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People vs. Sandiganbayan, 467 SCRA 137, August 16, 2005
People vs. Sandiganbayan, 467 SCRA 137, August 16, 2005
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G.R. No. 152532. August 16, 2005.
* THIRD DIVISION.
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PANGANIBAN, J.:
The Case
1
Before us is a Petition for Certiorari under Rule 65 of the
Rules of Court, seeking2 to nullify and set aside the January
23, 2002 Resolution of the Sandiganbayan (SB) in
Criminal
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The Facts
“On the basis of these findings, the BIR sent a letter dated July
13, 1987 to SMC demanding the payment of its deficiency tax in
the amount of P342,616,217.88. Apparently, the letter was
received by the SMC, as it protested the assessment in its letter
dated August 10, 1987 with the information: 1) that the alleged
specific tax deficiency was already paid when the BIR approved
SMC’s request that its excess ad valorem payments be applied to
its specific tax balance; 2) that the computation of the ad valorem
tax deficiency was erroneous since the BIR examiners disallowed
the deduction of the price differential (cost of freight from brewery
to warehouse) and ad valorem tax.
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“The protest was denied by the BIR thru a letter dated October
[8], 1987 signed by accused Commissioner Bienvenido Tan, Jr.,
but the original assessment of P342,616,217.88 was reduced to
P302,[0]51,048.93 due to the crediting of the taxpayer’s excess ad
valorem tax deposit of P21,805,409.10 with a reiteration of the
payment of the x x x assessed specific and ad valorem tax as
reduced.
“On October 27, 1987, herein accused referred the matter to
Jaime M. Maza, Assistant BIR Commissioner, Legal Service
Division and thereafter different BIR officials also reviewed the
case of SMC and rendered varying legal opinions on the issue x x
x
“On the part of Alicia P. Clemeno, Chief, Legislative Ruling
and Research Division, she recommended the reduction of SMC’s
tax liability, first to P21,856,985.29, and later to P22,000,000.00.
Balbino E. Gatdula, Jr., Assistant Revenue Service Chief, Legal
Service, supported the demand for ad valorem tax deficiency from
SMC. In a letter dated August 31, 1988, SMC, thru a certain
Avendano offered the amount of P10,000,000.00 for the settlement
of the assessment. This was concurred in by Juanito Urbi, Chief,
Prosecutor Division, BIR in a Memorandum dated December 20,
1988. Jaime Maza, Assistant Commissioner, Legal Service, BIR,
also gave his concurrence to the recommendation that the offer of
SMC for P10,000,000.00 in compromise settlement be accepted.
The recommendation was approved by accused Bienvenido Tan;
and accordingly, in a letter dated December 20, 1988, 4
SMC was
informed that its offer to compromise was accepted.”
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4 SB Decision dated March 2, 2001, pp. 13-16; Rollo, pp. 222-225. Words in
[bracket] supplied. Fourth Division. Penned by Justice Rodolfo G. Palattao
(member), with the concurrence of Justices Narciso S. Nario (chairman) and
Nicodemo T. Ferrer (member).
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The Issues
“A.
“B.
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6 The Petition was deemed submitted for decision on August 29, 2003, upon
receipt by the Court of private respondent’s Memorandum, signed by Attys. Mario
E. Ongkiko, Demetrio C. Custodio Jr., and Barbara Anne C. Migallos. Petitioner’s
Memorandum—signed by Special Prosecutor Dennis M. Villa-Ignacio, Deputy
Special Prosecutor Robert E. Kallos, Director (ASAB) Rodrigo V. Coquia, and
Special Prosecution Officer III Pilarita T. Lapitan—was filed on August 11, 2003.
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“C.
First Issue:
Viability of SMC’s Motion for Reconsideration
8
Section 229 of the NIRC provides thus:
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finds that proper taxes should be assessed, he shall first notify the
taxpayer of his findings. Within a period to be prescribed by
implementing regulations, the taxpayer shall be required to
respond to said notice. If the taxpayer fails to respond, the
Commissioner shall issue an assessment based on his findings.
“Such assessment may be protested administratively by filing a
request for reconsideration or reinvestigation in such form and
manner as may be prescribed by implementing regulation within
thirty (30) days from receipt of the assessment; otherwise, the
assessment shall become final and unappealable.
“If the protest is denied in whole or in part, the individual,
association or corporation adversely affected by the decision on
the protest may appeal to the Court of Tax Appeals within thirty
(30) days from receipt of the said decision; otherwise,
9
the decision
shall become final, executory and demandable.”
