XYLEM WATER SYSTEMS INTERNATIONAL, INC. VS.

COMMISSIONER OF INTERNAL REVENUE

FACTS: Petitioner Xylem Water Systems International, Inc. (formerly Goulds Pumps [N.Y.l, Inc.)filed a
Petition for Review seeking for the cancellation of the assessment for taxable year 2004 (a) expanded
withholding tax ("EWT") in the total amount of Php1,370,725.90; (b) final withholding tax ("FWT") in the total
amount of Php41,261,378.35; and (c) fringe benefit tax ("FBT") in the total amount of Php1,391,660.67.
issued by the Respondent Commissioner of Internal Revenue.

Petitioner Xylem Water Systems International, Inc. is a corporation duly organized and existing under and
by virtue of the laws of the State of Delaware, U.S.A. It is authorized to transact business in the Philippines
as a branch office primarily to engage in the manufacture, assembly, repair and maintenance of various
pumps and related products.

On the other hand, Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue who
has 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 the National Internal Revenue Code
("NIRC") of 1997,

On October 10, 2005, Petitioner received an LOA dated September 15, 2005. The LOA authorized the
examination of the books and accounts and other accounting records for taxable year 2004.

June 5, 2007, petitioner received from RDO a Preliminary Notice dated June 4, 2007 for the deficiency of
VAT and EWT, FWT, FBT for taxable year 2004. June 7, They answered acknowledging the receipt of the
Preliminary Notice requesting for additional 15 – 60 days from the receipt to submit documentary evidence.

January 9, 2008, Petitioner filed with the Revenue Region its reply to the Preliminary Notice and attached
its position paper dated June 25, 2007. They likewise availed of the Tax Amnesty program under RA9480
which covers year 2005 and prior years.

March 14,2008 from Revenue Region No.9. The said TVN authorized the verification of the supporting
documents and records of Petitioner pursuant to its request for reinvestigation. On January 08, 2009,
Petitioner received a Letter dated December 11, 2008 from RDO No. 56, authorizing a new set of revenue
officers to conduct the examination of the books of accounts and other accounting records of Petitioner. On
January 06, 2011, Petitioner received another Letter from RDO No. 56 dated December 21,2010, informing
Petitioner that the case will be forwarded to Revenue Region No.9 for further review, issuance of the
statutory assessment, and enforcement of collection.

On February 21, 2013, Petitioner received the Preliminary Collection Letter ("PCL") from RDO No. 56 which
sought to collect the VAT and the alleged deficiency taxes under Assessment No. 56-2004, in the total
amount of Php44,991,188.88.
Petitioner filed its protest of the Preliminary Collection Letter together with supporting documents with RDO
No. 56

Petitioner received the reply of RDO No. 56 dated July 02, 2013 to Petitioner's March 22, 2013 First
Protest.14 On July 28, 2014, Petitioner received a Final Notice Before Seizure ("FNBS") from RDO No. 56.
The FNBS gave Petitioner fifteen (15) days from receipt thereof to settle the alleged deficiency taxes as
provided in Respondent's PCL.1s On August 08, 2014, Petitioner ftled with RDO No. 56 its protest to the
FNBS ("Second Protest") . 16

On September 09,2014, Petitioner received the WDL from RDO No. 56, for the collection of the alleged
deficiency taxes, as follows:
(a) EWT in the total amount of Php1,370,725.90; (b) FWTin the total amount ofPhp41,261,378.35; and (c)
FBT in the total amount ofPhp1,391,660.67Y On October 03, 2014, Petitioner filed with the Court its Petition
for Review with (a) Urgent Motion to Quash the Warrant of Distraint and/ or Levy and (b) Application for
Temporary Restraining Order and/ or Writ of Preliminary Injunction.
ISSUE: Several issues were raised but the Court instead resolved to set aside other factual issues citing
the allegation that no FAN and/or Final Letter of Demand (FLD) were received by the Petitioner. In the
course of the trial, the Respondent contested that he duly issued the FAN and FLD citing a Letter from the
Revenue Region Office informing the Petitioner that said FAN has already been sent to Petitioner.

HELD: However, the Court is not persuaded with the foregoing evidence submitted citing the Supreme
Court decided case of Barcelona Roxas Securities, Inc. where it is incumbent upon the BIR to prove by
competent evidence that an assessment notice was indeed received by the taxpayer in case of the latter’s
denial. Accordingly, service made through registered mail is proved by the registry receipt issued by the
mailing office and an affidavit of the person mailing of facts pursuant to Section 13 of Rule 13 of the 1997
Rules on Civil Procedure. Absent one or the other, or worse both, there is no proof of service.
Notwithstanding the presentation made by the Respondent of a certified photocopy of the registry return
receipt, it was found out that no affidavit of the person mailing the same was presented. Moreover, it was
not established whether the signature on the registry return receipt indeed belongs to the Petitioner’s
authorized representative. Clearly, Respondent failed to prove that assessment notice had been actually
served and received to the Petitioner or its duly authorized agent leading to the cancellation of the
assessment. Thus, the Court GRANTED the Petition resulting in the CANCELLATION of assessment
MISNET V CIR

Facts:

On November 29, 2006, Petitioner Misnet, Inc. (Misnet) received a Preliminary Assessment Notice (PAN)
from Respondent Commissioner of Internal Revenue (CIR) stating that there was alleged deficiency in the
expanded withholding tax (EWT) and final withholding VAT (FVAT). Misnet filed a letter-protest on the PAN.

