G.R. No.

L-4817 May 26, 1954

SILVESTER M. PUNSALAN, ET AL., plaintiffs-
appellants,
vs.
THE MUNICIPAL BAR! " THE CIT# " MANILA,
ET AL., defendants-appellants.
Calanog and Alafriz for plaintiffs-appellants.
City Fiscal Eugenio Angeles and Assistant Fiscal
Eulogio S. Serreno for defendants-appellants.
RE#ES, J.$
This suit was commenced in the Court of First Instance
of Manila by two lawyers, a medical practitioner, a public
accountant, a dental surgeon and a pharmacist,
purportedly "in their own behalf and in behalf of other
professionals practising in the City of Manila who may
desire to oin it." !bect of the suit is the annulment of
!rdinance "o. ##$% of the City of Manila together with
the provision of the Manila charter authori&ing it and the
refund of ta'es collected under the ordinance but paid
under protest.
The ordinance in (uestion, which was approved by the
municipal board of the City of Manila on )uly *+, ,$+-,
imposes a municipal occupation ta' on persons
e'ercising various professions in the city and penali&es
non-payment of the ta' "by a fine of not more than two
hundred pesos or by imprisonment of not more than si'
months, or by both such fine and imprisonment in the
discretion of the court." .mong the professions ta'ed
were those to which plaintiffs belong. The ordinance was
enacted pursuant to paragraph /,0 of section ,% of the
1evised Charter of the City of Manila /as amended by
1epublic .ct "o. 2-$0, which empowers the Municipal
3oard of said city to impose a municipal occupation ta',
not to e'ceed 4+- per annum, on persons engaged in
the various professions above referred to.
5aving already paid their occupation ta' under section
*-, of the "ational Internal 1evenue Code, plaintiffs,
upon being re(uired to pay the additional ta' prescribed
in the ordinance, paid the same under protest and then
brought the present suit for the purpose already stated.
The lower court upheld the validity of the provision of law
authori&ing the enactment of the ordinance but declared
the ordinance itself illegal and void on the ground that
the penalty there in provided for non-payment of the ta'
was not legally authori&ed. From this decision both
parties appealed to this Court, and the only (uestion
they have presented for our determination is whether
this ruling is correct or not, for though the decision is
silent on the refund of ta'es paid plaintiffs ma6e no
assignment of error on this point.
To begin with defendants7 appeal, we find that the lower
court was in error in saying that the imposition of the
penalty provided for in the ordinance was without the
authority of law. The last paragraph /kk0 of the very
section that authori&es the enactment of this ta'
ordinance /section ,% of the Manila Charter0 in e'press
terms also empowers the Municipal 3oard "to fix
penalties for the violation of ordinances hich shall not
exceed to!sic" to hundred pesos fine or six months"
imprisonment# or $oth such fine and imprisonment# for a
single offense." 5ence, the pronouncement below that
the ordinance in (uestion is illegal and void because it
imposes a penalty not authori&ed by law is clearly
without basis.
.s to plaintiffs7 appeal, the contention in substance is
that this ordinance and the law authori&ing it constitute
class legislation, are unust and oppressive, and
authori&e what amounts to double ta'ation.
In raising the hue and cry of "class legislation", the
burden of plaintiffs7 complaint is not that the professions
to which they respectively belong have been singled out
for the imposition of this municipal occupation ta'8 and in
any event, the 9egislature may, in its discretion, select
what occupations shall be ta'ed, and in the e'ercise of
that discretion it may ta' all, or it may select for ta'ation
certain classes and leave the others unta'ed. /Cooley on
Ta'ation, :ol. 2, 2th ed., pp. ##$#-##$+.0 4laintiffs7
complaint is that while the law has authori&ed the City of
Manila to impose the said ta', it has withheld that
authority from other chartered cities, not to mention
municipalities. ;e do not thin6 it is for the courts to
udge what particular cities or municipalities should be
empowered to impose occupation ta'es in addition to
those imposed by the "ational <overnment. That matter
is peculiarly within the domain of the political
departments and the courts would do well not to
encroach upon it. Moreover, as the seat of the "ational
<overnment and with a population and volume of trade
many times that of any other 4hilippine city or
municipality, Manila, no doubt, offers a more lucrative
field for the practice of the professions, so that it is but
fair that the professionals in Manila be made to pay a
higher occupation ta' than their brethren in the
provinces.
4laintiffs brand the ordinance unust and oppressive
because they say that it creates discrimination within a
class in that while professionals with offices in Manila
have to pay the ta', outsiders who have no offices in the
city but practice their profession therein are not subect
to the ta'. 4laintiffs ma6e a distinction that is not found in
the ordinance. The ordinance imposes the ta' upon
every person "e'ercising" or "pursuing" = in the City of
Manila naturally = any one of the occupations named,
but does not say that such person must have his office in
Manila. ;hat constitutes e'ercise or pursuit of a
profession in the city is a matter of udicial determination.
The argument against double ta'ation may not be
invo6ed where one ta' is imposed by the state and the
other is imposed by the city /, Cooley on Ta'ation, 2th
ed., p. 2$*0, it being widely recogni&ed that there is
nothing inherently obno'ious in the re(uirement that
license fees or ta'es be e'acted with respect to the
same occupation, calling or activity by both the state and
the political subdivisions thereof. /+, .m. )ur., #2,.0
In view of the foregoing, the udgment appealed from is
reversed in so far as it declares !rdinance "o. ##$% of
the City of Manila illegal and void and affirmed in so far
as it holds the validity of the provision of the Manila
charter authori&ing it. ;ith costs against plaintiffs-
appellants.
4ablo, 3eng&on, Montemayor, )ugo, 3autista .ngelo,
9abrador, and Concepcion, ))., concur.
S%&a'a(% &)*)o*+
PARAS, C.J., dissenting>
I am constrained to dissent from the decision of the
maority upon the ground that the Municipal 3oard of
Manila cannot outlaw what Congress of the 4hilippines
has already authori&ed. The plaintiffs-appellants = two
lawyers, a physician, an accountant, a dentist and a
pharmacist = had already paid the occupation ta' under
section *-, of the "ational Internal 1evenue Code and
are thereby duly licensed to practice their respective
professions throughout the 4hilippines8 and yet they had
been re(uired to pay another occupation ta' under
!rdinance "o. ##$% for practising in the City of Manila.
This is a glaring e'ample of contradiction = the license
granted by the "ational <overnment is in effect
withdrawn by the City in case of non-payment of the ta'
under the ordinance. I fit be argued that the national
occupation ta' is collected to allow the professional
residing in Manila to pursue his calling in other places in
the 4hilippines, it should then be e'acted only from
professionals practising simultaneously in and outside of
Manila. .t any rate, we are confronted with the following
situation> ;hereas the professionals elsewhere pay only
one occupation ta', in the City of Manila they have to
pay two, although all are on e(ual footing insofar as
opportunities for earning money out of their pursuits are
concerned. The statement that practice in Manila is more
lucrative than in the provinces, may be true perhaps with
reference only to a limited few, but certainly not to the
general mass of practitioners in any field. .gain,
provincial residents who have occasional or isolated
practice in Manila may have to pay the city ta'. This
obvious discrimination or lac6 of uniformity cannot be
brushed aside or ustified by any trite pronouncement
that double ta'ation is legitimate or that legislation may
validly affect certain classes.
My position is that a professional who has paid the
occupation ta' under the "ational Internal 1evenue
Code should be allowed to practice in Manila even
without paying the similar ta' imposed by !rdinance "o.
##$%. The City cannot give what said professional
already has. I would not say that this !rdinance, enacted
by the Municipal 3oard pursuant to paragraph , of
section ,% of the 1evised Charter of Manila, as
amended by 1epublic .ct "o. 2-$, empowering the
3oard to impose a municipal occupation ta' not to
e'ceed 4+- per annum, is invalid8 but that only one ta',
either under the Internal 1evenue Code or under
!rdinance "o. ##$%, should be imposed upon a
practitioner in Manila.
G.R. No. L-7859 !%,%-.%' 22, 1955
/ALTER LUT0, a+ 123),)a4 A3-)*)+('a(o' o5 (6%
I*(%+(a(% E+(a(% o5 (6% 3%,%a+%3 A*(o*)o 1ay-%
L%3%+-a, plaintiff-appellant,
vs.
1. ANTNI ARANETA, a+ (6% Co44%,(o' o5 I*(%'*a4
R%7%*2%, defendant-appellee.
Ernesto %. &onzaga for appellant.
'ffice of the Solicitor &eneral Am$rosio (adilla# First
Assistant Solicitor &eneral &uillermo E. )orres and
Solicitor Felicisimo *. *osete for appellee.

RE#ES, 1.B L., J.:
This case was initiated in the Court of First Instance of
"egros !ccidental to test the legality of the ta'es
imposed by Commonwealth .ct "o. +?@, otherwise
6nown as the Augar .dustment .ct.
4romulgated in ,$2-, the law in (uestion opens /section
,0 with a declaration of emergency, due to the threat to
our industry by the imminent imposition of e'port ta'es
upon sugar as provided in the Tydings-McBuffe .ct, and
the "eventual loss of its preferential position in the Cnited
Atates mar6et"8 wherefore, the national policy was
e'pressed "to obtain a readustment of the benefits
derived from the sugar industry by the component
elements thereof" and "to stabili&e the sugar industry so
as to prepare it for the eventuality of the loss of its
preferential position in the Cnited Atates mar6et and the
imposition of the e'port ta'es."
In section *, Commonwealth .ct +?@ provides for an
increase of the e'isting ta' on the manufacture of sugar,
on a graduated basis, on each picul of sugar
manufactured8 while section # levies on owners or
persons in control of lands devoted to the cultivation of
sugar cane and ceded to others for a consideration, on
lease or otherwise =
a ta' e(uivalent to the difference between the
money value of the rental or consideration
collected and the amount representing ,* per
centum of the assessed value of such land.
.ccording to section ? of the law =
ADC. ?. .ll collections made under this .ct shall
accrue to a special fund in the 4hilippine
Treasury, to be 6nown as the 7Augar .dustment
and Atabili&ation Fund,7 and shall be paid out
only for any or all of the following purposes or to
attain any or all of the following obectives, as
may be provided by law.
