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CIR Vs Metro Star
CIR Vs Metro Star
CIR Vs Metro Star
Securities, Inc.) v. Commissioner of Internal Revenue, the Court wrote: Banc), in C.T.A. EB No. 306 and 2] its November 18, 2008
Jurisprudence has consistently shown that this Court accords the findings Resolution denying petitioner’s motion for reconsideration.
2
of fact by the CTA with the highest respect. In Sea-Land Service Inc. v. The CTA-En Banc affirmed in toto the decision of its Second
Court of Appeals [G.R. No. 122605, 30 April 2001, 357 SCRA 441, 445-
Division (CTA-Second Division) in CTA Case No. 7169 reversing
446], this Court recognizes that the Court of Tax Appeals, which by the
very nature of its function is dedicated exclusively to the consideration of the February 8, 2005 Decision of the CIR which assessed
tax problems, has necessarily developed an expertise on the subject, and its respondent Metro Star Superama, Inc. (Metro Star) of deficiency
conclusions will not be overturned unless there has been an abuse or value-added tax and withholding tax for the taxable year 1999.
improvident exercise of authority. Such findings can only be disturbed on _______________
appeal if they are not supported by substantial evidence or there is a
showing of gross error or abuse on the part of the Tax Court. In the 1 Rollo, pp. 32-75. Penned by Associate Justice Caesar A. Casanova, with
absence of any clear and convincing proof to the contrary, this Court must Associate Justices Erlinda P. Uy, Olga Palanca-Enriquez, concurring and Associate
presume that the CTA rendered a decision which is valid in every respect. Justices Ernesto D. Acosta and Lovell R. Bautista, dissenting.
_______________ 2 Id., at pp. 88-96.
636
* SECOND DIVISION.
636 SUPREME COURT REPORTS ANNOTATED
634
Commissioner of Internal Revenue vs. Metro Star Superama Inc
634 SUPREME COURT REPORTS ANNOTATEDBased on a Joint Stipulation of Facts and Issues of the parties, 3
DEFICIENCIES Metro Star actually received the alleged PAN, dated January 16,
VALUE ADDED TAX P 2002. It, accordingly, ruled that the Formal Letter of Demand
dated April 3, 2002, as well as the Warrant of Distraint and/or
WITHHOLDING TAX Levy dated May 12, 2003 were void, as Metro Star was denied due
TOTAL process.
P 292,874.16 6
Second Division, but the motion was denied in the latter’s July 24,
Subsequently, Revenue District Office No. 67 sent a copy of the Final
Notice of Seizure dated May 12, 2003, which petitioner received on May 2007 Resolution. 8
15, 2003, giving the latter last opportunity to settle its deficiency tax Aggrieved, the CIR filed a petition for review with the CTA- 9
liabilities within ten (10) [days] from receipt thereof, otherwise respondent En Banc, but the petition was dismissed after a determination that
BIR shall be constrained to serve and execute the Warrants of Distraint no new matters were raised. The CTA-En Banc disposed:
and/or Levy and Garnishment to enforce collection. _______________
On February 6, 2004, petitioner received from Revenue District
Office No. 67 a Warrant of Distraint and/or Levy No. 67-0029-23 dated 5 Id., at p. 85, citing Republic v. Court of Appeals, 233 Phil. 359, 364; 149
May 12, 2003 demanding payment of deficiency value-added tax and SCRA 351, 354 (1987).
withholding tax payment in the amount of P292,874.16.638 6 Id., at p. 86.
7 Id., at pp. 111-119.
8 Id., at pp. 120-122.
638 SUPREME COURT REPORTS ANNOTATED 9 Id., at pp. 123-138.
Metro Star filed a petition for review with the CTA. The parties
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denied by the CTA-En Banc in its November 18, 2008
then stipulated on the following issues to be decided by the tax Resolution. 11
court: The CIR, insisting that Metro Star received the PAN, dated
1. Whether the respondent complied with the due process January 16, 2002, and that due process was served nonetheless
requirement as provided under the National Internal because the latter received the Final Assessment Notice (FAN),
Revenue Code and Revenue Regulations No. 12-99 with comes now before this Court with the sole issue of whether or not
regard to the issuance of a deficiency tax assessment; Metro Star was denied due process.