On January 23, 2007, Misnet received a Formal Assessment Notice (FAN). On February 9, 2007, Misnet
administratively protested the FAN by filing a request for reconsideration. The CIR acknowledged the
protest letter and informed Misnet that its tax docket had been forwarded to the Revenue District Officer
No. 49 – North Makati.

On May 28, 2007, the CIR informed Misnet that the examiner has been authorized to verify the documents
relative to its request for reinvestigation and reiterated the previous assessment. On June 1, 2007, Misnet
sent a letter to the examiner reiterating its protest to the PAN and the FAN.

On April 28, 2008, the CIR again wrote a letter to Misnet, informing the latter that the CIR found additional
deficiency tax dues. On May 8, 2008, Misnet protested this letter.
On March 28, 2011, Misnet received an Amended Assessment Notice reflecting an amended deficiency
EWT after reinvestigation. On the same date, Misnet received a Final Decision on Disputed Assessment
(FDDA), stating that after reinvestigation, there was still due from Misnet representing EWT, FVAT, and
Compromise Penalty. Misnet received the FDDA on Marh 28, 2011.

On April 8, 2011, Misnet filed a letter-reply to the Amended Notice and FDDA which was received by the
CIR on April 11, 2011. On May 9, 2011, the CIR sent a letter to Misnet, informing the latter that its letter-
reply dated April 8, 2011 produced no legal effect since it availed of the improper remedy. It should have
appealed the final decision of the CIR to the Court of Tax Appeals (CTA) within 30 days from the date of
receipt of the FDDA, otherwise, the assessment became final, executory and demandable.

On May 27, 2011, Misnet filed a Petition for Relief from Judgment with CIR arguing that it was not able to
file its proper appeal of the FDDA due to its mistake and excusable negligence as it was not assisted by
counsel. On June 29, 2011, Misnet received a Preliminary Collection Letter dated June 22, 2011, which is
deemed a denial of Misnet’s Petition for Relief.

On June 26, 2011, Misnet filed a Petition for Review before the CTA Division but the CTA Division granted
the motion to dismiss by the CIR on the ground of lack of jurisdiction for Misnet’s failure to file an appeal
within the prescribed period of 30 days. Misnet’s motion for reconsideration was denied. On July 12, 2012,
Misnet filed a Petition for Review before the CTA En Banc but it was dismissed on the same ground. Misnet
filed a motion for reconsideration but the CTA En Banc denied it. Hence, this Petition for Review on
Certiorari before the Supreme Court (SC).

Issues:

Did the CTA En Banc correctly dismiss Misnet’s Petition for Review on the ground of lack of jurisdiction?

Ruling:

No. When Misnet sent a letter-reply dated April 8, 2011 to the Regional Director, it was actually protesting
both the Amended Assessment Notice and the FDDA. The Amended Assessment Notice reflects the
amended deficiency EWT after reinvestigation while the FDDA reflects the Final Decision on deficiency
EWT, FVAT, and Compromise Penalty. Since the deficiency EWT is a mere component of the aggregate
tax due as reflected in the FDDA, then the FDDA cannot be considered as the final decision of the CIR as
one of its components – the amended deficiency EWT – is still under protest.

With Misnet’s pending protest with the Regional Director on the amended EWT, then technically speaking,
there was yet no final decision that was issued by the CIR that is appealable to the CTA. It is still incumbent
for the Regional Director to act upon the protest on the amended EWT – whether to grant or deny it. Only
when the CIR settled (deny/grant) the protest on the deficiency EWT could there be a final decision on
Misnet’s liabilities. And only when there is a final decision of the CIR, would the prescriptive period to appeal
with the CTA begin to run.

Further, while the rule is that a taxpayer has 30 days to appeal to the CTA from the final decision of the
CIR, the said rule could not be applied if the Assessment Notice itself clearly states that the taxpayer must
file a protest with the CIR or the Regional Director within 30 days from receipt of the Assessment Notice.
Under the circumstances obtaining in this case, the SC opted not to apply the statutory period within which
to appeal with the CTA considering that no final decision yet was issued by the CIR on Misnet’s protest.

CIR vs. Fortune Tobacco

Facts: Prior to January 1, 1997, the excises taxes on cigarettes were in the form of ad valorem taxes,
pursuant to Section 142 of the 1977 National Internal Revenue Code (1977 Tax Code). Beginning January
1, 1997, RA 8240 took effect and a shift from ad valorem to specific taxes was made. A portion of Section
142(c) of the 1977 Tax Code, as amended by RA 8240, reads in part:

“The specific tax from any brand of cigarettes within the next three (3) years of effectivity of this Act shall
not be lower than the tax [which] is due from each brand on October 1, 1996.

xxx

The rates of specific tax on cigars and cigarettes under paragraphs (1), (2), (3) and (4) hereof, shall be
increased by twelve percent (12%) on January 1, 2000.”

To implement the 12% increase in specific taxes mandated under Section 145 of the 1997 Tax Code and
again pursuant to its rule-making powers, the CIR issued RR 17- 99, which reads partly:

“Provided, however, that the new specific tax rate for any existing brand of cigars [and] cigarettes packed
by machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax that is
actually being paid prior to January 1, 2000.”
Pursuant to these laws, respondent Fortune Tobacco Corporation paid in advance excise taxes and filed
an administrative claim for tax refund with the CIR for erroneously and/or illegally collected taxes in the
amount of P491 million.

