of the jurisdiction of the RTC over appeals from decisions of the city treasurer involving assessments imposed by
the latter. Explaining the nature of the jurisdiction of the RTC, the Court, in Yamane explained:

First, we dispose of the procedural issue, which essentially boils down to whether the RTC, in deciding an appeal taken
from a denial of a protest by a local treasurer under Section 195 of the Local Government Code, exercises "original
jurisdiction" or "appellate jurisdiction." The question assumes a measure of importance to this petition, for the adoption
of the position of the City Treasurer that the mode of review of the decision taken by the RTC is governed by Rule 41 of
the Rules of Civil Procedure means that the decision of the RTC would have long become final and executory by
reason of the failure of the Corporation to file a notice of appeal.

There are discernible conflicting views on the issue. The first, as expressed by the Court of Appeals, holds that the
RTC, in reviewing denials of protests by local treasurers, exercises appellate jurisdiction. This position is anchored on
the language of Section 195 of the Local Government Code which states that the remedy of the taxpayer whose protest
is denied by the local treasurer is "to appeal with the court of competent jurisdiction." Apparently though, the Local
Government Code does not elaborate on how such "appeal" should be undertaken.

The other view, as maintained by the City Treasurer, is that the jurisdiction exercised by the RTC is original in
character.1âwphi1 This is the first time that the position has been presented to the court for adjudication. Still, this
argument does find jurisprudential mooring in our ruling in Garcia v. De Jesus, where the Court proffered the following
distinction between original jurisdiction and appellate jurisdiction: "Original jurisdiction is the power of the Court to take
judicial cognizance of a case instituted for judicial action for the first time under conditions provided by law. Appellate
jurisdiction is the authority of a Court higher in rank to re-examine the final order or judgment of a lower Court which
tried the case now elevated for judicial review."

The quoted definitions were taken from the commentaries of the esteemed Justice Florenz Regalado. With the
definitions as beacon, the review taken by the RTC over the denial of the protest by the local treasurer would fall within
that court’s original jurisdiction. In short, the review is the initial judicial cognizance of the matter. Moreover, labelling the
said review as an exercise of appellate jurisdiction is inappropriate, since the denial of the protest is not the judgment or
order of a lower court, but of a local government official.

The stringent concept of original jurisdiction may seemingly be neutered by Rule 43 of the 1997Rules of Civil
Procedure, Section 1 of which lists a slew of administrative agencies and quasi-judicial tribunals or their officers whose
decisions may be reviewed by the Court of Appeals in the exercise of its appellate jurisdiction. However, the basic law
of jurisdiction, Batas Pambansa Blg. 129 (B.P. 129), ineluctably confers appellate jurisdiction on the Court of Appeals
over final rulings of quasi-judicial agencies, instrumentalities, boards or commission, by explicitly using the phrase
"appellate jurisdiction." The power to create or characterize jurisdiction of courts belongs to the legislature. While the
traditional notion of appellate jurisdiction connotes judicial review over lower court decisions, it has to yield to statutory
redefinitions that clearly expand its breadth to encompass even review of decisions of officers in the executive branches
of government.

Yet significantly, the Local Government Code, or any other statute for that matter, does not expressly confer appellate
jurisdiction on the part of regional trial courts from the denial of a tax protest by a local treasurer. On the other hand,
Section 22 of B.P. 129 expressly delineates the appellate jurisdiction of the Regional Trial Courts, confining as it does
said appellate jurisdiction to cases decided by Metropolitan, Municipal, and Municipal Circuit Trial Courts. Unlike in the
case of the Court of Appeals, B.P. 129 does not confer appellate jurisdiction on Regional Trial Courts over rulings made
by non-judicial entities.32

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Thus, although the Court in Yamane recognized that the RTC exercised its original jurisdiction over cases decided by a
local treasurer, it was quick to point out that with the advent of Republic Act (R.A.)No. 9282, the jurisdiction of the RTC
over such cases is no longer simply original and exclusive. The Court explained:

From these premises, it is evident that the stance of the City Treasurer is correct as a matter of law, and that the proper
remedy of the Corporation from the RTC judgment is an ordinary appeal under Rule 41 to the Court of Appeals.
However, we make this pronouncement subject to two important qualifications. First, in this particular case there are
nonetheless significant reasons for the Court to overlook the procedural error and ultimately uphold the adjudication of
the jurisdiction exercised by the Court of Appeals in this case. Second, the doctrinal weight of the pronouncement is
confined to cases and controversies that emerged prior to the enactment of Republic Act No. 9282, the law which
expanded the jurisdiction of the Court of Tax Appeals (CTA).

Republic Act No. 9282 definitively proves in its Section 7(a)(3) that the CTA exercises exclusive appellate jurisdiction to
review on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax cases original decided or
resolved by them in the exercise of their original or appellate jurisdiction. Moreover, the provision also states that the
review is triggered "by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the
1997 Rules of Civil Procedure."

Republic Act No. 9282, however, would not apply to this case simply because it arose prior to the effectivity of that law.
To declare otherwise would be to institute a jurisdictional rule derived not from express statutory grant, but from
implication. The jurisdiction of a court to take cognizance of a case should be clearly conferred and should not be
deemed to exist on mere implications, and this settled rule would be needlessly emasculated should we declare that the
Corporation’s position is correct in law.33

[Emphases and Underscoring Supplied]

Clearly, with the passage of R.A. No. 9282, the authority to exercise either original or appellate jurisdiction over local tax
cases depended on the amount of the claim. In cases where the RTC exercises appellate jurisdiction, it necessarily
follows that there must be a court capable of exercising original jurisdiction – otherwise there would be no appeal over
which the RTC would exercise appellate jurisdiction. The Court cannot consider the City Treasurer as the entity that
exercises original jurisdiction not only because it is not a "court" within the context of Batas Pambansa (B.P.)Blg. 129,
but also because, as explained above, "B.P. 129 expressly delineates the appellate jurisdiction of the Regional Trial
Courts, confining as it does said appellate jurisdiction to cases decided by Metropolitan, Municipal, and Municipal
Circuit Trial Courts." Verily, unlike in the case of the CA, B.P. 129 does not confer appellate jurisdiction on the RTC over
rulings made by non-judicial entities. The RTC exercises appellate jurisdiction only from cases decided by the
Metropolitan, Municipal, and Municipal Circuit Trial Courts in the proper cases. The nature of the jurisdiction exercised
by these courts is original, considering it will be the first time that a court will take judicial cognizance of a case instituted
for judicial action. Indeed, in cases where the amount sought to be refunded is below the jurisdictional amount of the
RTC, the Metropolitan, Municipal, and Municipal Circuit Trial Courts are clothed with ample authority to rule on such
claims. As Section 33(1),34 B.P. 129, as amended provides:

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil
Cases. – Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:

(1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate, including the grant of
provisional remedies in proper cases, where the value of the personal property, estate, or amount of the demand does
not exceed One hundred thousand pesos (₱100,000.00) or, in Metro Manila where such personal property, estate, or
amount of the demand does not exceed Two hundred thousand pesos (₱200,000.00) x x x x

The fact that the Metropolitan, Municipal, and Municipal Circuit Trial Courts exercise jurisdiction is one that even
petitioner CBC recognizes. As aptly pointed by the City Treasurer, in several claims below the jurisdictional amount of
the RTC, the petitioners had sought relief by filing their claim for refund with the first level courts:
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 Civil Case No. Court Amount Claimed by
Petitioner

183817-CV35 MeTC Manila, Branch 30 ₱342,350.77

175168-CV36 MeTC Manila, Branch 25 3,000.00

175169-CV37 MeTC Manila, Branch 25 10,844.92

175171-CV38 MeTC Manila, Branch 28 18,947.67

175172-CV39 MeTC Manila, Branch 28 72,693.55

175175-CV40 MeTC Manila, Branch 1 41,536.48

175178-CV41 MeTC Manila, Branch 23 26,782.06

In all, the Court finds that the claim of petitioner CBC for refund should be dismissed not only for being filed out of time
but also for not being filed before a court of competent jurisdiction.

Lest it be misunderstood, this Court is not reversing its pronouncements in Coca-Cola Bottlers Philippines, Inc. v. City of
Manila,42 The City of Manila v. Coca-Cola Bottlers, Inc.43 and City of Manila v. Coca-Cola Bottlers, Inc.44that Ordinance
Nos. 7988 and 8011 are invalid. This Court is simply pointing out the rule that claims for refunds are the exception,
rather than the rule, and that each claim for refund, in order to be granted, must be proceeded in accordance with the
manner set forth by law. After all, in every claim for refund of taxes paid, the burden is on the taxpayer to show that he
has strictly complied with the conditions for the grant of the tax refund or credit.45

WHEREFORE, the petition is DENIED. SO ORDERED.

DIGEST:

Petitioner, China Banking Corporation (CBC) is a universal bank duly organized and existing under the laws of the
Philippines. For the taxable years 1982 to 1986, CBC was engaged in transactions involving sales of foreign exchange
to the Central Bank of the Philippines (now Bangko Sentral ng Pilipinas), commonly known as SWAP transactions.
Petitioner did not file tax returns or pay tax on the SWAP transactions for those taxable years.

• Petitioner received an assessment from the Bureau of Internal Revenue (BIR) finding CBC liable for deficiency
documentary stamp tax (DST) on the sales of foreign bills of exchange to the Central Bank.

• On 8 May 1989, petitioner, through its vice-president, sent a letter of protest to the BIR. On 6 December 2001,
more than 12 years after the filing of the protest, the Commissioner of Internal Revenue (CIR) rendered a decision

117
reiterating the deficiency DST assessment and ordered the payment thereof plus increments within 30 days from
receipt of the Decision.

• CBC filed a Petition for Review with the CTA. The CTA Second Division denied the Petition of CBC. The CTA
ruled that a SWAP arrangement should be treated as a telegraphic transfer subject to documentary stamp tax.

• Petitioner appealed to the CTA En Banc. The appellate tax court, however, dismissed the Petition for Review in
a Decision dated 1 December 2005. CBC filed a Motion for Reconsideration on 21 December 2005, but it was denied in
a 20 March 2006 Resolution. The taxpayer now comes to this Court with a Rule 45 Petition, reiterating the arguments it
raised at the CTA level and invoking for the first time the argument of prescription.

ISSUE:

Whether or not the right of the BIR to collect the assessed DST from CBC is barred by prescription?

RULING:

The court grants the Petition on the ground that the right of the BIR to collect the assessed DST is barred by the statute
of limitations.

The Bureau of Internal Revenue (BIR) issued the assessment for deficiency DST on 19 April 1989, when the applicable
rule was Section 319(c) of the National Internal Revenue Code of 1977, as amended. In that provision, the time limit for
the government to collect the assessed tax is set at three years, to be reckoned from the date when the BIR
mails/releases/sends the assessment notice to the taxpayer. Further, Section 319(c) states that the assessed tax must
be collected by distraint or levy and/or court proceeding within the three-year period.

In this case, the records do not show when the assessment notice was mailed, released or sent to CBC. Nevertheless,
the latest possible date that the BIR could have released, mailed or sent the assessment notice was on the same date
that CBC received it, 19 April 1989. Assuming therefore that 19 April 1989 is the reckoning date, the BIR had three
years to collect the assessed DST. However, the records of this case show that there was neither a warrant of distraint
or levy served on CBC's properties nor a collection case filed in court by the BIR within the three-year period.

The attempt of the BIR to collect the tax through its Answer with a demand for CBC to pay the assessed DST in the
CTA on 11 March 2002 did not comply with Section 319(c) of the 1977 Tax Code, as amended. The demand was made
almost thirteen years from the date from which the prescriptive period is to be reckoned. Thus, the attempt to collect the
tax was made way beyond the three-year prescriptive period.

The running of the statute of limitations was not suspended by the request for reinvestigation.

The fact that the taxpayer in this case may have requested a reinvestigation did not toll the running of the three-year
prescriptive period. Section 320 of the 1977 Tax Code states:

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“Sec. 320. Suspension of running of statute.—The running of the statute of limitations provided in Sections 318 or 319
on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of
any deficiency, shall be suspended for the period during which the Commissioner is prohibited from making the
assessment or beginning distraint or levy or a proceeding in court and for sixty days thereafter; when the taxpayer
requests for a re-investigation which is granted by the Commissioner; when the taxpayer cannot be located in the
address given by him in the return filed upon which a tax is being assessed or collected: Provided, That if the taxpayer
informs the Commissioner of any change in address, the running of the statute of limitations will not be suspended;
when the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative, or a member of
his household with sufficient discretion, and no property could be located; and when the taxpayer is out of the
Philippines.”

A request for reinvestigation alone will not suspend the statute of limitations.Two things must concur: there must be a
request for reinvestigation and the CIR must have granted it. In the present case, there is no showing from the records
that the CIR ever granted the request for reinvestigation filed by CBC. That being the case, it cannot be said that the
running of the three-year prescriptive period was effectively suspended.

In this case, petitioner may have raised the question of prescription only on appeal to this Court. The BIR could have
crushed the defense by the mere invocation of the rule against setting up the defense of prescription only at the appeal
stage. The government, however, failed to do so. On the contrary, the BIR was silent despite having the opportunity to
invoke the bar against the issue of prescription. A new ruling is entered DENYING respondent's claim for deficiency
DST in the amount of P11,383,165.50.

COMMISSION OF INTERNAL REVENUE, Petitioner, vs. COURT OF TAX APPEALS (SECOND DIVISION) and
PETRON CORPORATION,* Respondents. G.R. No. 207843 July 15, 2015 PERLAS-BERNABE, J.:

Assailed in this petition for certiorari1 are the Resolutions dated February 13, 20132 and May 8, 20133 of the Court of
Tax Appeals, Second Division (CTA) in CTA Case No. 8544 reversing and setting aside the earlier dismissal of the
petition for review filed by private respondent Petron Corporation (Petron) in the said case on the bases of prematurity
and lack of jurisdiction.

The Facts

Petron, which is engaged in the manufacture and marketing of petroleum products, imports alkylate as a raw material or
blending component for the manufacture of ethanol-blended motor gasoline.4 For the period January 2009 to August
2011, as well as for the month of April 2012, Petron transacted an aggregate of 22 separate importations for which
petitioner the Commissioner of Internal Revenue (CIR) issued Authorities to Release Imported Goods (ATRIGs),
categorically stating that Petron's importation of alkylate is exempt from the payment of the excise tax because it was
not among those articles enumerated as subject to excise tax under Title VI of Republic Act No. (RA) 8424, 5 as
amended, or the 1997 National Internal Revenue Code (NIRC). With respect, however, to Petron's alkylate importations
covering the period September 2011 to June 2012 (excluding April 2012), the CIR inserted, without prior notice, a
reservation for all ATRIGs issued,6 stating that:

This is without prejudice to the collection of the corresponding excise taxes, penalties and interest depending on the
final resolution of the Office of the Commissioner on the issue of whether this item is subject to the excise taxes under
the National Internal Revenue Code of 1997, as amended.7

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

[A]lkylate which is a product of distillation similar to that of naphta, is subject to excise tax under Section 148( e) of the
National Internal Revenue Code (NIRC) of 1997. 9

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

On October 5, 2012, the CIR filed a motion to dismiss on the grounds of lack of jurisdiction and prematurity. 11

Initially, in a Resolution12 dated November 15, 2012, the CTA granted the CIR's motion and dismissed the case.
However, on Petron's motion for reconsideration,13 it reversed its earlier disposition in a Resolution14 dated February 13,
2013, and eventually denied the CIR's motion for reconsideration15 therefrom in a Resolution16dated May 8, 2013. In
effect, the CTA gave due course to Petron's petition, finding that: (a) the controversy was not essentially for the
determination of the constitutionality, legality or validity of a law, rule or regulation but a question on the propriety or
soundness of the CIR's interpretation of Section 148 (e) of the NIRC which falls within the exclusive jurisdiction of the
CTA under Section 4 thereof, particularly under the phrase "other matters arising under [the NIRC]"; 17 and (b) there are
attending circumstances that exempt the case from the rule on non-exhaustion of administrative remedies, such as the
great irreparable damage that may be suffered by Petron from the CIR's final assessment of excise tax on its
importation.18

Aggrieved, the CIR sought immediate recourse to the Court, through the instant petition, alleging that the CTA
committed grave abuse of discretion when it assumed authority to take cognizance of the case despite its lack of
jurisdiction to do so.19

The Issue Before the Court

The core issue to be resolved is whether or not the CTA properly assumed jurisdiction over the petition assailing the
imposition of excise tax on Petron's importation of alkylate based on Section 148 (e) of the NIRC.

The Court's Ruling

The petition is meritorious.

The CIR asserts that the interpretation of the subject tax provision, i.e., Section 148 (e) of the NIRC, embodied in CMC
No. 164-2012, is an exercise of her quasi-legislative function which is reviewable by the Secretary of Finance, whose
decision, in turn, is appealable to the Office of

the President and, ultimately, to the regular courts, and that only her quasi-judicial functions or the authority to decide
disputed assessments, refunds, penalties and the like are subject to the exclusive appellate jurisdiction of the
CTA.20 She likewise contends that the petition suffers from prematurity due to Petron 's failure to exhaust all available
remedies within the administrative level in accordance with the Tariff and Customs Code (TCC).21

The CIR's position is well-grounded.

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Section 4 of the NIRC confers upon the CIR both: (a) the power to interpret tax laws in the exercise of her quasi-
legislative function; and (b) the power to decide tax cases in the exercise of her quasi-judicial function. It also delineates
the jurisdictional authority to review the validity of the CIR's exercise of the said powers, thus:

SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to interpret the
provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner,
subject to review by the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed
in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau
of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax
Appeals. (Emphases and underscoring supplied)

The CTA is a court of special jurisdiction, with power to review by appeal decisions involving tax disputes rendered by
either the CIR or the COC.1âwphi1 Conversely, it has no jurisdiction to determine the validity of a ruling issued by the
CIR or the COC in the exercise of their quasi-legislative powers to interpret tax laws. These observations may be
deduced from a reading of Section 7 of RA 1125,22 as amended by RA 9282,23 entitled "An Act Creating the Court of
Tax Appeals," enumerating the cases over which the CT A may exercise its jurisdiction:

Sec. 7. Jurisdiction. -The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising
under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising
under the National Internal Revenue Code or other laws administered by the Bureau of Internal
Revenue, where the National Internal Revenue Code provides a specific period of action, in which case
the inaction shall be deemed a denial;

3. Decisions, orders or resolutions of the Regional Trial Comis in local tax cases originally decided or
resolved by them in the exercise of their original or appellate jurisdiction;

4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other
money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in
relation thereto, or other matters arising under the Customs Law or other laws administered by the
Bureau of Customs;

5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over
cases involving the assessment and taxation of real property originally decided by the provincial or city
board of assessment appeals;

6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from
decisions of the Commissioner of Customs which are adverse to the Government under Section 2315 of
the Tariff and Customs Code;

7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or
article, and the Secretary of Agriculture in the case of agricultural product, commodity or article, involving
dumping and countervailing duties under Section 301 and 302, respectively, of the Tariff and Customs
121
 Code, and safeguard measures under Republic Act No. 8800, where either party may appeal the
decision to impose or not to impose said duties.

b. Jurisdiction over cases involving criminal offenses as herein provided:

1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National Internal
Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of Internal
Revenue or the Bureau of Customs: Provided, however, That offenses or felonies mentioned in this
paragraph where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is
less than One million pesos (₱1,000,000.00) or where there is no specified amount claimed shall be tried
by the regular Courts and the jurisdiction of the CTA shall be appellate. Any provision of law or the Rules
of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the
recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with, and
jointly determined in the same proceeding by the CT A, the filing of the criminal action being deemed to
necessarily carry with it the filing of the civil action, and no right to reserve the filling of such civil action
separately from the criminal action will be recognized.

2. Exclusive appellate jurisdiction in criminal offenses:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax
cases originally decided by them, in their respective territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in
the exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan
Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in their respective
jurisdiction.

c. Jurisdiction over tax collection cases as herein provided:

1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees,
charges and penalties: Provided, however, That collection cases where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is less than One million pesos (₱1,000,000.00) shall be tried by the
proper Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court.

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection
cases originally decided by them, in their respective territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
exercise of their appellate jurisdiction over tax collection cases originally decided by the Metropolitan
Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction.
(Emphasis supplied)

In this case, Petron's tax liability was premised on the COC's issuance of CMC No. 164-2012, which gave effect to the
CIR's June 29, 2012 Letter interpreting Section 148 (e) of the NIRC as to include alkyl ate among the articles subject to
customs duties, hence, Petron's petition before the CTA ultimately challenging the legality and constitutionality of the
CIR's aforesaid interpretation of a tax provision. In line with the foregoing discussion, however, the CIR correctly argues
that the CT A had no jurisdiction to take cognizance of the petition as its resolution would necessarily involve a
declaration of the validity or constitutionality of the CIR's interpretation of Section 148 (e) of the NIRC, which is subject
to the exclusive review by the Secretary of Finance and ultimately by the regular courts. In British American Tobacco v.

122
Camacho,24 the Court ruled that the CTA's jurisdiction to resolve tax disputes excludes the power to rule on the
constitutionality or validity of a law, rule or regulation, to wit:

While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not include cases
where the constitutionality of a law or rule is challenged. Where what is assailed is the validity or constitutionality of a
law, or a rule or regulation issued by the administrative agency in the performance of its quasi-legislative function, the
regular courts have jurisdiction to pass upon the same. x x x.25

In asserting its jurisdiction over the present case, the CTA explained that Petron's petition filed before it "simply puts in
question" the propriety or soundness of the CIR's interpretation and application of Section 148 (e) of the NIRC (as
embodied in CMC No. 164-2012) "in relation to" the imposition of excise tax on Petron's importation of alkylate; thus,
the CTA posits that the case should be regarded as "other matters arising under [the NIRC]" under the second
paragraph of Section 4 of the NIRC, therefore falling within the CTA's jurisdiction: 26

SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to interpret the
provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner,
subject to review by the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed
in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau
of Internal Revenue is vested in the commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax
Appeals. (Emphases and underscoring supplied)

The Court disagrees.

As the CIR aptly pointed out, the phrase "other matters arising under this Code," as stated in the second paragraph of
Section 4 of the NIRC, should be understood as pertaining to those matters directly related to the preceding phrase
"disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto"
and must therefore not be taken in isolation to invoke the jurisdiction of the CTA. 27 In other words, the subject phrase
should be used only in reference to cases that are, to begin with, subject to the exclusive appellate jurisdiction of the
CTA, i.e., those controversies over which the CIR had exercised her quasi-judicial functions or her power to decide
disputed assessments, refunds or internal revenue taxes, fees or other charges, penalties imposed in relation thereto,
not to those that involved the CIR's exercise of quasi-legislative powers.

In Enrile v. Court of Appeals,28 the Court, applying the statutory construction principle of ejusdem generis,29explained
the import of using the general clause "other matters arising under the Customs Law or other law or part of law
administered by the Bureau of Customs" in the enumeration of cases subject to the exclusive appellate jurisdiction of
the CTA, saying that: [T]he 'other matters' that may come under the general clause should be of the same nature as
those that have preceded them applying the rule of construction known as ejusdem generis.30(Emphasis and
underscoring supplied)

Hence, as the CIR's interpretation of a tax provision involves an exercise of her quasi-legislative functions, the proper
recourse against the subject tax ruling expressed in CMC No. 164-2012 is a review by the Secretary of Finance and
ultimately the regular courts. In Commissioner of Customs v. Hypermix Feeds Corporation, 31 the Court has held that:

The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law or
the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review
or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction,
ordinance, or regulation in the courts, including the regional trial courts. This is within the scope of judicial power, which
includes the authority of the courts to determine in an appropriate action the validity of the acts of the political
departments. x x x.32

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Besides, Petron prematurely invoked the jurisdiction of the CT A. Under Section 7 of RA 1125, as amended by RA
9282, what is appealable to the CT A is the decision of the COC over a customs collector's adverse ruling on a
taxpayer's protest:

SEC. 7. Jurisdiction. -The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal
Revenue or other laws administered by the Bureau of Internal Revenue;

4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money
charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or
other matters arising under the Customs Law or other laws administered by the Bureau of Customs;

Section 11 of the same law is no less categorical in stating that what may be the subject of an appeal to the CT A is a
decision, ruling or inaction of the CIR or the COC, among others:

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. – Any party adversely affected by a decision, ruling or
inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the
Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the
Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling
or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein.

In this case, there was even no tax assessment to speak of. While customs collector Federico Bulanhagui himself
admitted during the CTA's November 8, 2012 hearing that the computation he had written at the back page of the IEIRD
served as the final assessment imposing excise tax on Petron's importation of alkylate,33 the Court concurs with the
CIR's stance that the subject IEIRD was not yet the customs collector's final assessment that could be the proper
subject of review. And even if it were, the same should have been brought first for review before the COC and not
directly to the CTA. It should be stressed that the CTA has no jurisdiction to review by appeal, decisions of the customs
collector.34 The TCC prescribes that a party adversely affected by a ruling or decision of the customs collector may
protest such ruling or decision upon payment of the amount due35 and, if aggrieved by the action of the customs
collector on the matter under protest, may have the same reviewed by the COC.36 It is only after the COC shall have
made an adverse ruling on the matter may the aggrieved party file an appeal to the CT A.37

Notably, Petron admitted to not having filed a protest of the assessment before the customs collector and elevating a
possible adverse ruling therein to the COC, reasoning that such a procedure would be costly and impractical, and would
unjustly delay the resolution of the issues which, being purely legal in nature anyway, were also beyond the authority of
the customs collector to resolve with finality.38 This admission is at once decisive of the issue of the CTA's jurisdiction
over the petition. There being no protest ruling by the customs collector that was appealed to the COC, the filing of the
petition before the CTA was premature as there was nothing yet to review.39

Verily, the fact that there is no decision by the COC to appeal from highlights Petron's failure to exhaust administrative
remedies prescribed by law. Before a party is allowed to seek the intervention of the courts, it is a pre-condition that he
avail of all administrative processes afforded him, such that if a remedy within the administrative machinery can be
resorted to by giving the administrative officer every opportunity to decide on a matter that comes within his jurisdiction,
then such remedy must be exhausted first before the court's power of judicial review can be sought, otherwise, the
premature resort to the court is fatal to one's cause of action.40 While there are exceptions to the principle of exhaustion
of administrative remedies, it has not been sufficiently shown that the present case falls under any of the exceptions.

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

DIGEST:

• Petron, which is engaged in the manufacture and marketing ofpetroleum products, imports alkylate as a raw
material or blending component for the manufacture of ethanol-blended motor gasoline. For the period January 2009 to
August 2011, as well as for the month of April 2012, Petron transacted an aggregate of 22 separate importations for
which petitioner the Commissioner of Internal Revenue (CIR) issued Authorities to Release Imported Goods (ATRIGs),
categorically stating that Petron's importation of alkylate is exempt from the payment of the excise tax.