1.1 Whether petitioner is liable for the respective The general rule is that the Court will not lightly set aside the
amounts of P291,069.09 and P1,805.07 as conclusions reached by the CTA which, by the very nature of its
deficiency VAT and withholding tax for the year functions, has accordingly developed an exclusive expertise on the
1999; resolution unless there has been an abuse or improvident exercise
1.2. Whether the assessment has become final and of authority. In Barcelon, Roxas Securities, Inc. (now known as
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executory and demandable for failure of petitioner UBP Securities, Inc.) v. Commissioner of Internal Revenue, the 13
to protest the same within 30 days from its receipt Court wrote:
thereof on April 11, 2002, pursuant to Section 228 “Jurisprudence has consistently shown that this Court accords the
of the National Internal Revenue Code; findings of fact by the CTA with the highest respect. In Sea-Land Service
2. Whether the deficiency assessments issued by the Inc. v. Court of Appeals [G.R. No. 122605, 30 April 2001, 357 SCRA 441,
respondent are void for failure to state the law and/or facts 445-446], this Court recognizes that the Court of Tax Appeals, which by
upon which they are based. the very nature of its function is dedicated exclusively to the consideration
of tax problems, has necessarily developed an expertise on the subject, and
2.2 Whether petitioner was informed of the law and
its conclusions will not be overturned unless there has been an abuse or
facts on which the assessment is made in improvident exercise of authority. Such findings can only be disturbed on
compliance with Section 228 of the National appeal if they are not supported by substantial evidence or there is a
Internal Revenue Code; showing of gross error or abuse on the part of the Tax Court. In the
3. Whether or not petitioner, as owner/operator of a absence of any clear and convincing proof
movie/cinema house, is subject to VAT on sales of _______________
shall be caused to be issued by the said Office, calling for payment regulation then, on the other hand, simply provided that a notice
of the taxpayer’s deficiency tax liability, inclusive of the be sent to the respondent in the form prescribed, and that no
applicable penalties. consequence would ensue for failure to comply with that form.
3.1.3 Exceptions to Prior Notice of the Assessment.—The The Court need not belabor to discuss the matter of Metro
notice for informal conference and the preliminary assessment Star’s failure to file its protest, for it is well-settled that a void
notice shall not be required in any of the following cases, in which assessment bears no fruit. 18
case, issuance of the formal assessment notice for the payment of It is an elementary rule enshrined in the 1987 Constitution that
the taxpayer’s deficiency tax liability shall be sufficient: no person shall be deprived of property without due process of
(i) When the finding for any deficiency tax is the result of law. In balancing the scales between the power of the State to tax
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mathematical error in the computation of the tax and its inherent right to prosecute perceived transgressors of the
appearing on the face of the tax return filed by the law on one side, and the constitutional rights of a citizen to due
taxpayer; or process of law and the equal protection of the laws on the other,
(ii) When a discrepancy has been determined between the the scales must tilt in favor of the individual, for a citizen’s right is
tax withheld and the amount actually remitted by the amply protected by the Bill of Rights under the Constitution. Thus,
withholding agent; or while “taxes are the lifeblood of the government,” the power to tax
(iii) When a taxpayer who opted to claim a refund or tax has its limits, in spite of all its plenitude. Hence in Commissioner
credit of excess creditable withholding tax for a taxable of Internal Revenue v. Algue, Inc., it was said—
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period was determined to have carried over and “Taxes are the lifeblood of the government and so should be collected
without unnecessary hindrance. On the other hand, such collection should
automatically applied the same amount claimed against be made in accordance with law as any arbitrariness will negate the very
the estimated tax liabilities for the taxable quarter or reason for government itself. It is therefore necessary to reconcile the
quarters of the succeeding taxable year; or apparently conflicting interests of the authorities and the taxpayers so that
(iv) When the excise tax due on excisable articles has not the real purpose of taxation, which is the promotion of the common good,
been paid; or may be achieved.