In its decision, the CTA First Division ruled in favor of Fortune Tobacco and granted its claim for refund.
The CTA First Divisions ruling was upheld on appeal by the CTA en banc. The CIR’s motion for
reconsideration of the CTA en banc’s decision was denied in a resolution.

Issue: Whether or not Section 1 of RR 17-99 is an unauthorized administrative legislation on the part of the
CIR.

Ruling: Yes. The proviso in Section 1 of RR 17-99 clearly went beyond the terms of the law it was supposed
to implement, and therefore entitles Fortune Tobacco to claim a refund of the overpaid excise taxes
collected pursuant to this provision.

The rule on uniformity of taxation is violated by the proviso in Section 1, RR 17-99. Uniformity in taxation
requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges
and liabilities. Although the brands all belong to the same category, the proviso in Section 1, RR 17-99
authorized the imposition of different (and grossly disproportionate) tax rates. It effectively extended the
qualification stated in the third paragraph of Section 145(c) of the 1997 Tax Code that was supposed to
apply only during the transition period. In the process, the CIR also perpetuated the unequal tax treatment
of similar goods that was supposed to be cured by the shift from ad valorem to specific taxes.

The Court further said that the omission in the law in fact reveals the legislative intent not to adopt the
higher tax rule. It appears that despite its awareness of the need to protect the increase of excise taxes to
increase government revenue, Congress ultimately decided against adopting the higher tax rule.

DEL MONTE v CIR

Facts:
On December 12, 2013, petitioner filed with the BIR, through the Electronic Filing and Payment System
("EFPS"), an electronic copy of its original November 2013 Monthly Remittance Return of Income Taxes
Withheld on Compensation [referred to herein as Withholding Tax on Compensation ("WTC") Return] for a
total amount of P26,739,317.66. Petitioner the said amount. On Jan 14, 2014, petitioner filed through the
EFPS an electronic copy of its original December 2013 WTC Return. Petitioner subsequently filed, through
the EFPS, an amended December 2013 WTC Return on January 20, 2014, reflecting a total amount due
of P26,926,896.72, with Filing Reference No. 011400008378200? On the same date, petitioner paid the
WTC in the amount of P26,739,317.66,8 by erroneously using Filing Reference No. 011300008205342,
which filing reference number pertains to the November 2013 WTC Return.

Considering that the WTC for November 2013 was already paid, the EFPS Payment Details for November
2013 reflected two (2) payments-- the first payment on December 16, 2013 (in the amount of P26,
739,317.66) and the second payment on January 20, 2014 (in the amount of P26,739,317.66).
Consequently, there was no payment reflected for December 2013. Upon inquiry with the BIR Large
Taxpayers Division - Makati, petitioner was informed that since it filed its Amended December 2013 WTC
return and paid through the EFPS, it had to pay the amount due for December 2013 using the correct Filing
Reference Number as it was the only way to reflect payment for the December 2013 WTC Return.

On January 21, 2014, petitioner paid the entire amount due of P26,926,896. 72 on its December 2013 WTC
Return under the correct Filing Reference No. 011400008378200. 12 On March 6, 2014, petitioner received
an Audit Results/Assessment Notice (RPS13 ) dated February 20, 2014 from the BIR Large Taxpayer's
Division – Makati in total amount of P6,798,478.64

On March 11, 2014, petitioner filed an Appeal Letter to Mr. Alfredo V. Misajon, then OIC-ACIR Large
Taxpayers Service- Makati, asking that only the difference between the December and November 2013
WTC due, in the amount of P187,579.06, be subjected to interest. 15 On the same date, petitioner filed an
Application for Abatement or Cancellation of Tax, Penalties and/or Interest Under Rev. Reg. No. 19-2007
(BIR Form No. 211 0) with the BIR Large Taxpayers Service Makati, citing the reason as "Late payment of
tax under meritorious circumstance."

Respondent issued the notice of denial and petitioner filed a petition for review. Respondent posted his
answer interposing the affirmative defenses:
1. The Court of Tax Appeals ("CTA") is a court of special jurisdiction and can only take cognizance of
such matters as are clearly within its jurisdiction;
2. The CTA has no jurisdiction over the instant petition. The Decision appealable to the CT A is a
decision on disputed assessment and not a decision denying the application for abatement. Hence,
petitioner does not have any cause of action against respondent;
3. To exercise the power of abatement is to enter into a contract, hence, consent is essential. The
mutuality of contracts hinders the courts from contracting for the parties;
4. The exercise of the power of abatement is a waiver on the part of the government of its right to
receive the contribution from its inhabitants, hence, the waiver must be voluntary;
5. Assuming the CTA has jurisdiction, petitioner failed to properly support its request for abatement
under the law; and,
6. The collection of the surcharge and penalties accompanying the tax liabilities is justified.

The parties filed their joint stipulation of facts and issues.

Issues:
1. Whether the Notice of Denial is proper, given that (a) petitioner timely paid its December 2013
WTC, and/or (b) any overpayment for the November 2013 WTC can be offset against the
December 2013 WTC.
2. Whether the Court has jurisdiction over the Petition for Review.
3. Assuming the Court has jurisdiction, whether petitioner is entitled to abatement under Section 204
of the 1997 National Internal Revenue Code ("NIRC"), as amended

Held:
1. CTA has jurisdiction over the case pursuant to Section 7(a)(1) of RA 1125, as amended. The Supreme
Court has long established that the jurisdiction of the CT A is not limited to decisions on disputed
assessments by the Commissioner of Internal Revenue (CIR), but also includes other matters involving
the interpretation and implementation of the NIRC of 1997, as amended.