• In June 2012, Petron imported 12,802,660 liters of alkylate and paid value-added tax (VAT) in the total amount
of 41,657,533.00 as evidenced by Import Entry and Internal Revenue Declaration (IEIRD) No. SN 122406532. Based
on the Final Computation, said importation was subjected by the Collector of Customs of Port Limay, Bataan, upon
instructions of the Commissioner of Customs (COC), to excise taxes of P4.35 per liter, or in the aggregate amount of
P55,691,571.00, and consequently, to an additional VAT of 12% on the imposed excise tax in the amount of
P6,682,989.00. The imposition of the excise tax was supposedly premised on Customs Memorandum Circular (CMC)
No. 164-2012 dated July 18, 2012, implementing the Letter dated June 29, 2012 issued by the CIR, which states that:
Alkylate which is a product of distillation similar to that of naphta, is subject to excise tax under Section 148(e) of the
National Internal Revenue Code (NIRC) of 1997.

• In view of the CIR's assessment, Petron filed before the CTA a petition for review, docketed as CTA Case No.
8544, raising the issue of whether its importation of alkylate as a blending component is subject to excise tax as
contemplated under Section 148 (e) of the NIRC. CIR filed a motion to dismiss on the grounds of lack of jurisdiction and
prematurity. CTA gave due course to Petron's petition, finding that: (a) the controversy was not essentially for the
determination of the constitutionality, legality or validity of a law, rule or regulation but a question on the propriety
orsoundness of the CIR's interpretation of Section 148 (e) of the NIRC which falls within the exclusive jurisdiction of the
CTA under Section 4 thereof, particularly under the phrase "other matters arising under [the NIRC]";17 and

(b) there are attending circumstances that exempt the case from the rule on non-exhaustion of administrative remedies,
such as the great irreparable damage that may be suffered by Petron from the CIR's final assessment of excise tax on
its importation.

• CIR sought immediate recourse to the Court, through the instant petition, alleging that the CTA committed grave
abuse of discretion when it assumed authority to take cognizance of the case despite its lack of jurisdiction to do so.

ISSUE:

Whether or not Court of Tax Appeals had jurisdiction?

RULING:

The CTA had no jurisdiction. The case does not fall within the jurisdiction of the CTA because the phrase "other matters
arising under this Code," as stated in the second paragraph of Section 4 of the NIRC, should be understood as
pertaining to those matters directly related to the preceding phrase "disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto". It cannot extend to evaluating the soundness of the
interpretation of tax laws by the CIR.

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Moreover, Section 4 of the NIRC confers upon the CIR both: (a) the power to interpret tax laws in the exercise of her
quasi-legislative function; and (b) the power to decide tax cases in the exercise of her quasi-judicial function. It
alsodelineates the jurisdictional authority to review the validity of the CIR's exercise of the said powers, thus:

SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to interpret the
provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner,
subject to review by the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed
in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau
of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax
Appeals.

The CTA is a court of special jurisdiction, with power to review by appeal decisions involving tax disputes rendered by
either the CIR or the COC. Conversely, [the CTA] has no jurisdiction to determine the validity of a ruling issued by the
CIR or the COC in the exercise of their quasi legislative powers to interpret tax laws.

In this case, Petron's tax liability was premised on the COC's issuance of CMC No. 164-2012, which gave effect to the
CIR's June 29, 2012 Letter interpreting Section 148 (e) of the NIRC as to include alkylate among the articles subject to
customs duties, hence, Petron's petition before the CTA ultimately challenging the legality and constitutionality of the
CIR's aforesaid interpretation of a tax provision. In line with the foregoing discussion, however, the CIR correctly argues
that the CTA had no jurisdiction to take cognizance of the petition as its resolution would necessarily involve a
declaration of the validity or constitutionality of the CIR's interpretation of Section 148 (e) of the NIRC, which is subject
to the exclusive review by the Secretary of Finance and ultimately by the regular courts. Hence, as the CIR's
interpretation of a tax provision involves an exercise of her quasi-legislative functions, the proper recourse against the
subject tax ruling expressed in CMC No.

164-2012 is a review by the Secretary of Finance and ultimately the regular courts.

There being no protest ruling by the customs collector that was appealed to the COC, the filing of the petition before the
CTA was premature as there was nothing yet to review. Verily, the fact that there is no decision by the COC to appeal
from highlights Petron's failure to exhaust administrative remedies prescribed by law. Before a party is allowed to seek
the intervention of the courts, it is a pre condition that he avail of all administrative processes afforded him, such that if a
remedy within the administrative machinery can be resorted to by giving the administrative officer every opportunity to
decide on a matter that comes within his jurisdiction, then such remedy must be exhausted first before the court's power
of judicial review can be sought, otherwise, the premature resort to the court is fatal to one's cause of action.

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BUREAU OF CUSTOMS, Petitioner, vs. THE HONORABLE AGNES VST DEVANADERA, ACTING SECRETARY,
DEPARTMENT OF JUSTICE; HONORABLE JOVENCITO R. ZUNO, PEDRITO L. RANCES, ARMAN A. DE
ANDRES, PAUL CHI TING CO, KENNETH PUNDANERA, MANUEL T. CO, SALLY L. CO,, STANLEY L. TAN,
ROCHELLE E. VICENCIO, LIZA R. MAGAWAY, JANICE L. CO, VIVENCIO ABANO, GREG YU, EDWIN AGUSTIN,
VICTOR D. PIAMONTE, UNIOIL PETROLEUM PHILIPPINES, INC., and OILINK, INTERNATIONAL,
INC., Respondents. G.R. No. 193253 September 8, 2015 PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse and set
aside the Court of Appeals (CA) Resolutions dated March 26, 20101 and August 4, 2010,2 and to reinstate the petition
for certiorari in CA-G.R. SP No. 113069, or in the alternative, to issue a decision finding probable cause to prosecute
the private respondents for violation of Sections 3601 and 3602, in relation to Sections 2503 and 2530, paragraphs f
and l (3), (4) and (5) of the Tariff and Customs Code of the Philippines (TCCP), as amended.

The antecedents are as follows:

Private respondent UNIOIL Petroleum Philippines, Inc. is engaged in marketing, distribution, and sale of petroleum, oil
and other products, while its co-respondent OILINK International, Inc. is engaged in manufacturing, importing,
exporting, buying, selling, or otherwise dealing in at wholesale and retails of petroleum, oil, gas and of any and all
refinements and byproducts thereof. Except for respondent Victor D. Piamonte who is a Licensed Customs Broker, the
following private respondents are either officers or directors of UNIOIL or OILINK:

1. Paul Chi Ting Co – Chairman of UNIOIL and OILINK

2. Kenneth Pundanera – President/Director of UNIOIL

3. Manuel T. Co – Officer/Director of UNIOIL

4. Sally L. Co – Officer/Director of UNIOIL

5. Stanley L. Tan – Officer/Director of UNIOIL

6. Rochelle E. Vicencio – Corporate Administrative Supervisor of UNIOIL

7. Liza R. Magaway – President of OILINK

8. Janice L. Co – Director of OILINK

9. Vivencio Abaño – Director of OILINK

10. Greg Yu – Director of OILINK

11. Edwin Agustin – Corporate Secretary of OILINK

On January 30, 2007, Commissioner Napoleon L. Morales of petitioner Bureau of Customs (BOC) issued Audit
Notification Letter (ANL) No. 0701246,3 informing the President of OILINK that the Post Entry Audit Group (PEAG) of
the BOC will be conducting a compliance audit, including the examination, inspection, verification and/or investigation of
all pertinent records of OILINK's import transactions for the past three (3)-year period counted from the said date.

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On March 2, 2007, a pre-audit conference was held between the BOC Audit Team4 and the representatives of
OILINK.5 During the conference, the Audit Team explained to OILINK representatives the purpose of the postentry audit
and the manner by which it would be conducted, and advised it as to the import documents required for such audit.

On March 14, 2007, OILINK submitted to the Audit Team the following documents: Post-Entry Audit Group General
Customs Questionnaire, General Information Sheet for the year 2006, SEC Registration, Articles of Incorporation,
Company By-laws, and Audited Financial Report for the year 2005.

On April 20, 2007, the Audit Team requested OILINK to submit the other documents stated in the List of Initial
Requirements for Submission, namely: 2004 Audited Financial Report, 2004-2006 Quarterly VAT Returns with the
accompanying schedule of importations, Organizational chart/structure, and List of foreign suppliers with details on the
products imported and the total amount, on a yearly basis.

On May 7, 2007, OILINK expressed its willingness to comply with the request for the production of the said documents,
but claimed that it was hampered by the resignation of its employees from the Accounting and Supply Department.
OILINK also averred that it would refer the matter to the Commissioner of Customs in view of the independent
investigation being conducted by the latter.

On June 4, 2007, OILINK sent a letter stating that the documents which the Audit Team previously requested were
available with the Special Committee of the BOC, and that it could not open in the meantime its Bureau of Internal
Revenue (BIR) – registered books of accounts for validation and review purposes.

In a letter dated July 11, 2007, the Audit Team informed OILINK of the adverse effects of its request for the
postponement of the exit conference and its continuous refusal to furnish it the required documents. It advised OILINK
that such acts constitute as waiver on its part to be informed of the audit findings and an administrative case would be
filed against it, without prejudice to the filing of a criminal action.

On July 24, 2007, Commissioner Morales approved the filing of an administrative case against OILINK for failure to
comply with the requirements of Customs Administrative Order (CAO) No. 4-2004.6 Such case was filed on July 30,
2007.

On September 20, 2007, an Order was issued by the Legal Service of the BOC, submitting the case for resolution in
view of OILINK's failure to file its Answer within the prescribed period.

On December 14, 2007, the Legal Service of the BOC rendered a Decision finding that OILINK violated Section
IV.A.2(c) and (e) of CAO 4- 20047 when it refused to furnish the Audit Team copies of the required documents, despite
repeated demands. The dispositive portion of the Decision states:

WHEREFORE, in view of the foregoing, this Office finds herein respondent liable for violating Sections IV.A.2 (c) and
(e) of Customs Administrative Order No. 4-2004, and a DECISION is hereby rendered:

1. Ordering OILINK INTERNATIONAL CORPORATION to pay the equivalent of twenty percent (20%) ad
valorem on the article/s subject of the Importation for which no records were kept and maintained as prescribed
in Section 2504 of the Customs Code in the amount of Pesos: Two Billion Seven Hundred Sixty-Four Million
Eight Hundred Fifty-Nine Thousand Three Hundred Four and 80/100 (Php 2,764,859,304.80);

2. Ordering the Bureau of Customs to hold the delivery or release of subsequent imported articles to answer for
the fine, any revised assessment, and/or as a penalty for failure to keep records.

This is without prejudice to the filing of a criminal case or any appropriate legal action against the importer in order to
protect the interest of the government and deter other importers from committing the same offense.

128
SO ORDERED.8

Pursuant to the Decision dated December 14, 2007, Commissioner Morales, in a letter9 of even date, directed the
President of OILINK to pay the BOC the administrative fine of _2,764,859,304.80 for violation of CAO No. 4-2004, in
relation to Section 2504 of the TCCP. Copy of the said Decision and letter were served to OILINK through personal
service on December 28, 2007.10

On March 13, 2008, Atty. Noemi B. Alcala, Officer-in-Charge, Collection Service, Revenue and Monitoring Group, sent
a final demand letter for OILINK to settle the administrative fine, otherwise, the BOC will be compelled to file the
necessary legal action and put in force Section 150811 of the TCCP against its succeeding shipments to protect the
government's interest.12

On April 23, 2008, a Hold Order13 was issued by Horacio P. Suansing, Jr., District Collector, Port of Manila, against all
shipments of OILINK for failure to settle its outstanding account with the BOC and to protect the interest of the
government pursuant to Section 1508 of the TCCP.

On May 2, 2008, Rochelle E. Vicencio, Corporate Administrative Supervisor of UNIOIL, citing the existing Terminalling
Agreement dated January 2, 2008 with OILINK for the Storage of UNIOIL's aromatic process oil and industrial
lubricating oils (collectively, "base oils"), requested District Collector Suansing Jr. to allow it to withdraw base oils from
OILINK's temporarily closed Terminal.

On May 6, 2008, Commissioner Morales granted the request of UNIOIL to withdraw its base oils stored at OILINK's
terminal/depot based on the Terminalling Agreement between the two companies, subject to the following conditions:

1. Only Unioil products shall be withdrawn subject to proper inventory by the BIR and BOC.

2. Appropriate duties and taxes due on the products to be withdrawn are fully paid or settled.

3. The company should allow the operation/withdrawal to be closely monitored and continuously underguarded
by assigned Customs personnel.14

On May 9, 2008, a Warrant of Seizure and Detention (WSD), docketed as Seizure Identification (S.I.) No. 2008-082,
was issued by District Collector Suansing Jr., directing the BOC officials to seal and padlock the oil tanks/depots of
OILINK located in Bataan.

On May 12, 2008, Kenneth C. Pundanera, Operations Manager of UNIOIL, requested Zaldy E. Almoradie, District
Collector of Mariveles, Bataan, for permission to release UNIOIL-owned products from OILINK's storage terminal.
Pertinent portion of the request letter reads:

Unioil is a licensed importer of various Petroleum Products by virtue of its import license LTAD-0-021-2002 issued on
March 26, 2002 which was revised to include all other petroleum products in 2007 through LTAMII (P) 001-10-07-
13639. To pursue its line of business, Unioil has an existing Terminalling Agreement with Oilink for the storage of
various Unioil products at the Oilink terminal located at Lucanin Pt., Mariveles, Bataan.

In view of the said temporary closure of Oilink's terminal, Unioil is currently unable to fully utilize its leased tanks as well
as make use of the products contained therein. We understand that there is still an unresolved issue between Oilink
and the Bureau of Customs. However, with all due respect, said issue should not affect Unioil because it is not a party
to the same, furthermore there is a legal and binding terminalling agreement between Oilink and Unioil which should be
honored.

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Last May 8, 2008, an asphalt importation for Unioil Petroleum Philippines, Inc. arrived in Mariveles, Bataan. This was
issued the corresponding discharging permit by the Bureau of Customs. All duties, excise taxes and value added taxes
for this product have already been settled. However, we are still unable to withdraw these products in order to serve our
customers who are using the product to supply major government infrastructure projects in the country.

In line with the endorsement coming from the Bureau of Customs Commissioner Napoleon D. Morales issued last May
6, 2008, Unioil has complied with the conditions stipulated therein which are:

1. Only Unioil products shall be withdrawn subject to proper inventory by the BIR and BOC.

2. Appropriate duties and taxes due on the products to be withdrawn are fully paid or settled.

3. The company (Unioil) should allow the operation/withdrawal to be closely monitored and continuously
underguarded by assigned Customs personnel.

In this regard, may we respectfully request your good office to please allow Unioil to withdraw from Oilink's terminal its
products which are stored in the following tanks[:]15

TANK PROD CONTENTS (Liters)

2 diesel 2,171,670.00

6 Rexo 1,862,846.00

10 asphalt 4,573.14

13 gasoline 809,345.00

14 gasoline 746,629.00

17 diesel 360,097.00

19 sn 500 203,659.00

20 sn 500 643,236.00

In the same request letter, District Collector Almoradie approved the release of the above petroleum products through a
handwritten note dated May 12, 2008: "All concerned: Pls. allow the release of the Unioil-owned products from the
Oilink Storage Terminal per this request. Thanks."16

On May 15, 2008, Pundanera wrote a clarificatory letter pursuant to the verbal instruction of District Collector Almoradie
to explain the withdrawal of products from the Terminal of OILINK, to wit:

As far as Unioil is concerned, we affirm to your good office that the products withdrawn/loaded at the Terminal are
entirely Unioil products. Unioil owns these products pursuant to its supply and terminalling agreements with Oilink. (We
shall be submitting to you copies of these documents as soon as they arrive from our office in Manila.) In addition, due
130
to the issue involving Oilink and the Bureau of Customs, Unioil was forced to secure its petroleum products from local
sources in order to comply with its valid contractual commitments.

Unioil intended to withdraw these products because it believed in good faith and based on documents in its possession
that it is allowed to do so. Unioil based its intention pursuant to the Indorsements of the Collector of the Port of Manila
as well as the Office of the Commissioner that allowed the withdrawal of Unioil products subject to compliance with the
three (3) conditions specified in the abovementioned Indorsements.

This being the precedent, we believe in good faith that, since Unioil owns the products, and it is considered a stranger
to the issue between Oilink and the Bureau, then Unioil is allowed to withdraw the products it owns subject to the
compliance with the three (3) stated conditions. Besides, any withdrawal is covered by an appropriate delivery receipt,
which would clearly indicate that Unioil owns the products being withdrawn.17

In a complaint-affidavit dated December 15, 2008, Atty. Balmyrson M. Valdez, a member of the petitioner BOC's Anti-
Oil Smuggling Coordinating Committee that investigated the illegal withdrawal by UNIOIL of oil products consigned to
OILINK, valued at _181,988,627.00 with corresponding duties and taxes in the amount of _35,507,597.00, accused the
private respondents of violation of Sections 360118 and 3602,19 in relation to Sections 250320 and 2530,21 paragraphs f
and l (3), (4) and (5), of the TCCP.

In a letter22 dated December 15, 2008, Commissioner Morales referred to the Office of Chief State Prosecutor Jovencito
R. Zuño the said complaintaffidavit, together with its annexes, for preliminary investigation. During the said
investigation, BOC's counsel appeared and all of the private respondents submitted their respective counter-affidavits.

In a Resolution23 dated May 29, 2009, public respondent Arman A. De Andres, State Prosecutor of the Department of
Justice (DOJ), recommended the dismissal of the complaint-affidavit for lack of probable cause. The Resolution was
approved by public respondents Assistant Chief State Prosecutor Pedrito L. Rances and Chief State Prosecutor Zuño.
On automatic review, the Resolution was affirmed by then Secretary of Justice Raul M. Gonzales. 24

Dissatisfied, the BOC filed a motion for reconsideration which was denied by the public respondent, the Acting
Secretary of Justice Agnes VST Devanadera, in a Resolution25 dated December 28, 2009.

On March 11, 2010, the BOC filed a petition for certiorari with the CA.

In the Resolution dated March 26, 2010, the CA dismissed outright the petition due to procedural defects:

The instant petition (i) contains no explanation why service thereof was not done personally (Sec. 11, Rule 13, 1997
Rules of Civil Procedure); (ii) shows that it has no proper verification and certification against forum shopping and (iii)
the docket and other lawful fees payment is short by P1,530.00.26

In the Resolution dated August 4, 2010, the CA denied the private respondents' motion for reconsideration of the March
26, 2010 Resolution, as follows:

We made a cursory examination of the petition filed in this case as well as the whole rollo of the case. It is our finding
that, up to the date hereof, the petitioner has not duly submitted to this Court another set of petition with a certification
against forum shopping embodied therein or appended thereto. Thus, the petition really suffers from a fatal defect until
now, and so, the petitioner has to bear the consequence thereof.27

The CA stressed that procedural rules are not to be belittled or dismissed simply because their non-observance may
have resulted in prejudice to a party's substantive rights. Like all rules, they are required to be followed except only
when, for the most persuasive of reasons, they may be relaxed to relieve a litigant of an injustice not commensurate
with the degree of thoughtlessness in not complying with the procedure prescribed. While it is true that litigation is not a

131
game of technicalities, this does not mean that Rules of Court may be ignored at will and at random to the prejudice of
the orderly presentation and assessment of the issues and their just resolution.

Aggrieved, the BOC filed the instant petition for review on certiorari, raising the following issues:

WHETHER THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT DENIED PETITIONER'S
MOTION FOR RECONSIDERATION SOLELY ON THE GROUND THAT, ALLEGEDLY, IT DID NOT RECEIVE
THE SECOND AND COMPLETE COPY OF THE PETITION, CONTAINING THE VERIFICATION AND
CERTIFICATION AGAINST FORUM SHOPPING.

WHETHER THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN LAW AND JURISPRUDENCE
WHEN IT AFFIRMED ITS 26 MARCH 2010 RESOLUTION, DISMISSING THE PETITION ON ACCOUNT OF
MERE TECHNICALITIES.

WHETHER THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT DID NOT
LOOK INTO THE MERITS OF THE CASE, WHERE IT WAS CLEARLY ESTABLISHED THAT THERE IS
PROBABLE CAUSE TO INDICT RESPONDENTS FOR TRIAL FOR VIOLATION OF SECTION 3601 AND 3602
IN RELATION TO SECTION 2530, PARAGRAPHS (E), AND SECTION 3604 (D), (E), (F), AND (H) OF THE
TCCP, AS AMENDED.28

The petition is partly meritorious.

Although the question of jurisdiction over the subject matter was not raised at bench by either of the parties, the Court
will first address such question before delving into the procedural and substantive issues of the instant petition. After all,
it is the duty of the courts to consider the question of jurisdiction before they look into other matters involved in the case,
even though such question is not raised by any of the parties.29 Courts are bound to take notice of the limits of their
authority and, even if such question is neither raised by the pleadings nor suggested by counsel, they may recognize
the want of jurisdiction and act accordingly by staying pleadings, dismissing the action, or otherwise noticing the defect,
at any stage of the proceedings.30 Besides, issues or errors not raised by the parties may be resolved by the Court
where, as in this case, the issue is one of jurisdiction; it is necessary in arriving at a just decision; and the resolution of
the issues raised by the parties depend upon the determination of the unassigned issue or error, or is necessary to give
justice to the parties.31

On the issue of whether or not the CA has certiorari jurisdiction over the resolution of the Acting Secretary of Justice,
affirming the dismissal of the complaint-affidavit for violation of provisions of the TCCP due to lackof probable cause,
the Court rules in negative.

The elementary rule is that the CA has jurisdiction to review the resolution of the DOJ through a petition
for certiorari under Rule 65 of the Rules of Court on the ground that the Secretary of Justice committed grave abuse of
his discretion amounting to excess or lack of jurisdiction.32 However, with the enactment33 of Republic Act (R.A.) No.
9282, amending R.A. No. 112534 by expanding the jurisdiction of the CTA, enlarging its membership and elevating its
rank to the level of a collegiate court with special jurisdiction, it is no longer clear which between the CA and the CTA
has jurisdiction to review through a petition for certiorari the DOJ resolution in preliminary investigations involving tax
and tariff offenses.

Apropos is City of Manila v. Hon. Grecia-Cuerdo35 where the Court en banc declared that the CTA has appellate
jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by the RTC in a local tax case,
despite the fact that there is no categorical statement to that effect under R.A. No. 1125, as well as the amendatory
R.A. No. 9282. Thus:

x x x Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme Court, in the exercise of its original
jurisdiction, to issue writs of certiorari, prohibition and mandamus. With respect to the Court of Appeals, Section 9 (1) of
132
Batas Pambansa Blg. 129 (BP 129) gives the appellate court, also in the exercise of its original jurisdiction, the power to
issue, among others, a writ of certiorari, whether or not in aid of its appellate jurisdiction. As to Regional Trial Courts,
the power to issue a writ of certiorari, in the exercise of their original jurisdiction, is provided under Section 21 of BP
129.

The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA, Section 1,
Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested in one Supreme Court and
in such lower courts as may be established by law and that judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether
or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the CTA includes that
of determining whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of the RTC in issuing an interlocutory order in cases falling within the exclusive appellate jurisdiction of the tax
court. It, thus, follows that the CTA, by constitutional mandate, is vested with jurisdiction to issue writs of certiorari in
these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the authority to
issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed tax cases to the CTA, it can
reasonably be assumed that the law intended to transfer also such power as is deemed necessary, if not indispensable,
in aid of such appellate jurisdiction. There is no perceivable reason why the transfer should only be considered as
partial, not total.

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law, jurisdiction is conferred on a
court or judicial officer, all auxiliary writs, processes and other means necessary to carry it into effect may be employed
by such court or officer.

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies with the CA, this
Court would be confirming the exercise by two judicial bodies, the CA and the CTA, of jurisdiction over basically the
same subject matter – precisely the split-jurisdiction situation which is anathema to the orderly administration of justice.
The Court cannot accept that such was the legislative motive, especially considering that the law expressly confers on
the CTA, the tribunal with the specialized competence over tax and tariff matters, the role of judicial review over local
tax cases without mention of any other court that may exercise such power. Thus, the Court agrees with the ruling of
the CA that since appellate jurisdiction over private respondents' complaint for tax refund is vested in the CTA, it follows
that a petition for certiorari seeking nullification of an interlocutory order issued in the said case should, likewise, be filed
with the same court. To rule otherwise would lead to an absurd situation where one court decides an appeal in the main
case while another court rules on an incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to split jurisdiction to
conclude that the intention of the law is to divide the authority over a local tax case filed with the RTC by giving to the
CA or this Court jurisdiction to issue a writ of certiorari against interlocutory orders of the RTC but giving to the CTA the
jurisdiction over the appeal from the decision of the trial court in the same case. It is more in consonance with logic and
legal soundness to conclude that the grant of appellate jurisdiction to the CTA over tax cases filed in and decided by the
RTC carries with it the power to issue a writ of certiorari when necessary in aid of such appellate jurisdiction. The
supervisory power or jurisdiction of the CTA to issue a writ of certiorari in aid of its appellate jurisdiction should co-exist
with, and be a complement to, its appellate jurisdiction to review, by appeal, the final orders and decisions of the RTC,
in order to have complete supervision over the acts of the latter.

A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it effectively, to make
all orders that will preserve the subject of the action, and to give effect to the final determination of the appeal. It carries
with it the power to protect that jurisdiction and to make the decisions of the court thereunder effective.
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The court, in aid of its appellate jurisdiction, has authority to control all auxiliary and incidental matters necessary to the
efficient and proper exercise of that jurisdiction. For this purpose, it may, when necessary, prohibit or restrain the
performance of any act which might interfere with the proper exercise of its rightful jurisdiction in cases pending before
it.

Lastly, it would not be amiss to point out that a court which is endowed with a particular jurisdiction should have powers
which are necessary to enable it to act effectively within such jurisdiction. These should be regarded as powers which
are inherent in its jurisdiction and the court must possess them in order to enforce its rules of practice and to suppress
any abuses of its process and to defeat any attempted thwarting of such process.

In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as the CA and shall possess all the
inherent powers of a court of justice.

Indeed, courts possess certain inherent powers which may be said to be implied from a general grant of jurisdiction, in
addition to those expressly conferred on them. These inherent powers are such powers as are necessary for the
ordinary and efficient exercise of jurisdiction; or are essential to the existence, dignity and functions of the courts, as
well as to the due administration of justice; or are directly appropriate, convenient and suitable to the execution of their
granted powers; and include the power to maintain the court's jurisdiction and render it effective in behalf of the litigants.

Thus, this Court has held that "while a court may be expressly granted the incidental powers necessary to effectuate its
jurisdiction, a grant of jurisdiction, in the absence of prohibitive legislation, implies the necessary and usual incidental
powers essential to effectuate it, and, subject to existing laws and constitutional provisions, every regularly constituted
court has power to do all things that are reasonably necessary for the administration of justice within the scope of its
jurisdiction and for the enforcement of its judgments and mandates." Hence, demands, matters or questions ancillary or
incidental to, or growing out of, the main action, and coming within the above principles, may be taken cognizance of by
the court and determined, since such jurisdiction is in aid of its authority over the principal matter, even though the court
may thus be called on to consider and decide matters which, as original causes of action, would not be within its
cognizance.