First, to place the sugar industry in a position to
maintain itself, despite the gradual loss of the
preferntial position of the 4hilippine sugar in the
Cnited Atates mar6et, and ultimately to insure its
continued e'istence notwithstanding the loss of
that mar6et and the conse(uent necessity of
meeting competition in the free mar6ets of the
world8
Aecond, to readust the benefits derived from the
sugar industry by all of the component elements
thereof = the mill, the landowner, the planter of
the sugar cane, and the laborers in the factory
and in the field = so that all might continue
profitably to engage therein8lawphi,.net
Third, to limit the production of sugar to areas
more economically suited to the production
thereof8 and
Fourth, to afford labor employed in the industry a
living wage and to improve their living and
wor6ing conditions> 4rovided, That the 4resident
of the 4hilippines may, until the adourment of
the ne't regular session of the "ational
.ssembly, ma6e the necessary disbursements
from the fund herein created /,0 for the
establishment and operation of sugar
e'periment station or stations and the
underta6ing of researchers /a0 to increase the
recoveries of the centrifugal sugar factories with
the view of reducing manufacturing costs, /b0 to
produce and propagate higher yielding varieties
of sugar cane more adaptable to different district
conditions in the 4hilippines, /c0 to lower the
costs of raising sugar cane, /d0 to improve the
buying (uality of denatured alcohol from
molasses for motor fuel, /e0 to determine the
possibility of utili&ing the other by-products of the
industry, /f0 to determine what crop or crops are
suitable for rotation and for the utili&ation of
e'cess cane lands, and /g0 on other problems
the solution of which would help rehabilitate and
stabili&e the industry, and /*0 for the
improvement of living and wor6ing conditions in
sugar mills and sugar plantations, authori&ing
him to organi&e the necessary agency or
agencies to ta6e charge of the e'penditure and
allocation of said funds to carry out the purpose
hereinbefore enumerated, and, li6ewise,
authori&ing the disbursement from the fund
herein created of the necessary amount or
amounts needed for salaries, wages, travelling
e'penses, e(uipment, and other sundry
e'penses of said agency or agencies.
4laintiff, ;alter 9ut&, in his capacity as )udicial
.dministrator of the Intestate Dstate of .ntonio )ayme
9edesma, see6s to recover from the Collector of Internal
1evenue the sum of 4,2,???.2- paid by the estate as
ta'es, under section # of the .ct, for the crop years
,$2%-,$2$ and ,$2$-,$+-8 alleging that such ta' is
unconstitutional and void, being levied for the aid and
support of the sugar industry e'clusively, which in
plaintiff7s opinion is not a public purpose for which a ta'
may be constitutioally levied. The action having been
dismissed by the Court of First Instance, the plaintifs
appealed the case directly to this Court /)udiciary .ct,
section ,@0.
The basic defect in the plaintiff7s position is his
assumption that the ta' provided for in Commonwealth
.ct "o. +?@ is a pure e'ercise of the ta'ing power.
.nalysis of the .ct, and particularly of section ?
/heretofore (uoted in full0, will show that the ta' is levied
with a regulatory purpose, to provide means for the
rehabilitation and stabili&ation of the threatened sugar
industry. In other words, the act is primarily an e'ercise
of the police power.
This Court can ta6e udicial notice of the fact that sugar
production is one of the great industries of our nation,
sugar occupying a leading position among its e'port
products8 that it gives employment to thousands of
laborers in fields and factories8 that it is a great source of
the state7s wealth, is one of the important sources of
foreign e'change needed by our government, and is
thus pivotal in the plans of a regime committed to a
policy of currency stability. Its promotion, protection and
advancement, therefore redounds greatly to the general
welfare. 5ence it was competent for the legislature to
find that the general welfare demanded that the sugar
industry should be stabili&ed in turn8 and in the wide field
of its police power, the lawma6ing body could provide
that the distribution of benefits therefrom be readusted
among its components to enable it to resist the added
strain of the increase in ta'es that it had to sustain /Aligh
vs. Eir6wood, *#@ C. A. +*, +$ 9. Dd. %#+8 )ohnson vs.
Atate e' rel. Marey, $$ Fla. ,#,,, ,*% Ao. %+#8 Ma'cy
Inc. vs. Mayo, ,-# Fla. ++*, ,#$ Ao. ,*,0.
.s stated in )ohnson vs. Atate e' rel. Marey, with
reference to the citrus industry in Florida =
The protection of a large industry constituting
one of the great sources of the state7s wealth
and therefore directly or indirectly affecting the
welfare of so great a portion of the population of
the Atate is affected to such an e'tent by public
interests as to be within the police power of the
sovereign. /,*% Ap. %+@0.
!nce it is conceded, as it must, that the protection and
promotion of the sugar industry is a matter of public
concern, it follows that the 9egislature may determine
within reasonable bounds what is necessary for its
protection and e'pedient for its promotion. 5ere, the
legislative discretion must be allowed fully play, subect
only to the test of reasonableness8 and it is not
contended that the means provided in section ? of the
law /above (uoted0 bear no relation to the obective
pursued or are oppressive in character. If obective and
methods are ali6e constitutionally valid, no reason is
seen why the state may not levy ta'es to raise funds for
their prosecution and attainment. Ta'ation may be made
the implement of the state7s police power /<reat .tl. F
4ac. Tea Co. vs. <rosean, #-, C. A. 2,*, %, 9. Dd.
,,$#8 C. A. vs. 3utler, *$@ C. A. ,, %- 9. Dd. 2@@8
M7Culloch vs. Maryland, 2 ;heat. #,?, 2 9. Dd. +@$0.
That the ta' to be levied should burden the sugar
producers themselves can hardly be a ground of
complaint8 indeed, it appears rational that the ta' be
obtained precisely from those who are to be benefited
from the e'penditure of the funds derived from it. .t any
rate, it is inherent in the power to ta' that a state be free
to select the subects of ta'ation, and it has been
repeatedly held that "ine(ualities which result from a
singling out of one particular class for ta'ation, or
e'emption infringe no constitutional limitation"
/Carmichael vs. Aouthern Coal F Co6e Co., #-, C. A.
2$+, %, 9. Dd. ,*2+, citing numerous authorities, at p.
,*+,0.
From the point of view we have ta6en it appears of no
moment that the funds raised under the Augar
Atabili&ation .ct, now in (uestion, should be e'clusively
spent in aid of the sugar industry, since it is that very
enterprise that is being protected. It may be that other
industries are also in need of similar protection8 that the
legislature is not re(uired by the Constitution to adhere
to a policy of "all or none." .s ruled in Minnesota e' rel.
4earson vs. 4robate Court, #-$ C. A. *@-, %2 9. Dd.
@22, "if the law presumably hits the evil where it is most
felt, it is not to be overthrown because there are other
instances to which it might have been applied8" and that
"the legislative authority, e'erted within its proper field,
need not embrace all the evils within its reach" /". 9. 1.
3. vs. )ones F 9aughlin Ateel Corp. #-, C. A. ,, %, 9.
Dd. %$#0.
Dven from the standpoint that the .ct is a pure ta'
measure, it cannot be said that the devotion of ta'
money to e'perimental stations to see6 increase of
efficiency in sugar production, utili&ation of by-products
and solution of allied problems, as well as to the
improvements of living and wor6ing conditions in sugar
mills or plantations, without any part of such money
being channeled directly to private persons, constitutes
e'penditure of ta' money for private purposes, /compare
Dverson vs. 3oard of Dducation, $, 9. Dd. 2@*, ,?% .91
,#$*, ,2--0.
The decision appealed from is affirmed, with costs
against appellant. Ao ordered.
(aras# C. %.# +engzon# (adilla# *eyes# A.# %ugo# +autista
Angelo# ,a$rador# and Concepcion# %%.# concur.
G.R. No. L-67649 12*% 28, 1988
ENGRACI "RANCIA, petitioner,
vs.
INTERME!IATE APPELLATE CURT a*3 H
"ERNAN!E0, respondents.

GUTIERRE0, 1R., J.:
The petitioner invo6es legal and e(uitable grounds to
reverse the (uestioned decision of the Intermediate
.ppellate Court, to set aside the auction sale of his
property which too6 place on Becember +, ,$@@, and to
allow him to recover a *-# s(uare meter lot which was,
sold at public auction to 5o Fernande& and ordered titled
in the latter7s name.
The antecedent facts are as follows>
Dngracio Francia is the registered owner of a residential
lot and a two-story house built upon it situated at 3arrio
Aan Isidro, now Bistrict of Ata. Clara, 4asay City, Metro
Manila. The lot, with an area of about #*% s(uare
meters, is described and covered by Transfer Certificate
of Title "o. 2@#$ /#@@$+0 of the 1egistry of Beeds of
4asay City.
!n !ctober ,+, ,$@@, a ,*+ s(uare meter portion of
Francia7s property was e'propriated by the 1epublic of
the 4hilippines for the sum of 42,,,?.-- representing
the estimated amount e(uivalent to the assessed value
of the aforesaid portion.
Aince ,$?# up to ,$@@ inclusive, Francia failed to pay
his real estate ta'es. Thus, on Becember +, ,$@@, his
property was sold at public auction by the City Treasurer
of 4asay City pursuant to Aection @# of 4residential
Becree "o. 2?2 6nown as the 1eal 4roperty Ta' Code
in order to satisfy a ta' delin(uency of 4*,2--.--. 5o
Fernande& was the highest bidder for the property.
Francia was not present during the auction sale since he
was in Iligan City at that time helping his uncle ship
bananas.
!n March #, ,$@$, Francia received a notice of hearing
of 91C Case "o. ,+$#-4 "In re> 4etition for Dntry of "ew
Certificate of Title" filed by 5o Fernande&, see6ing the
cancellation of TCT "o. 2@#$ /#@@$+0 and the issuance
in his name of a new certificate of title. Cpon verification
through his lawyer, Francia discovered that a Final 3ill of
Aale had been issued in favor of 5o Fernande& by the
City Treasurer on Becember ,,, ,$@%. The auction sale
and the final bill of sale were both annotated at the bac6
of TCT "o. 2@#$ /#@@$+0 by the 1egister of Beeds.