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. 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 quasijudicial 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.

Indubitably, the phrase "other matters arising under this Code" pertains to cases that are to begin with,
subject to the exclusive appellate jurisdiction of the CTA

In this case, the Notice of Denial in question arose from the disputed Audit Results / Assessment Notice
(RPS) assessing petitioner for surcharge, interest and compromise penalty, a controversy clearly within
the jurisdiction of the CT A. The denial of petitioner's application for abatement is properly subsumed
under the phrase "other matters arising under the National Internal Revenue Code." Anent the
timeliness of the subject Petition for Review, records show that petitioner received the Notice of Denial
on January 11, 2018. 38 Since the subject Petition for Review was filed on February 12, 2018 (February
 10 and 11 being a Saturday and a Sunday, respectively), 39 the Petition for Review was timely filed
within the thirty day reglementary period.

2. The Audit Assessment is void for issued in petitioner's process Results I Notice (RPS) having been
violation of right to due.

The NIRC and prevailing jurisprudence prescribe the due process requirement to be observed in issuing
deficiency tax assessments. Strict compliance with these requirements is necessary to make an
assessment valid.

A BIR officer cannot simply subject a taxpayer to audit without valid authority issued for that purpose.
Section 13 of the NIRC of 1997, as amended, provides: "SEC. 13. Authority of a Revenue Officer. -
Subject to the rules and regulations to be prescribed by the Secretary of Finance, upon
recommendation of the Commissioner, a Revenue Officer assigned to perform assessment functions
in any district may, pursuant to a Letter of Authority issued by the Revenue Regional Director, examine
taxpayers within the jurisdiction of the district in order to collect the correct amount of tax, or to
recommend the assessment of any deficiency tax due in the same manner that the said acts could
have been performed by the Revenue Regional Director himself."

WHEREFORE, premises considered, the Petition for Review is hereby GRANTED. Accordingly, the
Audit Results/Assessment Notice dated February 20, 2014 assessing petitioner for payment of
surcharge, interest and compromise penalty in the amount of P6,796,478.64 for the late payment of
petitioner's Withholding Tax on Compensation Return for the month of December 2013 and the
subsequent Notice of Denial dated October 10, 2016 are CANCELLED and SET ASIDE.

CORAL BAY NICKEL CORP v CIR

Facts:
The petitioner, a domestic corporation engaged in the manufacture of nickel and/or cobalt mixed sulphide,
is a VAT entity registered with the Bureau of Internal Revenue (BIR). It is also registered with the Philippine
Economic Zone Authority (PEZA) as an Ecozone Export Enterprise at the Rio Tuba Export Processing Zone
under PEZA Certificate of Registration dated December 27, 2002.

The petitioner filed its Amended VAT Return declaring unutilized input tax from its domestic purchases of
capital goods, other than capital goods and services, for its third and fourth quarters of 2002 totalling
P50,124,086.75.

Due to the alleged inaction of the respondent, the petitioner elevated its claim to the CTA by petition for
review, praying for the refund of the aforesaid input VAT. After trial on the merits, the CTA in Division
promulgated its decision denying the petitioner's claim for refund on the ground that the petitioner was not
entitled to the refund of alleged unutilized input VAT. After the CTA in Division denied its Motion for
Reconsideration the petitioner elevated the matter to the CTA En Banc which also denied the petition. The
CTA En Banc denied the petitioner's Motion for Reconsideration through the resolution.

Issue

Was the petitioner, an entity located within an ECOZONE, entitled to the refund of its unutilized input taxes
incurred before it became a PEZA registered entity?

Ruling:

The appeal is bereft of merit. The petitioner filed with the BIR on June 10, 2004 its application for tax refund
or credit representing the unutilized input tax for the third and fourth quarters of 2002. Barely 28 days later,
it brought its appeal in the CTA contending that there was inaction on the part of the petitioner despite its
not having waited for the lapse of the 120-day period mandated by Section 112 (D) of the 1997 NTRC. At
the time of the petitioner's appeal, however, the applicable rule was that provided under BIR Ruling No.
DA-489-03,[14] issued on December 10, 2003, to wit: It appears, therefore, that it is not necessary for the
Commissioner of Internal Revenue to first act unfavorably on the claim for refund before the Court of Tax
Appeals could validly take cognizance of the case. This is so because of the positive mandate of Section
230 of the Tax Code and also by virtue of the doctrine that the delay of the Commissioner in rendering his
decision does not extend the reglementary period prescribed by statute.

Incidentally, the taxpayer could not be faulted for taking advantage of the full two-year period set by law for
filing his claim for refund [with the Commissioner of Internal Revenue]. Indeed, no provision in the tax code
requires that the claim for refund be fixed at the earliest instance in order to give the Commissioner an
opportunity to rule on it and the court to review the ruling of the Commissioner of Internal Revenue on
appeal. xxx

The exception to the mandatory and jurisdictional compliance with the 120+30 day-period is when the claim
for the tax refund or credit was filed in the period between December 10, 2003 and October 5, 2010 during
which BIR Ruling No. DA-489-03 was still in effect. Accordingly, the premature filing of the judicial claim
was allowed, giving to the CTA jurisdiction over the appeal.
As to the main issue, we sustain the assailed decision of the CTA En Banc.