Based on the foregoing disquisitions, it can be reasonably concluded that the authority of the CTA to take cognizance of
petitions for certiorari questioning interlocutory orders issued by the RTC in a local tax case is included in the powers
granted by the Constitution as well as inherent in the exercise of its appellate jurisdiction.36

Since the Court ruled in City of Manila v. Hon. Grecia-Cuerdo37 that the CTA has jurisdiction over a special civil action
for certiorari questioning an interlocutory order of the RTC in a local tax case via express constitutional mandate and for
being inherent in the exercise of its appellate jurisdiction, it can also be reasonably concluded based on the same
premise that the CTA has original jurisdiction over a petition for certiorari assailing the DOJ resolution in a preliminary
investigation involving tax and tariff offenses.

If the Court were to rule that jurisdiction over a petition for certiorari assailing such DOJ resolution lies with the CA, it
would be confirming theexercise by two judicial bodies, the CA and the CTA, of jurisdiction over basically the same
subject matter – precisely the split-jurisdiction situation which is anathema to the orderly administration of justice. The
Court cannot accept that such was the legislative intent, especially considering that R.A. No. 9282 expressly confers on
the CTA, the tribunal with the specialized competence over tax and tariff matters, the role of judicial review over local
tax cases without mention of any other court that may exercise such power.38

Concededly, there is no clear statement under R.A. No. 1125, the amendatory R.A. No. 9282, let alone in the
Constitution, that the CTA has original jurisdiction over a petition for certiorari. By virtue of Section 1,

Article VIII of the 1987 Constitution, vesting judicial power in the Supreme Court and such lower courts as may be
established by law, to determine whether or not there has been a grave abuse of discretion on the part of any branch or
instrumentality of the Government, in relation to Section 5(5), Article VIII thereof, vesting upon it the power to
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promulgate rules concerning practice and procedure in all courts, the Court thus declares that the CA's original
jurisdiction39 over a petition for certiorari assailing the DOJ resolution in a preliminary investigation involving tax and
tariff offenses was necessarily transferred to the CTA pursuant to Section 7 of R.A. No. 9282, 40and that such petition
shall be governed by Rule 65 of the Rules of Court, as amended. Accordingly, it is the CTA, not the CA, which has
jurisdiction over the petition for certiorari assailing the DOJ resolution of dismissal of the BOC's complaint-affidavit
against private respondents for violation of the TCCP.

On the procedural issue of whether the CA erred in dismissing the petition for certiorari on the sole ground of lack of
verification and certification against forum shopping, the Court rules in the affirmative, despite the above discussion that
such petition should have been filed with the CTA.

In Traveño, et al. v. Bobongon Banana Growers Multi-Purpose Cooperative, et al.,41 the Court restated the
jurisprudence on non-compliancewith the requirements on, or submission of defective, verification and certification
against forum shopping:

1) A distinction must be made between non-compliance with the requirement on or submission of defective
verification, and noncompliance with the requirement on or submission of defective certification against forum
shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily render the pleading
fatally defective. The court may order its submission or correction or act on the pleading if the attending
circumstances are such that strict compliance with the Rule may be dispensed with in order that the ends of
justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth
of the allegations in the complaint or petition signs the verification, and when matters alleged in the petition have
been made in good faith or are true and correct.

4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in verification,
is generally not curable by its subsequent submission or correction thereof, unless there is a need to relax the
Rule on the ground of "substantial compliance" or presence of "special circumstances or compelling reasons."

5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case; otherwise,
those who did not sign will be dropped as parties to the case. Under reasonable or justifiable circumstances,
however, as when all the plaintiffs or petitioners share a common interest and invoke a common cause of action
or defense, the signature of only one of them in the certification against forum shopping substantially complies
with the Rule.

6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his counsel. If,
however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he must execute a Special
Power of Attorney designating his counsel of record to sign on his behalf.42

While it admittedly filed a petition for certiorari without a certification against forum shopping on March 11, 2010, the
BOC claimed to have subsequently complied with such requirement by filing through registered mail a complete set of
such petition, the following day which was also the last day of the reglementary period. The problem arose when the CA
failed to receive such complete set of the petition for certiorari with the verification and certification against forum
shopping. In support of the motion for reconsideration of the CA's March 26, 2010 resolution which dismissed outright
the petition, the BOC asserted that it filed a complete set of petition by registered mail. It also submitted an affidavit of
the person who did the mailing as required by Section 12,43 Rule 13 of the Rules of Court, including the registry receipt
numbers, but not the receipts themselves which were allegedly attached to the original copy mailed to the CA. Instead
of ordering the BOC to secure a certification from the postmaster to verify if a complete set of the petition was indeed

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filed by registered mail, the CA – after examining the whole case rollo and finding that no other set of petition with a
certification against forum shopping was duly submitted – denied the motion for reconsideration.

Faced with the issue of whether or not there is a need to relax the strict compliance with procedural rules in order that
the ends of justice may be served thereby and whether "special circumstances or compelling reasons" are present to
warrant a liberal interpretation of such rules, the Court rules – after a careful review of the merits of the case – in the
affirmative.

Despite the BOC's failed attempt to comply with the requirement of verification and certification against forum shopping,
the Court cannot simply ignore the CA's perfunctory dismissal of the petition on such sole procedural ground vis-à-vis
the paramount public interest in the subject matter and the substantial amount involved, i.e., the alleged illegal
withdrawal of oil products worth _181,988,627.00 with corresponding duties and taxes worth _35,507,597.00. Due to
the presence of such special circumstances and in the interest of justice, the CA should have at least passed upon the
substantive issue raised in the petition, instead of dismissing it on such procedural ground. Although it does not
condone the failure of BOC to comply with the said basic requirement, the Court is constrained to exercise the inherent
power to suspend its own rules in order to do justice in this particular case.

Given that the petition for certiorari should have been filed with the CTA, the mistake committed by the BOC in filing
such petition before the CA may be excused. In this regard, Court takes note that nothing in R.A. No. 1125, as
amended by R.A. No. 9282, indicates that a petition for certiorari under Rule 65 may be filed with the CTA. Despite the
enactment of R.A. No. 9282 on March 30, 2004, it was only about ten (10) years later in the case of City of Manila v.
Hon. Grecia-Cuerdo44 that the Court ruled that the authority of the CTA to take cognizance of such petitions is included
in the powers granted by the Constitution, as well as inherent in the exercise of its appellate jurisdiction. While the rule
on perfection of appeals cannot be classified as a difficult question of law,45mistake in the construction or application of
a doubtful question of law, as in this case, may be considered as a mistake of fact, excusing the BOC from the
consequences of the erroneous filing of its petition with the CA.

As the CA dismissed the petition for certiorari solely due to a procedural defect without resolving the issue of whether or
not the Acting Secretary of Justice gravely abused her discretion in affirming the dismissal of the BOC's complaint-
affidavit for lack of probable cause, the Court ought to reinstate the petition and refer it to the CTA for proper
disposition. For one, as a highly specialized court specifically created for the purpose of reviewing tax and customs
cases,46 the CTA is dedicated exclusively to the study and consideration of revenue-related problems, and has
necessarily developed an expertise on the subject.47 For another, the referral of the petition to the CTA is in line with the
policy of hierarchy of courts in order to prevent inordinate demands upon the Court's time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent further overcrowding of its docket. 48

Be that as it may, the Court stressed in The Diocese of Bacolod v. Commission on Elections49 that the doctrine of
hierarchy of courts is not an iron-clad rule, and that it has full discretionary power to take cognizance and assume
jurisdiction over special civil actions for certiorari filed directly with it for exceptionally compelling reasons or if warranted
by the nature of the issues clearly and specifically raised in the petition. Recognized exceptions to the said doctrine are
as follows: (a) when there are genuine issues of constitutionality that must be addressed at the most immediate time;
(b) when the issues involved are of transcendental importance; (c) cases of first impression where no jurisprudence yet
exists that will guide the lower courts on the matter; (d) the constitutional issues raised are better decided by the Court;
(e) where exigency in certain situations necessitate urgency in the resolution of the cases; (f) the filed petition reviews
the act of a constitutional organ; (g) when petitioners rightly claim that they had no other plain, speedy, and adequate
remedy in the ordinary course of law that could free them from the injurious effects of respondents’ acts in violation of
their right to freedom of expression; and (h) the petition includes questions that are dictated by public welfare and the
advancement of public policy, or demanded by the broader interest of justice, or the orders complained of were found to
be patent nullities, or the appeal was considered as clearly an inappropriate remedy.50 Since the present case includes
questions that are dictated by public welfare and the advancement of public policy, or demanded by the broader interest
of justice, as well as to avoid multiplicity of suits and further delay in its disposition, the Court shall directly resolve the
petition for certiorari, instead of referring it to the CTA.

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On the substantive issue of whether the Acting Secretary of Justice gravely abused her discretion in affirming the
dismissal of the BOC's complaint-affidavit for lack of probable cause, the settled policy of noninterference in the
prosecutor’s exercise of discretion requires the courts to leave to the prosecutor and to the DOJ the determination of
what constitutes sufficient evidence to establish probable cause. As the Court explained in Unilever Philippines, Inc. v.
Tan:51

The determination of probable cause for purposes of filing of information in court is essentially an executive function
that is lodged, at the first instance, with the public prosecutor and, ultimately, to the Secretary of Justice. The prosecutor
and the Secretary of Justice have wide latitude of discretion in the conduct of preliminary investigation; and their
findings with respect to the existence or non-existence of probable cause are generally not subject to review by the
Court.

Consistent with this rule, the settled policy of non-interference in the prosecutor’s exercise of discretion requires the
courts to leave to the prosecutor and to the DOJ the determination of what constitutes sufficient evidence to establish
probable cause. Courts can neither override their determination nor substitute their own judgment for that of the latter.
They cannot likewise order the prosecution of the accused when the prosecutor has not found a prima facie case.

Nevertheless, this policy of non-interference is not without exception. The Constitution itself allows (and even directs)
court action where executive discretion has been gravely abused. In other words, the court may intervene in the
executive determination of probable cause, review the findings and conclusions, and ultimately resolve the existence or
non-existence of probable cause by examining the records of the preliminary investigation when necessary for the
orderly administration of justice.52

Probable cause for purposes of filing a criminal information is defined as such facts as are sufficient to engender a well-
founded belief that a crime has been committed and the respondent is probably guilty thereof, and should be held for
trial.53 As explained in Sy v. Secretary of Justice,54 citing Villanueva v. Secretary of Justice:55

x x x [Probable cause] is such a state of facts in the mind of the prosecutor as would lead a person of ordinary caution
and prudence to believe or entertain an honest or strong suspicion that a thing is so. The term does not mean "actual or
positive cause"; nor does it import absolute certainty. It is merely based on opinion and reasonable belief. Thus, a
finding of probable cause does not require an inquiry into whether there is sufficient evidence to procure a conviction. It
is enough that it is believed that the act or omission complained of constitutes the offense charged. Precisely,
there is a trial for the reception of evidence of the prosecution in support of the charge. 56

To find out if there is a reasonable ground to believe that acts or ommissions complained of constitute the offenses
charged, the Court must first examine whether or not the allegations against private respondents in the BOC's
complaint-affidavit constitute the offenses of unlawful importation under Section 3601 and various fraudulent practices
against customs revenue under Section 3602 of the TCCP.

In Jardeleza v. People,57 the Court discussed the concepts of unlawful importation under Section 3601 of the TCCP,
and various fraudulent practices against customs revenue under Section 3602 thereof, thus:

Section 3601 of the TCC was designed to supplement the existing provisions of the TCC against the means leading up
to smuggling, which might render it beneficial by a substantive and criminal statement separately providing for the
punishment of smuggling. The law was intended not to merge into one and the same offense all the many acts which
are classified and punished by different penalties, penal or administrative, but to legislate against the overt act of
smuggling itself. This is manifested by the use of the words "fraudulently" and "contrary to law" in the law.

Smuggling is committed by any person who: (1) fraudulently imports or brings into the Philippines any article contrary to
law; (2) assists in so doing any article contrary to law; or (3) receives, conceals, buys, sells or in any manner facilitate
the transportation, concealment or sale of such goods after importation, knowing the same to have been imported
contrary to law.
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The phrase "contrary to law" in Section 3601 qualifies the phrases "imports or brings into the Philippines" and "assists in
so doing," and not the word "article." The law penalizes the importation of any merchandise in any manner contrary to
law.

The word "law" includes regulations having the force and effect of law, meaning substantive or legislative type rules as
opposed to general statements of policy or rules of agency, organization, procedures or positions. An inherent
characteristic of a substantive rule is one affecting individual rights and obligations; the regulation must have been
promulgated pursuant to a congressional grant of quasi-legislative authority; the regulation must have been
promulgated in conformity to with congressionally-imposed procedural requisites.

Section 3602 of the TCC, on the other hand, provides:

Sec. 3602. Various Fraudulent Practices Against Customs Revenue. – Any person who makes or attempts to make any
entry of imported or exported article by means of any false or fraudulent invoice, declaration, affidavit, letter, paper or by
any means of any false statement, written or verbal, or by any means of any false or fraudulent practice whatsoever, or
knowingly effects any entry of goods, wares or merchandise, at less than the true weight or measures thereof or upon a
false classification as to quality or value, or by the payment of less than the amount legally due, or knowingly and
wilfully files any false or fraudulent entry or claim for the payment of drawback or refund of duties upon the exportation
of merchandise, or makes or files any affidavit, abstract, record, certificate or other document, with a view to securing
the payment to himself or others of any drawback, allowance or refund of duties on the exportation of merchandise,
greater than that legally due thereon, or who shall be guilty of any wilful act or omission shall, for each offense, be
punished in accordance with the penalties prescribed in the preceding section.

The provision enumerates the various fraudulent practices against customs revenue, such as the entry of imported or
exported articles by means of any false or fraudulent invoice, statement or practice; the entry of goods at less than the
true weight or measure; or the filing of any false or fraudulent entry for the payment of drawback or refund of duties.

The fraud contemplated by law must be intentional fraud, consisting of deception, willfully and deliberately dared or
resorted to in order to give up some right. The offender must have acted knowingly and with the specific intent to
deceive for the purpose of causing financial loss to another; even false representations or statements or omissions of
material facts come within fraudulent intent. The fraud envisaged in the law includes the suppression of a material fact
which a party is bound in good faith to disclose. Fraudulent nondisclosure and fraudulent concealment are of the same
genre.

Fraudulent concealment presupposes a duty to disclose the truth and that disclosure was not made when opportunity to
speak and inform was present, and that the party to whom the duty of disclosure as to a material fact was due was
thereby induced to act to his injury.1âwphi1 Fraud is not confined to words or positive assertions; it may consist as well
of deeds, acts or artifice of a nature calculated to mislead another and thus allow one to obtain an undue advantage.58

In unlawful importation, also known as outright smuggling, goods and articles of commerce are brought into the country
without the required importation documents, or are disposed of in the local market without having been cleared by the
BOC or other authorized government agencies, to evade the payment of correct taxes, duties and other charges. Such
goods and articles do not undergo the processing and clearing procedures at the BOC, and are not declared through
submission of import documents, such as the import entry and internal revenue declaration.

In various fraudulent practices against customs revenue, also known as technical smuggling, on the other hand, the
goods and articles are brought into the country through fraudulent, falsified or erroneous declarations, to substantially
reduce, if not totally avoid, the payment of correct taxes, duties and other charges. Such goods and articles pass
through the BOC, but the processing and clearing procedures are attended by fraudulent acts in order to evade the
payment of correct taxes, duties, and other charges. Often committed by means of misclassification of the nature,
quality or value of goods and articles, undervaluation in terms of their price, quality or weight, and misdeclaration of

138
their kind, such form of smuggling is made possible through the involvement of the importers, the brokers and even
some customs officials and personnel.

In light of the foregoing discussion, the Court holds that private respondents cannot be charged with unlawful
importation under Section 3601 of the TCCP because there is no allegation in the BOC's complaint-affidavit to the effect
that they committed any of the following acts: (1) fraudulently imported or brought into the Philippines the subject
petroleum products, contrary to law; (2) assisted in so doing; or (3) received, concealed, bought, sold or in any manner
facilitated the transportation, concealment or sale of such goods after importation, knowing the same to have been
imported contrary to law.

The said acts constituting unlawful importation under Section 3601 of the TCCP can hardly be gathered from the
following allegations in the BOC's complaint-affidavit:

19.1 From May 23, 2007 to February 10, 2008, UNIOIL is not an accredited importer of the BOC;

19.2 From the time UNIOIL was accredited on February 11, 2008 until the time of its request to withdraw its oil products
on 02 May 2008, they did not import Gasoil (diesel) and Mogas Gasoline;

19.3 The Terminalling Agreement allegedly executed between OILINK and UNIOIL was obviously for the purpose of
circumventing the Warrant of Seizure and Detention issued against the shipments of OILINK aside from the fact that it
was only executed on 02 January 2008 after the decision of the Commissioner finding OILINK liable to pay an
administrative fine of Two Billion Seven Hundred Sixty-Four Million Eight Hundred Fifty-Nine Thousand Three Hundred
Four Pesos and 80/100 (Php2,764,859,304.80);

19.4 Only base oil should have been withdrawn by UNIOIL since it is the only product subject of its request and
approved by the Commissioner;

19.5 UNIOIL withdrew Gasoil (Diesel) and Mogas which were not covered by importations;

19.6 Finally, the illegal release/withdrawal of the oil products deprived the government of the supposed partial payment
on the Php2.7 billion liability of OILINK in the approximate amount of Php181,988,627 representing the customs value
of the released/withdrawn oil products and estimated duties and taxes of Php35,507,597 due thereon or the total
amount of Php217,496,224.00.59

21.1 When UNIOIL withdrew Gasoil (Diesel) and Mogas without filing the corresponding Import Entry, the shipment
becomes unlawful per se and thus falls under unlawful importation under Section 3601 of the Tariff and Customs Code
of the Philippines, as amended;

21.2 The fact that UNIOIL and OILINK executed a belated Terminalling Agreement after the issuance of the Warrant of
Seizure and Detention showed the fraudulent intent of the respondents whereby UNIOIL can still withdraw the oil
products stored at OILINK's depot likewise in clear violation of section 3601 and 3602 of the Tariff and Customs Code
of the Philippines, as amended;

21.3 The fact that the UNIOIL make [sic] it appear that they are the owner of Gasoil (Diesel) and Mogas when in truth
and in fact they did not import said products make them liable for [violation of] Section 3602 of the Tariff and Customs
Code of the Philippines, as amended and falsification;60

Since the foregoing allegations do not constitute the crime of unlawful importation under Section 3601 of the TCCP, the
Acting Secretary of Justice did not commit grave abuse of discretion when she affirmed the State Prosecutor's dismissal
the BOC's complaint-affidavit for lack of probable cause.

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Neither could private respondents be charged with various fraudulent practices against customs revenue under Section
3602 of the TCCP as the above allegations do not fall under any of the following acts or omissions constituting such
crime/s: (1) making or attempting to make any entry of imported or exported article: (a) by means of any false or
fraudulent invoice, declaration, affidavit, letter, paper or by any means of any false statement, written or verbal; or (b) by
any means of any false or fraudulent practice whatsoever; or (2) knowingly effecting any entry of goods, wares or
merchandise, at less than the true weight or measures thereof or upon a false classification as to quality or value, or by
the payment of less than the amount legally due; or (3) knowingly and wilfully filing any false or fraudulent entry or claim
for the payment of drawback or refund of duties upon the exportation of merchandise; or (4) making or filing any
affidavit, abstract, record, certificate or other document, with a view to securing the payment to himself or others of any
drawback, allowance or refund of duties on the exportation of merchandise, greater than that legally due thereon.

Related to various fraudulent practices against customs revenue by means of undervaluation, misclassification and
misdeclaration in the import entry is the following provision of R.A. No. 7651 - An Act to Revitalize and Strengthen the
Bureau of Customs, Amending for the Purpose Certain Sections of the Tariff and Customs Code of the Philippines, as
amended:61

Sec. 2503. Undervaluation, Misclassification and Misdeclaration in Entry. – When the dutiable value of the imported
articles shall be so declared and entered that the duties, based on the declaration of the importer on the face of the
entry, would be less by ten percent (10%) than should be legally collected, or when the imported articles shall be
so described and entered that the duties based on the importer's description on the face of the entry would be less by
ten percent (10%) than should be legally collected based on the tariff classification, or when the dutiable weight,
measurement or quantity of imported articles is found upon examination to exceed by ten percent (10%) or more than
the entered weight, measurement or quantity, a surcharge shall be collected from the importer in an amount of not less
than the difference between the full duty and the estimated duty based upon the declaration of the importer, nor more
than twice of such difference: Provided, that an undervaluation, misdeclaration in weight, measurement or
quantity of more than thirty percent (30%) between the value, weight, measurement, or quantity declared in the
entry, and the actual value, weight, quantity, or measurement shall constitute a prima facie evidence of fraud
penalized under Sec. 2530 of this Code: Provided, further, that any misdeclared or undeclared imported articles/items
found upon examination shall ipso facto be forfeited in favor of the Government to be disposed of pursuant to the
provisions of this Code.

When the undervaluation, misdescription, misclassification or misdeclaration in the import entry is intentional,
the importer shall be subject to the penal provision under Sec. 3602 of this Code.62

A careful reading of the BOC's complaint-affidavit would show that there is no allegation to the effect that private
respondents committed undervaluation, misdeclaration in weight, measurement or quantity of more than thirty percent
(30%) between the value, weight, measurement, or quantity declared in the entry, and the actual value, weight,
quantity, or measurement which constitute prima facie evidence of fraud. Nor is there an allegation that they
intentionally committed undervaluation, misdescription, misclassification or misdeclaration in the import entry. Since the
allegations in the BOC's complaint-affidavit fall short of the acts or omissions constituting the various fraudulent acts
against customs revenue under Section 3602 of the TCCP, the Acting Secretary of Justice correctly ruled that there
was no probable cause to believe that they committed such crime/s.

While it is true that the sole office of the writ of certiorari is the correction of errors of jurisdiction, including the
commission of grave abuse of discretion amounting to lack of jurisdiction, and does not include a correction of the
public respondents' evaluation of the evidence and factual findings thereon, it is sometimes necessary to delve into
factual issues in order to resolve the allegations of grave abuse of discretion as a ground for the special civil action
of certiorari.63 In light of this principle, the Court reviews the following findings of the Acting Secretary of Justice in
affirming the State Prosecutor's dismissal of the BOC's complaint-affidavit for lack of probable cause:

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Respondents are being charged for unlawful importation under Section 3601, and fraudulent practices against customs
revenues under Section 3602, of the TCCP, as amended. For these charges to prosper, complainant must prove, first
and foremost, that the subject articles were imported. On this score alone, complainant has miserably failed.

Indeed, except for complainant's sweeping allegation, no clear and convincing proof was presented to show that the
subject petroleum products (gasoil and mogas) withdrawn by Unioil from the oil depot/terminal of Oilink were imported.
For, only when the articles are imported that the importer/consignee is required to file an import entry declaration and
pay the corresponding customs duties and taxes. The fact that complainant's record fails to show that an import entry
was filed for the subject articles does not altogether make out a case of unlawful importation under Section 3601, or
fraudulent practices against customs revenue under Section 3602, of the TCCP, without having first determined
whether the subject articles are indeed imported. Thus, in this case, complainant still bears the burden of proof to show
that the subject petroleum products are imported, by means of documents other than the import entry declaration, such
as but not limited to, the transport documents consisting of the inward foreign manifest, bill of lading, commercial
invoice and packing list, all indicating that the goods were bought from a supplier/seller in a foreign country and
imported or transported to the Philippines. Instead[,] complainant merely surmised that since the subject products were
placed under warrant of seizure and detention[,] they must necessarily be imported. Regrettably, speculation and
surmises do not constitute evidence and should not, therefore, be taken against the respondents. x x x Taken in this
light, we find more weight and credence in respondent Unioil's claim that the subject petroleum products were not
imported by them, but were locally purchased, more so since it was able to present local sales invoices covering the
same.

Even assuming gratia argumenti that the subject petroleum products were imported, it still behooves the complainant to
present clear and convincing proof that the importation was unlawful or that it was carried out through any fraudulent
means, practice or device to prejudice the government. But again, complainant failed to discharge this burden.

As can be culled from the records, the warrant of seizure and detention docketed as Seizure Identification No. 2008-
082, which covers various gas tanks already stored at Oilink's depot/terminal located at Lucanin Pt., Mariveles, Bataan,
was issued pursuant to Section 2536, in relation to Section 1508, of the TCCP because of Oilink's failure to pay the
administrative fine of P2,764,859,304.80 that was previously meted against the company for its failure/refusal to submit
to a post entry audit. In fact, the delivery of all shipments consigned to or handled directly or indirectly by Oilink was put
on hold as per order of the Customs Commissioner dated April 23, 2008 pursuant to Section 1508 of the TCCP, also for
the same reason. There was nothing on record which shows, or from which it could be inferred, that the warrant of
seizure and detention or hold order were imposed pursuant to Section 2530 of the same Code which relates, among
others, to unlawfully imported articles or those imported through any fraudulent practice or device to prejudice the
government, much less due to non-payment of the corresponding customs duties and taxes due on the
shipments/articles covered by the warrant of seizure and detention. Again, what complainant's evidence clearly shows
is that Oilink's failure to pay the administrative fine precipitated the issuance of the warrant of seizure and detention and
hold order.64

After a careful review of records, the Court affirms the dismissal of the BOC's complaint-affidavit for lack of probable
cause, but partly digresses from the reasoning of the Acting Secretary of Justice in arriving at such conclusion. While
the Acting Secretary of Justice correctly stated that the act of fraudulent importation of articles must be first proven in
order to be charged for violation of Section 3601 of the TCCP, the Court disagrees that proof of such importation is also
required for various fraudulent practices against customs revenue under Section 3602 thereof.

As held in Jardeleza v. People,65 the crime of unlawful importation under Section 3601 of the TCCP is complete, in the
absence of a bona fide intent to make entry and pay duties when the prohibited article enters Philippine territory.
Importation, which consists of bringing an article into the country from the outside, is complete when the taxable,
dutiable commodity is brought within the limits of the port of entry.66 Entry through a customs house is not the essence
of the act.67 On the other hand, as regards Section 3602 of the TCCP which particularly deals with the making or
attempting to make a fraudulent entry of imported or exported articles, the term "entry" in customs law has a triple
meaning, namely: (1) the documents filed at the customs house; (2) the submission and acceptance of the documents;

141
and (3) the procedure of passing goods through the customs house.68 In view thereof, it is only for charges for unlawful
importation under Section 3601 that the BOC must first prove that the subject articles were imported. For violation of
Section 3602, in contrast, what must be proved is the act of making or attempting to make such entry of articles.

The Court likewise disagrees with the finding of the Acting Secretary of Justice that the BOC failed to prove that the
products subject of the WSD were imported. No such proof was necessary because private respondents themselves
presented in support of their counter-affidavits copies of import entries69 which can be considered as prima
facie evidence that OILINK imported the subject petroleum products. At any rate, the Acting Secretary of Justice aptly
gave credence to their twenty (20) sales invoices70 covering the dates October 1, 2007 until April 30, 2008 which tend to
prove that UNIOIL locally purchased such products from OILINK even before the BOC rendered the Decision dated
December 14, 2007 imposing a _2,764,859,304.80 administrative fine, and holding the delivery or release of its
subsequently imported articles to answer for the fine, any revised assessment and/or penalty for failure to keep records.