Petitioner argues that “on October 8, 1987, a final decision
was rendered by private respondent as to SMC’s tax
liability totaling P302,051,048.93 x x x.” Since SMC did not
appeal to the CTA, this decision became final and could no
longer be compromised by private respondent. We disagree.
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9 §229 was originally found in the NIRC of 1977, which was codified by
and made an integral part of Presidential Decree (PD) No. 1158, otherwise
known as “A Decree to Consolidate and Codify all the Internal Revenue
Laws of the Philippines.”
When the NIRC of 1977 was amended by PD 1705 on August 1, 1980,
§229 was restated as §16(d). On January 16, 1981, PD 1773 further
amended §16 by eliminating paragraph (d) and inserting its contents
between §§319 and 320 as a new §319-A. PD 1994 then renumbered §319-
A as §270 on January 1, 1986; and on January 1, 1988, §270 was again
renumbered as §229 and rearranged to fall under Chapter 3 of Title VIII
of the NIRC by Executive Order (EO) No. 273, otherwise known as
“Adopting a Value-Added Tax, Amending for this Purpose Certain
Provisions of the National Internal Revenue Code, and for other
purposes.”
At present, §229 has been amended as §228 by RA 8424, otherwise
known as the “Tax Reform Act of 1997.”
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receipt
12
of the assessment and substantiated by facts and
law. The assessment was received by SMC only on
October 26, 1987. Its request for reinvestigation was in
turn received by the BIR on November 10, 1987, well
within the 30-day period allowed by Section 229; thus, the
assessment had not yet become final.
Moreover, a day after SMC’s receipt of the assessment,
the SB found that a meeting had indeed been held between
private respondent and the representatives of SMC,
resulting in the suspension of the alleged finality of the
assessment. The meeting partook of the nature of an oral,
in advance of the written, request for reinvestigation. In
both instances, the taxpayer’s request was not merely pro
forma; it had the effect of suspending—not
13
interrupting—
the 30-day period for appeal.
We do not agree with petitioner’s contention that,
contrary to the finding of the SB in its March 2, 2001
Decision, no conference had been held on that date. A
careful perusal of the Decision would, however, reveal that
the date of
14
the supposed conference was not indicated with
certainty. And even if it were, the conference was
supposed to have been held between SMC’s representatives
and BIR officials, other than private respondent, on the
computation (not the assessment) that was followed by
SMC and that bore the alleged approval by the BIR.
Third, after SMC’s request for reinvestigation, no other
issuance emanated from the BIR that could be 15considered a
decision. Therefore, no appeal to the Tax Court could have
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12 See Dayrit v. Cruz, 165 SCRA 571, 580, September 26, 1988; and
Vitug and Acosta, supra, p. 309.
13 See Dy Pac & Co., Inc. v. Court of Tax Appeals, 79 SCRA 442, 447,
October 18, 1977; Surigao Electric Co., Inc. v. Court of Tax Appeals, 57
SCRA 523, 527, June 28, 1974; and Vitug and Acosta, supra, p. 312.
14 SB Decision, p. 23; Rollo, p. 232.
15 This refers to the Court of Tax Appeals (CTA).
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Second Issue:
Application of the Ad Valorem Tax
to the Specific Tax Deficiency
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23 Ad valorem taxes refer to excise taxes that are based on the selling
price or other specific value of the article taxed. 2nd paragraph of §109 of
the NIRC of 1977, as amended and renumbered by PD 1994, and again
amended by EO 22.
24 Specific taxes refer to excise taxes that are based on the weight,
volume capacity, or any other physical unit of measurement of the article
taxed. 2nd paragraph of §109 of the NIRC of 1977, as amended and
renumbered by PD 1994, and again amended by EO 22.
25 These are taxes on articles manufactured or produced in the
Philippines for domestic sale or consumption or for any other disposition.
De Leon, The Law on Transfer and Business Taxation (12th ed., 1998), p.
251.
26 Both taxes fall under the same title in the NIRC of 1977.
27 These increments pertain to the surcharges and interest on the
amount of deficiency.
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lations. Again, the assessment was not final, demandable
or executory at the time.
Fourth, in a letter to the Blue Ribbon Committee of the
Senate, no less than the succeeding commissioner of
internal revenue declared that the abatement of the
specific tax deficiency through the proposed application was
proper. Even if the new commissioner had admittedly been
advised by private respondent, there remained the
unrebutted presumptions of good faith and regularity in
the performance of official functions.