The rule that any sale by a VAT-registered supplier from the Customs Territory to a PEZA-registered
enterprise shall be considered an export sale and subject to zero percent (0%) VAT was clearly established
only on 15 October 1999, upon the issuance of RMC No. 74-99. Prior to the said date, however, whether
or not a PEZA-registered enterprise was VAT-exempt depended on the type of fiscal incentives availed of
by the said enterprise. This old rule on VAT-exemption or liability of PEZA-registered enterprises, followed
by the BIR, also recognized and affirmed by the CTA, the Court of Appeals, and even this Court, cannot be
lightly disregarded considering the great number of PEZA-registered enterprises which did rely on it to
determine its tax liabilities, as well as, its privileges.

According to the old rule, Section 23 of Rep. Act No. 7916, as amended, gives the PEZA-registered
enterprise the option to choose between two sets of fiscal incentives: (a) The five percent (5%) preferential
tax rate on its gross income under Rep. Act No. 7916, as amended; and (b) the income tax holiday provided
under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, as amended.

xxxx

This old rule clearly did not take into consideration the Cross Border Doctrine essential to the VAT system
or the fiction of the ECOZONE as a foreign territory. It relied totally on the choice of fiscal incentives of the
PEZA-registered enterprise. Again, for emphasis, the old VAT rule for PEZA-registered enterprises was
based on their choice of fiscal incentives: (1) If the PEZA-registered enterprise chose the five percent (5%)
preferential tax on its gross income, in lieu of all taxes, as provided by Rep. Act No. 7916, as amended,
then it would be VAT-exempt; (2) If the PEZA-registered enterprise availed of the income tax holiday under
Exec. Order No. 226, as amended, it shall be subject to VAT at ten percent (10%). Such distinction was
abolished by RMC No. 74-99, which categorically declared that all sales of goods, properties, and services
made by a VAT-registered supplier from the Customs Territory to an ECOZONE enterprise shall be subject
to VAT, at zero percent (0%) rate, regardless of the tatter's type or class of PEZA registration; and, thus,
affirming the nature of a PEZA-registered or an ECOZONE enterprise as a VAT-exempt
entity.[18] (underscoring and emphasis supplied)

Furthermore, Section 8 of Republic Act No. 7916 mandates that PEZA shall manage and operate the
ECOZONE as a separate customs territory. The provision thereby establishes the fiction that an ECOZONE
is a foreign tenitory separate and distinct from the customs territory. Accordingly, the sales made by
suppliers from a customs territory to a purchaser located within an ECOZONE will be considered as
exportations. Following the Philippine VAT system's adherence to the Cross Border Doctrine and
Destination Principle, the VAT implications are that "no VAT shall be imposed to form part of the cost of
goods destined for consumption outside of the territorial border of the taxing authority"[19] Thus, Toshiba has
discussed that:
This Court agrees, however, that PEZA-registered enterprises, which would necessarily be located within
ECQZONES, are VAT-exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which
imposes the five percent (5%) preferential tax rate on gross income of PEZA-registered enterprises, in lieu
of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that
ECOZONES are foreign territory.

It is important to note herein that respondent Toshiba is located within an ECOZONE. An ECOZONE or a
Special Economic Zone has been described as —

. . . [S]elected areas with highly developed or which have the potential to be developed into agro-industrial,
industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and
bounds are fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the
following: industrial estates (IEs), export processing zones (EPZs), free trade zones and tourist/recreational
centers.

The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred
to as the Customs Territory.

Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the
ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is a foreign
territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the
ECOZONE shall be treated as an exportation from the Customs Territory. Conversely, sales made by a
supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as an importation
into the Customs Territory.[20] (underscoring and emphasis are supplied)

The petitioner's principal office was located in Barangay Rio Tuba, Bataraza, Palawan.[21] Its plant site was
specifically located inside the Rio Tuba Export Processing Zone — a special economic zone (ECOZONE)
created by Proclamation No. 304, Series of 2002, in relation to Republic Act No. 7916. As such, the
purchases of goods and services by the petitioner that were destined for consumption within the ECOZONE
should be free of VAT; hence, no input VAT should then be paid on such purchases, rendering the petitioner
not entitled to claim a tax refund or credit. Verily, if the petitioner had paid the input VAT, the CTA was
correct in holding that the petitioner's proper recourse was not against the Government but against the
seller who had shifted to it the output VAT following RMC No. 42-03,[22] which provides:

In case the supplier alleges that it reported such sale as a taxable sale, the substantiation of remittance of
the output taxes of the seller (input taxes of the exporter-buyer) can only be established upon the thorough
audit of the suppliers' VAT returns and corresponding books and records. It is, therefore, imperative that
the processing office recommends to the concerned BIR Office the audit of the records of the seller.

In the meantime, the claim for input tax credit by the exporter-buyer should be denied without prejudice to
the claimant's right to seek reimbursement of the VAT paid, if any, from its supplier.
We should also take into consideration the nature of VAT as an indirect tax. Although the seller is statutorily
liable for the payment of VAT, the amount of the tax is allowed to be shifted or passed on to the
buyejr.[23] However, reporting and remittance of the VAT paid to the BIR remained to be the seller/supplier's
obligation. Hence, the proper party to seek the tax refund or credit should be the suppliers, not the petitioner.