The Court also finds as misplaced the BOC's reliance on the Terminalling Agreement dated January 2, 2008 and the
Certification71 that UNIOIL made no importation of Gasoil (diesel) and Mogas gasoline from January 2007 up to June
2008 in order to prove that it illegally imported the said products. Such documentary evidence tend to prove only that
UNIOIL was engaged in the importation of petroleum products and that it did not import the said products during the
said period. Such documents, however, do not negate the evidence on record which tend to show that OILINK was the
one that filed the import entries,72 and that UNIOIL locally purchased from OILINK such products as indicated in the
sales invoices.73 Not being the importer of such products, UNIOIL, its directors and officers, are not required to file their
corresponding import entries. Hence, contrary to the BOC's allegation, UNIOIL's withdrawal of the Gasoil (Diesel) and
Mogas gasoline without filing the corresponding import entries can neither be considered as unlawful importation under
Section 3601 of the TCCP nor as a fraudulent practice against customs revenue under Section 3602 thereof.

Moreover, the fact that private respondent Paul Chi Ting Co is both the Chairman of UNIOIL and OILINK is not enough
to justify the application of the doctrine of piercing the corporate veil. In fact, mere ownership by a single stockholder or
by another corporation of a substantial block of shares of a corporation does not, standing alone, provide sufficient
justification for disregarding the separate corporate personality.74 In Kukan International Corporation v. Hon. Judge
Reyes, et al.75 the Court explained the application of the said doctrine in this wise:

In fine, to justify the piercing of the veil of corporate fiction, it must be shown by clear and convincing proof that the
separate and distinct personality of the corporation was purposefully employed to evade a legitimate and binding
commitment and perpetuate a fraud or like wrongdoings. To be sure, the Court has, on numerous occasions, applied
the principle where a corporation is dissolved and its assets are transferred to another to avoid a financial liability of the
first corporation with the result that the second corporation should be considered a continuation and successor of the
first entity.

In those instances when the Court pierced the veil of corporate fiction of two corporations, there was a confluence of the
following factors:

1. A first corporation is dissolved;

2. The assets of the first corporation is transferred to a second corporation to avoid a financial liability of the first
corporation; and

3. Both corporations are owned and controlled by the same persons such that the second corporation should be
considered as a continuation and successor of the first corporation.76

Granted that the principle of piercing the veil of corporate entity comes into play only during the trial of the case for the
purpose of determining liability,77 it is noteworthy that even the BOC itself virtually recognized that OILINK and UNIOIL
are separate and distinct entities when it alleged that only the base oil products should have been withdrawn by
UNIOIL, since they were the only products subject of its request and approved by the Customs Commissioner. As
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discussed above, however, private respondents were able to present sales invoices which tend to show that UNIOIL
locally purchased Gasoil (diesel) and Mogas gasoline products from OILINK. Hence, the BOC cannot invoke the
doctrine of piercing the veil of corporate entity in this case.

On a final note, the Court stresses that OILINK, its directors or officers, and Victor D. Piamonte, the Licensed Customs
Broker, may still be held liable for various fraudulent practices against customs revenue under

Section 3602 of the TCCP, if the final results of the post-entry audit and examination would show that they committed
any of the following acts or omissions: (1) making or attempting to make any entry of imported or exported article: (a) by
means of any false or fraudulent invoice, declaration, affidavit, letter, paper or by any means of any false statement,
written or verbal; or (b) by any means of any false or fraudulent practice; or (2) intentional undervaluation,
misdescription, misclassification or misdeclaration in the import entries; or (3) undervaluation, misdeclaration in weight,
measurement or quantity of more than thirty percent (30%) between the value, weight, measurement, or quantity
declared in the entries, and the actual value, weight, quantity, or measurement. This is consistent with Section
230178 (Warrant for Detention of Property-Cash Bond) of the TCCP which states that nothing therein shall be construed
as relieving the owner or importer from any criminal liability which may arise from any violation of law committed in
connection with the importation of articles, which in this case were placed under a WSD for failure of the importer,
OILINK, to submit the required post-entry audit documents under CAO No. 4-2004.

In addition, OILINK and its directors or officers may be held liable under Section 16 of R.A. No. 9135: 79

SEC. 16. A new section to be known as Section 3611 is hereby inserted in Part 3, Title VII of the Tariff and Customs
Code of the Philippines, as amended, which shall read as follows:

SEC. 3611. Failure to Pay Correct Duties and Taxes on Imported Goods. - Any person who, after being subjected to
post-entry audit and examination as provided in Section 3515 of Part 2, Title VII hereof, is found to have incurred
deficiencies in duties and taxes paid for imported goods, shall be penalized according to three (3) degrees of
culpability subject to any mitigating, aggravating or extraordinary factors that are clearly established by the
available evidence:

(a) Negligence - When the deficiency results from an offender’s failure, through an act or acts of omission or
commission, to exercise reasonable care and competence to ensure that a statement made is correct, it shall be
determined to be negligent and punishable by a fine equivalent to not less than one-half (1/2) but not more than
two (2) times the revenue loss.

(b) Gross Negligence - When a deficiency results from an act or acts of omission or commission done with
actual knowledge or wanton disregard for the relevant facts and with indifference to or disregard for the
offender’s obligation under the statute, it shall be determined to be grossly negligent and punishable by a fine
equivalent to not less than two and a half (2 ½) but not more than four (4) times the revenue loss.

(c) Fraud - When the material false statement or act in connection with the transaction was committed or omitted
knowingly, voluntarily and intentionally, as established by clear and convincing evidence, it shall be determined
to be fraudulent and be punishable by a fine equivalent to not less than five (5) times but not more than eight (8)
times the revenue loss and imprisonment of not less than two (2) years but not more than eight (8) years.

The decision of the Commissioner of Customs, upon proper hearing, to impose penalties as prescribed in this Section
may be appealed in accordance with Section 2402 hereof.80

With respect to the directors or officers of OILINK, they may further be held liable jointly and severally for all damages
suffered by the government on account of such violation of Sections 3602 and 3611 of the TCCP, upon clear and
convincing proof that they willfully and knowingly voted for or assented to patently unlawful acts of the corporation or
was guilty of gross negligence or bad faith in directing its corporate affairs.81
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WHEREFORE, the petition is PARTLY GRANTED. The Court of Appeals Resolutions dated March 26, 2010 and
August 4, 2010, in CA-G.R. SP No. 113069, are REVERSED and SET ASIDE. The Resolution dated December 28,
2009 of the ·Acting Secretary of Justice Agnes VST Devanedera, which upheld the State Prosecutor's dismissal of the
complaintaffidavit filed by the Bureau of Customs for lack of probable cause, is AFFIRMED. This is without prejudice to
the filing of the appropriate criminal and administrative charges under Sections 3602 and 3611 of the Tariff and
Customs Code of the Philippines, as amended, against private respondents OILINK, its officers and directors, and
Victor D. Piamonte, if the final results of the post-entry audit and examination would show that they violated the said
provisions. SO ORDERED.

NO DIGEST

BANCO DE ORO, BANK OF COMMERCE, CHINA BANKING CORPORATION, METROPOLITAN BANK & TRUST
COMPANY, PHILIPPINE BANK OF COMMUNICATIONS, PHILIPPINE NATIONAL BANK, PHILIPPINE VETERANS
BANK, AND PLANTERS DEVELOPMENT BANK, Petitioners vs. RIZAL COMMERCIAL BANKING CORPORATION
AND RCBC CAPITAL CORPORATION, Petitioners-Intervenors G.R. No. 198756 August 16, 2016

CAUCUS OF DEVELOPMENT NGO NETWORKS, Petitioner-Intevenor, vs. REVENUE, SECRETARY OF FINANCE,

DEPARTMENT OF FINANCE, THE NATIONAL TREASURER, AND BUREAU OF TREASURY, Respondents.
LEONEN, J.:

This resolves separate motions for reconsideration and clarification filed by the Office of the Solicitor General 1and
petitioners-intervenors Rizal Commercial Banking Corporation and RCBC Capital Corporation2 of our Decision dated
January 13, 2015, which: (1) granted the Petition and Petitions-in-Intervention and nullified Bureau of Internal Revenue
(BIR) Ruling Nos. 370-2011 and DA 378-2011; and (2) reprimanded the Bureau of Treasury for its continued retention
of the amount corresponding to the 20% final withholding tax that it withheld on October 18, 2011, and ordered it to
release the withheld amount to the bondholders.

In the notice to all Government Securities Eligible Dealers (GSEDs) entitled Public Offering of Treasury Bonds3(Public
Offering) dated October 9, 2001, the Bureau of Treasury announced that "P30.0 [billion] worth of 10- year Zero[-
]Coupon Bonds [would] be auctioned on October 16, 2001[.]"4 It stated that "the issue being limited to 19 lenders and
while taxable shall not be subject to the 20% final withholding [tax]."5

On October 12, 2001, the Bureau of Treasury released a memo on the Formula for the Zero-Coupon Bond. 6 The memo
stated in part that the formula, in determining the purchase price and settlement amount, "is only applicable to the
zeroes that are not subject to the 20% final withholding due to the 19 buyer/lender limit."7

On October 15, 2001, one (1) day before the auction date, the Bureau of Treasury issued the Auction Guidelines for the
10-year Zero-Coupon Treasury Bond to be Issued on October 16, 2001 (Auction Guidelines).8 The Auction Guidelines
reiterated that the Bonds to be auctioned are "[n]ot subject to 20% withholding tax as the issue will be limited to a
maximum of 19 lenders in the primary market (pursuant to BIR Revenue Regulation No. 020 2001 )." 9

At the auction held on October 16, 2001, Rizal Commercial Banking Corporation (RCBC) participated on behalf of
Caucus of Development NGO Networks (CODE-NGO) and won the bid. 10 Accordingly, on October 18, 2001, the
Bureau of Treasury issued P35 billion worth of Bonds at yield-tomaturity of 12.75% to RCBC for approximately P10.17
billion, 11 resulting in a discount of approximately P24.83 billion.

Likewise, on October 16, 2001, RCBC Capital entered into an underwriting agreement12 with CODE-NGO, where RCBC
Capital was appointed as the Issue Manager and Lead Underwriter for the offering of the PEACe Bonds. 13RCBC
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Capital agreed to underwrite14 on a firm basis the offering, distribution, and sale of the P3 5 billion Bonds at the price of
Pll,995,513,716.51. 15 In Section 7(r) of the underwriting agreement, CODE-NGO represented that "[a]ll income derived
from the Bonds, inclusive of premium on redemption and gains on the trading of the same, are exempt from all forms of
taxation as confirmed by [the] Bureau of Internal Revenue . . . letter rulings dated 31 May 2001 and 16 August 2001,
respectively." 16

17
RCBC Capital sold and distributed the Government Bonds for an issue price of Pll,995,513,716.51. Banco de Oro, et
al. purchased the PEACe Bonds on different dates. 18

On October 7, 2011, barely 11 days before maturity of the PEACe Bonds, the Commissioner of Internal Revenue
issued BIR Ruling No. 370- 201119 declaring that the PEACe Bonds, being deposit substitutes, were subject to 20%
final withholding tax. 20 Under this ruling, the Secretary of Finance directed the Bureau of Treasury to withhold a 20%
final tax from the face value of the PEACe Bonds upon their payment at maturity on October 18, 2011.21

On October 17, 2011, replying to an urgent query from the Bureau of Treasury, the Bureau of Internal Revenue
issued BIR Ruling No. DA 378-201122 clarifying that the final withholding tax due on the discount or interest earned on
the PEACe Bonds should "be imposed and withheld not only on RCBC/CODE NGO but also [on] 'all subsequent
holders of the Bonds. "'23

On October 17, 2011, petitioners filed before this Court a Petition for Certiorari, Prohibition, and/or Mandamus (with
urgent application for a temporary restraining order and/or writ of preliminary injunction). 24

On October 18, 2011, this Court issued a temporary restraining order25 "enjoining the implementation of BIR Ruling No.
370-2011 against the [PEACe Bonds,] ... subject to the condition that the 20% final withholding tax on interest income
therefrom shall be withheld by the petitioner banks and placed in escrow pending resolution of [the] petition." 26

RCBC and RCBC Capital, as well as CODE-NGO separately moved for leave of court to intervene and to admit the
Petition-in-Intervention. The Motions were granted by this Court. 27

Meanwhile, on November 9, 2011, petitioners filed their Manifestation with Urgent Ex Parte Motion to Direct
Respondents to Comply with the TR0.28

On November 15, 2011, this Court directed respondents to: "(1) show cause why they failed to comply with the October
18, 2011 resolution; and (2) comply with the Court's resolution in order that petitioners may place the corresponding
funds in escrow pending resolution of the petition. " 29

On December 6, 2011, this Court noted respondents' compliance. 30

On November 27, 2012, petitioners filed their Manifestation with Urgent Reiterative Motion [To Direct Respondents to
Comply with the Temporary Restraining Order]. 31

On December 4, 2012, this Court noted petitioners' Manifestation with Urgent Reiterative Motion and required
respondents to comment. 32 Respondents filed their Comment, 33 to which petitioners filed their Reply. 34

On January 13, 2015, this Court promulgated the Decision35 granting the Petition and the Petitions-in-Intervention.
Applying Section 22(Y) of the National Internal Revenue Code, we held that the number of lenders/investors at every
transaction is determinative of whether a debt instrument is a deposit substitute subject to 20% final withholding tax.
When at any transaction, funds are simultaneously obtained from 20 or more lenders/investors, there is deemed to be a
public borrowing and the bonds at that point in time are deemed deposit substitutes. Consequently, the seller is
required to withhold the 20% final withholding tax on the imputed interest income from the bonds. We further declared
void BIR Rulings Nos. 370-2011 and DA 378-2011 for having disregarded the 20-lender rule provided in Section 22(Y).
The Decision disposed as follows:
145
WHEREFORE, the petition for review and petitions-in- intervention are GRANTED. BIR Ruling Nos. 370-2011 and DA
378- 2011 are NULLIFIED.

Furthermore, respondent Bureau of Treasury is REPRIMANDED for its continued retention of the amount
corresponding to the 20% final withholding tax despite this court's directive in the temporary restraining order and in the
resolution dated November 15, 2011 to deliver the amounts to the banks to be placed in escrow pending resolution of
this case.

Respondent Bureau of Treasury is hereby ORDERED to immediately release and pay to the bondholders the amount
corresponding to the 20% final withholding tax that it withheld on October 18, 2011. 36

37
On March 13, 2015, respondents filed by registered mail their Motion for Reconsideration and Clarification.

On March 16, 2015, petitioners-intervenors RCBC and RCBC Capital moved for clarification and/or partial
reconsideration.38

On July 6, 2015, petitioners Banco de Oro, et al. filed their

Consolidated Comment39 on respondents' Motion for Reconsideration and Clarification and petitioners-intervenors
RCBC and RCBC Capital Corporation's Motion for Clarification and/or Partial Reconsideration.

On October 29, 2015, petitioners Banco de Oro, et al. filed their Urgent Reiterative Motion [to Direct Respondents to
Comply with the Temporary Restraining Order].40

The issues raised in the motions revolve around the following:

First, the proper interpretation and application of the 20-lender rule under Section 22(Y) of the National Internal
Revenue Code, particularly in relation to issuances of government debt instruments;

Second, whether the seller in the secondary market can be the proper withholding agent of the final withholding tax due
on the yield or interest income derived from government debt instruments considered as deposit substitutes;

Third, assuming the PEACe Bonds are considered "deposit substitutes," whether government or the Bureau of Internal
Revenue is estopped from imposing and/or collecting the 20% final withholding tax from the face value of these Bonds.
Further:

(a) Will the imposition of the 20% final withholding tax violate the non-impairment clause of the Constitution?

(b) Will it constitute a deprivation of property without due process of law?

Lastly, whether the respondent Bureau of Treasury is liable to pay 6% legal interest.

Before going into the substance of the motions for reconsideration, we find it necessary to clarify on the procedural
aspects of this case. This is with special emphasis on the jurisdiction of the Court of Tax Appeals in view of the previous
conflicting rulings of this Court.

Earlier, respondents questioned the propriety of petitioners' direct resort to this Court. They argued that petitioners
should have challenged first the 2011 Bureau of Internal Revenue rulings before the Secretary of Finance, consistent
with the doctrine on exhaustion of administrative remedies.
146
In the assailed Decision, we agreed that interpretative rulings of the Bureau of Internal Revenue are reviewable by the
Secretary of Finance under Section 441 of the National Internal Revenue Code. However, we held that because of the
special circumstances availing in this case-namely: the question involved is purely legal; the urgency of judicial
intervention given the impending maturity of the PEA Ce Bonds; and the futility of an appeal to the Secretary of Finance
as the latter appeared to have adopted the challenged Bureau of Internal Revenue rulings-there was no need for
petitioners to exhaust all administrative remedies before seeking judicial relief.

We also stated that:

[T]he jurisdiction to review the rulings of the Commissioner of Internal Revenue pertains to the Court of Tax Appeals.
The questioned BIR Ruling Nos. 370-2011 and DA 378-2011 were issued in connection with the implementation of the
1997 National Internal Revenue Code on the taxability of the _interest income from zero-coupon bonds issued by the
government.

Under Republic Act No. 1125 (An Act Creating the Court of Tax Appeals), as amended by Republic Act No. 9282, such
rulings of the Commissioner of Internal Revenue are appealable to that court, thus:

SEC. 7. Jurisdiction. -The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal
Revenue or other laws administered by the Bureau of Internal Revenue;

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a decision, ruling or
inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the
Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the
Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or
ruling or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein.

SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil proceeding involving matters 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.

In Commissioner of Internal Revenue v. Leal, citing Rodriguez v. Blaquera, this court emphasized the jurisdiction of the
Court of Tax Appeals over rulings of the Bureau of Internal Revenue, thus:

While the Court of Appeals correctly took cognizance of the petition for certiorari, however, let it be stressed that the
jurisdiction to review the rulings of the Commissioner of Internal Revenue pertains to the Court of Tax Appeals, not to
the RTC.

The questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the Commissioner implementing
the Tax Code on the taxability of pawnshops.

Such revenue orders were issued pursuant to petitioner's powers under Section 245 of the Tax Code, which states:

"SEC. 245. Authority of the Secretary of Finance to promulgate rules and regulations. - The Secretary of Finance, upon
recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement
of the provisions of this Code.

147
The authority of the Secretary of Finance to determine articles similar or analogous to those subject to a rate of sales
tax under certain category enumerated in Section 163 and 165 of this Code shall be without prejudice to the power of
the Commissioner of Internal Revenue to make rulings or opinions in connection with the implementation of the
provisions of internal revenue laws, including ruling on the classification of articles of sales and similar purposes."

The Court, in Rodriguez etc. vs. Blaquera, etc., ruled:

"Plaintiff maintains that this is not an appeal from a ruling of the Collector of Internal Revenue, but merely an attempt to
nullify General Circular No. V-148, which does not adjudicate or settle any controversy, and that, accordingly, this case
is not within the jurisdiction of the Court of Tax Appeals.

We find no merit in this pretense. General Circular No. V-148 directs the officers charged with the collection of taxes
and license fees to adhere strictly to the interpretation given by the defendant to the statutory provisions above
mentioned, as set forth in the Circular. The same incorporates, therefore, a decision of the Collector of Internal
Revenue (now Commissioner of Internal Revenue) on the manner of enforcement of the said statute, the administration
of which is entrusted by law to the Bureau of Internal Revenue. As such, it comes within the purview of Republic Act No.
1125, Section 7 of which provides that the Court of Tax Appeals 'shall exercise exclusive appellate jurisdiction to review
by appeal . . . decisions of the Collector of Internal Revenue in . . . matters arising under the National Internal Revenue
Code or other law or part of the law administered by the Bureau of Internal Revenue. "[['42]]

In Commissioner of Internal Revenue v. Leal, 43 the Commissioner issued Revenue Memorandum Order (RMO) No. 15-
91 imposing 5% lending investors tax on pawnshops, and Revenue Memorandum Circular (RMC) No. 43-91 subjecting
the pawn ticket to documentary stamp tax.44 Leal, a pawnshop owner and operator, asked for reconsideration of the
revenue orders, but it was denied by the Commissioner in BIR Ruling No. 221-91.45 Thus, Leal filed before the Regional
Trial Court a petition for prohibition seeking to prohibit the Commissioner from implementing the revenue orders. 46 This
Court held that Leal should have filed her petition for prohibition before the Court of Tax Appeals, not the Regional Trial
Court, because "the questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the
Commissioner implementing the Tax Code on the taxability of pawnshops."47 This Court held that such rulings in
connection with the implementation of internal revenue laws are appealable to the Court of Tax Appeals under Republic
Act No. 1125, as amended.48

Likewise, in Asia International Auctioneers, Inc. v. Hon. Parayno, Jr., 49 this Court upheld the jurisdiction of the Court of
Tax Appeals over the Regional Trial Courts, on the issue of the validity of revenue memorandum circulars.50 It explained
that "the assailed revenue regulations and revenue memorandum circulars [were] actually rulings or opinions of the
[Commissioner of Internal Revenue] on the tax treatment of motor vehicles sold at public auction within the [Subic
Special Economic Zone] to implement Section 12 of [Republic Act] No. 7227." This Court further held that the taxpayers'
invocation of this Court's intervention was premature for its failure to first ask the Commissioner of Internal Revenue for
reconsideration of the assailed revenue regulations and revenue memorandum circulars.

However, a few months after the promulgation of Asia International Auctioneers, British American Tobacco v.
Camacho51 pointed out that although Section 7 of Republic Act No. 1125, as amended, confers on the Court of Tax
Appeals jurisdiction to resolve tax disputes in general, this does not include cases where the constitutionality of a law or
rule is challenged. Thus:

The jurisdiction of the Court of Tax Appeals is defined in Republic Act No. 1125, as amended by Republic Act No. 9282.
Section 7 thereof states, in pertinent part:

While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not include cases
where the constitutionality of a law or rule is challenged. Where what is assailed is the validity or constitutionality of a
law, or a rule or regulation issued by the administrative agency in the performance of its quasi-legislative function, the
regular courts have jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules
issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts.
148
Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the
regional trial courts. This is within the scope of judicial power, which includes the authority of the courts to determine in
an appropriate action the validity of the acts of the political departments. Judicial power includes the duty of the courts
of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determin
whether or not there has been a grave abuse of dicretion amounting to lack or execss of jurisdiction on the part of any
branch or instrumentality of the Government.

In Drilon v. Lim, it was held:

We stress at the outset that the lower court had jurisdiction to consider the constitutionality of Section 187, this authority
being embraced in the general definition of the judicial power to determine what are the valid and binding laws by the
criterion of their conformity to the fundamental law. Specifically, B.P. 129 vests in the regional trial courts jurisdiction
over all civil cases in which the subject of the litigation is incapable of pecuniary estimation, even as the accused in a
criminal action has the right to question in his defense the constitutionality of a law he is charged with violating and of
the proceedings taken against him, particularly as they contravene the Bill of Rights. Moreover, Article X, Section 5(2),
of the Constitution vests in the Supreme Court appellate jurisdiction over final judgments and orders of lower courts in
all cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential
decree, proclamation, order, instruction, ordinance, or regulation is in question.

The petition for injunction filed by petitioner before the RTC is a direct attack on the constitutionality of Section 145(C) of
the NIRC, as amended, and the validity of its implementing rules and regulations. In fact, the RTC limited the resolution
of the subject case to the issue of the constitutionality of the assailed provisions. The determination of whether the
assailed law and its implementing rules and regulations contravene the Constitution is within the jurisdiction of regular
courts. The Constitution vests the power of judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the
regional trial courts. Petitioner, therefore, properly filed the subject case before the RTC. 52 (Citations omitted)

British American Tobacco involved the validity of: (1) Section 145 of Republic Act No. 8424; (2) Republic Act No. 9334,
which further amended Section 145 of the National Internal Revenue Code on January 1, 2005; (3) Revenue
Regulations Nos. 1-97, 9-2003, and 22-2003; and (4) RMO No. 6- 2003.53

A similar ruling was made in Commissioner of Customs v. Hypermix Feeds Corporation. 54 Central to the case was
Customs Memorandum Order (CMO) No. 27-2003 issued by the Commissioner of Customs. This issuance provided for
the classification of wheat for tariff purposes. In anticipation of the implementation of the CMO, Hypermix filed a Petition
for Declaratory Relief before the Regional Trial Court. Hypermix claimed that said CMO was issued without observing
the provisions of the Revised Administrative Code; was confiscatory; and violated the equal protection clause of the
1987 Constitution. 55 The Commissioner of Customs moved to dismiss on the ground of lack of jurisdiction. 56 On the
issue regarding declaratory relief, this Court ruled that the petition filed by Hypermix had complied with all the requisites
for an action of declaratory relief to prosper. Moreover:

Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the
regional trial courts. This is within the scope of judicial power, which includes the authority of the courts to determine in
an appropriate action the validity of the acts of the political departments. 57

We revert to the earlier rulings in Rodriguez, Leal, and Asia International Auctioneers, Inc. The Court of Tax Appeals
has exclusive jurisdiction to determine the constitutionality or validity of tax laws, rules and regulations, and other
administrative issuances of the Commissioner of Internal Revenue.

Article VIII, Section 1 of the 1987 Constitution provides the general definition of judicial power:

149
 ARTICLE VIII
JUDICIAL DEPARTMENT

Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by
law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. (Emphasis supplied)

Based on this constitutional provision, this Court recognized, for the first time, in The City of Manila v. Hon. Grecia-
Cuerdo,58 the Court of Tax Appeals' jurisdiction over petitions for certiorari assailing interlocutory orders issued by the
Regional Trial Court in a local tax case. Thus:

[W]hile there is no express grant of such power, with respect to the CTA, Section 1, Article VIII of the 1987 Constitution
provides, nonetheless, that judicial power shall be vested in one Supreme Court and in such lower courts as may be
established by law and that judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the CTA includes that
of determining whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of the RTC in issuing an interlocutory order in cases falling within the exclusive appellate jurisdiction of the tax
court. It, thus, fo1lows that the CTA, by constitutional mandate, is vested with jurisdiction to issue writs of certiorari in
these cases. 59 (Emphasis in the original)

This Court further explained that the Court of Tax Appeals' authority to issue writs of certiorari is inherent in the exercise
of its appellate jurisdiction.

A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it effectively, to make
all orders that will preserve the subject of the action, and to give effect to the final determination of the appeal. It carries
with it the power to protect that jurisdiction and to make the decisions of the court thereunder effective. The court, in aid
of its appellate jurisdiction, has authority to control all auxiliary and incidental matters necessary to the efficient and
proper exercise of that jurisdiction. For this purpose, it may, when necessary, prohibit or restrain the performance of any
act which might interfere with the proper exercise of its rightful jurisdiction in cases pending before it.

Lastly, it would not be amiss to point out that a court which is endowed with a particular jurisdiction should have powers
which are necessary to enable it to act effectively within such jurisdiction. These should be regarded as powers which
are inherent in its jurisdiction and the court must possess them in order to enforce its rules of practice and to suppress
any abuses of its process and to defeat any attempted thwarting of such process.

In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as the CA and shall possess all the
inherent powers of a court of justice.

Indeed, courts possess certain inherent powers which may be said to be implied from a general grant of jurisdiction, in
addition to those expressly conferred on them. These inherent powers are such powers as are necessary for the
ordinary and efficient exercise of jurisdiction; or are essential to the existence, dignity and functions of the courts, as
well as to the due administration of justice; or are directly appropriate, convenient and suitable to the execution of their
granted powers; and include the power to maintain the court's jurisdiction and render it effective in behalf of the litigants.