(v) When an article locally purchased or imported by an xxx xxx xxx
exempt person, such as, but not limited to, vehicles, It is said that taxes are what we pay for civilized society. Without
capital equipment, machineries and spare parts, has been taxes, the government would be paralyzed for the lack of the motive power
to activate and operate it. Hence, despite the natural reluctance to surrender
sold, traded or transferred to non-exempt persons. part of
3.1.4 Formal Letter of Demand and Assessment Notice.— _______________
The formal letter of demand and assessment notice shall be issued
by the Commissioner or his duly authorized representative. The 17 Commissioner of Internal Revenue v. Azucena T. Reyes, G.R. No. 159694 & G.R. No.
163581 January 27, 2006, 382 SCRA 480.
letter of demand calling for payment of the taxpayer’s deficiency 18 Id.
tax or taxes shall state the facts, the law, rules and regulations, or 19 Section 1, Article III, 1987 Constitution.
20 241 Phil. 829; 158 SCRA 9 (1988).
jurisprudence on which the assessment is based,
646 648
646 SUPREME COURT REPORTS ANNOTATED 648 SUPREME COURT REPORTS ANNOTATED
Commissioner of Internal Revenue vs. Metro Star Superama Inc. Commissioner of Internal Revenue vs. Metro Star Superama Inc
otherwise, the formal letter of demand and assessment notice shall one’s hard-earned income to taxing authorities, every person who is able to
be void (see illustration in ANNEX B hereof). must contribute his share in the running of the government. The
The same shall be sent to the taxpayer only by registered mail government for its part is expected to respond in the form of tangible and
or by personal delivery. intangible benefits intended to improve the lives of the people and enhance
If sent by personal delivery, the taxpayer or his duly their moral and material values. This symbiotic relationship is the rationale
of taxation and should dispel the erroneous notion that it is an arbitrary
authorized representative shall acknowledge receipt thereof in the
method of exaction by those in the seat of power.
duplicate copy of the letter of demand, showing the following: (a) But even as we concede the inevitability and indispensability of
His name; (b) signature; (c) designation and authority to act for taxation, it is a requirement in all democratic regimes that it be
and in behalf of the taxpayer, if acknowledged received by a exercised reasonably and in accordance with the prescribed
person other than the taxpayer himself; and (d) date of receipt procedure. If it is not, then the taxpayer has a right to complain and the
thereof. courts will then come to his succor. For all the awesome power of the tax
x x x.” collector, he may still be stopped in his tracks if the taxpayer can
demonstrate x x x that the law has not been observed.” (Emphasis 21
From the provision quoted above, it is clear that the sending supplied).
of a PAN to taxpayer to inform him of the assessment made is but
WHEREFORE, the petition is DENIED.
part of the “due process requirement in the issuance of a
SO ORDERED.
deficiency tax assessment,” the absence of which renders nugatory
Carpio (Chairperson), Nachura, Peralta and Abad,
any assessment made by the tax authorities. The use of the word
JJ., concur.
“shall” in subsection 3.1.2 describes the mandatory nature of the
service of a PAN. The persuasiveness of the right to due process Petition denied.
reaches both substantial and procedural rights and the failure of
the CIR to strictly comply with the requirements laid down by law Note.—A post-reporting notice and pre-assessment notice do
and its own rules is a denial of Metro Star’s right to due not bear the gravity of a formal assessment notice. (Commissioner
process. Thus, for its failure to send the PAN stating the facts and
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on Internal Revenue vs. Menguito, 565 SCRA 461 [2008]
the law on which the assessment was made as required by Section ——o0o——
228 of R.A. No. 8424, the assessment made by the CIR is void.
The case of CIR v. Menguito cited by the CIR in support of
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its argument that only the non-service of the FAN is fatal to the
validity of an assessment, cannot apply to this case because the
issue therein was the non-compliance with the provisions of R. R.