In view of the foregoing considerations, the Court must uphold the rejection of the appeal of the petitioner.
This Court has repeatedly poirited out that a claim for tax refund or credit is similar to a tax exemption and
should be strictly construed against the taxpayer. The burden of proof to show that he is ultimately entitled
to the grant of such tax refund or credit rests on the taxpayer.[24] Sadly, the petitioner has not discharged
its burden.

WHEREFORE, the Court AFFIRMS the decision promulgated on May 29, 2009 in CTA EB Case No. 403;
and ORDERS the petitioner to pay the costs of suit. SO ORDERED.

CIR v TRANSFIELD PH
Assailed in this petition for review on certiorari are the August 5, 2013 Decision and the February 19, 2014
Resolution[2] of the Court of Tax Appeals (CTA) En Banc in CTA EB Case No. 907 which affirmed the
February 28, 2012 Amended Decision[3] and the May 14, 2012 Resolution[4] of the CTA First Division in
CTA Case No. 7842.

The Antecedents

On May 30, 2007, respondent Transfield Philippines, Inc. (respondent) received copies of Final Assessment
Notice (FAN) issued by petitioner Commissioner of Internal Revenue (CIR), through Nestor S. Valeroso,
Officer-in-Charge, Assistant Commissioner for the Large Taxpayers Service.[5] Respondent was assessed
the total sum of P563,168,996.70 for deficiency income tax, Expanded Withholding Tax (EWT), and Value-
Added Tax (VAT), inclusive of interest and compromise penalties for the Fiscal Year July 1, 2001 to June
30, 2002. The details of the assessments are as follows:

Kind of Tax Basic Interest Compromise Total

Income Tax 291,320,169.28 271,335,605.67 25,000.00 562,680,774.95

EWT 66,497.56 69,996.28 14,000.00 150,493.84

VAT 147,156.30 164,071.61 24,500.00 335,727.91

VAT penalty 2,000.00 2,000.00

Total 291,533,823.14 271,569,673.56 65,500.00 563,168,996.70

On June 5, 2007, respondent filed a protest with the Bureau of Internal Revenue (BIR).[6] Without acting on
respondent's protest, the BIR issued the First Collection Letter demanding immediate payment of the
assessments. Respondent received a copy of the First Collection Letter on August 28, 2007.
Then, on January 17, 2008, petitioner constructively served a Final Notice Before Seizure to respondent's
office. Respondent availed of the benefits of Republic Act (R.A.) No. 9480 by submitting the following
documents to the Development Bank of the Philippines (DBP), an authorized agent bank of the BIR: 1)
Notice of Availment of Tax Amnesty; 2) Tax Amnesty Return (BIR Form No. 2116); 3) Statement of Assets,
Liabilities and Net Worth (SALN) as of December 31, 2005; and 4) Tax Amnesty Payment Form (BIR Form
No. 0617). On the same day, respondent paid the BIR, through DBP, an amnesty tax in the amount of
P112,500.00..

On July 10, 2008, petitioner wrote respondent, advising the latter that under Revenue Memorandum
Circular (RMC) No. 19-2008, those "with delinquent accounts/accounts receivable considered as assets of
the BIR/ Government, including self-assessed tax," are not allowed to avail of the benefits of R.A. No.
9480.[10]

On September 8, 2008, petitioner issued a Warrant of Distraint and/or Levy (WDAL) directing the seizure
of respondent's goods, chattels or effects, and other personal properties, and/or levy of its real property
and interest in/or rights to real property to the extent of P563,168,996.70.[11] A copy of the WDAL was
constructively served on respondent's offices on September 11, 2008. On the same day, the Bank of the
Philippine Islands (BPI) informed respondent that the latter's account was being put on hold because of the
WDAL.

The CTA First Division Ruling

In an Amended Decision[12] dated February 28, 2012, the CTA First Division ruled that the CTA has
jurisdiction not only over decisions or inactions of the CIR in cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties in relation thereto, but also over other matters
arising under the National Internal Revenue Code (NIRC) or other laws administered by the BIR. It declared
that petitioner is already barred from collecting from respondent the alleged tax liabilities because it is
undisputed that respondent had complied with all the legal requirements pertaining to its application for tax
amnesty by submitting to the BIR its Notice of Availment of Tax Amnesty, Tax Amnesty Return, SALN, and
Tax Amnesty Payment Form together with the BIR Tax Payment Deposit Slip evidencing payment of
amnesty tax amounting to P112,500.00. The CTA First Division added that when respondent complied with
all the requirements of R.A. No. 9480, it is deemed to have settled in full all its tax liabilities for the years
covered by the tax amnesty. It held that the July 10, 2008 Letter of petitioner is void as it disqualifies
respondent from availing of the immunity from payment of tax liabilities under R.A. No. 9480 on the ground
that its account has been considered delinquent or receivable asset of the government, which reason is not
in consonance with the provisions of R.A. No. 9480. The fallo reads:

WHEREFORE, the Motion for Reconsideration (from the Decision dated 20 September 2011) dated
October 11, 2011 filed by petitioner is hereby GRANTED.

Consequently, the Warrant of Distraint and/or Levy dated September 08, 2008 is hereby declared NULL
and VOID and of no legal effect. Respondent is now precluded from collecting the amount of
P563,168,996.70, representing petitioner's tax liability for taxable year 2002, which is deemed settled.