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Thus, this Court has held that "while a court may be expressly granted the incidental powers necessary to effectuate its
jurisdiction, a grant of jurisdiction, in the absence of prohibitive legislation, implies the necessary and usual incidental
powers essential to effectuate it, and, subject to existing laws and constitutional provisions, every regularly constituted
court has power to do all things that are reasonably necessary for the administration of justice within the scope of its
jurisdiction and for the enforcement of its judgments and mandates." Hence, demands, matters or questions ancillary or
incidental to, or growing out of, the main action, and coming within the above principles, may be taken cognizance of by
the court and determined, since such jurisdiction is in aid of its authority over the principal matter, even though the court
may thus be called on to consider and decide matters which, as original causes of action, would not be within its
cognizance.60 (Citations omitted)

Judicial power likewise authorizes lower courts to determine the constitutionality or validity of a law or regulation in the
first instance.61 This is contemplated in the Constitution when it speaks of appellate review of final judgments of inferior
courts in cases where such constitutionality is in issue.62

On, June 16, 1954, Republic Act No. 1125 created the Court of Tax Appeals not as another superior administrative
agency as was its predecessor-the former Board of Tax Appeals-but as a part of the judicial system63 with exclusive
jurisdiction to act on appeals from:

(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal
Revenue Code or other law or part of law administered by the Bureau of Internal Revenue;

(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money
charges; seizure, detention or release of property affected fines, forfeitures or other penalties imposed in relation
thereto; or other matters arising under the Customs Law or other law or part of law administered by the Bureau of
Customs; and

(3) Decisions of provincial or city Boards of Assessment Appeals in cases involving the assessment and taxation of real
property or other matters arising under the Assessment Law, including rules and regulations relative thereto.

Republic Act No. 1125 transferred to the Court of Tax Appeals jurisdiction over all matters involving assessments that
were previously cognizable by the Regional Trial Courts (then courts of first instance).64

In 2004, Republic Act No. 9282 was enacted. It expanded the jurisdiction of the Court of Tax Appeals and elevated its
rank to the level of a collegiate court with special jurisdiction. Section 1 specifically provides that the Court of Tax
Appeals is of the same level as the Court of Appeals and possesses "all the inherent powers of a Court of Justice." 65

Section 7, as amended, grants the Court of Tax Appeals the exclusive jurisdiction to resolve all tax-related issues:

Section 7. Jurisdiction - The CTA shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:

1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal
Revenue Code or other laws administered by the Bureau of Internal Revenue;

2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal
Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue
Code provides a specific period of action, in which case the inaction shall be deemed a denial;

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3) Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them
in the exercise of their original or appellate jurisdiction;

4) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money
charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or
other matters arising under the Customs Law or other laws administered by the Bureau of Customs;

5) Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases
involving the assessment and taxation of real property originally decided by the provincial or city board of assessment
appeals;

6) Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of
the Commissioner of Customs which are adverse to the Government under Section 2315 of the Tariff and Customs
Code;

7) Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or article, and the
Secretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and countervailing
duties under Section 301 and 302, respectively, of the Tariff and Customs Code, and safeguard measures under
Republic Act No. 8800, where either party may appeal the decision to impose or not to impose said duties.

The Court of Tax Appeals has undoubted jurisdiction to pass upon the constitutionality or validity of a tax law or
regulation when raised by the taxpayer as a defense in disputing or contesting an assessment or claiming a refund. It is
only in the lawful exercise of its power to pass upon all matters brought before it, as sanctioned by Section 7 of
Republic Act No. 1125, as amended.

This Court, however, declares that the Court of Tax Appeals may likewise take cognizance of cases directly challenging
the constitutionality or validity of a tax law or regulation or administrative issuance (revenue orders, revenue
memorandum circulars, rulings).

Section 7 of Republic Act No. 1125, as amended, is explicit that, except for local taxes, appeals from the decisions of
quasi-judicial agencies66 (Commissioner of Internal Revenue, Commissioner of Customs, Secretary of Finance, Central
Board of Assessment Appeals, Secretary of Trade and Industry) on tax-related problems must be brought exclusively to
the Court of Tax Appeals.

In other words, within the judicial system, the law intends the Court of Tax Appeals to have exclusive jurisdiction to
resolve all tax problems. Petitions for writs of certiorari against the acts and omissions of the said quasi-judicial
agencies should, thus, be filed before the Court of Tax Appeals. 67

Republic Act No. 9282, a special and later law than Batas Pambansa Blg. 12968 provides an exception to the original
jurisdiction of the Regional Trial Courts over actions questioning the constitutionality or validity of tax laws or
regulations. Except for local tax cases, actions directly challenging the constitutionality or validity of a tax law or
regulation or administrative issuance may be filed directly before the Court of Tax Appeals.

Furthermore, with respect to administrative issuances (revenue orders, revenue memorandum circulars, or rulings),
these are issued by the Commissioner under its power to make rulings or opinions in connection

with the implementation of the provisions of internal revenue laws. Tax rulings, on the other hand, are official positions
of the Bureau on inquiries of taxpayers who request clarification on certain provisions of the National Internal Revenue
Code, other tax laws, or their implementing regulations.69Hence, the determination of the validity of these issuances
clearly falls within the exclusive appellate jurisdiction of the Court of Tax Appeals under Section 7(1) of Republic Act No.
1125, as amended, subject to prior review by the Secretary of Finance, as required under Republic Act No. 8424.70

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We now proceed to the substantive aspects.

II

Respondents contend that the 20-lender rule should not strictly apply to issuances of government debt instruments,
which by nature, are borrowings from the public. 71 Applying the rule otherwise leads to an absurd result.72 They point
out that in BIR Ruling No. 007-0473 dated July 16, 2004 (the precursor of BIR Ruling Nos. 370-2011 and DA 378-2011),
the Bureau of Treasury's admitted intent to make the government securities freely tradable to an unlimited number of
lenders/investors in the secondary market was considered in place of an actual head count of lenders/investors due to
the limitations brought about by the absolute confidentiality of investments in government bonds under Section 2 of
Republic Act No. 1405, otherwise known as the Bank Secrecy Law. 74

Considering that the PEACe Bonds were intended to be freely tradable in the secondary market to 20 or more
lenders/investors, respondents contend. that they, like other similarly situated government securities-awarded to 19 or
less GSEDs in the primary market but freely tradable to 20 or more lenders/investors in the secondary market-should
be treated as deposit substitutes subject to the 20% final withholding tax. 75

Petitioners and petitioners-intervenors RCBC and RCBC Capital counter that Section 22(Y) of the National Internal
Revenue Code applies to all types of securities, including those issued by government. They add that under this
provision, it is the actual number of lenders at any one time that is material in determining whether an issuance is to be
considered a deposit substitute and not the intended distribution plan of the issuer.

Moreover, petitioners and petitioners-intervenors RCBC and RCBC Capital argue that the real intent behind the
issuance of the PEACe Bonds, as reflected by the representations and assurances of government in various issuances
and rulings, was to limit the issuance to 19 lenders and below. Hence, they contend that government cannot now take
an inconsistent position.

We find respondents' proposition to consider the intended public distribution of government securities-in this case, the
PEACe Bonds-in place of an actual head count to be untenable.

The general rule of requiring adherence to the letter in construing statutes applies with peculiar strictness to tax laws
and the provisions of a taxing act are not to be extended by implication. 76

The definition of deposit substitutes in Section 22(Y) specifically defined "public" to mean "twenty (20) or more individual
or corporate lenders at any one time."77 The qualifying phrase for public introduced78 by the National Internal Revenue
Code shows that a change in the meaning of the provision was intended, and this Court should construe the provision
as to give effect to the amendment.79 Hence, in light of Section 22(Y), the reckoning of whether there are 20 or more
individuals or corporate lenders is crucial in determining the tax treatment of the yield from the debt instrument. In other
words, if there are 20 or more lenders, the debt instrument is considered a deposit substitute and subject to 20% final
withholding tax.

II.A

The definition of deposit substitutes under the National Internal Revenue Code was lifted from Section 95 of Republic
Act No. 7653, otherwise known as the New Central Bank Act:

SEC. 95. Definition of Deposit Substitutes. The term "deposit substitutes" is defined as an alternative form of obtaining
funds from the public. other than deposits. through the issuance. endorsement, or acceptance of debt instruments for
the borrower's own account, for the purpose ofrelending or purchasing of receivables and other obligations. These
instruments may include, but need not be limited to, bankers' acceptances, promissory notes, participations, certificates
of assignment and similar instruments with recourse, and repurchase agreements. The Monetary Board shall determine
what specific instruments shall be considered as deposit substitutes for the purposes of Section 94 of this Act:
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Provided, however, That deposit substitutes of commercial, industrial and other nonfinancial companies issued for the
limited purpose of financing their own needs or the needs of their agents or dealers shall not be covered by the
provisions of Section 94 of this Act. (Emphasis supplied)

Banks are entities engaged in the lending of funds obtained from the public in the form of deposits. 80Deposits of money
in banks and similar institutions are considered simple loans. 81 Hence, the relationship between a depositor and a bank
is that of creditor and debtor. The ownership of the amount deposited is transmitted to the bank upon the perfection of
the contract and it can make use of the amount deposited for its own transactions and other banking operations.
Although the bank has the obligation to return the amount deposited, it has no obligation to return or deliver the same
money that was deposited.82

The definition of deposit substitutes in the banking laws was brought about by an observation that banks and non-bank
financial intermediaries have increasingly resorted to issuing a variety of debt instruments, other than bank deposits, to
obtain funds from the public. The definition also laid down the groundwork for the supervision by the Central Bank of
quasi-banking functions.83

As defined in the banking sector, the term "public" refers to 20 or more lenders. 84 "What controls is the actual number
of persons or entities to whom the products or instruments are issued. If there are at least twenty (20) lenders or
creditors, then the funds are considered obtained from the public."85

If a bank or non-bank financial intermediary sells debt instruments to 20 or more lenders/placers at any one time,
irrespective of outstanding amounts, for the purpose of releI].ding or purchasing of receivables or obligations, it is
considered to be performing a quasi-banking function and consequently subject to the appropriate regulations of the
Bangko Sentral ng Pilipinas (BSP).

11.B

Under the National Internal Revenue Code, however, deposit substitutes include not only the issuances and sales of
banks and quasi-banks for relending or purchasing receivables and other similar obligations, but also debt instruments
issued by commercial, industrial, and other nonfinancial companies to finance their own needs or the needs of their
agents or dealers. This can be deduced from a reading together of Section 22(X) and (Y):

Section 22. Definitions - When used in this Title:

....

(X) The term 'quasi-banking activities' means borrowing funds from twenty (20) or more personal or corporate lenders at
any one time, through the issuance, endorsement, or acceptance of debt instruments of any kind other than deposits for
the borrower's own account, or through the issuance of certificates of assignment or similar instruments, with recourse,
or of repurchase agreements for purposes of re-lending or purchasing receivables and other similar obligations:
Provided, however, That commerciali industrial and other non-financial companies, which borrow funds through any of
these means for the limited purpose of financing their own needs or the needs of their agents or dealers, shall not be
considered as performing quasi-banking functions.

(Y) The term 'deposit substitutes' shall mean an alternative form of

obtaining funds from the public (the term 'public' means borrowing from twenty (20) or more individual or
corporate lenders at any one time), other than deposits, through the issuance, endorsement, or acceptance of debt
instruments for the borrower's own account, for the purpose of relending or purchasing of receivables and other
obligations, or financing their own needs or the needs of their agent or dealer. (Emphasis supplied)

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For internal re.venue tax purposes, therefore, even debt instruments issued and sold to 20 or more lenders/investors by
commercial or industrial companies to finance their own needs are considered deposit substitutes, taxable as such.

11.C

The interest income on bank deposits was subjected for the first time to the withholding tax system under Presidential
Decree No. 1156,86 which was promulgated in 1977. The whereas clauses spell the reasons for the law:

[I]nterest on bank deposit is one of the items includible in gross income .... [M]any bank depositors fail to declare
interest income in their income tax returns. . . . [I]n order to maximize the collection of the income tax on interest on
bank deposits, it is necessary to apply the withholdings system on this type of fixed or determinable income.

In the same year, Presidential Decree No. 115487 was also promulgated. It imposed a 35% transaction tax (final tax) on
interest income from every commercial paper issued in the primary market, regardless of whether they are issued to the
public or not. 88 Commercial paper was defined as "an instrument evidencing indebtedness of any person or entity,
including banks and non-banks performing quasi-banking functions, which is issued, endorsed, sold, transferred or in
any manner conveyed to another person or entity, either with or without recourse and irrespective of maturity." The
imposition of a final tax on commercial papers was "aimed primarily to improve the administrative provisions of the
National Internal Revenue Code to ensure the collection on the tax on interest on commercial papers used as principal
instruments issued in the primary market."89 It was reported that "the [Bureau of Internal Revenue had] no means of
enforcing strictly the taxation on interest income earned in the money market transactions. " 90

These presidential decrees, as well as other new internal revenue laws and various laws and decrees that have so far
amended the provisions of the 1939 National Internal Revenue Code were consolidated and codified into the 1977
National Internal Revenue Code.91

In 1980, Presidential Decree No. 173992 was promulgated, which further amended certain provisions of the 1977
National Internal Revenue Code and repealed Section 210 (the provision embodying the percentage tax on commercial
paper transactions). The Decree imposed a final tax of 20% on interests from yields on deposit substitutes issued to the
public.93 The tax was required to be withheld by banks and non-bank financial intermediaries and paid to the Bureau of
Internal Revenue in accordance with Section 54 of the 1977 National Internal Revenue Code. Presidential Decree No.
1739, as amended by Presidential Decree No. 1959 in 1984 (which added the definition of deposit substitutes) was
subsequently incorporated in the National Internal Revenue Code.

These developments in the National Internal Revenue Code reflect the rationale for the application of the withholding
system to yield from deposit substitutes, which is essentially to maximize and expedite the collection of income taxes by
requiring its payment at the source, 94 as with the case of the interest on bank deposits. When banks sell deposit
substitutes to the public, the final withholding tax is imposed on the interest income because it would be difficult to
collect from the public. Thus, the incipient scheme in the final withholding tax is to achieve an effective administration in
capturing the interest-income windfall from deposit substitutes as a source of revenue.

It must be emphasized, however, that withholding tax is merely a method of collecting income tax in advance. The
perceived tax is collected at the source of income payment to ensure collection. Consequently, those subjected to the
final withholding tax are no longer subject to the regular income tax.

III

Respondents maintain that the phrase "at any one time" must be given its ordinary meaning, i.e. "at any given time" or
"during any particular point or moment in the day."95 They submit that the correct interpretation of Section 22(Y) does
.not look at any specific transaction concerning the security; instead, it considers the existing number of
lenders/investors of such security at any moment in time, whether in the primary or secondary market. 96 Hence, when

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during the lifetime of the security, there was any one instance where twenty or more individual or corporate lenders held
the security, the borrowing becomes "public" in character and is ipso facto subject to 20% final withholding tax.97

Respondents further submit that Section 10.1(k) of the Securities Regulation Code and its Implementing Rules and
Regulations may be applied by analogy, such that if at any time, (a) the lenders/investors number 20 or more; or (b)
should the issuer merely offer the securities publicly or to 20 or more lenders/investors, these securities should be
deemed deposit substitutes.98

On the other hand, petitioners-intervenors RCBC and RCBC Capital insist that the phrase "at any one time" only refers
to transactions made in the primary market.1âwphi1 According to them, the PEACe Bonds are not deposit substitutes
since CODE-NGO, through petitioner-intervenor RCBC, is the sole lender in the primary market, and all subsequent
transactions in the secondary market merely pertain to a sale and/or assignment of credit and not borrowings from the
public.99

Similarly, petitioners contend that for a government security, such as the PEACe Bonds, to be considered as deposit
substitutes, it is an indispensable requirement that there is "borrowing" between the issuer and the lender/investor in the
primary market and between the transferee and the transferor in the secondary market. Petitioners submit that in the
secondary market, the transferee/buyer must have recourse to the selling investor as required by Section 22(Y) of the
National Internal Revenue Code so that a borrowing "for the borrower's (transferor's) own account" is created between
the buyer and the seller. Should the transferees in the secondary market who have recourse to the transferor reach 20
or more, the transaction will be subjected to a-final withholding tax. 100

Petitioners and petitioners-intervenors RCBC and RCBC Capital contend that respondents' proposed application of
Section 10.l(k) of the Securities Regulation Code and its Implementing Rules is misplaced because: (1) the National
Internal Revenue Code clearly provides the conditions when a security issuance should qualify as a deposit substitute
subject to the 20% final withholding tax; and (2) the two laws govern different matters.

III.A

Generally, a corporation may obtain funds for capital expenditures by floating either shares of stock (equity) or bonds
(debt) in the capital market. Shares of stock or equity securities represent ownership, interest, or participation in the
issuer-corporation. On the other hand, bonds or debt securities are evidences of indebtedness of the issuer-corporation.

New securities are issued and sold to the investing public for the first time in the primary market. Transactions in the
primary market involve an actual transfer of funds from the investor to the issuer of the new security. The transfer of
funds is evidenced by a security, which becomes a financial asset in the hands of the buyer/investor.

New issues are usually sold through a registered underwriter, which may be an investment house or bank registered as
an underwriter of securities.101 An underwriter helps the issuer find buyers for its securities. In some cases, the
underwriter buys the whole issue from the issuer and resells this to other security dealers and the public. 102 When a
group of underwriters pool together their resources to underwrite an issue, they are called the "underwriting
syndicate."103

On the other hand, secondary markets refer to the trading of outstanding or already-issued securities. In any secondary
market trade, the cash proceeds normal_ly go to the selling investor rather than to the issuer.

To illustrate: A decides to issue bonds to raise capital funds. X buys and is issued A bonds. The proceeds of the sale go
to A, the issuer. The sale between A and Xis a primary market transaction.

Before maturity, X trades its A bonds to Y. The A bonds sold by X are not X's indebtedness. The cash paid for the
bonds no longer go to A, but remains with X, the s_elling investor/holder. The transfer of A bonds from X to Y is

156
considered a secondary market transaction. Any difference between the purchase price of the assets (A bonds) and the
sale price is a trading gain subject to a different tax treatment, as will be explained later.

When Y trades its A bonds to Z, the sale is still considered a secondary market transaction. In other words, the trades
from X to Y, Y to Z, and Z to subsequent holders/investors are considered secondary market transactions. If Z holds on
to the bonds and the bonds mature, Z will receive from A the face value of the bonds.

A bond is similar to a bank deposit in the sense that the investor lends money to the issuer and the issuer pays interest
on the invested amount. However, unlike bank deposits, bonds are marketable securities. The market mechanism
provides quick mobility of money and securities. 104 Thus, bondholders can sell their bonds before they mature to other
investors, in tum converting their· financial assets to cash. In contrast, deposits, in the form of savings accounts for
instance, can only be redeemed by the issuing bank.

111.B

An investor in bonds may derive two (2) types of income:

First, the interest or the amount paid by the borrower to the lender/investor for the use of the lender’s money.105 For
interest-bearing bonds, interest is normally earned at the coupon date. In zero-coupon bonds, the discount is an interest
amortized up to maturity.

Second, the gain, if any, that is earned when the bonds are traded before maturity date or when redeemed at maturity.

The 20% final withholding tax imposed on interest income or yield from deposit substitute does not apply to the gains
derived from trading, retirement, or redemption of the instrument.

It must be stressed that interest income, derived by individuals from long-term deposits or placements made with banks
in the form of deposit substitutes, is exempt from income tax. Consequently, it is likewise exempt from the final
withholding tax under Sections 24(B)(l) and 25(A)(2) of the National Internal Revenue Code. However, when it is pre-
terminated by the individual investor, graduated rates of 5%, 12%, or 20%, depending on the remaining maturity of the
instrument, will apply on the entire income, to be deducted and withheld by the depository bank.

With respect to gains derived from long-term debt instruments, Section 32(B)(7)(g) of the National Internal Revenue
Code provides:

Sec. 32. Gross Income. –

(B) Exclusions from Gross Income. - The following items shall not be included in gross income and shall be exempt
from taxation under this title:

(7) Miscellaneous Items. -

(g) Gains from the Sale of Bonds, Debentures or other Certificate of Indebtedness. - Gains realized from the sale or
exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5)
years.

Thus, trading gains, or gains realized from the sale or transfer of bonds (i.e., those with a maturity of more than five
years) in the secondary market, are exempt from income tax. These "gains" refer to the difference between the selling
price of the bonds in the secondary market and the price at which the bonds were purchased by the seller. For
discounted instruments such as the zero-coupon bonds, the trading gain is the excess of the selling price over the book

157
value or accreted value (original issue price plus accumulated discount from the time of purchase up to the time of sale)
of the instruments.106

Section 32(B)(7)(g) also includes gains realized by the last holder of the bonds when the bonds are redeemed at
maturity, which is the difference between the proceeds from the retirement of the bonds and the price at which the last
holder acquired the bonds.

On the other hand, gains realized from the trading of short-term bonds (i.e., those with a maturity of less than five years)
in the secondary market are subject to regular income tax rates (ranging from 5% to 32% for individuals, and 30% for
corporations) under Section 32107 of the National Internal Revenue Code.

111.C

The Secretary of Finance, through the Bureau of Treasury, 108 is authorized under Section 1 of Republic Act No. 245, as
amended, to issue evidences of indebtedness such as treasury bills and bonds to meet public expenditures or to
provide for the purchase, redemption, or refunding of any obligations.

These treasury bills and bonds are issued and sold by the Bureau of Treasury to lenders/investors through a network of
licensed dealers (called Government Securities Eligible Dealers or GSEDs ). 109GSEDs are classified into primary and
ordinary dealers. 110 A primary dealer enjoys certain privileges such as eligibility to participate in the competitive bidding
of regular issues, eligibility to participate in the issuance of special issues such as zero-coupon treasury bonds, and
access to tap facility window. 111 On the other hand, ordinary dealers are only allowed to participate in the
noncompetitive bidding. 112 Moreover, primary dealers are required to meet the following obligations:

a. Must submit at least one competitive bid in each scheduled auction.

b. Must have total awards of at least 2% of the total amount of bills or bonds awarded within a particular quarter. This
requirement does not cover special issues.

113
c. Must be active in the trading of GS [government securities] in the secondary market.

A primary dealer who fails to comply with its obligations will be dropped from the roster of primary dealers and classified
as an ordinary dealer.

The auction method is the main channel used for originating government securities. 114 Under this method, the Bureau
of Treasury issues a public notice offering treasury bills and bonds for sale and inviting tenders. 115 The GSEDs tender
their bids electronically; 116 after the cut-off time, the Auction Committee deliberates on the bids and decide on the
award. 117

The Auction Committee then downloads the awarded securities to the winning bidders' Principal Securities Account in
the Registry of Scrip less Securities (RoSS). The RoSS, an electronic book-entry system established by the Bureau of
Treasury, is the official Registry of ownership of or interest in government securities. 118 All government securities
floated/originated by the National Government under its scripless policy, as well as subsequent transfers of the same in
the secondary market, are recorded in the RoSS in the Principal Securities Account of the GSED. 119

A GSED is required to open and maintain Client Securities Accounts in the name of its respective clients for
segregating government securities acquired by such clients from the GSED' s own securities holdings. A GSED may
also lump all government securities sold to clients in one account, provided ·that the GSED maintains complete records
of ownership/other titles of its clients in the GSED's own books. 120

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Thus, primary issues of treasury bills and bonds are supposed to be issued only to GSEDs. By participating in auctions,
the GSED acts as a channel between the Bureau of Treasury and investors in the primary market. The winning GSED
bidder acquires the privilege to on-sell government securities to other financial institutions or final investors who need
not be GSEDs. 121 Further, nothing in the law or the rules of the Bureau of Treasury prevents the GSED from entering
into contract with another entity to further distribute government securities.

In effecting a sale or distribution of government securities, a GSED acts in a certain sense as the "agent" of the Bureau
of Treasury. In Doles v. Angeles, 122 the basis of an agency is representation. 123 The question of whether an agency
has been created may be established by direct or circumstantial evidence. 124 For an agency to arise, it is not necessary
that the princi~al personally encounter the third person with whom the agent interacts. 125 The law contemplates
impersonal dealings where the principal need not personally know or meet the third person with whom the agent
transacts: precisely, the purpose of agency is to extend the personality of the principal through the facility of the
agent. 126 It was also stressed that the manner in which the parties designate the relationship is not controlling. 127 If an
act done by one person on behalf of another is in its essential nature one of agency, the former is the agent of the latter,
notwithstanding he or she is not caled.128

Through the use of GSEDs, particularly primary dealers, government is able to ensure the absorption of newly issued
securities and promote activity in the government securities market. The primary dealer system allows government to
access potential investors in the market by taking advantage of the GSEDs' distribution capacity. The sale transactions
executed by the GSED are indirectly for the benefit of the issuer. An investor who purchases bonds from the GSED
becomes an indirect lender to government. The financial asset in the hand of the investor represents a claim to future
cash, which the borrower-government must pay at maturity date. 129

Accordingly, the existence of 20 or more lenders should be reckoned at the time when the successful GSED-bidder
distributes (either by itself or through an underwriter) the government securities to final holders. When the GSED sells
the · government securities to 20 or more investors, the government securities are deemed to be in the nature of a
deposit substitute, taxable as such.

On the other hand, trading of bonds between two (2) investors in the secondary market involves a purchase or sale
transaction. The transferee of the bonds becomes the new owner, who is entitled to recover the face value of the bonds
from the issuer at maturity date. Any profit realized from the purchase or sale transaction is in the nature of a trading
gain subject to a different tax treatment, as explained above.

Respondents contend that the literal application of the "20 or more lenders at any one time" to government securities
would lead to: (1) impossibility of tax enforcement due to limitations imposed by the Bank Secrecy Law; (2) possible
uncertainties130; and (3) loopholes.131These concerns, however, are not sufficient justification for us to deviate from the
text of the law.132 Determining the wisdom, policy, or expediency of a statute is outside the realm of judicial
power.133 These are matters that should be addressed to the legislature. Any other interpretation looking into the
purported effects of the law would be tantamount to judicial legislation.

IV

Section 57 prescribes the withholding tax on interest or yield on deposit substitutes, among others, and the person
obligated to withhold the same. Section 57 reads:

Section 57. Withholding of Tax at Source. -

(A) Withholding of Final Tax on Certain Incomes. - Subject to rules and regulations, the Secretary of Finance may
promulgate, upon the recommendation of the Commissioner, requiring the filing of income tax return by certain income
payees, the tax imposed or prescribed by Sections 24(B)(l), 24(B)(2), 24(C), 24(D)(l); 25(A)(2), 25(A)(3), 25(B), 25(C),
25(D), 25(E); 27(D)(l), 27(D)(2), 27(D)(3), 27(D)(5); 28(A)(4), 28(A)(5), 28(A)(7)(a), 28(A)(7)(b), 28(A)(7)(c), 28(B)(l),
28(B)(2), 28(B)(3), 28(B)(4), 28(B)(5)(a), 28(B)(5)(b), 28(B)(5)(c), 33 and 282 of the Code on specified items of income
159
shall be withheld by payor-corporation and/or person and paid in the same manner and subject to the same conditions
as provided in Section 58 of this Code.