!n March *-, ,$@$, Francia filed a complaint to annul
the auction sale. 5e later amended his complaint on
)anuary *2, ,$%-.
!n .pril *#, ,$%,, the lower court rendered a decision,
the dispositive portion of which reads>
;5D1DF!1D, in view of the foregoing,
udgment is hereby rendered dismissing
the amended complaint and ordering>
/a0 The 1egister of
Beeds of 4asay City to
issue a new Transfer
Certificate of Title in
favor of the defendant
5o Fernande& over the
parcel of land including
the improvements
thereon, subect to
whatever
encumbrances
appearing at the bac6 of
TCT "o. 2@#$ /#@@$+0
and ordering the same
TCT "o. 2@#$ /#@@$+0
cancelled.
/b0 The plaintiff to pay
defendant 5o
Fernande& the sum of
4,,---.-- as attorney7s
fees. /p. #-, 1ecord on
.ppeal0
The Intermediate .ppellate Court affirmed the decision
of the lower court in toto.
5ence, this petition for review.
Francia prefaced his arguments with the following
assignments of grave errors of law>
I
1DA4!"BD"T I"TD1MDBI.TD .44D99.TD C!C1T
C!MMITTDB . <1.:D D11!1 !F 9.; I" "!T
5!9BI"< 4DTITI!"D17A !39I<.TI!" T! 4.G
4*,2--.-- F!1 AC44!ADB T.H BD9I"ICD"CG ;.A
ADT-!FF 3G T5D .M!C"T !F 42,,,?.-- ;5IC5
T5D <!:D1"MD"T IA I"BD3TDB T! T5D F!1MD1.
II
1DA4!"BD"T I"TD1MDBI.TD .44D99.TD C!C1T
C!MMITTDB . <1.:D ."B AD1I!CA D11!1 I"
"!T 5!9BI"< T5.T 4DTITI!"D1 ;.A "!T
41!4D19G ."B BC9G "!TIFIDB T5.T ." .CCTI!"
A.9D !F 5IA 41!4D1TG ;.A T! T.ED 49.CD !"
BDCDM3D1 +, ,$@@ T! A.TIAFG ." .99D<DB T.H
BD9I"ICD"CG !F 4*,2--.--.
III
1DA4!"BD"T I"TD1MDBI.TD .44D99.TD C!C1T
FC1T5D1 C!MMITTDB . AD1I!CA D11!1 ."B
<1.:D .3CAD !F BIAC1DTI!" I" "!T 5!9BI"<
T5.T T5D 41ICD !F 4*,2--.-- 4.IB 3G
1DA4!"TBD"T 5! FD1"."BDJ ;.A <1!AA9G
I".BDIC.TD .A T! A5!CE !"D7A C!"ACID"CD
.M!C"TI"< T! F1.CB ."B . BD41I:.TI!" !F
41!4D1TG ;IT5!CT BCD 41!CDAA !F 9.;, ."B
C!"ADICD"T9G, T5D .CCTI!" A.9D M.BD
T5D1D!F IA :!IB. /pp. ,-, ,@, *--*,, 1ollo0
;e gave due course to the petition for a more thorough
in(uiry into the petitioner7s allegations that his property
was sold at public auction without notice to him and that
the price paid for the property was shoc6ingly
inade(uate, amounting to fraud and deprivation without
due process of law.
. careful review of the case, however, discloses that Mr.
Francia brought the problems raised in his petition upon
himself. ;hile we commiserate with him at the loss of
his property, the law and the facts militate against the
grant of his petition. ;e are constrained to dismiss it.
Francia contends that his ta' delin(uency of 4*,2--.--
has been e'tinguished by legal compensation. 5e claims
that the government owed him 42,,,?.-- when a portion
of his land was e'propriated on !ctober ,+, ,$@@.
5ence, his ta' obligation had been set-off by operation
of law as of !ctober ,+, ,$@@.
There is no legal basis for the contention. 3y legal
compensation, obligations of persons, who in their own
right are reciprocally debtors and creditors of each other,
are e'tinguished /.rt. ,*@%, Civil Code0. The
circumstances of the case do not satisfy the
re(uirements provided by .rticle ,*@$, to wit>
/,0 that each one of the obligors be
bound principally and that he be at the
same time a principal creditor of the
other8
''' ''' '''
/#0 that the two debts be due.
''' ''' '''
This principal contention of the petitioner has no merit.
;e have consistently ruled that there can be no off-
setting of ta'es against the claims that the ta'payer may
have against the government. . person cannot refuse to
pay a ta' on the ground that the government owes him
an amount e(ual to or greater than the ta' being
collected. The collection of a ta' cannot await the results
of a lawsuit against the government.
In the case of *epu$lic v. -am$ulao ,um$er Co. /2
AC1. ?**0, this Court ruled that Internal 1evenue
Ta'es can not be the subect of set-off or compensation.
;e stated that>
. claim for ta'es is not such a debt,
demand, contract or udgment as is
allowed to be set-off under the statutes
of set-off, which are construed
uniformly, in the light of public policy, to
e'clude the remedy in an action or any
indebtedness of the state or municipality
to one who is liable to the state or
municipality for ta'es. "either are they a
proper subect of recoupment since they
do not arise out of the contract or
transaction sued on. ... /%- C.).A.,
@#@20. "The general rule based on
grounds of public policy is well-settled
that no set-off admissible against
demands for ta'es levied for general or
local governmental purposes. The
reason on which the general rule is
based, is that ta'es are not in the nature
of contracts between the party and party
but grow out of duty to, and are the
positive acts of the government to the
ma6ing and enforcing of which, the
personal consent of individual ta'payers
is not re(uired. ..."
;e stated that a ta'payer cannot refuse to pay his ta'
when called upon by the collector because he has a
claim against the governmental body not included in the
ta' levy.
This rule was reiterated in the case of Corders v.
&onda /,% AC1. ##,0 where we stated that> "... internal
revenue ta'es can not be the subect of compensation>
1eason> government and ta'payer are not mutually
creditors and debtors of each other7 under .rticle ,*@% of
the Civil Code and a "claim for ta'es is not such a debt,
demand, contract or udgment as is allowed to be set-
off."
There are other factors which compel us to rule against
the petitioner. The ta' was due to the city government
while the e'propriation was effected by the national
government. Moreover, the amount of 42,,,?.-- paid by
the national government for the ,*+ s(uare meter
portion of his lot was deposited with the 4hilippine
"ational 3an6 long before the sale at public auction of
his remaining property. "otice of the deposit dated
Aeptember *%, ,$@@ was received by the petitioner on
Aeptember #-, ,$@@. The petitioner admitted in his
testimony that he 6new about the 42,,,?.-- deposited
with the ban6 but he did not withdraw it. It would have
been an easy matter to withdraw 4*,2--.-- from the
deposit so that he could pay the ta' obligation thus
aborting the sale at public auction.
4etitioner had one year within which to redeem his
property although, as well be shown later, he claimed
that he poc6eted the notice of the auction sale without
reading it.
4etitioner contends that "the auction sale in (uestion
was made without complying with the mandatory
provisions of the statute governing ta' sale. "o
evidence, oral or otherwise, was presented that the
procedure outlined by law on sales of property for ta'
delin(uency was followed. ... Since defendant .o
Fernandez has the affirmative of this issue# the $urden
of proof therefore rests upon him to sho that plaintiff
as duly and properly notified ... ./4etition for 1eview,
1ollo p. ,%8 emphasis supplied0
;e agree with the petitioner7s claim that 5o Fernande&,
the purchaser at the auction sale, has the burden of
proof to show that there was compliance with all the
prescribed re(uisites for a ta' sale.
The case of /alencia v. %imenez /,, 4hil. 2$*0 laid down
the doctrine that>
''' ''' '''
... KBLue process of law to be followed in
ta' proceedings must be established by
proof and thegeneral rule is that the
purchaser of a tax title is $ound to take
upon himself the $urden of shoing the
regularity of all proceedings leading up
to the sale. /emphasis supplied0
There is no presumption of the regularity of any
administrative action which results in depriving a
ta'payer of his property through a ta' sale. /Camo v.
1iosa 3oyco, *$ 4hil. 2#@08 Benoga v. Insular
<overnment, ,$ 4hil. *?,0. This is actually an e'ception
to the rule that administrative proceedings are presumed
to be regular.
3ut even if the burden of proof lies with the purchaser to
show that all legal prere(uisites have been complied
with, the petitioner can not, however, deny that he did
receive the notice for the auction sale. The records
sustain the lower court7s finding that>
KTLhe plaintiff claimed that it was illegal
and irregular. 5e insisted that he was
not properly notified of the auction sale.
Aurprisingly, however, he admitted in his
testimony that he received the letter
dated "ovember *,, ,$@@ /D'hibit "I"0
as shown by his signature /D'hibit "I-."0
thereof. 5e claimed further that he was
not present on Becember +, ,$@@ the
date of the auction sale because he
went to Iligan City. .s long as there was
substantial compliance with the
re(uirements of the notice, the validity of
the auction sale can not be assailed ... .
;e (uote the following testimony of the petitioner on
cross-e'amination, to wit>
I. My (uestion to you is
this letter mar6ed as
D'hibit I for 5o
Fernande& notified you
that the property in
(uestion shall be sold at
public auction to the
highest bidder on
Becember +, ,$@@
pursuant to Aec. @2 of
4B 2?2. ;ill you tell the
Court whether you
received the original of
this letterM
.. I ust signed it
because I was not able
to read the same. It was
ust sent by mail carrier.
I. Ao you admit that
you received the
original of D'hibit I and
you signed upon receipt
thereof but you did not
read the contents of itM
.. Ges, sir, as I was in a
hurry.
I. .fter you received
that original where did
you place itM
.. I placed it in the
usual place where I
place my mails.
4etitioner, therefore, was notified about the auction sale.