SO ORDERED.[13]

Petitioner moved for reconsideration, but the same was denied by the CTA First Division in a
Resolution[14] dated May 14, 2012. Aggrieved, petitioner filed a petition for review before the CTA En Banc.
The CTA En Banc Ruling
In a Decision[15] dated August 5, 2013, the CTA En Banc opined that it has jurisdiction to rule on the petition
because it is not an appeal of the disputed assessment which is subject to a reglementary period, but it is
a case to determine whether the issuance of the WDAL is proper. It added that the issue to be addressed
is not the timeliness of the protest, but rather, whether petitioner may validly collect taxes from respondent
despite the latter having availed of the tax amnesty. The CTA En Banc concluded that respondent properly
availed of the immunity from payment of taxes under R.A. No. 9480, and as such, the issuance of a WDAL
was invalid, which justified the filing of a petition within 30 days from receipt of the warrant. It disposed the
case in this wise:

WHEREFORE, the petition is DENIED. The Amended Decision dated February 28, 2012, rendered by the
First Division of this Court in CTA Case No. 7842, and its Resolution dated May 14, 2012
are AFFIRMED. No pronouncement as to costs.

Petitioner moved for reconsideration, but the same was denied by the CTA En Banc on February 19, 2014.
Hence, this petition for review on certiorari.

Issues:
I. WHETHER THE CTA COMMITTED REVERSIBLE ERROR WHEN IT ASSUMED JURISDICTION
OVER THE CASE.

II. WHETHER THE CTA COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT
RESPONDENT IS ENTITLED TO THE IMMUNITIES UNDER THE TAX AMNESTY PROGRAM
PROVIDED IN REPUBLIC ACT NO. 9480.[17]

The Court's Ruling

I.
A tax amnesty operates as a general pardon or intentional overlooking by the State of its authority to impose
penalties on persons otherwise guilty of evasion or violation of a revenue or tax law. It is an absolute
forgiveness or waiver by the government of its right to collect what is due it and to give tax evaders who
wish to relent a chance to start with a clean slate. A tax amnesty, much like a tax exemption, is never
favored nor presumed in law. The grant of a tax amnesty is akin to a tax exemption; thus, it must be
construed strictly against the taxpayer and liberally in favor of the taxing authority.[24]

On May 24, 2007, R.A. No. 9480 took effect and authorized the grant of a tax amnesty to qualified taxpayers
for all national internal revenue taxes for the taxable year 2005 and prior years, with or without assessments
duly issued therefor, that have remained unpaid as of December 31, 2005.[25] The pertinent provisions of
R.A. No. 9480 are:

SEC. 1. Coverage. — There is hereby authorized and granted a tax amnesty which shall cover all national
internal revenue taxes for the taxable year 2005 and prior years, with or without assessments duly issued
therefor, That have remained unpaid as of December 31, 2005: Provided, however, that the amnesty
hereby authorized and granted shall not cover persons or cases enumerated under Section 8 hereof
xxxx
SEC. 6. Immunities and Privileges. — Those who availed themselves of the tax amnesty under Section 5
hereof, and have fully complied with all its conditions shall be entitled to the following immunities and
privileges:
(a) The taxpayer shall be immune from the payment of taxes, as well as additions thereto, and the
appurtenant civil, criminal or administrative penalties under the National Internal Revenue Code of
1997, as amended, arising from the failure to pay any and all internal revenue taxes for taxable
year 2005 and prior years. (Emphases supplied)

xxxx

To implement R.A. No. 9480, the Department of Finance (DOF) issued DOF Department Order No. 29-07
(DO 29-07). Section 6 thereof outlines the method for availing a tax amnesty under R.A. No. 9480, viz.:

SEC. 6. Method of Availment of Tax Amnesty.

1. Forms/Documents to be filed. — To avail of the general tax amnesty, concerned taxpayers shall file the
following documents/requirements:
a. Notice of Availment in such form as may be prescribed by the BIR;
b. Statement of Assets, Liabilities and Networth (SALN) as of December 31, 2005 in such [form], as
may be prescribed by the BIR;
c. Tax Amnesty Return in such form as may be prescribed by the BIR.
2. Place of Filing of Amnesty Tax Return. — The Tax Amnesty Return, together with the other documents
stated in Sec. 6 (1) hereof, shall be filed as follows:
a. Residents shall file with the Revenue District Officer (RDO)/Large Taxpayer District Office of the
BIR which has jurisdiction over the legal residence or principal place of business of the taxpayer,
as the case may be.
b. Non-residents shall file with the office of the Commissioner of the BIR, or with the RDO.
c. At the option of the taxpayer, the RDO may assist the taxpayer in accomplishing the forms and
computing the taxable base and the amnesty tax payable, but may not look into, question or
examine the veracity of the entries contained in the Tax Amnesty Return, [SALN], or such other
documents submitted by the taxpayer.
3. Payment of Amnesty Tax and Full Compliance. — Upon filing of the Tax Amnesty Return in accordance
with Sec. 6 (2) hereof, the taxpayer shall pay the amnesty tax to the authorized agent bank or in the
absence thereof, the Collection Agents or duly authorized Treasurer of the city or municipality in which
such person has his legal residence or principal place of business.

The RDO shall issue sufficient Acceptance of Payment Forms, as may be prescribed by the BIR for the use
of — or to be accomplished by — the bank, the collection agent or the Treasurer, showing the acceptance
by the amnesty tax payment. In case of the authorized agent bank, the branch manager or the assistant
branch manager shall sign the acceptance of payment form.