Likewise, Section 2.57 of Revenue Regulations No. 2-98 (implementing the National Internal Revenue Code relative to
the Withholding on Income subject to the Expanded Withholding Tax and Final Withholding Tax) states that the liability
for payment of the tax rests primarily on the payor as a withholding agent. Section 2.57 reads:

Sec. 2.57. WITHHOLDING OF TAX AT SOURCE. -

(A) Final Withholding Tax - Under the final withholding tax system the amount of income tax withheld by the
withholding agent is constituted as a full and final payment of the income tax due from the payee of said income. The
liability for payment of the tax rests primarily on the payor as a withholding agent. Thus, in case of his failure to withhold
the tax or in case of under withhp;ding the deficiency tax shall be collected from the payor/witholding agent[.] (Emphasis
supplied)

From these provisions, it is the payor-borrower who primarily has the duty to withhold and remit the 20% final tax on
interest income or yield from deposit substitutes.

This does not mean, however, that only the payor-borrower can be constituted as withholding agent. Under Section 59
of the National Internal Revenue Code, any person who has control, receipt, custody, or disposal of the income may be
constituted as withholding agent:

SEC. 59. Tax on Profits Collectible from Owner or Other Persons. - The tax imposed under this Title upon gains,
profits, and income not falling under the foregoing and not returned and paid by virtue of the foregoing or as otherwise
provided by law shall be assessed by personal return under rules and regulations to be prescribed by the Secretary of
Finance, upon recommendation of the Commissioner. The intent and purpose of the Title is that all gains, profits and
income of a taxable class, as defined in this Title, shall be charged and assessed with the corresponding tax prescribed
by this Title, and said tax shall be paid by the owners of such gains, profits and income, or the proper person having the
receipt, custody, control or disposal of the same. For purposes of this Title, ownership of such gains, profits and income
or liability to pay the tax shall be determined as of the year for which a return is required to be rendered. (Emphasis
supplied)

The intent and purpose of the National Internal Revenue Code provisions on withholding taxes is also explicitly stated,
i.e., that all gains, profits, and income "re charged and assessed with the corresponding tax" 134 and said tax paid by
"the owners of such gains, profits and income, or the proper person having the receipt, custody, control or disposal of
the same." 135

The obligation to deduct and withhold tax at source arises at the time an income subject to withholding is paid or
payable, whichever comes first. 136 In interest-bearing bonds, the interest is taxed at every instance that interest is paid
(and income is earned) on the bond. However, in a zerocoupon bond, it is expected that no periodic interest payments
will be made. Rather, the investor will be paid the principal and interest (discount) together when the bond reaches
maturity.

As explained by respondents, "the discount is the imputed interest earned on the security, and since paymnet is made
at maturity, there is an accreted interest that causes the price of a zero coupon instrument to accordingly increase with
time, all things being constant." 137

In a 10-year zero-coupon bond, for instance, the discount (or interest) is not earned in the first period, i.e., the value of
the instrument does not equal par at the end of the first period. The total discount is earned over the life of the
instrument. Nonetheless, the total discount is considered earned on the year of sale based on current value. 138

160
In view of this, the successful GSED-bidder, as agent of the Bureau of Treasury, has the primary responsibility to
withhold the 20% final withholding tax on the interest valued at present value, when its sale and distribution of the
government securities constitutes a deposit substitute transaction. The 20% final tax is deducted by the buyer from the
discount of the bonds and included in the remittance of the purchase price.

The final tax withheld by the withholding agent is considered as a "full and final payment of the income tax due from the
payee on the said income [and the] payee is not required to file an income tax return for the particular
income." 139 Section 10 of Department of Finance Department Order No. 020-10140 in relation to the National Internal
Revenue Code also provides that no other tax shall be collected on subsequent trading of the securities that have been
subjected to the final tax.

In this case, the PEACe Bonds were awarded to petitionersintervenors RCBC/CODE-NGO as the winning bidder in the
primary auction. At the same time, CODE-NGO got RCBC Capital as underwriter, to distribute and sell the bonds to the
public.

The Underwriting Agreement141 and RCBC Term Sheet142 for the sale of the PEACe bonds show that the settlement
dates for the issuance by the Bureau of Treasury of the Bonds to petitioners-intervenors RCBC/CODENGO and the
distribution by petitioner-intervenor RCBC Capital of the PEA Ce Bonds to various investors fall on the same day,
October 18, 2001.

This implies that petitioner-intervenor RCBC Capital was authorized to perform a book-building process, 143 a customary
method of initial distribution of securities by underwriters, where it could collate orders for the securities ahead of the
auction or before the securities were actually issued. Through this activity, the underwriter obtains information about
market conditions and preferences ahead of the auction of the government securities.

The reckoning of the phrase "20 or more lenders" should be at the time when petitioner-intervenor RCBC Capital sold
the PEACe bonds to investors. Should the number of investors to whom petitioner-intervenor RCBC Capital distributed
the PEACe bonds, therefore, be found to be 20 or more, the PEACe Bonds are considered deposit substitutes subject
to the 20% final withholding tax. Petitioner-intervenors RCBC/CODE-NGO and RCBC Capital, as well as the final
bondholders who have recourse to government upon maturity, are liable to pay the 20% final withholding tax.

We note that although the originally intended negotiated sale of the bonds by government to CODE-NGO did not
materialize, CODE-NGO, a private entity-still through the participation of petitioners-intervenors RCBC and RCBC
Capital-ended up as the winning bidder for the government securities and was able to use for its projects the profit
earned from the sale of the government securities to final investors.

Giving unwarranted benefits, advantage, or preference to a party and causing undue injury to government expose the
perpetrators or responsible parties to liability under Section 3(e) of Republic Act No. 3019. Nonetheless, this is not the
proper venue to determine and settle any such liability.

VI

Petitioners-intervenors RCBC and RCBC Capital contend that they cannot be held liable for the 20% final withholding
should have been made, their obligation was not clear since BIR Ruling Nos. 370-2011 and DA 378-2011 stated that
the 20% final withholding tax does not apply to PEACe Bonds. 144Second, to punish them under the circumstances (i.e.,
when they secured the PEACe Bonds from the Bureau of Treasury and sold the Bonds to the lenders/investors, they
had no obligation to remit the 20% final withholding tax) would violate due process of law and the constitutional
proscription on ex facto law.145

161
Petitioner-intervenor RCBC Capital further posits that it cannot be held liable for the 20% final withholding tax even as a
taxpayer because it never earned interest income from the PEACe Bonds, and any income earned is deemed in the
nature of an underwriting fee. 146 Petitionersintervenors RCBC and RCBC Capital instead argue that the liability falls on
the Bureau of Treasury and CODE-NGO, as withholding agent and taxpayer, respectively, considering their explicit
representation that the PEACe Bonds are exempt from the final withholding tax. 147

Petitioners-intervenors RCBC and RCBC Capital add that the Bureau of Internal Revenue is barred from assessing and
collecting the 20% final withholding tax, assuming it was due, on the ground of prescription. 148 They contend that the
three (3)-year prescriptive period under Section 203, rather than the 10-year assessment period under Section 222, is
applicable because they were compliant with the requirement of filing monthly returns that reflect the final withholding
taxes due or remitted for the relevant period. No false or fraudulent return was made because they relied on the 2001
BIR Rulings and on the representations made by the Bureau of Treasury and CODE-NGO that the PEACe Bonds were
not subject to the 20% final withholding tax. 149

Finally, petitioners-intervenors RCBC and RCBC Capital argue that this Court's interpretation of the phrase "at any one
time" cannot be applied to the PEACe Bonds and should be given prospective application only because it would cause
prejudice to them, among others. They cite Section 246 of the National Internal Revenue Code on non-retroactivity of
rulings, as well as Commissioner of Internal Revenue v. San Roque Power Corporation, 150 which held that taxpayers
may rely upon a rule or ruling issued by the Commissioner from the time it was issued up to its reversal by the
Commissioner or the court. According to them, the retroactive application of the court's decision would impair their
vested rights, violate the constitutional prohibition on non-impairment of contracts, and constitute a substantial breach of
obligation on the part of govemment. 151 In addition, the imposition of the 20% final withholding tax on the PEA Ce
Bonds would allegedly have pernicious effects on the integrity of existing securities that is I contrary to the state policies
of stabilizing the financial system and of developing the capital markets. 152

CODE-NGO likewise contends that it merely relied in good faith on the 2001 BIR Rulings confirming that the PEA Ce
Bonds were not subject to the 20% final withholding tax. 153 Therefore, it should not be prejudiced if the BIR Rulings are
found to be erroneous and reversed by the Commissioner or this court.154 CODE-NGO argues that this Court's Decision
construing the phrase "at any one time" to determine the phrase "20 or more lenders" to include both the primary and
secondary market should be applied prospectively. 155

Assuming it is liable for the 20% final withholding tax, CODE-NGO argues that the collection of the final tax was barred
by prescription.156 CODE-NGO points out that under Section 203 of the National Internal Revenue Code, internal
revenue taxes such as the final tax, should be assessed within three (3) years after the last day prescribed by law for
the filing of the return. 157 It further argues that Section 222(a) on exceptions to the prescribed period. for tax
assessment and collection does not apply. 158 It claims that there is no fraud or intent to evade taxes as it relied in good
faith on the assurances of the Bureau of Internal Revenue and Bureau of Treasury the PEACe Bonds are not subject to
the 20% final withholding tax. 159 We find merit on the claim of petitioners-intervenors RCBC, RCBC Capital, and
CODE-NGO for prospective application of our Decision.

The phrase "at any one time" is ambiguous in the context of the financial market. Hence, petitioner-intervenor RCBC
and the rest of the investors relied on the opinions of the Bureau of Internal Revenue in BIR Ruling Nos. 020-2001, 035-
2001 160 dated August 16, 2001, and DA-175- 01161dated September 29, 2001 to vested their rights in the exemption
from the final withholding tax. In sum, these rulings pronounced that to determine whether the financial assets, i.e., debt
instruments and securities, are deposit substitutes, the "20 or more individual or corporate lenders" rule must apply.
Moreover, the determination of the phrase "at any one time" to determine the "20 or more lenders" is to be determined
at the time of the original issuance. This being the case, the PEACe Bonds were not to be treated as deposit
substitutes.

In ABS-CBN Broadcasting Corp. v. Court of Tax Appeals,162 the Commissioner demanded from petitioner deficiency
withholding income tax on film rentals remitted to foreign corporations for the years 1965 to 1968. The assessment was
made under Revised Memo Circular No. 4-71 issued in 1971, which used gross income as tax basis for the required
162
withholding tax, instead of one-half of the film rentals as provided under General Circular No. V-334. In setting aside the
assessment, this Court ruled that in the interest of justice and fair play, rulings or circulars promulgated by the
Commissioner of Internal Revenue have no retroactive application where applying them would prove prejudicial to
taxpayers who relied in good faith on previous issuances of the Commissioner. This Court further held that Section
24(b) of then National Internal Revenue Code sought to be implemented by General Circular No. V-334 was neither too
plain nor simple to understand and was capable of different interpretations. Thus:

The rationale behind General Circular No. V-334 was clearly stated therein, however: "It ha[ d] been determined that the
tax is still imposed on income derived from capital, or labor, or both combined, in accordance with the basic principle of
income taxation ... and that a mere return of capital or investment is not income .... " "A part of the receipts of a non-
resident foreign film distributor derived from said film represents, therefore, a return of investment." The circular thus
fixed the return of capital at 50% to simplify the administrative chore of determining the portion of the rentals covering
the return of capital.

Were the "gross income" base clear from Sec. 24(b), perhaps, the ratiocination of the Tax Court could be
upheld. It should be noted, however, that said Section was not too plain and simple to understand. The fact that
the issuance of the General Circular in question was rendered necessary leads to no other conclusion than that
it was not easy of comprehension and could be subjected to different interpretations.

In fact, Republic Act No. 2343, dated June 20, 1959, supra, which was the basis of General Circular No. V-334, was
just one in a series of enactments regarding Sec. 24(b) of the Tax Code. Republic Act No. 3825 came next on June 22,
1963 without changing the basis but merely adding a proviso (in bold letters).

(b) Tax on foreign corporation. - (1) Non-resident corporations. - There shall be levied, collected, and paid for each
taxable year, in lieu of the tax imposed by the preceding paragraph, upon the amount received by every foreign
corporation not engaged in trade or business within the Philippines, from all sources within the Philippines, as interest,
dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or
determinable annual or periodical gains, profits and income, a tax equal to thirty per centum of such amount:
PROVIDED, HOWEVER, THAT PREMIUMS SHALL NOT INCLUDE REINSURANCE PREMIUMS." (double emphasis
ours)

Republic Act No. 3841, dated likewise on June 22, 1963, followed after, omitting the proviso and inserting some words
(also in bold letters).

"(b) Tax on foreign corporations. - (1) Nonresident corporations. - There shall be levied, collected and paid for each
taxable year, in lieu of the tax imposed by the preceding paragraph, upon the amount received by every foreign
corporation not engaged in trade or business within the Philippines, from all sources within the Philippines, as interest,
dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or
determinable annual or periodical OR CASUAL gains, profits and income, AND CAP IT AL GAINS, a tax equal to
thirty per centum of such amount."

The principle of legislative approval of administrative interpretation by re-enactment clearly obtains in this case. It
provides that "the re-enactment of a statute substantially unchanged is persuasive indication of the adoption by
Congress of a prior executive construction." Note should be taken of the fact that this case involves not a mere opinion
of the Commissioner or ruling rendered on a mere query, but a Circular formally issued to "all internal revenue officials"
by the then Commissioner of Internal Revenue.

It was only on June 27, 1968 under Republic Act No. 5431, supra, which became the basis of Revenue Memorandum
Circular No. 4-71, that Sec. 24(b2 was amended to refer specifically to 35% of the "gross income."163 (Emphasis
supplied)

163
San Roque has held that the 120-day and the 30-day periods under Section 112 of the National Internal Revenue Code
are mandatory and jurisdictional. Nevertheless, San Roque provided an exception to the rule, such that judicial claims
filed by taxpayers who relied on BIR Ruling No. DA-489-03-from its issuance on December 10, 2003 until its reversal by
this Court in Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. 164 on October 6, 2010-are
shielded from the vice of prematurity. The BIR Ruling declared that the "taxpayer-claimant need not wait for the lapse of
the 120-day period before it could seek judicial relief with the C[ourt] [of] T[ax] A[ppeals] by way of Petition for Review."
The Court reasoned that:

Taxpayers should not be prejudiced by an erroneous interpretation by the Commissioner, particularly on a difficult
question of law. The abandonment of the Atlas doctrine by Mirant and Aichi is proof that the reckoning of the
prescriptive periods for input VAT tax refund or credit is a difficult question of law. The abandonment of the Atlas
doctrine did not result in Atlas, or other taxpayers similarly situated, being made to return the tax refund or credit they
received or could have received under Atlas prior to its abandonment. This Court is applying Mirant and Aichi
prospectively. Absent fraud, bad faith or misrepresentation, the reversal by this Court of a general interpretative rule
issued by the Commissioner, like the reversal of a specific BIR ruling under Section 246, should also apply
prospectively ....

....

Thus, the only issue is whether BIR Ruling No. DA-489-03 is a general interpretative rule applicable to all taxpayers or a
specific ruling applicable only to a particular taxpayer.

BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made, not by a
particular taxpayer, but by a government agency tasked with processing tax refunds and credits, that is, the One Stop
Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance. This government agency is also the
addressee, or the entity responded to, in BIR Ruling No. DA-489-03. Thus, while this government agency mentions in
its query to the Commissioner the administrative claim of Lazi Bay Resources Development, Inc., the agency was in
fact asking the Commissioner what to do in cases like the tax claim of Lazi Bay Resources Development, Inc., where
the taxpayer did not wait for the lapse of the 120-day period.

Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling No. DA-
489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010,
where this Court held that the 120+30 day periods are mandatory and jurisdictional.165 (Emphasis supplied)

The previous interpretations given to an ambiguous law by the Commissioner of Internal Revenue, who is charged to
carry out its provisions, are entitled to great weight, and taxpayers who relied on the same should not be prejudiced in
their rights. 166 Hence, this Court's construction should be prospective; otherwise, there will be a violation of due process
for failure to accord persons, especially the parties affected by it, fair notice of the special burdens imposed on them.

VII

Urgent Reiterative Motion [to Direct Respondents to Comply with the

Temporary Restraining Order]

Petitioners Banco de Oro, et al. allege that the temporary restraining order issued by this Court on October 18, 2011
continues to be effective under Rule 58, Section 5 of the Rules of Court and the Decision dated January 13, 2015.
Thus, considering respondents' refusal to comply with their obligation under the temporary restraining order, petitioners
ask this Court to issue a resolution directing respondents, particularly the Bureau of Treasury, "to comply with its order
by immediately releasing to the petitioners during the pendency of the case the 20% final withholding tax" so that the
monies may be placed in escrow pending resolution of the case.167

164
We recall that in its previous pleadings, respondents remain firm in its stance that the October 18, 2011 temporary
restraining order could no longer be implemented because the acts sought to be enjoined were already fait
accompli. 168 They allege that the amount withheld was already remitted by the Bureau of Treasury to the Bureau of
Internal Revenue. Hence, it became part of the General Fund, which required legislative appropriation before it could
validly be disbursed. 169 Moreover, they argue that since the amount in question pertains to taxes alleged to be
erroneously withheld and collected by government, the proper recourse was for the taxpayers to file an application for
tax refund before the Commissioner of Internal Revenue under Section 204 of the National Internal Revenue Code. 170

In our January 13, 2015 Decision, we rejected respondents' defense of fait accompli. We held that the amount withheld
were yet to be remitted to the Bureau of Internal Revenue, and the evidence Gournal entry voucher) submitted by
respondents was insufficient to prove the fact of remittance. Thus:

The temporary restraining order enjoins the entire implementation of the 2011 BIR Ruling that constitutes both
the withholding and remittance of the 20% final withholding tax to the Bureau of Internal Revenue. Even though the
Bureau of Treasury had already withheld the 20% final withholding tax when they received the temporary restraining
order, it had yet to remit the monies it withheld to the Bureau of Internal Revenue, a remittance which"was due only on
November 10, 2011. The act enjoined by the temporary restraining order had not yet been fully satisfied and was still
continuing.

Under DOF-DBM Joint Circular No. 1-2000A dated July 31, 2001 which prescribes to national government agencies
such as the Bureau of Treasury the procedure for the remittance of all taxes they withheld to the Bureau of Internal
Revenue, a national agency shall file before the Bureau of Internal Revenue a Tax Remittance Advice (TRA) supported
by withholding tax returns on or before the 1 oth day of the following month after the said taxes had been withheld. The
Bureau of Internal Revenue shall transmit an original copy of the TRA to the Bureau of Treasury, which shall be the
basis in recording the remittance of the tax collection. The Bureau of Internal Revenue will then record the amount of
taxes reflected in the TRA as tax collection in the Journal of Tax Remittance by government agencies based on its
copies of the TRA. Respondents did not submit any withholding tax return or TRA to prove that the 20% final
withholding tax was indeed remitted by the Bureau of Treasury to the Bureau oflnternal Revenue on October 18, 2011.

Respondent Bureau of Treasury's Journal Entry Voucher No. 11-10- 10395 dated October 18, 2011 submitted to this
court shows:

Account Debit Amount Credit

Code Amount
Bonds Payable-UT, Dom-Zero 35,000,000,000.00
442-360
Coupon I/Bonds (Peace
Bonds)- 10 yr Sinking Fund-
Cash (BSF) 198-001 30,033,792,203.59

Due to BIR 412-002 4,966,207,796.41

To record redemption of 10yr
Zero coupon (Peace Bond) net
of the 20% final withholding
tax pursuant to BIR Ruling No.
378-2011, value date, October
18, 2011 per BTr letter
authority and BSP Bank
Statements.
165
The foregoing journal entry, however, does not prove that the amount of P4,966,207, 796.41, representing the 20% final
withholding tax on the PEACe Bonds, was disbursed by it and remitted to the Bureau of Internal Revenue on October
18, 2011. The entries merely show that the monies corresponding to 20% final withholding tax was set aside for
remittance to the Bureau of Internal Revenue. 171

Respondents did not submit any withholding tax return or tax remittance advice to prove that the 20% final withholding
tax was, indeed, remitted by the Bureau of Treasury to the Bureau of Internal Revenue on October 18, 2011, and
consequently became part of the general fund of the government. The corresponding journal entry in the books of both
the Bureau of Treasury and Bureau of Internal Revenue showing the transfer of the withheld funds to the Bureau of
Internal Revenue was likewise not submitted to this Court. The burden of proof lies on them to show their claim of
remittance. Until now, respondents have failed to submit sufficient supporting evidence to prove their claim.

In Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing Corporation, 172 this Court upheld
the right of a withholding agent to file a claim for refund of the withheld taxes of its foreign parent company. This
Court, citing Philippine Guaranty Company, Inc. v. Commissioner of Internal Revenue, 173 ruled that inasmuch as it is an
agent of government for the withholding of the proper amount of tax, it is also an agent of its foreign parent company
with respect to the filing of the necessary income tax return and with respect to actual payment of the tax to the
government. Thus:

The term "taxpayer" is defined in our NIRC as referring to "any person subject to tax imposed by the Title [on Tax on
Income]." It thus becomes important to note that under Section 53(c) of the NIRC, the withholding agent who is
"required to deduct and withhold any tax" is made "personally liable for such tax" and indeed is indemnified against any
claims and demands which the stockholder might wish to make in

questioning the amount of payments effected by the withholding agent in accordance with the provisions of the NIRC.
The withholding agent, P&G-Phil., is directly and independently liable for the correct amount of the tax that should be
withheld from the dividend remittances. The withholding agent is, moreover, subject to and liable for deficiency
assessments, surcharges and penalties should the amount of the tax withheld be finally found to be less than the
amount that should have been withheld under law.

A "person liable for tax" has been held to be a "person subject to tax" and properly considered a "taxpayer." The terms
"liable for tax" and "subject to tax" both connote legal obligation or duty to pay a tax. It is very difficult, indeed
conceptually impossible, to consider a person who is statutorily made "liable for tax" as not "subject to tax." By any
reasonable standard, such a person should be regarded as a party in interest, or as a person having sufficient legal
interest, to bring a suit for refund of taxes he believes were illegally collected from him.

In Philippine Guaranty Company, Inc. v. Commissioner of Internal Revenue, this Court pointed out that a withholding
agent is in fact the agent both of the government and of the taxpayer, and that the withholding agent is not an ordinary
government agent:

The law sets no condition for the personal liability of the withholding agent to attach. The reason is to compel the
withholding agent to withhold the tax under all circumstances. In effect, the responsibility for the collection of the tax as
well as the payment thereof is concentrated upon the person over whom the Government has jurisdiction. Thus, the
withholding agent is constituted the agent of both the Government and the taxpayer. With respect to the collection
and/or withholding of the tax, he is the Government's agent. In regard to the filing of the necessary income tax return
and the payment of the tax to the Government, he is the agent of the taxpayer. The withholding agent, therefore, is no
ordinary government agent especially because under Section 53 (c) he is held personally liable for the tax he is duty
bound to withhold; whereas the Commissioner and his deputies are not made liable by law.

If, as pointed out in Philippine Guaranty, the withholding agent is also an agent of the beneficial owner of the dividends
with respect to the filing of the necessary income tax return and with respect to actual payment of the tax to the
government, such authority may reasonably be held to include the authority to file a claim for refund and to bring an
166
action for recovery of such claim. This implied authority is especially warranted where, as in the instant case, the
withholding agent is the wholly owned subsidiary of the parent-stockholder and therefore, at all times, under the
effective control of such parent-stockholder. In the circumstances of this case, it seems particularly unreal to deny the
implied authority of P&G-Phil. to claim a refund and to commence an action for such refund.

....

We believe and so hold that, under the circumstances of this case, P&G-Phil. is properly regarded as a "taxpayer"
within the meaning of Section 309, NIRC, and as impliedly authorized to file the claim for refund and the suit to recover
such claim.174 (Emphasis supplied, citations omitted)

In Commissioner of Internal Revenue v. Smart Communication, Inc.;175

[W]hile the withholding agent has the right to recover the taxes erroneously or illegally collected, he nevertheless has
the obligation to remit the same to the principal taxpayer. As an agent of the taxpayer, it is his duty to return what he
has recovered; otherwise, he would be unjustly enriching himself at the expense of the principal taxpayer from whom
the taxes were withheld, and from whom he derives his legal right to file a claim for refund. 176

Since respondents have not sufficiently shown the actual remittance of the 20% final withholding taxes withheld from
the proceeds of the PEACe bonds to the Bureau of Internal Revenue, there was no legal impediment for the Bureau of
Treasury (as agent of petitioners) to release the monies to petitioners to be placed in escrow, pending resolution of the
motions for reconsideration filed in this case by respondents and petitioners-intervenors RCBC and RCBC Capital.

Moreover, Sections 204 and 229 of the National Internal Revenue Code are not applicable since the Bureau of
Treasury's act of withholding the 20% final withholding tax was done after the Petition was filed.

Petitioners also urge177 us to hold respondents liable for 6% legal interest reckoned from October 19, 2011 until they
fully pay the amount corresponding to the 20% final withholding tax. This Court has previously granted interest in cases
where patent arbitrariness on the part of the revenue authorities has been shown, or where the collection of tax was
illegal.178

In Philex Mining Corp. v. Commissioner of Internal Revenue: 179

[T]he rule is that no interest on refund of tax can be awarded unless authorized by law or the collection of the tax was
attended by arbitrariness. An action is not arbitrary when exercised honestly and upon due consideration where there is
room for two opinions, however much it may be believed that an erroneous conclusion was reached. Arbitrariness
presupposes inexcusable or obstinate disregard of legal provisions.180 (Emphasis supplied, citations omitted)

Here, the Bureau of Treasury made no effort to release the amount of ₱4,966,207,796.41, corresponding to the 20%
final withholding tax, when it could have done so.

In the Court's temporary restraining order dated October 18, 2011,181 which respondent received on October 19, 2011,
we "enjoin[ed] the implementation of BIR Ruling No. 370-2011 against the [PEACe Bonds,] ... subject to the condition
that the 20% final withholding tax on interest income there.from shall be withheld by the petitioner banks and placed in
escrow pending resolution of [the} petition." 182

Subsequently, in our November 15, 2011 Resolution, we directed respondents to "show cause why they failed to
comply with the [temporary restraining order]; and [to] comply with the [temporary restraining order] in order that
petitioners may place the corresponding funds in escrow pending resolution of the petition."183

Respondent did not heed our orders.

167
In our Decision dated January 13, 2015, we reprimanded the Bureau of Treasury for its continued retention of the
amount corresponding to the 20% final withholding tax, in wanton disregard of the orders of this Court.

We further ordered the Bureau of Treasury to immediately release and pay the bondholders the amount corresponding
to the 20% final withholding tax that it withheld on October 18, 2011.

However, respondent remained obstinate in its refusal to release the monies and exhibited.utter disregard and defiance
of this Court.

As early as October 19, 2011, petitioners could have deposited the amount of ₱4,966,207, 796.41 in escrow and
earned interest, had respondent Bureau of Treasury complied with the temporary restraining order and

released the funds. It was inequitable for the Bureau of Treasury to have withheld the potential earnings of the funds in
escrow from petitioners.