It was negligence on his part when he ignored such
notice. 3y his very own admission that he received the
notice, his now coming to court assailing the validity of
the auction sale loses its force.
4etitioner7s third assignment of grave error li6ewise lac6s
merit. .s a general rule, gross inade(uacy of price is not
material /Be 9eon v. Aalvador, #? AC1. +?@8 4once de
9eon v. 1ehabilitation Finance Corporation, #? AC1.
*%$8 Tolentino v. .gcaoili, $, 4hil. $,@ Cnrep.0. Aee
also +arrozo /da. de &ordon v. Court of Appeals /,-$
AC1. #%%0 we held that "alleged gross inade(uacy of
price is not material when the law gives the owner the
right to redeem as when a sale is made at public
auction, upon the theory that the lesser the price, the
easier it is for the owner to effect redemption."
In /elas0uez v. Coronel /+ AC1. $%+0, this Court held>
... K1Lespondent treasurer now claims
that the prices for which the lands were
sold are unconscionable considering the
wide divergence between their
assessed values and the amounts for
which they had been actually sold.
5owever, while in ordinary sales for
reasons of e(uity a transaction may be
invalidated on the ground of inade(uacy
of price, or when such inade(uacy
shoc6s one7s conscience as to ustify the
courts to interfere, such does not follow
when the law gives to the owner the
right to redeem, as when a sale is made
at public auction, upon the theory that
the lesser the price the easier it is for
the owner to effect the redemption. .nd
so it was aptly said> ";hen there is the
right to redeem, inade(uacy of price
should not be material, because the
udgment debtor may reac(uire the
property or also sell his right to redeem
and thus recover the loss he claims to
have suffered by reason of the price
obtained at the auction sale."
The reason behind the above rulings is well enunciated
in the case of .ilton et. ux. v. 1e ,ong# et al. /,%% ;ash.
,?*, ?, 4. *d, ,*$-0>
If mere inade(uacy of price is held to be
a valid obection to a sale for ta'es, the
collection of ta'es in this manner would
be greatly embarrassed, if not rendered
altogether impracticable. In 3lac6 on
Ta' Titles /*nd Dd.0 *#%, the correct rule
is stated as follows> "where land is sold
for ta'es, the inade(uacy of the price
given is not a valid obection to the
sale." This rule arises from necessity,
for, if a fair price for the land were
essential to the sale, it would be useless
to offer the property. Indeed, it is
notorious that the prices habitually paid
by purchasers at ta' sales are grossly
out of proportion to the value of the land.
/1othchild 3ros. v. 1ollinger, #* ;ash.
#-@, @# 4. #?@, #?$0.
In this case now before us, we can aptly use the
language of -c&uire# et al. v. +ean# et al. /*?@ 4. +++0>
9i6e most cases of this character there
is here a certain element of hardship
from which we would be glad to relieve,
but do so would unsettle long-
established rules and lead to uncertainty
and difficulty in the collection of ta'es
which are the life blood of the state. ;e
are convinced that the present rules are
ust, and that they bring hardship only to
those who have invited it by their own
neglect.
;e are inclined to believe the petitioner7s claim that the
value of the lot has greatly appreciated in value.
4recisely because of the widening of 3uendia .venue in
4asay City, which necessitated the e'propriation of
adoining areas, real estate values have gone up in the
area. 5owever, the price (uoted by the petitioner for a
*-# s(uare meter lot appears (uite e'aggerated. .t any
rate, the foregoing reasons which answer the petitioner7s
claims lead us to deny the petition.
.nd finally, even if we are inclined to give relief to the
petitioner on e(uitable grounds, there are no strong
considerations of substantial ustice in his favor. Mr.
Francia failed to pay his ta'es for ,2 years from ,$?# up
to the date of the auction sale. 5e claims to have
poc6eted the notice of sale without reading it which, if
true, is still an act of ine'plicable negligence. 5e did not
withdraw from the e'propriation payment deposited with
the 4hilippine "ational 3an6 an amount sufficient to pay
for the bac6 ta'es. The petitioner did not pay attention to
another notice sent by the City Treasurer on "ovember
#, ,$@%, during the period of redemption, regarding his
ta' delin(uency. There is furthermore no showing of bad
faith or collusion in the purchase of the property by Mr.
Fernande&. The petitioner has no standing to invo6e
e(uity in his attempt to regain the property by belatedly
as6ing for the annulment of the sale.
;5D1DF!1D, I" :ID; !F T5D F!1D<!I"<, the
petition for review is BIAMIAADB. The decision of the
respondent court is affirmed.
A! !1BD1DB.
Fernan !Chairman"# Feliciano# +idin and Cortes# %%.#
concur.
G.R. No. L-75697 12*% 18, 1987
VALENTIN TI 3o)*8 .2+)*%++ 2*3%' (6% *a-% a*3
+(y4% o5 MI ENTERPRISES, petitioner,
vs.
VI!EGRAM REGULATR# BAR!, MINISTER "
"INANCE, METR MANILA CMMISSIN, CIT#
MA#R a*3 CIT# TREASURER "
MANILA, respondents.
2elson 3. 2g for petitioner.
)he City ,egal 'fficer for respondents City -ayor and
City )reasurer.

MELENCI-HERRERA, J.:
This petition was filed on Aeptember ,, ,$%? by
petitioner on his own behalf and purportedly on behalf of
other videogram operators adversely affected. It assails
the constitutionality of 4residential Becree "o. ,$%@
entitled ".n .ct Creating the :ideogram 1egulatory
3oard" with broad powers to regulate and supervise the
videogram industry /hereinafter briefly referred to as the
3!.1B0. The Becree was promulgated on !ctober +,
,$%+ and too6 effect on .pril ,-, ,$%?, fifteen /,+0 days
after completion of its publication in the !fficial <a&ette.
!n "ovember +, ,$%+, a month after the promulgation of
the abovementioned decree, 4residential Becree "o.
,$$2 amended the "ational Internal 1evenue Code
providing, inter alia>
ADC. ,#2. /ideo )apes. = There shall
be collected on each processed video-
tape cassette, ready for playbac6,
regardless of length, an annual ta' of
five pesos8 4rovided, That locally
manufactured or imported blan6 video
tapes shall be subect to sales ta'.
!n !ctober *#, ,$%?, the <reater Manila Theaters
.ssociation, Integrated Movie 4roducers, Importers and
Bistributors .ssociation of the 4hilippines, and 4hilippine
Motion 4ictures 4roducers .ssociation, hereinafter
collectively referred to as the Intervenors, were permitted
by the Court to intervene in the case, over petitioner7s
opposition, upon the allegations that intervention was
necessary for the complete protection of their rights and
that their "survival and very e'istence is threatened by
the unregulated proliferation of film piracy." The
Intervenors were thereafter allowed to file their Comment
in Intervention.
The rationale behind the enactment of the BDC1DD, is
set out in its preambular clauses as follows>
,. ;5D1D.A, the proliferation and
unregulated circulation of videograms
including, among others, videotapes,
discs, cassettes or any technical
improvement or variation thereof, have
greatly preudiced the operations of
moviehouses and theaters, and have
caused a sharp decline in theatrical
attendance by at least forty percent
/2-N0 and a tremendous drop in the
collection of sales, contractor7s specific,
amusement and other ta'es, thereby
resulting in substantial losses estimated
at 42+- Million annually in government
revenues8
*. ;5D1D.A, videogram/s0
establishments collectively earn around
4?-- Million per annum from rentals,
sales and disposition of videograms,
and such earnings have not been
subected to ta', thereby depriving the
<overnment of appro'imately 4,%-
Million in ta'es each year8
#. ;5D1D.A, the unregulated activities
of videogram establishments have also
affected the viability of the movie
industry, particularly the more than
,,*-- movie houses and theaters
throughout the country, and occasioned
industry-wide displacement and
unemployment due to the shutdown of
numerous moviehouses and theaters8
2. ";5D1D.A, in order to ensure
national economic recovery, it is
imperative for the <overnment to create
an environment conducive to growth
and development of all business
industries, including the movie industry
which has an accumulated investment
of about 4# 3illion8
+. ;5D1D.A, proper ta'ation of the
activities of videogram establishments
will not only alleviate the dire financial
condition of the movie industry upon
which more than @+,--- families and
+--,--- wor6ers depend for their
livelihood, but also provide an additional
source of revenue for the <overnment,
and at the same time rationali&e the
heretofore uncontrolled distribution of
videograms8
?. ;5D1D.A, the rampant and
unregulated showing of obscene
videogram features constitutes a clear
and present danger to the moral and
spiritual well-being of the youth, and
impairs the mandate of the Constitution
for the Atate to support the rearing of
the youth for civic efficiency and the
development of moral character and
promote their physical, intellectual, and
social well-being8
@. ;5D1D.A, civic-minded citi&ens and
groups have called for remedial
measures to curb these blatant
malpractices which have flaunted our
censorship and copyright laws8
%. ;5D1D.A, in the face of these grave
emergencies corroding the moral values
of the people and betraying the national
economic recovery program, bold
emergency measures must be adopted
with dispatch8 ... /"umbering of
paragraphs supplied0.
4etitioner7s attac6 on the constitutionality of the
BDC1DD rests on the following grounds>
,. Aection ,- thereof, which imposes a
ta' of #-N on the gross receipts
payable to the local government is a
1IBD1 and the same is not germane to
the subect matter thereof8
*. The ta' imposed is harsh,
confiscatory, oppressive andOor in
unlawful restraint of trade in violation of
the due process clause of the
Constitution8
#. There is no factual nor legal basis for
the e'ercise by the 4resident of the vast
powers conferred upon him by
.mendment "o. ?8
2. There is undue delegation of power
and authority8
+. The Becree is an ex-post facto law8
and
?. There is over regulation of the video
industry as if it were a nuisance, which it
is not.
;e shall consider the foregoing obections in seriatim.
,. The Constitutional re(uirement that "every bill shall
embrace only one subect which shall be e'pressed in
the title thereof" 1 is sufficiently complied with if the title
be comprehensive enough to include the general
purpose which a statute see6s to achieve. It is not
necessary that the title e'press each and every end that
the statute wishes to accomplish. The re(uirement is
satisfied if all the parts of the statute are related, and are
germane to the subect matter e'pressed in the title, or
as long as they are not inconsistent with or foreign to the
general subect and title.