The Acceptance of Payment Form, the Notice of Availment, the SALN, and the Tax Amnesty Return shall
be submitted to the RDO, which shall be received only after complete payment. The completion of these
requirements shall be deemed full compliance with the provisions of [R.A. No.] 9480. x x x (Emphasis
supplied)

In this case, it remains undisputed that respondent complied with all the requirements pertaining to its
application for tax amnesty by submitting to the BIR a Notice of Availment of Tax Amnesty, Tax Amnesty
Return, SALN as of December 31, 2005 and Tax Amnesty Payment Form. Further, it paid the corresponding
amnesty taxes. Hence, respondent has successfully availed itself of the tax amnesty benefits granted under
R.A. No. 9480 which include immunity from "the appurtenant civil, criminal, or administrative penalties under
the NIRC of 1997, as amended, arising from the failure to pay any and all internal revenue taxes for taxable
year 2005 and prior years."

II.

The CIR, however, insists that respondent is still liable for deficiency taxes, contending that under RMC No.
19-2008, respondent is disqualified to avail of the tax amnesty because it falls under the exception of
"delinquent accounts or accounts receivable considered as assets by the BIR or the Government, including
self-assessed tax." In Commissioner of Internal Revenue v. Philippine Aluminum Wheels, Inc.,[26] petitioner
therein raised a similar argument which the Court did not sustain and instead ruled that "in case there is a
discrepancy between the law and a regulation issued to implement the law, the law prevails because the
rule or regulation cannot go beyond the terms and provisions of the law. x x x To give effect to the exception
under RMC No. 19-2008 of delinquent accounts or accounts receivable by the BIR, as interpreted by the
BIR, would unlawfully create a new exception for availing of the Tax Amnesty Program under [R.A. No.]
9480."[27]

Moreover, it must be noted that under Section 8 of R.A. No. 9480, only the following persons are disqualified
from availing of the tax amnesty:

SEC. 8. Exceptions. — x x x
a. Withholding agents with respect to their withholding tax liabilities;
b. Those with pending cases falling under the jurisdiction of the Presidential Commission on Good
Government;
c. Those with pending cases involving unexplained or unlawfully acquired wealth or under the Anti-Graft
and Corrupt Practices Act;
d. Those with pending cases filed in court involving violation of the Anti-Money Laundering Law;
e. Those with pending criminal cases for tax evasion and other criminal offenses under Chapter II of Title
X of the National Internal Revenue Code of 1997, as amended, and the felonies of frauds, illegal
exactions and transactions, and malversation of public funds and property under Chapters III and IV of
Title VII of the Revised Penal Code; and
f. Tax cases subject of final and executory judgment by the courts.[28]

It is a basic precept of statutory construction that the express mention of one person, thing, act, or
consequence excludes all others as expressed in the maxim expressio unius est exclusio alterius. In
implementing tax amnesty laws, the CIR cannot now insert an exception where there is none under the
law. Indeed, a tax amnesty must be construed strictly against the taxpayer and liberally in favor of the taxing
authority. However, the rule-making power of administrative agencies cannot be extended to amend or
expand statutory requirements or to embrace matters not originally encompassed by the law. Administrative
regulations should always be in accord with the provisions of the statute they seek to implement, and any
resulting inconsistency shall be resolved in favor of the basic law.[29]

III.
As regards the issue on the propriety and timeliness of the petition for review, suffice it to say that in this
case, the reckoning point of the 30-day period to appeal the assessments is immaterial because the
assessments have already been extinguished by respondent's compliance with the requirements for tax
amnesty under R.A. No. 9480. To sustain petitioner's contention that respondent should have elevated an
appeal to the CTA when it received the Final Notice Before Seizure, or at most, when it received the July
10, 2008 Letter of the BIR, would lead to an absurd and unjust situation wherein the taxpayer avails of the
benefits of a tax amnesty law, yet the BIR still issues a WDAL simply because the taxpayer did not appeal
the assessment to the CTA. The requirement of filing an appeal with the CTA even after the taxpayer has
already complied with the requirements of the tax amnesty law negates the amnesty granted to the taxpayer
and creates a condition which is not found in the law. It is worthy to note that respondent filed a protest to
the assessments, but because of the passage of R.A. No. 9480, it no longer pursued its legal remedies
against the assessments. Thus, respondent cannot be faulted for filing a petition for review with the CTA
only upon receipt of the WDAL for it rightfully relied on the provision of R.A. No. 9480 that "those who
availed themselves of the tax amnesty x x x, and have fully complied with all its conditions x x x shall be
immune from the payment of taxes x x x." Finally, in CS Garment, Inc. v. Commissioner of Internal
Revenue,[30] the Court pronounced that taxpayers may immediately enjoy the privileges and immunities
under R.A. No. 9480 as soon as they fulfill the suspensive condition imposed therein, i.e., submission of 1)
Notice of Availment of Tax Amnesty Form; 2) Tax Amnesty Return Form (BIR Form No. 2116); 3) SALN as
of December 31, 2005; and 4) Tax Amnesty Payment Form (Acceptance of Payment Form or BIR Form
No. 0617). In fine, the deficiency taxes for Fiscal Year July 1, 2001 to June 30, 2002 are deemed settled in
view of respondent's compliance with the requirements for tax amnesty under R.A. No. 9480.

WHEREFORE, the petition is DENIED. The August 5, 2013 Decision and the February 19, 2014 Resolution
of the Court of Tax Appeals in CTA EB Case No. 907 are AFFIRMED. SO ORDERED.