Third Issue:
Acceptance of the P10 Million Alleged Compromise
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33
Section 147(A) of the NIRC, as amended by PD 1959 in
1984, provides for the collection of a specific tax on each
liter of the volume capacity of fermented liquor. In addition
to the provision on the specific tax, the first paragraph of
its Section 147(B) provides for the levying, assessment and
collection of an ad valorem tax. The latter tax is equivalent
to a certain percentage of the brewer’s gross selling price,
net of the specific tax, of the product to be removed from
the brewery or other place of manufacture. The ad valorem
tax shall be paid by the brewer at the same time as the
specific tax. 34
Added in 1984 were provisions of Section 186-A
governing the determination of the gross selling price of
cigarettes, as well as the administrative requirements and
penalties imposable. Such provisions shall apply to the
determination of the gross selling price of fermented
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liquor. Basically, this means that the amount of tax due
on the fermented liquor shall be determined by the price at
which it is sold either wholesale in the factory of SMC or
directly to the public through its sales agents. If the
fermented liquor is sold or allowed to be sold wholesale by
SMC in another establishment which it owns, the
wholesale price in that establishment shall determine the
tax applicable to the fermented liquor sold there. When the
price is less than the cost of manufacture plus all expenses
incurred, until the fermented liquor is finally sold by SMC,
such cost plus expenses shall be the basis for determining
the amount of tax to be collected.
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33 This law took effect on October 15, 1984, with respect to the first 10%
ad valorem tax imposed on fermented liquor, and on January 1, 1985, with
respect to the next 10% ad valorem tax.
34 This section was added under a new Chapter IV of Title IV of the
NIRC of 1977 by §1 of EO 960, which had already taken effect on
September 1, 1984. Subsequently, the ad valorem tax on cigarettes was
revised effective September 3, 1984, while the specific tax rates were also
revised effective October 1, 1984. EO 978 effected both revisions, the dates
of effectivity of which are found in its §6.
35 2nd paragraph of §147(B) of the NIRC of 1977 as amended by PD
1959.
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therefore, that the price that should be used as the tax base
for computing the ad valorem tax on fermented liquor is the
price at the
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brewery. After all, excise taxes are taxes on
property, not on the sale of the property.
Verily, the price differential cannot be ascertained at the
time the fermented liquor is removed from the brewery,
because such ascertainment will involve amounts that
cannot be determined with certainty in advance, and that
vary from one commercial outlet to another. The price
differential, according to SMC, represents the cost of
discounts, promotions, rebates, and transportation. To
require the inclusion of the price differential in, not its
deduction from, the tax base for purposes of computing the
ad valorem tax would certainly lead to the impossible
situation of computing for such tax, because the price
differential itself cannot be determined unless the
fermented liquor is actually sold.
Hence, no ad valorem tax can ever be paid before the
removal of the fermented liquor from the place of
production. This outcome cannot be countenanced, for it
would be contrary to what the law mandates—payment
before removal. It follows that the tax base to be used
should be net of the price differential. In other words, the
gross selling price should be that which is charged at the
brewery prior to the removal of the fermented liquor.
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Abatement,
Not Compromise
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48 This section became §295 when amended by PD 1773, and later §245
when amended by PD 1994.
49 There was even a lower assessment at P8,001,977.97, as disclosed in
a Memorandum dated November 21, 1988, issued by Supervising Revenue
Enforcement Officer Jesus Q. Bundang; later confirmed and endorsed on
November 25, 1988 by Assistant Commissioner (on Excise Tax) Aquilino
T. Larin.
50 Statsky, Hussey, Diamond, and Nakamura, West’s Legal Desk
Reference (1991), p. 1.
51 Garner (ed. in chief), Black’s Law Dictionary (8th ed., 2004), p. 3.
52 Smith, West’s Tax Law Dictionary (1993), p. 1.
54 Moreno, Philippine Law Dictionary (3rd ed., 1988), p. 129.
53 Statsky, Hussey, Diamond, and Nakamura, supra, p. 46.
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VOL. 467, AUGUST 16, 2005 163
People vs. Sandiganbayan
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assessment is excessive or erroneous; or if the
administration costs
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involved do not justify the collection of
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the amount due. No mutual concessions need be made,
because an excessive or erroneous tax is not compromised; 58
it is abated or canceled. Only correct taxes should be paid.
Besides, as we have discussed earlier, there was no finality
in the assessment that could be settled.
Moreover, petitioner did not prove the alleged bad faith
attributed to private respondent, who simply relied upon
his subordinates. Mere assertion will not suffice. Even
reference to the approval by the Evaluation Board was
misleading, for such approval was inexistent at 59the time
and was merely a product of RA 8424 as amended. Actual,
not presumed, fraud should be the bench mark of liability.
Fourth Issue:
Violation of Section 3(e) of RA 3019
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Epilogue
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