2
.n act having a single general
subect, indicated in the title, may contain any number of
provisions, no matter how diverse they may be, so long
as they are not inconsistent with or foreign to the general
subect, and may be considered in furtherance of such
subect by providing for the method and means of
carrying out the general obect."
9
The rule also is that
the constitutional re(uirement as to the title of a bill
should not be so narrowly construed as to cripple or
impede the power of legislation.
4
It should be given
practical rather than technical construction.
5
Tested by the foregoing criteria, petitioner7s contention
that the ta' provision of the BDC1DD is a rider is without
merit. That section reads, inter alia>
Aection ,-. )ax on Sale# ,ease or
1isposition of /ideograms. =
"otwithstanding any provision of law to
the contrary, the province shall collect a
ta' of thirty percent /#-N0 of the
purchase price or rental rate, as the
case may be, for every sale, lease or
disposition of a videogram containing a
reproduction of any motion picture or
audiovisual program. Fifty percent
/+-N0 of the proceeds of the ta'
collected shall accrue to the province,
and the other fifty percent /+-N0 shall
acrrue to the municipality where the ta'
is collected8 41!:IBDB, That in
Metropolitan Manila, the ta' shall be
shared e(ually by the CityOMunicipality
and the Metropolitan Manila
Commission.
''' ''' '''
The foregoing provision is allied and germane to, and is
reasonably necessary for the accomplishment of, the
general obect of the BDC1DD, which is the regulation of
the video industry through the :ideogram 1egulatory
3oard as e'pressed in its title. The ta' provision is not
inconsistent with, nor foreign to that general subect and
title. .s a tool for regulation
6
it is simply one of the
regulatory and control mechanisms scattered throughout
the BDC1DD. The e'press purpose of the BDC1DD to
include ta'ation of the video industry in order to regulate
and rationali&e the heretofore uncontrolled distribution of
videograms is evident from 4reambles * and +, supra.
Those preambles e'plain the motives of the lawma6er in
presenting the measure. The title of the BDC1DD, which
is the creation of the :ideogram 1egulatory 3oard, is
comprehensive enough to include the purposes
e'pressed in its 4reamble and reasonably covers all its
provisions. It is unnecessary to e'press all those
obectives in the title or that the latter be an inde' to the
body of the BDC1DD.
7
*. 4etitioner also submits that the thirty percent /#-N0
ta' imposed is harsh and oppressive, confiscatory, and
in restraint of trade. 5owever, it is beyond serious
(uestion that a ta' does not cease to be valid merely
because it regulates, discourages, or even definitely
deters the activities ta'ed.
8
The power to impose ta'es
is one so unlimited in force and so searching in e'tent,
that the courts scarcely venture to declare that it is
subect to any restrictions whatever, e'cept such as rest
in the discretion of the authority which e'ercises it.
9
In
imposing a ta', the legislature acts upon its constituents.
This is, in general, a sufficient security against erroneous
and oppressive ta'ation. 1:
The ta' imposed by the BDC1DD is not only a regulatory
but also a revenue measure prompted by the reali&ation
that earnings of videogram establishments of around
4?-- million per annum have not been subected to ta',
thereby depriving the <overnment of an additional
source of revenue. It is an end-user ta', imposed on
retailers for every videogram they ma6e available for
public viewing. It is similar to the #-N amusement ta'
imposed or borne by the movie industry which the
theater-owners pay to the government, but which is
passed on to the entire cost of the admission tic6et, thus
shifting the ta' burden on the buying or the viewing
public. It is a ta' that is imposed uniformly on all
videogram operators.
The levy of the #-N ta' is for a public purpose. It was
imposed primarily to answer the need for regulating the
video industry, particularly because of the rampant film
piracy, the flagrant violation of intellectual property
rights, and the proliferation of pornographic video tapes.
.nd while it was also an obective of the BDC1DD to
protect the movie industry, the ta' remains a valid
imposition.
The public purpose of a ta' may legally
e'ist even if the motive which impelled
the legislature to impose the ta' was to
favor one industry over another. 11
It is inherent in the power to ta' that a
state be free to select the subects of
ta'ation, and it has been repeatedly
held that "ine(uities which result from a
singling out of one particular class for
ta'ation or e'emption infringe no
constitutional limitation". 12 Ta'ation
has been made the implement of the
state7s police power.19
.t bottom, the rate of ta' is a matter better addressed to
the ta'ing legislature.
#. 4etitioner argues that there was no legal nor factual
basis for the promulgation of the BDC1DD by the former
4resident under .mendment "o. ? of the ,$@#
Constitution providing that "whenever in the udgment of
the 4resident ... , there e'ists a grave emergency or a
threat or imminence thereof, or whenever the interim
3atasang 4ambansa or the regular "ational .ssembly
fails or is unable to act ade(uately on any matter for any
reason that in his udgment re(uires immediate action,
he may, in order to meet the e'igency, issue the
necessary decrees, orders, or letters of instructions,
which shall form part of the law of the land."
In refutation, the Intervenors and the Aolicitor <eneral7s
!ffice aver that the %th "whereas" clause sufficiently
summari&es the ustification in that grave emergencies
corroding the moral values of the people and betraying
the national economic recovery program necessitated
bold emergency measures to be adopted with dispatch.
;hatever the reasons "in the udgment" of the then
4resident, considering that the issue of the validity of the
e'ercise of legislative power under the said .mendment
still pends resolution in several other cases, we reserve
resolution of the (uestion raised at the proper time.
2. "either can it be successfully argued that the
BDC1DD contains an undue delegation of legislative
power. The grant in Aection ,, of the BDC1DD of
authority to the 3!.1B to "solicit the direct assistance of
other agencies and units of the government and
deputi&e, for a fi'ed and limited period, the heads or
personnel of such agencies and units to perform
enforcement functions for the 3oard" is not a delegation
of the power to legislate but merely a conferment of
authority or discretion as to its e'ecution, enforcement,
and implementation. "The true distinction is between the
delegation of power to ma6e the law, which necessarily
involves a discretion as to what it shall be, and
conferring authority or discretion as to its e'ecution to be
e'ercised under and in pursuance of the law. The first
cannot be done8 to the latter, no valid obection can be
made." 14 3esides, in the very language of the decree,
the authority of the 3!.1B to solicit such assistance is
for a "fi'ed and limited period" with the deputi&ed
agencies concerned being "subect to the direction and
control of the 3!.1B." That the grant of such authority
might be the source of graft and corruption would not
stigmati&e the BDC1DD as unconstitutional. Ahould the
eventuality occur, the aggrieved parties will not be
without ade(uate remedy in law.
+. The BDC1DD is not violative of the ex post
facto principle. .n ex post facto law is, among other
categories, one which "alters the legal rules of evidence,
and authori&es conviction upon less or different
testimony than the law re(uired at the time of the
commission of the offense." It is petitioner7s position that
Aection ,+ of the BDC1DD in providing that>
.ll videogram establishments in the
4hilippines are hereby given a period of
forty-five /2+0 days after the effectivity of
this Becree within which to register with
and secure a permit from the 3!.1B to
engage in the videogram business and
to register with the 3!.1B all their
inventories of videograms, including
videotapes, discs, cassettes or other
technical improvements or variations
thereof, before they could be sold,
leased, or otherwise disposed of.
Thereafter any videogram found in the
possession of any person engaged in
the videogram business without the
re(uired proof of registration by the
3!.1B, shall be prima facie evidence
of violation of the Becree, whether the
possession of such videogram be for
private showing andOor public e'hibition.
raises immediately a prima facie evidence of violation of
the BDC1DD when the re(uired proof of registration of
any videogram cannot be presented and thus parta6es
of the nature of an ex post facto law.
The argument is untenable. .s this Court held in the
recent case of /allarta vs. Court of Appeals# et al. 15
... it is now well settled that "there is no
constitutional obection to the passage
of a law providing that the presumption
of innocence may be overcome by a
contrary presumption founded upon the
e'perience of human conduct, and
enacting what evidence shall be
sufficient to overcome such presumption
of innocence" /4eople vs. Mingoa $*
4hil. %+? K,$+#L at %+%-+$, citing ,
C!!9DG, . T1D.TIAD !" T5D
C!"ATITCTI!".9 9IMIT.TI!"A, ?#$-
?2,0. .nd the "legislature may enact
that when certain facts have been
proved that they shall be prima facie
evidence of the e'istence of the guilt of
the accused and shift the burden of
proof provided there be a rational
connection between the facts proved
and the ultimate facts presumed so that
the inference of the one from proof of
the others is not unreasonable and
arbitrary because of lac6 of connection
between the two in common
e'perience". 16
.pplied to the challenged provision, there is no (uestion
that there is a rational connection between the fact
proved, which is non-registration, and the ultimate fact
presumed which is violation of the BDC1DD, besides the
fact that the prima facie presumption of violation of the
BDC1DD attaches only after a forty-five-day period
counted from its effectivity and is, therefore, neither
retrospective in character.
?. ;e do not share petitioner7s fears that the video
industry is being over-regulated and being eased out of
e'istence as if it were a nuisance. 3eing a relatively new
industry, the need for its regulation was apparent. ;hile
the underlying obective of the BDC1DD is to protect the
moribund movie industry, there is no (uestion that public
welfare is at bottom of its enactment, considering "the
unfair competition posed by rampant film piracy8 the
erosion of the moral fiber of the viewing public brought
about by the availability of unclassified and unreviewed
video tapes containing pornographic films and films with
brutally violent se(uences8 and losses in government
revenues due to the drop in theatrical attendance, not to
mention the fact that the activities of video
establishments are virtually unta'ed since mere payment
of Mayor7s permit and municipal license fees are
re(uired to engage in business. 17
The enactment of the Becree since .pril ,-, ,$%? has
not brought about the "demise" of the video industry. !n
the contrary, video establishments are seen to have
proliferated in many places notwithstanding the #-N ta'
imposed.