Due to the Bureau of Treasury's unjustified refusal to release the funds to be deposited in escrow, in utter disregard of
the orders of the Court, it is held liable to pay legal interest of 6% per annum 184 on the amount of ₱4,966,207, 796.41
representing the 20% final withholding tax on the PEACe Bonds.

WHEREFORE, respondents' Motion for Reconsideration and Clarification is DENIED, and petitioners-intervenors RCBC
and RCBC Capital Corporation's Motion for Clarification and/or Partial Reconsideration is PARTLY GRANTED.

Respondent Bureau of Treasury is hereby ORDERED to immediately release and pay the bondholders the amount of
P4,966,207, 796.41, representing the 20% final withholding tax on the PEACe Bonds, with legal interest of 6% per
annum from October 19, 2011 until full payment. SO ORDERED.

NO DIGEST

THE CITY OF MANILA, LIBERTY M. TOLEDO, in her capacity as THE TREASURER OF MANILA and JOSEPH
SANTIAGO, in his capacity as the CHIEF OF THE LICENSE DIVISION OF CITY OF MANILA,petitioners, vs.
COCA-COLA BOTTLERS PHILIPPINES, INC., Respondent. G.R. No. 181845 August 4, 2009
CHICO-NAZARIO, J.:

This case is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Civil Procedure seeking to review
and reverse the Decision1 dated 18 January 2008 and Resolution2 dated 18 February 2008 of the Court of Tax Appeals
en banc (CTA en banc) in C.T.A. EB No. 307. In its assailed Decision, the CTA en banc dismissed the Petition for
Review of herein petitioners City of Manila, Liberty M. Toledo (Toledo), and Joseph Santiago (Santiago); and affirmed
the Resolutions dated 24 May 2007,3 8 June 2007,4 and 26 July 2007,5 of the CTA First Division in C.T.A. AC No. 31,
which, in turn, dismissed the Petition for Review of petitioners in said case for being filed out of time. In its questioned
Resolution, the CTA en banc denied the Motion for Reconsideration of petitioners.

Petitioner City of Manila is a public corporation empowered to collect and assess business taxes, revenue fees, and
permit fees, through its officers, petitioners Toledo and Santiago, in their capacities as City Treasurer and Chief of the
Licensing Division, respectively. On the other hand, respondent Coca-Cola Bottlers Philippines, Inc. is a corporation
engaged in the business of manufacturing and selling beverages, and which maintains a sales office in the City of
Manila.

The case stemmed from the following facts:

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Prior to 25 February 2000, respondent had been paying the City of Manila local business tax only under Section 14 of
Tax Ordinance No. 7794,6 being expressly exempted from the business tax under Section 21 of the same tax
ordinance. Pertinent provisions of Tax Ordinance No. 7794 provide:

Section 14. – Tax on Manufacturers, Assemblers and Other Processors. – There is hereby imposed a graduated tax on
manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors, distilled
spirits, and wines or manufacturers of any article of commerce of whatever kind or nature, in accordance with any of the
following schedule:

over ₱6,500,000.00 up to

₱25,000,000.00 - - - - - - - - - - - - - - - - - - - -- ₱36,000.00 plus 50% of 1%

in excess of ₱6,500,000.00

Section 21. – Tax on Businesses Subject to the Excise, Value-Added or Percentage Taxes under the NIRC. – On any
of the following businesses and articles of commerce subject to excise, value-added or percentage taxes under the
National Internal Revenue Code hereinafter referred to as NIRC, as amended, a tax of FIFTY PERCENT (50%) of ONE
PERCENT (1%) per annum on the gross sales or receipts of the preceding calendar year is hereby imposed:

(A) On persons who sell goods and services in the course of trade or business; and those who import goods whether
for business or otherwise; as provided for in Sections 100 to 103 of the NIRC as administered and determined by the
Bureau of Internal Revenue pursuant to the pertinent provisions of the said Code.

(D) Excisable goods subject to VAT

(1) Distilled spirits

(2) Wines

(8) Coal and coke

(9) Fermented liquor, brewers’ wholesale price, excluding the ad valorem tax

PROVIDED, that all registered businesses in the City of Manila that are already paying the aforementioned tax shall be
exempted from payment thereof.

Petitioner City of Manila subsequently approved on 25 February 2000, Tax Ordinance No. 7988,7 amending certain
sections of Tax Ordinance No. 7794, particularly: (1) Section 14, by increasing the tax rates applicable to certain
establishments operating within the territorial jurisdiction of the City of Manila; and (2) Section 21, by deleting the
proviso found therein, which stated "that all registered businesses in the City of Manila that are already paying the
aforementioned tax shall be exempted from payment thereof." Petitioner City of Manila approved only after a year, on
22 February 2001, another tax ordinance, Tax Ordinance No. 8011, amending Tax Ordinance No. 7988.

Tax Ordinances No. 7988 and No. 8011 were later declared by the Court null and void in Coca-Cola Bottlers
Philippines, Inc. v. City of Manila8 (Coca-Cola case) for the following reasons: (1) Tax Ordinance No. 7988 was enacted
in contravention of the provisions of the Local Government Code (LGC) of 1991 and its implementing rules and
regulations; and (2) Tax Ordinance No. 8011 could not cure the defects of Tax Ordinance No. 7988, which did not
legally exist.
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However, before the Court could declare Tax Ordinance No. 7988 and Tax Ordinance No. 8011 null and void, petitioner
City of Manila assessed respondent on the basis of Section 21 of Tax Ordinance No. 7794, as amended by the
aforementioned tax ordinances, for deficiency local business taxes, penalties, and interest, in the total amount of
₱18,583,932.04, for the third and fourth quarters of the year 2000. Respondent filed a protest with petitioner Toledo on
the ground that the said assessment amounted to double taxation, as respondent was taxed twice, i.e., under Sections
14 and 21 of Tax Ordinance No. 7794, as amended by Tax Ordinances No. 7988 and No. 8011. Petitioner Toledo did
not respond to the protest of respondent.

Consequently, respondent filed with the Regional Trial Court (RTC) of Manila, Branch 47, an action for the cancellation
of the assessment against respondent for business taxes, which was docketed as Civil Case No. 03-107088.

On 14 July 2006, the RTC rendered a Decision9 dismissing Civil Case No. 03-107088. The RTC ruled that the business
taxes imposed upon the respondent under Sections 14 and 21 of Tax Ordinance No. 7988, as amended, were not of
the same kind or character; therefore, there was no double taxation. The RTC, though, in an Order 10 dated 16
November 2006, granted the Motion for Reconsideration of respondent, decreed the cancellation and withdrawal of the
assessment against the latter, and barred petitioners from further imposing/assessing local business taxes against
respondent under Section 21 of Tax Ordinance No. 7794, as amended by Tax Ordinance No. 7988 and Tax Ordinance
No. 8011. The 16 November 2006 Decision of the RTC was in conformity with the ruling of this Court in the Coca-Cola
case, in which Tax Ordinance No. 7988 and Tax Ordinance No. 8011 were declared null and void. The Motion for
Reconsideration of petitioners was denied by the RTC in an Order11 dated 4 April 2007. Petitioners received a copy of
the 4 April 2007 Order of the RTC, denying their Motion for Reconsideration of the 16 November 2006 Order of the
same court, on 20 April 2007.

On 4 May 2007, petitioners filed with the CTA a Motion for Extension of Time to File Petition for Review, praying for a
15-day extension or until 20 May 2007 within which to file their Petition. The Motion for Extension of petitioners was
docketed as C.T.A. AC No. 31, raffled to the CTA First Division.

Again, on 18 May 2007, petitioners filed, through registered mail, a Second Motion for Extension of Time to File a
Petition for Review, praying for another 10-day extension, or until 30 May 2007, within which to file their Petition.

On 24 May 2007, however, the CTA First Division already issued a Resolution dismissing C.T.A. AC No. 31 for failure
of petitioners to timely file their Petition for Review on 20 May 2007.

Unaware of the 24 May 2007 Resolution of the CTA First Division, petitioners filed their Petition for Review therewith on
30 May 2007 via registered mail. On 8 June 2007, the CTA First Division issued another Resolution, reiterating the
dismissal of the Petition for Review of petitioners.

Petitioners moved for the reconsideration of the foregoing Resolutions dated 24 May 2007 and 8 June 2007, but their
motion was denied by the CTA First Division in a Resolution dated 26 July 2007. The CTA First Division reasoned that
the Petition for Review of petitioners was not only filed out of time -- it also failed to comply with the provisions of
Section 4, Rule 5; and Sections 2 and 3, Rule 6, of the Revised Rules of the CTA.

Petitioners thereafter filed a Petition for Review before the CTA en banc, docketed as C.T.A. EB No. 307, arguing that
the CTA First Division erred in dismissing their Petition for Review in C.T.A. AC No. 31 for being filed out of time,
without considering the merits of their Petition.

The CTA en banc rendered its Decision on 18 January 2008, dismissing the Petition for Review of petitioners and
affirming the Resolutions dated 24 May 2007, 8 June 2007, and 26 July 2007 of the CTA First Division. The CTA en
banc similarly denied the Motion for Reconsideration of petitioners in a Resolution dated 18 February 2008.

Hence, the present Petition, where petitioners raise the following issues:

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 I. WHETHER OR NOT PETITIONERS SUBSTANTIALLY COMPLIED WITH THE REGLEMENTARY PERIOD
TO TIMELY APPEAL THE CASE FOR REVIEW BEFORE THE [CTA DIVISION].

II. WHETHER OR NOT THE RULING OF THIS COURT IN THE EARLIER [COCA-COLA CASE] IS
DOCTRINAL AND CONTROLLING IN THE INSTANT CASE.

III. WHETHER OR NOT PETITIONER CITY OF MANILA CAN STILL ASSESS TAXES UNDER [SECTIONS] 14
AND 21 OF [TAX ORDINANCE NO. 7794, AS AMENDED].

IV. WHETHER OR NOT THE ENFORCEMENT OF [SECTION] 21 OF THE [TAX ORDINANCE NO. 7794, AS
AMENDED] CONSTITUTES DOUBLE TAXATION.

Petitioners assert that Section 1, Rule 712 of the Revised Rules of the CTA refers to certain provisions of the Rules of
Court, such as Rule 42 of the latter, and makes them applicable to the tax court. Petitioners then cannot be faulted in
relying on the provisions of Section 1, Rule 4213 of the Rules of Court as regards the period for filing a Petition for
Review with the CTA in division. Section 1, Rule 42 of the Rules of Court provides for a 15-day period, reckoned from
receipt of the adverse decision of the trial court, within which to file a Petition for Review with the Court of Appeals. The
same rule allows an additional 15-day period within which to file such a Petition; and, only for the most compelling
reasons, another extension period not to exceed 15 days. Petitioners received on 20 April 2007 a copy of the 4 April
2007 Order of the RTC, denying their Motion for Reconsideration of the 16 November 2006 Order of the same court. On
4 May 2007, believing that they only had 15 days to file a Petition for Review with the CTA in division, petitioners moved
for a 15-day extension, or until 20 May 2007, within which to file said Petition. Prior to the lapse of their first extension
period, or on 18 May 2007, petitioners again moved for a 10-day extension, or until 30 May 2007, within which to file
their Petition for Review. Thus, when petitioners filed their Petition for Review with the CTA First Division on 30 May
2007, the same was filed well within the reglementary period for doing so.

Petitioners argue in the alternative that even assuming that Section 3(a), Rule 814 of the Revised Rules of the CTA
governs the period for filing a Petition for Review with the CTA in division, still, their Petition for Review was filed within
the reglementary period. Petitioners call attention to the fact that prior to the lapse of the 30-day period for filing a
Petition for Review under Section 3(a), Rule 8 of the Revised Rules of the CTA, they had already moved for a 10-day
extension, or until 30 May 2007, within which to file their Petition. Petitioners claim that there was sufficient justification
in equity for the grant of the 10-day extension they requested, as the primordial consideration should be the
substantive, and not the procedural, aspect of the case. Moreover, Section 3(a), Rule 8 of the Revised Rules of the
CTA, is silent as to whether the 30-day period for filing a Petition for Review with the CTA in division may be extended
or not.

Petitioners also contend that the Coca-Cola case is not determinative of the issues in the present case because the
issue of nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 is not the lis mota herein. The Coca-Cola case
is not doctrinal and cannot be considered as the law of the case.

Petitioners further insist that notwithstanding the declaration of nullity of Tax Ordinance No. 7988 and Tax Ordinance
No. 8011, Tax Ordinance No. 7794 remains a valid piece of local legislation. The nullity of Tax Ordinance No. 7988 and
Tax Ordinance No. 8011 does not effectively bar petitioners from imposing local business taxes upon respondent under
Sections 14 and 21 of Tax Ordinance No. 7794, as they were read prior to their being amended by the foregoing null
and void tax ordinances.

Petitioners finally maintain that imposing upon respondent local business taxes under both Sections 14 and 21 of Tax
Ordinance No. 7794 does not constitute direct double taxation. Section 143 of the LGC gives municipal, as well as city
governments, the power to impose business taxes, to wit:

SECTION 143. Tax on Business. – The municipality may impose taxes on the following businesses:

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 (a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of
liquors, distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or nature, in
accordance with the following schedule:
(b) On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature in accordance
with the following schedule:
(c) On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers or retailers of
essential commodities enumerated hereunder at a rate not exceeding one-half (1/2) of the rates prescribed
under subsections (a), (b) and (d) of this Section:

Provided, however, That barangays shall have the exclusive power to levy taxes, as provided under Section 152
hereof, on gross sales or receipts of the preceding calendar year of Fifty thousand pesos (₱50,000.00) or less,
in the case of cities, and Thirty thousand pesos (₱30,000) or less, in the case of municipalities.

(e) On contractors and other independent contractors, in accordance with the following schedule:
(f) On banks and other financial institutions, at a rate not exceeding fifty percent (50%) of one percent (1%) on
the gross receipts of the preceding calendar year derived from interest, commissions and discounts from lending
activities, income from financial leasing, dividends, rentals on property and profit from exchange or sale of
property, insurance premium.
(g) On peddlers engaged in the sale of any merchandise or article of commerce, at a rate not exceeding Fifty
pesos (₱50.00) per peddler annually.
(h) On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned
may deem proper to tax: Provided, That on any business subject to the excise, value-added or percentage tax
under the National Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of
gross sales or receipts of the preceding calendar year.

Section 14 of Tax Ordinance No. 7794 imposes local business tax on manufacturers, etc. of liquors, distilled spirits,
wines, and any other article of commerce, pursuant to Section 143(a) of the LGC. On the other hand, the local business
tax under Section 21 of Tax Ordinance No. 7794 is imposed upon persons selling goods and services in the course of
trade or business, and those importing goods for business or otherwise, who, pursuant to Section 143(h) of the LGC,
are subject to excise tax, value-added tax (VAT), or percentage tax under the National Internal Revenue Code (NIRC).
Thus, there can be no double taxation when respondent is being taxed under both Sections 14 and 21 of Tax
Ordinance No. 7794, for under the first, it is being taxed as a manufacturer; while under the second, it is being taxed as
a person selling goods in the course of trade or business subject to excise, VAT, or percentage tax.

The Court first addresses the issue raised by petitioners concerning the period within which to file with the CTA a
Petition for Review from an adverse decision or ruling of the RTC.

The period to appeal the decision or ruling of the RTC to the CTA via a Petition for Review is specifically governed by
Section 11 of Republic Act No. 9282,15 and Section 3(a), Rule 8 of the Revised Rules of the CTA.

Section 11 of Republic Act No. 9282 provides:

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. – Any party adversely affected by a decision, ruling or
inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the
Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the
Regional Trial Courts may file an Appeal with the CTA within thirty (30) days after the receipt of such decision or ruling
or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein.

Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of
the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from the receipt of the decision or ruling or in the
case of inaction as herein provided, from the expiration of the period fixed by law to act thereon. x x x. (Emphasis
supplied.)
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Section 3(a), Rule 8 of the Revised Rules of the CTA states:

SEC 3. Who may appeal; period to file petition. – (a) A party adversely affected by a decision, ruling or the inaction of
the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a
decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the
Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by
petition for review filed within thirty days after receipt of a copy of such decision or ruling, or expiration of the period
fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. x x x. (Emphasis supplied.)

It is crystal clear from the afore-quoted provisions that to appeal an adverse decision or ruling of the RTC to the CTA,
the taxpayer must file a Petition for Review with the CTA within 30 days from receipt of said adverse decision or ruling
of the RTC.

It is also true that the same provisions are silent as to whether such 30-day period can be extended or not. However,
Section 11 of Republic Act No. 9282 does state that the Petition for Review shall be filed with the CTA following the
procedure analogous to Rule 42 of the Revised Rules of Civil Procedure. Section 1, Rule 4216 of the Revised Rules of
Civil Procedure provides that the Petition for Review of an adverse judgment or final order of the RTC must be filed with
the Court of Appeals within: (1) the original 15-day period from receipt of the judgment or final order to be appealed; (2)
an extended period of 15 days from the lapse of the original period; and (3) only for the most compelling reasons,
another extended period not to exceed 15 days from the lapse of the first extended period.

Following by analogy Section 1, Rule 42 of the Revised Rules of Civil Procedure, the 30-day original period for filing a
Petition for Review with the CTA under Section 11 of Republic Act No. 9282, as implemented by Section 3(a), Rule 8 of
the Revised Rules of the CTA, may be extended for a period of 15 days. No further extension shall be allowed
thereafter, except only for the most compelling reasons, in which case the extended period shall not exceed 15 days.

Even the CTA en banc, in its Decision dated 18 January 2008, recognizes that the 30-day period within which to file the
Petition for Review with the CTA may, indeed, be extended, thus:

Being suppletory to R.A. 9282, the 1997 Rules of Civil Procedure allow an additional period of fifteen (15) days for the
movant to file a Petition for Review, upon Motion, and payment of the full amount of the docket fees. A further extension
of fifteen (15) days may be granted on compelling reasons in accordance with the provision of Section 1, Rule 42 of the
1997 Rules of Civil Procedure x x x.17

In this case, the CTA First Division did indeed err in finding that petitioners failed to file their Petition for Review in
C.T.A. AC No. 31 within the reglementary period.

From 20 April 2007, the date petitioners received a copy of the 4 April 2007 Order of the RTC, denying their Motion for
Reconsideration of the 16 November 2006 Order, petitioners had 30 days, or until 20 May 2007, within which to file their
Petition for Review with the CTA. Hence, the Motion for Extension filed by petitioners on 4 May 2007 – grounded on
their belief that the reglementary period for filing their Petition for Review with the CTA was to expire on 5 May 2007,
thus, compelling them to seek an extension of 15 days, or until 20 May 2007, to file said Petition – was unnecessary
and superfluous. Even without said Motion for Extension, petitioners could file their Petition for Review until 20 May
2007, as it was still within the 30-day reglementary period provided for under Section 11 of Republic Act No. 9282; and
implemented by Section 3(a), Rule 8 of the Revised Rules of the CTA.

The Motion for Extension filed by the petitioners on 18 May 2007, prior to the lapse of the 30-day reglementary period
on 20 May 2007, in which they prayed for another extended period of 10 days, or until 30 May 2007, to file their Petition
for Review was, in reality, only the first Motion for Extension of petitioners. The CTA First Division should have granted
the same, as it was sanctioned by the rules of procedure. In fact, petitioners were only praying for a 10-day extension,
five days less than the 15-day extended period allowed by the rules. Thus, when petitioners filed via registered mail

173
their Petition for Review in C.T.A. AC No. 31 on 30 May 2007, they were able to comply with the reglementary period
for filing such a petition.

Nevertheless, there were other reasons for which the CTA First Division dismissed the Petition for Review of petitioners
in C.T.A. AC No. 31; i.e., petitioners failed to conform to Section 4 of Rule 5, and Section 2 of Rule 6 of the Revised
Rules of the CTA. The Court sustains the CTA First Division in this regard.

Section 4, Rule 5 of the Revised Rules of the CTA requires that:

SEC. 4. Number of copies. – The parties shall file eleven signed copies of every paper for cases before the Court en
banc and six signed copies for cases before a Division of the Court in addition to the signed original copy, except as
otherwise directed by the Court. Papers to be filed in more than one case shall include one additional copy for each
additional case. (Emphasis supplied.)

Section 2, Rule 6 of the Revised Rules of the CTA further necessitates that:
SEC. 2. Petition for review; contents. – The petition for review shall contain allegations showing the jurisdiction of the
Court, a concise statement of the complete facts and a summary statement of the issues involved in the case, as well
as the reasons relied upon for the review of the challenged decision. The petition shall be verified and must contain a
certification against forum shopping as provided in Section 3, Rule 46 of the Rules of Court. A clearly legible duplicate
original or certified true copy of the decision appealed from shall be attached to the petition. (Emphasis supplied.)

The aforesaid provisions should be read in conjunction with Section 1, Rule 7 of the Revised Rules of the CTA, which
provides:

SECTION 1. Applicability of the Rules of Court on procedure in the Court of Appeals, exception. – The procedure in the
Court en banc or in Divisions in original or in appealed cases shall be the same as those in petitions for review and
appeals before the Court of Appeals pursuant to the applicable provisions of Rules 42, 43, 44, and 46 of the Rules of
Court, except as otherwise provided for in these Rules. (Emphasis supplied.)

As found by the CTA First Division and affirmed by the CTA en banc, the Petition for Review filed by petitioners via
registered mail on 30 May 2007 consisted only of one copy and all the attachments thereto, including the Decision
dated 14 July 2006; and that the assailed Orders dated 16 November 2006 and 4 April 2007 of the RTC in Civil Case
No. 03-107088 were mere machine copies. Evidently, petitioners did not comply at all with the requirements set forth
under Section 4, Rule 5; or with Section 2, Rule 6 of the Revised Rules of the CTA. Although the Revised Rules of the
CTA do not provide for the consequence of such non-compliance, Section 3, Rule 42 of the Rules of Court may be
applied suppletorily, as allowed by Section 1, Rule 7 of the Revised Rules of the CTA. Section 3, Rule 42 of the Rules
of Court reads:

SEC. 3. Effect of failure to comply with requirements. – The failure of the petitioner to comply with any of the foregoing
requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the
petition, and the contents of and the documents which should accompany the petition shall be sufficient ground for the
dismissal thereof. (Emphasis supplied.)

True, petitioners subsequently submitted certified copies of the Decision dated 14 July 2006 and assailed Orders dated
16 November 2006 and 4 April 2007 of the RTC in Civil Case No. 03-107088, but a closer examination of the stamp on
said documents reveals that they were prepared and certified only on 14 August 2007, about two months and a half
after the filing of the Petition for Review by petitioners.

Petitioners never offered an explanation for their non-compliance with Section 4 of Rule 5, and Section 2 of Rule 6 of
the Revised Rules of the CTA. Hence, although the Court had, in previous instances, relaxed the application of rules of
procedure, it cannot do so in this case for lack of any justification.

174
Even assuming arguendo that the Petition for Review of petitioners in C.T.A. AC No. 31 should have been given due
course by the CTA First Division, it is still dismissible for lack of merit.

Contrary to the assertions of petitioners, the Coca-Cola case is indeed applicable to the instant case. The pivotal issue
raised therein was whether Tax Ordinance No. 7988 and Tax Ordinance No. 8011 were null and void, which this Court
resolved in the affirmative. Tax Ordinance No. 7988 was declared by the Secretary of the Department of Justice (DOJ)
as null and void and without legal effect due to the failure of herein petitioner City of Manila to satisfy the requirement
under the law that said ordinance be published for three consecutive days. Petitioner City of Manila never appealed
said declaration of the DOJ Secretary; thus, it attained finality after the lapse of the period for appeal of the same. The
passage of Tax Ordinance No. 8011, amending Tax Ordinance No. 7988, did not cure the defects of the latter, which, in
any way, did not legally exist.

By virtue of the Coca-Cola case, Tax Ordinance No. 7988 and Tax Ordinance No. 8011 are null and void and without
any legal effect. Therefore, respondent cannot be taxed and assessed under the amendatory laws--Tax Ordinance No.
7988 and Tax Ordinance No. 8011.

Petitioners insist that even with the declaration of nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011,
respondent could still be made liable for local business taxes under both Sections 14 and 21 of Tax Ordinance No.
7944 as they were originally read, without the amendment by the null and void tax ordinances.

Emphasis must be given to the fact that prior to the passage of Tax Ordinance No. 7988 and Tax Ordinance No. 8011
by petitioner City of Manila, petitioners subjected and assessed respondent only for the local business tax under
Section 14 of Tax Ordinance No. 7794, but never under Section 21 of the same. This was due to the clear and
unambiguous proviso in Section 21 of Tax Ordinance No. 7794, which stated that "all registered business in the City of
Manila that are already paying the aforementioned tax shall be exempted from payment thereof." The "aforementioned
tax" referred to in said proviso refers to local business tax. Stated differently, Section 21 of Tax Ordinance No. 7794
exempts from the payment of the local business tax imposed by said section, businesses that are already paying such
tax under other sections of the same tax ordinance. The said proviso, however, was deleted from Section 21 of Tax
Ordinance No. 7794 by Tax Ordinances No. 7988 and No. 8011. Following this deletion, petitioners began assessing
respondent for the local business tax under Section 21 of Tax Ordinance No. 7794, as amended.1avvphi1

The Court easily infers from the foregoing circumstances that petitioners themselves believed that prior to Tax
Ordinance No. 7988 and Tax Ordinance No. 8011, respondent was exempt from the local business tax under Section
21 of Tax Ordinance No. 7794. Hence, petitioners had to wait for the deletion of the exempting proviso in Section 21 of
Tax Ordinance No. 7794 by Tax Ordinance No. 7988 and Tax Ordinance No. 8011 before they assessed respondent
for the local business tax under said section. Yet, with the pronouncement by this Court in the Coca-Cola case that Tax
Ordinance No. 7988 and Tax Ordinance No. 8011 were null and void and without legal effect, then Section 21 of Tax
Ordinance No. 7794, as it has been previously worded, with its exempting proviso, is back in effect. Accordingly,
respondent should not have been subjected to the local business tax under Section 21 of Tax Ordinance No. 7794 for
the third and fourth quarters of 2000, given its exemption therefrom since it was already paying the local business tax
under Section 14 of the same ordinance.

Petitioners obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No. 7794, to their own detriment.
Said exempting proviso was precisely included in said section so as to avoid double taxation.