In the last analysis, what petitioner basically (uestions is
the necessity, wisdom and e'pediency of the BDC1DD.
These considerations, however, are primarily and
e'clusively a matter of legislative concern.
!nly congressional power or
competence, not the wisdom of the
action ta6en, may be the basis for
declaring a statute invalid. This is as it
ought to be. The principle of separation
of powers has in the main wisely
allocated the respective authority of
each department and confined its
urisdiction to such a sphere. There
would then be intrusion not allowable
under the Constitution if on a matter left
to the discretion of a coordinate branch,
the udiciary would substitute its own. If
there be adherence to the rule of law, as
there ought to be, the last offender
should be courts of ustice, to which
rightly litigants submit their controversy
precisely to maintain unimpaired the
supremacy of legal norms and
prescriptions. The attac6 on the validity
of the challenged provision li6ewise
insofar as there may be obections, even
if valid and cogent on its wisdom cannot
be sustained. 18
In fine, petitioner has not overcome the presumption of
validity which attaches to a challenged statute. ;e find
no clear violation of the Constitution which would ustify
us in pronouncing 4residential Becree "o. ,$%@ as
unconstitutional and void.
;5D1DF!1D, the instant 4etition is hereby dismissed.
"o costs.
A! !1BD1DB.
)eehankee# !C.%."# 3ap# Fernan# 2arvasa# &utierrez# %r.#
Cruz# (aras# Feliciano# &ancayco# (adilla# +idin#
Sarmiento and Cortes# %%.# concur.
G.R. No+. 1411:4 ; 148769 12*% 8, 2::7
ATLAS CNSLI!ATE! MINING AN!
!EVELPMENT CRPRATIN, petitioner,
vs.
CMMISSINER " INTERNAL
REVENUE, respondent.
! E C I S I N
CHIC-NA0ARI, J.$
3efore this Court are the consolidated cases involving
the unsuccessful claims of herein petitioner .tlas
Consolidated Mining and Bevelopment Corporation
/petitioner corporation0 for the refundOcredit of the input
:alue .dded Ta' /:.T0 on its purchases of capital
goods and on its &ero-rated sales in the ta'able (uarters
of the years ,$$- and ,$$*, the denial of which by the
Court of Ta' .ppeals /CT.0, was affirmed by the Court
of .ppeals.
4etitioner corporation is engaged in the business of
mining, production, and sale of various mineral products,
such as gold, pyrite, and copper concentrates. It is a
:.T-registered ta'payer. It was initially issued :.T
1egistration "o. #*-.-?---***2, dated , )anuary ,$%%,
but it had to register anew with the appropriate revenue
district office /1B!0 of the 3ureau of Internal 1evenue
/3I10 when it moved its principal place of business, and
it was re-issued :.T 1egistration "o. #*-----2?**,
dated ,+ .ugust ,$$-.
,
G.R. No. 141104
4etitioner corporation filed with the 3I1 its :.T 1eturn
for the first (uarter of ,$$*.
*
It alleged that it li6ewise
filed with the 3I1 the corresponding application for the
refundOcredit of its input :.T on its purchases of capital
goods and on its &ero-rated sales in the amount
of 4*?,-#-,2?-.--.
#
;hen its application for
refundOcredit remained unresolved by the 3I1, petitioner
corporation filed on *- .pril ,$$2 its 4etition for 1eview
with the CT., doc6eted as CT. Case "o. +,-*.
.sserting that it was a "&ero-rated :.T person," it
prayed that the CT. order herein respondent
Commissioner of Internal 1evenue /respondent
Commissioner0 to refundOcredit petitioner corporation
with the amount of 4*?,-#-,2?-.--, representing the
input :.T it had paid for the first (uarter of ,$$*. The
respondent Commissioner opposed and sought the
dismissal of the petition for review of petitioner
corporation for failure to state a cause of action. .fter
due trial, the CT. promulgated its Becision
2
on *2
"ovember ,$$@ with the following disposition P
/HERE"RE, in view of the foregoing, the
instant claim for refund is hereby !ENIE! on the
ground of prescription, insufficiency of evidence
and failure to comply with Aection *#- of the Ta'
Code, as amended. .ccordingly, the petition at
bar is hereby !ISMISSE! for lac6 of merit.
The CT. denied the motion for reconsideration of
petitioner corporation in a 1esolution
+
dated ,+ .pril
,$$%.
;hen the case was elevated to the Court of .ppeals as
C.-<.1. A4 "o. 2@?-@, the appellate court, in its
Becision,
?
dated ? )uly ,$$$, dismissed the appeal of
petitioner corporation, finding no reversible error in the
CT. Becision, dated *2 "ovember ,$$@. The
subse(uent motion for reconsideration of petitioner
corporation was also denied by the Court of .ppeals in
its 1esolution,
@
dated ,2 Becember ,$$$.
Thus, petitioner corporation comes before this
Court, via a 4etition for 1eview on Certiorari under 1ule
2+ of the 1evised 1ules of Court, assigning the following
errors committed by the Court of .ppeals P
I
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II
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I:
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%
G.R. No. 148763
<.1. "o. ,2%@?# involves almost the same set of facts
as in <.1. "o. ,2,,-2 presented above, e'cept that it
relates to the claims of petitioner corporation for
refundOcredit of input :.T on its purchases of capital
goods and on its &ero-rated sales made in the last three
ta'able (uarters of ,$$-.
4etitioner corporation filed with the 3I1 its :.T 1eturns
for the second, third, and fourth (uarters of ,$$-, on *-
)uly ,$$-, ,% !ctober ,$$-, and *- )anuary ,$$,,
respectively. It submitted separate applications to the
3I1 for the refundOcredit of the input :.T paid on its
purchases of capital goods and on its &ero-rated sales,
the details of which are presented as follows P
Bate of .pplication 4eriod Covered .mount .pplied For
*, .ugust ,$$- *
nd
Iuarter, ,$$-
*, "ovember ,$$- #
rd
Iuarter, ,$$-
,$ February ,$$, 2
th
Iuarter, ,$$-
;hen the 3I1 failed to act on its applications for
refundOcredit, petitioner corporation filed with the CT.
the following petitions for review P
Bate Filed 4eriod Covered CT. Case "o.
*- )uly ,$$* *
nd
Iuarter, ,$$-
$ !ctober ,$$* #
rd
Iuarter, ,$$-
,2 )anuary ,$$# 2
th
Iuarter, ,$$-
which were eventually consolidated. The respondent
Commissioner contested the foregoing 4etitions and
prayed for the dismissal thereof. The CT. ruled in favor
of respondent Commissioner and in its Becision,
$
dated
#- !ctober ,$$@, dismissed the 4etitions mainly on the
ground that the prescriptive periods for filing the same
had e'pired. In a 1esolution,
,-
dated ,+ )anuary ,$$%,
the CT. denied the motion for reconsideration of
petitioner corporation since the latter presented no new
matter not already discussed in the court7s prior
Becision. In the same 1esolution, the CT. also denied
the alternative prayer of petitioner corporation for a new
trial since it did not fall under any of the grounds cited
under Aection ,, 1ule #@ of the 1evised 1ules of Court,
and it was not supported by affidavits of merits re(uired
by Aection * of the same 1ule.
4etitioner corporation appealed its case to the Court of
.ppeals, where it was doc6eted as C.-<.1. A4 "o.
2?@,%. !n ,+ Aeptember *---, the Court of .ppeals
rendered its Becision,
,,
finding that although petitioner
corporation timely filed its 4etitions for 1eview with the
CT., it still failed to substantiate its claims for the
refundOcredit of its input :.T for the last three (uarters of
,$$-. In its 1esolution,
,*
dated *@ )une *--,, the
appellate court denied the motion for reconsideration of
petitioner corporation, finding no cogent reason to
reverse its previous Becision.
.ggrieved, petitioner corporation filed with this Court
another 4etition for 1eview on Certiorari under 1ule 2+
of the 1evised 1ules of Court, doc6eted as <.1. "o.
,2%@?#, raising the following issues P
..
;5DT5D1 !1 "!T T5D C!C1T !F
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T5D F.CTC.9 3.AIA F!1 T5D I"AT."T
C9.IM.
3.
;5DT5D1 !1 "!T T5D C!C1T !F
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IA "! 3.AIA T! <1."T 4DTITI!"D17A
M!TI!" F!1 "D; T1I.9.
There being similarity of parties, subect matter, and
issues, <.1. "os. ,2,,-2 and ,2%@?# were
consolidated pursuant to a 1esolution, dated 2
Aeptember *--?, issued by this Court. The ruling of this
Court in these cases hinges on how it will resolve the
following 6ey issues> /,0 prescription of the claims of
petitioner corporation for input :.T refundOcredit8 /*0
validity and applicability of 1evenue 1egulations "o. *-
%% imposing upon petitioner corporation, as a
re(uirement for the :.T &ero-rating of its sales, the
burden of proving that the buyer companies were not
ust 3!I-registered but also e'porting @-N of their total
annual production8 /#0 sufficiency of evidence presented
by petitioner corporation to establish that it is indeed
entitled to input :.T refundOcredit8 and /20 legal ground
for granting the motion of petitioner corporation for re-
opening of its cases or holding of new trial before the
CT. so it could be given the opportunity to present the
re(uired evidence.
Prescription
The prescriptive period for filing an application for ta'
refundOcredit of input :.T on &ero-rated sales made in
,$$- and ,$$* was governed by Aection ,-?/b0 and /c0
of the Ta' Code of ,$@@, as amended, which provided
that P
ADC. ,-?. *efunds or tax credits of input tax. P
' ' '.
/b0 4ero-rated or effectively zero-rated sales. P
.ny person, e'cept those covered by paragraph
/a0 above, whose sales are &ero-rated may,
within two years after the close of the (uarter
when such sales were made, apply for the
issuance of a ta' credit certificate or refund of
the input ta'es attributable to such sales to the
e'tent that such input ta' has not been applied
against output ta'.
' ' ' '
/e0 (eriod ithin hich refund of input taxes
may $e made $y the Commissioner. P The
Commissioner shall refund input ta'es within ?-
days from the date the application for refund
was filed with him or his duly authori&ed
representative. "o refund of input ta'es shall be
allowed unless the :.T-registered person files
an application for refund within the period
prescribed in paragraphs /a0, /b0 and /c0 as the
case may be.
3y a plain reading of the foregoing provision, the two-
year prescriptive period for filing the application for
refundOcredit of input :.T on &ero-rated sales shall be
determined from the close of the (uarter when such
sales were made.
4etitioner contends, however, that the said two-year
prescriptive period should be counted, not from the close
of the (uarter when the &ero-rated sales were made, but
from the date of filing of the (uarterly :.T return and
payment of the ta' due *- days thereafter, in
accordance with Aection ,,-/b0 of the Ta' Code of
,$@@, as amended, (uoted as follows P
ADC. ,,-. *eturn and payment of value-added
tax. P ' ' '.
/b0 )ime for filing of return and payment of tax. P
The return shall be filed and the ta' paid within
*- days following the end of each (uarter
specifically prescribed for a :.T-registered
person under regulations to be promulgated by
the Aecretary of Finance> (rovided#
hoever# That any person whose registration is
cancelled in accordance with paragraph /e0 of
Aection ,-@ shall file a return within *- days
from the cancellation of such registration.
It is already well-settled that the two-year prescriptive
period for instituting a suit or proceeding for recovery of
corporate income ta' erroneously or illegally paid under
Aection *#-
,#
of the Ta' Code of ,$@@, as amended,
was to be counted from the filing of the final adustment
return. This Court already set out in ACC*A
5nvestments Corporation v. Court of Appeals#
,2
the
rationale for such a rule, thus P
Clearly, there is the need to file a return first
before a claim for refund can prosper inasmuch
as the respondent Commissioner by his own
rules and regulations mandates that the
corporate ta'payer opting to as6 for a refund
must show in its final adustment return the
income it received from all sources and the
amount of withholding ta'es remitted by its
withholding agents to the 3ureau of Internal
1evenue. The petitioner corporation filed its final
adustment return for its ,$%, ta'able year on
.pril ,+, ,$%*. In our 1esolution dated .pril ,-,
,$%$ in the case of Commissioner of 5nternal
*evenue v. Asia Australia Express# ,td. /<.1.
"o. %+$+?0, we ruled that the two-year
prescriptive period within which to claim a refund
commences to run, at the earliest, on the date of
the filing of the adusted final ta' return. 5ence,
the petitioner corporation had until .pril ,+, ,$%2
within which to file its claim for refund.
Considering that .CC1.I" filed its claim for
refund as early as Becember *$, ,$%# with the
respondent Commissioner who failed to ta6e
any action thereon and considering further that
the non-resolution of its claim for refund with the
said Commissioner prompted .CC1.I" to
reiterate its claim before the Court of Ta'
.ppeals through a petition for review on .pril ,#,
,$%2, the respondent appellate court manifestly
committed a reversible error in affirming the
holding of the ta' court that .CC1.I"7s claim for
refund was barred by prescription.
It bears emphasis at this point that the rationale
in computing the two-year prescriptive period
with respect to the petitioner corporation7s claim
for refund from the time it filed its final
adustment return is the fact that it was only then
that .CC1.I" could ascertain whether it made
profits or incurred losses in its business
operations. The "date of payment", therefore, in
.CC1.I"7s case was when its ta' liability, if
any, fell due upon its filing of its final adustment
return on .pril ,+, ,$%*.
In another case, Commissioner of 5nternal *evenue v.
)-6 Sales# 5nc.,
,+
this Court further e'pounded on the
same matter P
. re-e'amination of the aforesaid minute
resolution of the Court in the (acific
(rocon case is warranted under the
circumstances to lay down a categorical
pronouncement on the (uestion as to when the
two-year prescriptive period in cases of (uarterly
corporate income ta' commences to run. . full-
blown decision in this regard is rendered more
imperative in the light of the reversal by the
Court of Ta' .ppeals in the instant case of its
previous ruling in the (acific (rocon case.
Aection *$* /now Aection *#-0 of the "ational
Internal 1evenue Code should be interpreted in
relation to the other provisions of the Ta' Code
in order to give effect the legislative intent and to
avoid an application of the law which may lead
to inconvenience and absurdity. In the case
of (eople vs. *ivera /+$ 4hil. *#? K,$##L0, this
Court stated that statutes should receive a
sensible construction, such as will give effect to
the legislative intention and so as to avoid an
unust or an absurd
conclusion. 52)E*(*E)A)5' )A,5S 52
A-+5&75S SE-(E* F*5E21A ES)# 7)
E/5)A)7* 52C'2/E25E2S E) A+S7*17-.
;here there is ambiguity, such interpretation as
will avoid inconvenience and absurdity is to be
adopted. Furthermore, courts must give effect to
the general legislative intent that can be
discovered from or is unraveled by the four
corners of the statute, and in order to discover
said intent, the whole statute, and not only a
particular provision thereof, should be
considered. /-anila ,odge 2o. 89:# et al. vs.
Court of Appeals# et al. @# AC1. ,?* K,$@?0
Dvery section, provision or clause of the statute
must be e'pounded by reference to each other
in order to arrive at the effect contemplated by
the legislature. The intention of the legislator
must be ascertained from the whole te't of the
law and every part of the act is to be ta6en into
view. /Chartered +ank vs. 5mperial, 2% 4hil. $#,
K,$*,L8 ,opez vs. El .oger Filipino, 2@ 4hil. *2$,
cited in A$oitiz Shipping Corporation vs. City of
Ce$u, ,# AC1. 22$ K,$?+L0.
Thus, in resolving the instant case, it is
necessary that we consider not only Aection *$*
/now Aection *#-0 of the "ational Internal
1evenue Code but also the other provisions of
the Ta' Code, particularly Aections %2, %+ /now
both incorporated as Aection ?%0, Aection %?
/now Aection @-0 and Aection %@ /now Aection
?$0 on Iuarterly Corporate Income Ta'
4ayment and Aection #*, /now Aection *#*0 on
6eeping of boo6s of accounts. .ll these
provisions of the Ta' Code should be
harmoni&ed with each other.
' ' ' '
Therefore, the filing of a (uarterly income ta'
returns re(uired in Aection %+ /now Aection ?%0
and implemented per 3I1 Form ,@-*-I and
payment of (uarterly income ta' should only be
considered mere installments of the annual ta'
due. These (uarterly ta' payments which are
computed based on the cumulative figures of
gross receipts and deductions in order to arrive
at a net ta'able income, should be treated as
advances or portions of the annual income ta'
due, to be adusted at the end of the calendar or
fiscal year. This is reinforced by Aection %@ /now
Aection ?$0 which provides for the filing of
adustment returns and final payment of income
ta'. Conse(uently, the two-year prescriptive
period provided in Aection *$* /now Aection
*#-0 of the Ta' Code should be computed from
the time of filing the .dustment 1eturn or
.nnual Income Ta' 1eturn and final payment of
income ta'.
In the case of Collector of 5nternal *evenue vs.
Antonio (rieto /* AC1. ,--@ K,$?,L0, this Court
held that when a ta' is paid in installments, the
prescriptive period of two years provided in
Aection #-? /Aection *$*0 of the "ational
Internal 1evenue Code should be counted from
the date of the final payment. This ruling is
reiterated in Commissioner of 5nternal *evenue
vs. Carlos (alanca /,% AC1. 2$? K,$??L0,
wherein this Court stated that where the ta'
account was paid on installment, the
computation of the two-year prescriptive period
under Aection #-? /Aection *$*0 of the Ta'
Code, should be from the date of the last
installment.
In the instant case, TMH Aales, Inc. filed a suit
for a refund on March ,2, ,$%2. Aince the two-
year prescriptive period should be counted from
the filing of the .dustment 1eturn on .pril
,+,,$%*, TMH Aales, Inc. is not yet barred by
prescription.
The very same reasons set forth in the afore-cited cases
concerning the two-year prescriptive period for claims for
refund of illegally or erroneously collected income ta'
may also apply to the 4etitions at bar involving the same
prescriptive period for claims for refundOcredit of input
:.T on &ero-rated sales.
It is true that unli6e corporate income ta', which is
reported and paid on installment every (uarter, but is
eventually subected to a final adustment at the end of
the ta'able year, :.T is computed and paid on a purely
(uarterly basis without need for a final adustment at the
end of the ta'able year. 5owever, it is also e(ually true
that until and unless the :.T-registered ta'payer
prepares and submits to the 3I1 its (uarterly :.T return,
there is no way of 6nowing with certainty ust how much
input :.T
,?
the ta'payer may apply against its output
:.T8
,@
how much output :.T it is due to pay for the
(uarter or how much e'cess input :.T it may carry-over
to the following (uarter8 or how much of its input :.T it
may claim as refundOcredit. It should be recalled that not
only may a :.T-registered ta'payer directly apply
against his output :.T due the input :.T it had paid on
its importation or local purchases of goods and services
during the (uarter8 the ta'payer is also given the option
to either /,0 carry over any e'cess input :.T to the
succeeding (uarters for application against its future
output :.T liabilities, or /*0 file an application for refund
or issuance of a ta' credit certificate covering the
amount of such input :.T.
,%
5ence, even in the absence
of a final adustment return, the determination of any
output :.T payable necessarily re(uires that the :.T-
registered ta'payer ma6e adustments in its :.T return
every (uarter, ta6ing into consideration the input :.T
which are creditable for the present (uarter or had been
carried over from the previous (uarters.
Moreover, when claiming refundOcredit, the :.T-
registered ta'payer must be able to establish that it does
have refundable or creditable input :.T, and the same
has not been applied against its output :.T liabilities P
information which are supposed to be reflected in the
ta'payer7s :.T returns. Thus, an application for
refundOcredit must be accompanied by copies of the
ta'payer7s :.T returnOs for the ta'able (uarterOs
concerned.