Double taxation means taxing the same property twice when it should be taxed only once; that is, "taxing the same
person twice by the same jurisdiction for the same thing." It is obnoxious when the taxpayer is taxed twice, when it
should be but once. Otherwise described as "direct duplicate taxation," the two taxes must be imposed on the same
subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing
period; and the taxes must be of the same kind or character.18

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Using the aforementioned test, the Court finds that there is indeed double taxation if respondent is subjected to the
taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since these are being imposed: (1) on the same
subject matter – the privilege of doing business in the City of Manila; (2) for the same purpose – to make persons
conducting business within the City of Manila contribute to city revenues; (3) by the same taxing authority – petitioner
City of Manila; (4) within the same taxing jurisdiction – within the territorial jurisdiction of the City of Manila; (5) for the
same taxing periods – per calendar year; and (6) of the same kind or character – a local business tax imposed on gross
sales or receipts of the business. The distinction petitioners attempt to make between the taxes under Sections 14 and
21 of Tax Ordinance No. 7794 is specious. The Court revisits Section 143 of the LGC, the very source of the power of
municipalities and cities to impose a local business tax, and to which any local business tax imposed by petitioner City
of Manila must conform. It is apparent from a perusal thereof that when a municipality or city has already imposed a
business tax on manufacturers, etc. of liquors, distilled spirits, wines, and any other article of commerce, pursuant to
Section 143(a) of the LGC, said municipality or city may no longer subject the same manufacturers, etc. to a business
tax under Section 143(h) of the same Code. Section 143(h) may be imposed only on businesses that are subject to
excise tax, VAT, or percentage tax under the NIRC, and that are "not otherwise specified in preceding paragraphs." In
the same way, businesses such as respondent’s, already subject to a local business tax under Section 14 of Tax
Ordinance No. 7794 [which is based on Section 143(a) of the LGC], can no longer be made liable for local business tax
under Section 21 of the same Tax Ordinance [which is based on Section 143(h) of the LGC]. WHEREFORE, premises
considered, the instant Petition for Review on Certiorari is hereby DENIED. No costs. SO ORDERED.

COMMISSIONER OF CUSTOMS, Petitioner, vs. MARINA SALES, INC., Respondent.

G.R. No. 183868 November 22, 2010 MENDOZA, J.:

In this petition for review on certiorari1 under Rule 45, the Commissioner of Customs (Commissioner), represented by
the Office of the Solicitor General (OSG), assails the April 11, 2008 Resolution2 of the Court of Tax Appeals En Banc
(CTA-En Banc), in C.T.A. E.B. No. 333, dismissing his petition for review for his failure to file a motion for
reconsideration before the Court of Tax Appeals Division (CTA-Division).

Respondent Marina Sales, Inc. (Marina) is engaged in the manufacture of Sunquick juice concentrates. It was
appointed by CO-RO Food A/S of Denmark, maker of Sunquick Juice Concentrates, to be its manufacturing arm in the
Philippines. As such, Marina usually imports raw materials into the country for the purpose. In the past, the Bureau of
Customs (BOC) assessed said type of importations under Tariff Heading H.S. 2106.90 10 with a 1% import duty rate.3

On March 6, 2003, Marina’s importation, labeled as Import Entry No. C-33771-03, arrived at the Manila International
Container Port (MICP) on board the vessel APL Iris V-111. Said Import Entry No. C-33771-03 consisted of a 1’ x 20’
container STC with a total of 80 drums: (a) 56 drums of 225 kilograms Sunquick Orange Concentrate; and (b) 24 drums
of 225 kilograms of Sunquick Lemon Concentrate.4 It was supported by the following documents: (a) Bill of Lading No.
APLU 800452452 dated February 2, 2003;5 and (b) CO-RO Food A/S of Denmark Invoice No. 1619409 dated January
27, 2003.6

Marina computed and paid the duties under Tariff Harmonized System Heading H.S. 2106.90 10 at 1% import duty rate.

This time, however, the BOC examiners contested the tariff classification of Marina’s Import Entry No. C-33771-03
under Tariff Heading H.S. 2106.90 10. The BOC examiners recommended to the Collector of Customs, acting as
Chairman of the Valuation and Classification Review Committee (VCRC) of the BOC, to reclassify Marina’s importation
as Tariff Heading H.S. 2106.90 50 (covering composite concentrates for simple dilution with water to make beverages)
with a corresponding 7% import duty rate.

The withheld importation being necessary to its business operations, Marina requested the District Collector of the BOC
to release Import Entry No. C-33771-03 under its Tentative Release System.7 Marina undertook to pay the reclassified
rate of duty should it be finally determined that such reclassification was correct. The District Collector granted the
request.

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On April 15, 2003, the VCRC directed Marina to appear in a deliberation on May 15, 2003 and to explain why its
shipment under Import Entry No. C-33771-03 should not be classified under Tariff Heading H.S. 2106.90 50 with import
duty rate of 7%.8

On May 15, 2003, Marina, through its Product Manager Rowena T. Solidum and Customs Broker Juvenal A. Llaneza,
attended the VCRC deliberation and submitted its explanation,9 dated May 13, 2003, along with samples of the
importation under Import Entry No. C-33771-03.

On May 21, 2003, another importation of Marina arrived at the MICP designated as Import Entry No. C-67560-03. It
consisted of another 1’ x 20’ container STC with a total of 80 drums: (a) 55 drums of 225 kilograms of Sunquick Orange
Concentrate; (b) 1 drum of 225 kilograms of Sunquick Tropical Fruit Concentrate; (c) 17 drums of 225 kilograms of
Sunquick Lemon Concentrate; (d) 3 drums of 225 kilograms of Sunquick Ice Lemon Concentrate; and (e) 4 drums of
225 kilograms Sunquick Peach Orange Concentrate. The said importation was accompanied by the following
documents: (a) Bill of Lading No. KKLUCPH060291 dated April 17, 2003;10 and (b) CO-RO Foods A/S Denmark Invoice
No. 1619746 dated April 15, 2003.11

Again, the BOC examiners disputed the tariff classification of Import Entry No. C-67560-03 and recommended to the
VCRC that the importation be classified at Tariff Heading H.S. 2106.90 50 with the corresponding 7% duty rate.

In order for Import Entry No. C-67560-03 to be released, Marina once again signed an undertaking under the Tentative
Release System.12

In a letter dated July 7, 2003, the VCRC scheduled another deliberation requiring Marina to explain why Import Entry
No. C-67560-03 should not be classified under Tariff Heading H.S. 2106.90 50 at the import duty rate of 7%.13

On July 17, 2003, Marina again attended the VCRC deliberation and submitted its explanation14 dated July 17, 2003
together with samples in support of its claim that the imported goods under Import Entry No. C-67560-03 should not be
reclassified under Tariff Heading H.S. 2106.90 50.

Thereafter, the classification cases for Import Entry No. C-33771-03 and Import Entry No. C-67560-03 were
consolidated.

On September 11, 2003, as reflected in its 1st Indorsement, the VCRC reclassified Import Entry No. C-33771-03 and
Import Entry No. C-67560-03 under Tariff Heading H.S. 2106.90 50 at 7% import duty rate.15

On October 7, 2003, Marina appealed before the Commissioner challenging VCRC’s reclassification.16

In its 1st Indorsement of November 13, 2003,17 the VCRC modified its earlier ruling and classified Marina’s Import Entry
No. C-33771-03 and Import Entry No. C-67560-03 under Tariff Heading H.S. 2009 19 00 at 7% duty rate, H.S. 2009.80
00 at 7% duty rate and H.S. 2009.90 00 at 10% duty rate.

Apparently not in conformity, Marina interposed a petition for review before the CTA on February 3, 2004, which was
docketed as CTA Case No. 6859.

On October 31, 2007, the CTA Second Division ruled in favor of Marina18 holding that its classification under Tariff
Heading H.S. 2106.90 10 was the most appropriate and descriptive of the disputed importations.19 It opined that
Marina’s importations were raw materials used for the manufacture of its Sunquick products, not ready-to-drink juice
concentrates as argued by the Commissioner.20 Thus, the decretal portion of the CTA - Second Division reads:

WHEREFORE, finding merit in petitioner’s Petition for Review, the same is hereby GRANTED. Accordingly, the
Resolution/Decision dated November 13, 2003 of the Valuation and Classification Review Committee of the Bureau of

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Customs is hereby SET ASIDE and petitioner’s importation covered by Import Entry Nos. C-33771-03 and C-67560-03
are reclassified under Tariff Harmonized System Heading H.S. 2106.90 10 with an import duty rate of 1%. SO
ORDERED.

The Commissioner disagreed and elevated the case to the CTA-En Banc via a petition for review.21

In its Resolution of April 11, 2008, the CTA En Banc dismissed the petition. The pertinent portions of the decision
including the fallo read:

A careful scrutiny of the record of this case showed that petitioner failed to file before the Second Division the required
Motion for Reconsideration before elevating his case to the CTA En Banc.

Section 1, Rule 8 of the Revised Rules of the Court of Tax Appeals provided for the following rule, to wit:

RULE 8
PROCEDURE IN CIVIL CASES

SECTION 1. Review of Cases in the Court en banc.- In cases falling under the exclusive appellate jurisdiction of the
Court en banc, the petition for review of a decision or resolution of the Court in Division must be preceded by the filing
of a timely motion for reconsideration or new trial with the Division.

In statutory construction, the use of the word "must" indicates that the requirement is mandatory. Furthermore, the word
"must" connote an imperative act or operates to simply impose a duty which may be enforced. It is true the word "must"
is sometimes construed as "may" – permissive – but this is only when the context requires it. Where the context plainly
shows the provision to be mandatory, the word "must" is a command and cannot be construed as permissive, but must
be given the signification which it imparts.

It is worthy to note that the Supreme Court ruled that a Motion for Reconsideration is mandatory as a precondition to the
filing of a Petition for Review under Rule 43 of the Rules of Court.

WHEREFORE, applying by analogy the above ruling of the Supreme Court and taking into consideration the mandatory
provision provided by Section 1 of Rule 8 of the Revised Rules of the Court of Tax Appeals and considering further that
petitioner did not file a Motion for Reconsideration with the Second Division before elevating the case to the Court En
Banc, which eventually deprived the Second Division of an opportunity to amend, modify, reverse or correct its mistake
or error, if there be, petitioner’s Petition for Review is hereby DISMISSED. SO ORDERED.22

The Commissioner sought reconsideration of the disputed decision, but the CTA En Banc issued a denial in its July 14,
2008 Resolution.23

Hence, this petition.

In his Memorandum,24 the Commissioner submits the following issues for resolution:

A.

WHETHER THE DISMISSAL BY THE COURT OF TAX APPEALS’ EN BANC OF PETITIONER’S PETITION
BASED ON MERE TECHNICALITY WILL RESULT IN INJUSTICE AND UNFAIRNESS TO PETITIONER.

B.

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 WHETHER THE CHALLENGED DECISION OF THE COURT OF TAX APPEALS’ SECOND DIVISION
HOLDING THAT RESPONDENT’S IMPORTATION ARE COVERED BY IMPORT ENTRY NOS. C-33771-03
AND C-67560-03 ARE CLASSIFIED UNDER TARIFF HARMONIZED SYSTEM HEADING H.S. 2106.90 10
WITH AN IMPORT DUTY RATE OF ONE PERCENT (1%) IS NOT CORRECT.25

The Commissioner argues that the dismissal of his petition before the CTA-En Banc is inconsistent with the principle of
the liberal application of the rules of procedure.26 He points out that due to the dismissal of the petition, the government
would only be collecting 1% import duty rate from Marina instead of 7%.27 This, if sanctioned, would result in grave
injustice and unfairness to the government.28

The Commissioner also contends that the testimony of Marina’s expert witness, Aurora Kimura, pertaining to Sunquick
Lemon compound shows that it could be classified as "heavy syrup"29 falling under the category of H.S. 2190.90 50 with
a 7% import duty rate.30

The Court finds no merit in the petition.

On the procedure, the Court agrees with the CTA En Banc that the Commissioner failed to comply with the mandatory
provisions of Rule 8, Section 1 of the Revised Rules of the Court of Tax Appeals31 requiring that "the petition for review
of a decision or resolution of the Court in Division must be preceded by the filing of a timely motion for reconsideration
or new trial with the Division." The word "must" clearly indicates the mandatory -- not merely directory -- nature of a
requirement."32

The rules are clear. Before the CTA En Banc could take cognizance of the petition for review concerning a case falling
under its exclusive appellate jurisdiction, the litigant must sufficiently show that it sought prior reconsideration or moved
for a new trial with the concerned CTA division. Procedural rules are not to be trifled with or be excused simply because
their non-compliance may have resulted in prejudicing a party’s substantive rights.33 Rules are meant to be followed.
They may be relaxed only for very exigent and persuasive reasons to relieve a litigant of an injustice not commensurate
to his careless non-observance of the prescribed rules.34

At any rate, even if the Court accords liberality, the position of the Commissioner has no merit. After examining the
records of the case, the Court is of the view that the import duty rate of 1%, as determined by the CTA Second Division,
is correct.

The table shows the different classification of Tariff import duties relevant to the case at bar:

IMPORT
TARIFF HEADING COVERAGE
DUTY RATE

H.S. 2106.90 10 1% Covers flavouring materials, nes., of kind used in food and drink
industries; other food preparations to be used as raw material in preparing
composite concentrates for making beverages

H.S. 2106.90 50 7% Covers composite concentrate for simple dilution with water to make
beverages

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 H.S. 2009. 19 00 7% Covers orange juice, not frozen

H.S. 2009.80 00 7% Covers juice of any other single fruit or vegetable

H.S. 2009.90 00 10% Covers mixtures of juices

The Commissioner insists that Marina’s two importations should be classified under Tariff Heading H.S. 2106.90 50 with
an import duty rate of 7% because the concentrates are ready for consumption by mere dilution with water.

The Court is not persuaded.

As extensively discussed by the CTA Second Division, to fit into the category listed under the Tariff Harmonized System
Headings calling for a higher import duty rate of 7%, the imported articles must not lose its original character. In this
case, however, the laboratory analysis of Marina’s samples yielded a different result.35 The report supported Marina’s
position that the subject importations are not yet ready for human consumption. Moreover, Marina’s plant manager,
Rebecca Maronilla, testified that the juice compounds could not be taken in their raw form because they are highly
concentrated and must be mixed with other additives before they could be marketed as Sunquick juice products. If
taken in their unprocessed form, the concentrates without the mixed additives would produce a sour taste.36 In other
words, the concentrates, to be consumable, must have to lose their original character. To quote the CTA Second
Division:

Verily, to fall under the assailed Tariff Harmonized System Headings, petitioner’s (herein respondent) articles of
importation, as fruit juices/mixtures, should not have lost its original character, in spite of the addition of certain
"standardizing agents/constituents." Contrary thereto, We find the subject importations categorized as "non-alcoholic
composite concentrates" to have apparently lost their original character due to the addition of ingredients in such
quantity that the concentrated fruit juice mixture only comprises a small percentage of the entire compound.

This was clearly explained by the VCRC in its subsequent Resolution/Decision ("1st Indorsement") issued on February
17, 2005 pertaining to subsequent similar importations of petitioner, effectively correcting its findings in the assailed
Resolution/Decision dated November 13, 2003 concerning the same party-importer, issues and articles of
importation,37 to wit:

SUB-GROUP OBSERVATIONS/FINDINGS:

The classification issue was divided into two regimes. The era under the old Harmonized Commodity Description and
Coding System, while the other is the latest revised edition, the Asean Harmonized Tariff Nomenclature.

The previous committee resolution was promulgated technically not on the merit of the case but failure on the part of
the importer to submit their position paper/arguments within the prescriptive period given by the committee.

Importer submitted samples of subject shipment for laboratory analysis to Philippine Customs laboratory to validate the
veracity of product information given by the supplier and to determine the correct tariff classification.

Based on the report of the Laboratory Analysis, compound is made up to water 57.9%, Invert Sugar 34.34%, Citric Acid
2.94%, Vitamin C (Ascorbic Acid) 105 mg.

Since the item is compound which is composed of water, sugar, concentrated juice, flavourings, citric acid, stabilizer,
preservatives, vitamins C and colouring to produce beverage ready to drink. Consequently the concentrated citrus juice
has lost its original character due to the fact that it comprises only 12% of the total compound.38
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Items (fruit juices) classifiable under HS 2009 are fruit juices generally obtained by pressing fresh, healthy and ripe fruit.
Per item 4 of the Explanatory Notes to the Harmonized Commodity Description and Coding System apparently subject
article has lost its original character as concentrated fruit juice drink to the compounding ingredients which reduces the
fruit juices to 12% of the total compound.

In view of the foregoing subject article is classifiable under Tariff Heading H.S. 2106.90 10 at 1% for entries filed under
the old regime. For those filed under the new regime tariff heading AHTN 2106.90 51 at 1% where the item are
specifically provided.

RESOLUTION: To apply sub-group recommendation which is to adopt H.S. 2106.90 10 at 1% for entries filed under the
old regime and for those filed under the new regime, AHTN 2106.90 51 at 1% where the item are specifically provided.39

To "manufacture" is to "make or fabricate raw materials by hand, art or machinery, and work into forms convenient for
use."40 Stated differently, it is to transform by any process into another form suitable for its intended use. Marina, as the
manufacturing arm of CO-RO Food A/S of Denmark, transforms said juice compounds, being raw materials, into a
substance suitable for human consumption. This is evident from the "Commissioner’s Report"41 of Executive Clerk of
Court II, CTA, Jesus P. Inocando, Jr., who conducted an ocular inspection of Marina’s manufacturing plant in Taguig
City.1avvphi1 Pertinent excerpts of the "Commissioner’s Report" are herein reproduced:

On our ocular inspection of the manufacturing plant of petitioner, Ms. Solidum and Mr. Domingo showed us the sample
of the imported compounds (raw materials), showed to us the step by step manufacturing process of petitioner and
even showed us the bottling and packaging of the finished product.

Per observation of the undersigned, the imported compounds (raw materials) are very sticky, the plant is clean and that
the personnel of petitioner in the plant strictly following the manufacturing process as presented in Annex A and Annex
B of this report.

Upon questioning by the counsel for respondent, Mr. Domingo said that while the imported compounds (raw materials)
can be mixed with water and may be drinkable, he is not sure if the same is suitable for human consumption. None of
us dared to taste the sample of imported compounds (raw materials) diluted in water. The imported compounds (raw
materials) mixed with water produces bubbles on top of the mixture, not like the one that has gone through the
manufacturing process. Counsel for respondent requested for the marking of Label of Sunquick Lemon (840 ml.),
[Annex C], as Exhibit 1 for the respondent.42

Contrary to the Commissioner’s assertions, empirical evidence shows that the subject importations would have to
undergo a laborious method, as shown by its manufacturing flowchart43 and manufacturing process,44 to achieve their
marketable juice consistency. Accordingly, the 1% tariff import duty rate under Tariff Heading H.S. 2106.90 10 was
correctly applied to the subject importations.

In any case, the VCRC in its 1st Indorsement45 of February 17, 2005 (a subsequent proceeding involving the same type
of importation) rectified the disputed tariff reclassification rate. Thus, in Marina’s succeeding importations, the VCRC
already adopted the 1% import duty rate as paid by Marina in the past.

WHEREFORE, the petition is DENIED. SO ORDERED.

PHILIPPINE BRITISH ASSURANCE COMPANY, INC., Petitioner, vs. REPUBLIC OF THE PHILIPPINES,
represented by the BUREAU OF CUSTOMS (BOC), Respondent. G.R. No. 185588 February 2, 2010
VELASCO, JR., J.:
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 The Case

This Petition for Review on Certiorari under Rule 45 seeks to reverse and set aside the July 23, 20081 and November
28, 20082 Resolutions of the Court of Appeals (CA) in CA-G.R. CV No. 88786, entitled Republic of the Philippines
represented by the Bureau of Customs (BOC) v. Philippine British Assurance Company, Inc.

The Facts

Petitioner Philippine British Assurance Company, Inc. is an insurance company duly organized and existing under and
by virtue of the laws of the Republic of the Philippines. As such, petitioner issues customs bonds to its clients in favor of
the BOC. These bonds secure the release of imported goods in order that the goods may be released from the BOC
without prior payment of the corresponding customs duties and taxes. Under these bonds, petitioner and its clients
jointly and severally bind themselves to pay the BOC the face value of the bonds, in the event that the bonds expire
without either the imported goods being re-exported or the proper duties and taxes being paid.

On December 9, 2003, the Republic, represented by the BOC, filed a Complaint dated December 3, 20033against
petitioner for Collection of Money with Damages before the Regional Trial Court, Branch 20 in Manila. The case was
docketed as Civil Case No. 03-108583, entitled Republic of the Philippines represented by the Bureau of Customs v.
Philippine British Assurance Company, Inc. It was alleged in the Complaint that petitioner had outstanding unliquidated
customs bonds with the BOC.1avvph!1

After hearing, the trial court issued a Decision dated September 21, 2006,4 the dispositive portion of which states:

PREMISES CONSIDERED, the Court finds for the Plaintiff Republic of the Philippines represented by the Bureau of
Customs and the defendant British Assurance Company, Inc., is hereby ordered to pay the plaintiff the amount of
Php736,742.03 representing defendant’s unpaid/unliquidated customs bonds plus legal interest from the finality of this
Decision. Defendant’s counterclaims are hereby DISMISSED. SO ORDERED.

From such Decision, petitioner filed a motion for reconsideration which the trial court denied in an Order dated February
5, 2007.

Thus, petitioner appealed the Decision to the CA.

The CA thereafter issued the first assailed Resolution dated July 23, 2008 dismissing the case for lack of jurisdiction.

Petitioner, thus, filed a Motion for Reconsideration dated August 11, 2008.5 It was, however, denied by the CA in its
second assailed Resolution.

Hence, we have this petition.

The Issues

A.

The [CA] committed serious error of law when it ruled that it has no jurisdiction over the appeal and the same lies with
the Court of Tax Appeals because the instant case is a tax collection case.

B.

The [CA] committed serious error of law when it failed to rule that customs bonds are in the nature of a contract
between the surety and the Bureau of Customs.6
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 The Court’s Ruling

This petition must be granted.

The CA Has Jurisdiction over the Instant Case

The CA ruled in the first assailed Resolution that it had no jurisdiction over the subject matter of the appeal, thus:

With the foregoing in mind, it cannot be denied that the issuance of such bonds is rooted on, based upon, and
interrelated with the payment of taxes and customs duties. Strictly speaking, therefore, BOC’s suit against British
Assurance is one for collection of taxes. Taking in mind that this appeal, filed on March 13, 2007, involves a tax case
decided by the RTC in the exercise of its original jurisdiction, it necessarily follows that jurisdiction over the same is with
the Court of Tax Appeals pursuant to Republic Act No. 9282.7

On the other hand, petitioner argues that "in as much as Respondent’s right was initially based on its right to collect
duties and taxes, the same was converted to a right arising out of a contract, the bond being a contract between
Respondent and Petitioner x x x."8 In support of such contention, petitioner cites Republic of the Philippines v.
Mambulao Lumber (Mambulao),9 wherein we ruled:

Although the original obligation of the lumber company arose from non-payment of taxes, the complaint against said
Company and the Surety is predicated upon the bond executed by them. In other words, plaintiff’s right originally arising
from law has become a right based upon a written contract, enforceable within ten (10) years x x x.

We agree with petitioner’s contention.

Republic Act No. (RA) 928210 amended Section 7 of RA 1125 to read as follows:

Section 7. Section 7 of the same Act is hereby amended to read as follows:

"Sec. 7. Jurisdiction. - The CTA shall exercise:

"a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

"3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them
in the exercise of their original or appellate jurisdiction. (Emphasis supplied.)

In the instant case, the original complaint filed with the trial court was in the nature of a collection case, purportedly to
collect on the obligation of petitioner by virtue of the bonds executed by it in favor of respondent, essentially a
contractual obligation.

As petitioner correctly points out, an action to collect on a bond used to secure the payment of taxes is not a tax
collection case, but rather a simple case for enforcement of a contractual liability.

In Mambulao, Mambulao Lumber Company (MLC) was liable for deficiency sales tax to the Republic. The parties
agreed to an installment plan, whereby MLC obligated itself to pay such obligation in 12 equal monthly installments. To
secure the installment payments, MLC and Mambulao Insurance and Surety Corporation executed a surety bond in
favor of the Republic. MLC defaulted in the payment of its obligation. Thus, the Republic proceeded against the surety
bond. MLC sought the dismissal of the case against it on the ground of prescription, arguing that under Sec. 331, in
relation to Sec. 183(A), of the National Internal Revenue Code (NIRC), internal revenue taxes must be assessed within
five (5) years from the filing of the corresponding return.

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Thus, we ruled in that case that the NIRC was inapplicable to the case and that the Republic had ten (10) years from
default of payment within which to collect the indebtedness of MLC. We explained that an action based upon a surety
bond cannot be considered a tax collection case. Rather, such action would properly be a case based on a contract.

In a more succinct ruling in Republic of the Philippines v. Xavier Gun Trading,11 we decided:

The present actions by the government are for the forfeiture of the bonds in question. Although the subject matter of
said bonds are internal revenue taxes, it cannot be denied that upon the execution of said bonds, the tax-payer, as
principal and the bondsman, as surety, assumed a new and entirely distinct obligation and became subject to an
entirely different kind of liability. Thus, it has been held:

However, as soon as the bond was executed, the taxpayer assumed a second and entirely distinct obligation, and
became subject to a new and entirely different kind of liability ... The new liability was voluntary and contractual. It was
in form a direct and primary obligation, not to pay a tax, but to pay the sum of $12,635.00, defeasible only upon
payment by the tax-payer of a certain amount, to be fixed by subsequent action of the Commissioner. No limitation was
put upon the time within which the Commissioner was required to act in fixing such sum. Inasmuch as the Collector had
the right to proceed immediately for the collection of the tax, it follows that he also had the right to require, as the price
of forbearance from such action, a general promise to pay such amount as might be found due at any time, either
before or after the expiration of the statutory period . . . (McCaughn v. Philadelphia Barge Co., 27 F [2d] 628)

The making of the bond gives the United States a cause of action separate and distinct from an action to collect taxes
which it already had. The statutes now pleaded to bar the suit can not be extended by implication to a suit upon a
subsequent and substituted contract. The postponement of the collection of taxes returned was a waiver of the statutory
limitation of five years that would have applied had the voluntary return of the taxpayer stood and no bond been given. If
there is any limitation applicable to a suit on the bond, it is conceded that it has not yet become effective. (United States
v. Barth Co., 73 L. Ed. 746; U.S. 278-279) (Emphasis supplied.)

Verily, the instant case is not a tax collection case; hence, the CA has jurisdiction over the case.

In addition, it must be stressed that even the BOC did not consider the case as one for tax collection. In its Complaint
dated December 3, 2003, the BOC stated:

10. Plaintiff thus sent defendant PHILIPPINE BRITISH a letter dated October 5, 2001 informing said defendant that it
had an outstanding unliquidated customs bonds with the Bureau of Customs in the sum of PHP 4,457,290.00 and that if
defendant failed to explain within five days from receipt of such letter why these bonds have not been liquidated as set
forth in Paragraph 6 hereof, then plaintiff will forfeit the said customs bonds and institute collection against the said
bonds. x x x (Emphasis supplied.)

Pursuant to such letter, the BOC instituted a complaint against petitioner for collection of money, decidedly not a tax
collection case, before the trial court. Moreover, as correctly pointed out by petitioner, the BOC purposefully did not
follow the procedure in the proper prosecution of a tax collection case. This may only be explained with the fact that the
BOC itself did not consider the action that it instituted as a tax collection case.

Certainly, the administrative agencies tasked with the prosecution of cases within their specific area of concern should
know the nature of the action to be filed and the proper procedure by which they can collect on liabilities to it. Here, the
BOC’s actions reveal its position that indeed the case was not a tax collection case but an action for the enforcement of
a contractual obligation. Hence, appellate jurisdiction over the petition properly lies with the CA and not the Court of Tax
Appeals.

WHEREFORE, this petition is GRANTED. The CA’s July 23, 2008 and November 28, 2008 Resolutions in CA-G.R. CV
No. 88786 are accordingly REVERSED and SET ASIDE. This case is hereby REMANDED to the CA for hearing on the
merits. No costs. SO ORDERED.
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