9astly, although the ta'payer7s refundable or creditable
input :.T may not be considered as illegally or
erroneously collected, its refundOcredit is a privilege
e'tended to (ualified and registered ta'payers by the
very :.T system adopted by the 9egislature. Auch input
:.T, the same as any illegally or erroneously collected
national internal revenue ta', consists of monetary
amounts which are currently in the hands of the
government but must rightfully be returned to the
ta'payer. Therefore, whether claiming refundOcredit of
illegally or erroneously collected national internal
revenue ta', or input :.T, the ta'payer must be given
e(ual opportunity for filing and pursuing its claim.
For the foregoing reasons, it is more practical and
reasonable to count the two-year prescriptive period for
filing a claim for refundOcredit of input :.T on &ero-rated
sales from the date of filing of the return and payment of
the ta' due which, according to the law then e'isting,
should be made within *- days from the end of each
(uarter. 5aving established thus, the relevant dates in
the instant cases are summari&ed and reproduced below
P
4eriod Covered Bate of
Filing/1eturn wO
3I10
Bate of
Filing/.pplication wO
3I10
*
nd
Iuarter, ,$$- *- )uly ,$$- *, .ugust ,$$-
#
rd
Iuarter, ,$$- ,% !ctober ,$$- *, "ovember ,$$-
2
th
Iuarter, ,$$- *- )anuary ,$$, ,$ February ,$$,
,
st
Iuarter, ,$$* *- .pril ,$$*
The above table readily shows that the administrative
and udicial claims of petitioner corporation for refund of
its input :.T on its &ero-rated sales for the last three
(uarters of ,$$- were all filed within the prescriptive
period.
5owever, the same cannot be said for the claim of
petitioner corporation for refund of its input :.T on its
&ero-rated sales for the first (uarter of ,$$*. Dven
though it may seem that petitioner corporation filed in
time its udicial claim with the CT., there is no showing
that it had previously filed an administrative claim with
the 3I1. Aection ,-?/e0 of the Ta' Code of ,$@@, as
amended, e'plicitly provided that no refund of input :.T
shall be allowed unless the :.T-registered ta'payer filed
an application for refund with respondent Commissioner
within the two-year prescriptive period. The application
of petitioner corporation for refundOcredit of its input :.T
for the first (uarter of ,$$* was not only unsigned by its
supposed authori&ed representative, Ma. 4a& 1.
Aemilla, Manager-Finance and Treasury, but it was not
dated, stamped, and initialed by the 3I1 official who
purportedly received the same. The CT., in its
Becision,
,$
dated *2 "ovember ,$$@, in CT. Case "o.
+,-*, made the following observations P
This Court, li6ewise, reects any probative value
of the .pplication for Ta' CreditO1efund of :.T
4aid /3I1 Form "o. *++*0 KD'hibit "37L formally
offered in evidence by the petitioner on account
of the fact that it does not bear the 3I1 stamp
showing the date when such application was
filed together with the signature or initial of the
receiving officer of respondent7s 3ureau. ;orse
still, it does not show the date of application and
the signature of a certain Ma. 4a& 1. Aemilla
indicated in the form who appears to be
petitioner7s authori&ed filer.
. review of the records reveal that the original of
the aforecited application was lost during the
time petitioner transferred its office /TA", p. ?,
5earing of Becember $, ,$$20. .ttempt was
made to prove that petitioner e'erted efforts to
recover the original copy, but to no avail.
Bespite this, however, ;e observe that
petitioner completely failed to establish the
missing dates and signatures abovementioned.
!n this score, said application has no probative
value in demonstrating the fact of its filing within
two years after the Kfiling of the :.T return for
the (uarterL when petitioner7s sales of goods
were made as prescribed under Aection ,-?/b0
of the Ta' Code. ;e believe thus that petitioner
failed to file an application for refund in due form
and within the legal period set by law at the
administrative level. 5ence, the case at bar has
failed to satisfy the re(uirement on the prior filing
of an application for refund with the respondent
before the commencement of a udicial claim for
refund, as prescribed under Aection *#- of the
Ta' Code. This fact constitutes another one of
the many reasons for not granting petitioner7s
udicial claim.
.s pointed out by the CT., in serious doubt is not only
the fact of whether petitioner corporation timely filed its
administrative claim for refund of its input :.T for the
first (uarter of ,$$*, but also whether petitioner
corporation actually filed such administrative claim in the
first place. For failing to prove that it had earlier filed with
the 3I1 an application for refundOcredit of its input :.T
for the first (uarter of ,$$*, within the period prescribed
by law, then the case instituted by petitioner corporation
with the CT. for the refundOcredit of the very same ta'
cannot prosper.
Revenue Regulations No. 288 an! t"e 70# e$port
re%uire&ent
Cnder Aection ,--/a0 of the Ta' Code of ,$@@, as
amended, a ,-N :.T was imposed on the gross selling
price or gross value in money of goods sold, bartered or
e'changed. Get, the same provision subected the
following sales made by :.T-registered persons to -N
:.T P
/,0 D'port sales8 and
/*0 Aales to persons or entities whose
e'emption under special laws or international
agreements to which the 4hilippines is a
signatory effectively subects such sales to &ero-
rate.
"D'port Aales" means the sale and shipment or
e'portation of goods from the 4hilippines to a
foreign country, irrespective of any shipping
arrangement that may be agreed upon which
may influence or determine the transfer of
ownership of the goods so e'ported, or foreign
currency denominated sales. "Foreign currency
denominated sales", means sales to
nonresidents of goods assembled or
manufactured in the 4hilippines, for delivery to
residents in the 4hilippines and paid for in
convertible foreign currency remitted through the
ban6ing system in the 4hilippines.
These are termed &ero-rated sales. . &ero-rated sale is
still considered a ta'able transaction for :.T purposes,
although the :.T rate applied is -N. . sale by a :.T-
registered ta'payer of goods andOor services ta'ed at
-N shall not result in any output :.T, while the input
:.T on its purchases of goods or services related to
such &ero-rated sale shall be available as ta' credit or
refund.
*-
4etitioner corporation (uestions the validity of 1evenue
1egulations "o. *-%% averring that the said regulations
imposed additional re(uirements, not found in the law
itself, for the &ero-rating of its sales to 4hilippine
Amelting and 1efining Corporation /4.A.10 and
4hilippine 4hosphate, Inc. /45I945!A0, both of which
are registered not only with the 3!I, but also with the
then D'port 4rocessing Jone .uthority /D4J.0.
*,
The contentious provisions of 1evenue 1egulations "o.
*-%% read P
ADC. *. 4ero-rating. P /a0 Aales of raw materials
to 3!I-registered e'porters. P Aales of raw
materials to e'port-oriented 3!I-registered
enterprises whose e'port sales, under rules and
regulations of the 3oard of Investments, e'ceed
seventy percent /@-N0 of total annual
production, shall be subect to &ero-rate under
the following conditions>
"/,0 The seller shall file an application
with the 3I1, .TT".> Bivision, applying
for &ero-rating for each and every
separate buyer, in accordance with
Aection %/d0 of 1evenue 1egulations
"o. +-%@. The application should be
accompanied with a favorable
recommendation from the 3oard of
Investments."
"/*0 The raw materials sold are to be
used e'clusively by the buyer in the
manufacture, processing or repac6ing of
his own registered e'port product8
"/#0 The words "Jero-1ated Aales" shall
be prominently indicated in the sales
invoice. The e'porter /buyer0 can no
longer claim from the 3ureau of Internal
1evenue or any other government office
ta' credits on their &ero-rated
purchases8
/b0 Aales of raw materials to foreign buyer. P
Aales of raw materials to a nonresident foreign
buyer for delivery to a resident local e'port-
oriented 3!I-registered enterprise to be used in
manufacturing, processing or repac6ing of the
said buyer7s goods and paid for in foreign
currency, inwardly remitted in accordance with
Central 3an6 rules and regulations shall be
subect to &ero-rate.
It is the position of the respondent Commissioner,
affirmed by the CT. and the Court of .ppeals, that
Aection * of 1evenue 1egulations "o. *-%% should be
applied in the cases at bar8 and to be entitled to the
&ero-rating of its sales to 4.A.1 and 45I945!A,
petitioner corporation, as a :.T-registered seller, must
be able to prove not only that 4.A.1 and 45I945!A
are 3!I-registered corporations, but also that more than
@-N of the total annual production of these corporations
are actually e'ported. 1evenue 1egulations "o. *-%%
merely echoed the re(uirement imposed by the 3!I on
e'port-oriented corporations registered with it.
;hile this Court is not prepared to stri6e down the
validity of 1evenue 1egulations "o. *-%%, it finds that its
application must be limited and placed in the proper
conte't. "ote that Aection * of 1evenue 1egulations "o.
*-%% referred only to the &ero-rated sales of raw
materials to e'port-oriented 3!I-registered
enterprises whose e'port sales, under 3!I rules and
regulations, should e'ceed seventy percent /@-N0 of
their total annual production.
Aection * of 1evenue 1egulations "o. *-%%, should not
have been applied to the &ero-rating of the sales made
by petitioner corporation to 4.A.1 and 45I945!A. .t
the onset, it must be emphasi&ed that 4.A.1 and
45I945!A, in addition to being registered with the 3!I,
were also registered with the D4J. and located within
an e'port-processing &one. 4etitioner corporation does
not claim that its sales to 4.A.1 and 45I945!A are
&ero-rated on the basis that said sales were made to
e'port-oriented 3!I-registered corporations, but rather,
on the basis that the sales were made to D4J.-
registered enterprises operating within e'port processing
&ones. .lthough sales to e'port-oriented 3!I-registered
enterprises and sales to D4J.-registered enterprises
located within e'port processing &ones were both
deemed e'port sales, which, under Aection ,--/a0 of the
Ta' Code of ,$@@, as amended, shall be subect to -N
:.T distinction must be made between these two types
of sales because each may have different substantiation
re(uirements.
The Ta' Code of ,$@@, as amended, gave a limited
definition of e'port sales, to wit> "The sale and shipment
or e'portation of goods from the 4hilippines to a foreign
country, irrespective of any shipping arrangement that
may be agreed upon which may influence or determine
the transfer of ownership of the goods so e'ported, or
foreign currency denominated sales." D'ecutive !rder
"o. **?, otherwise 6nown as the !mnibus Investments
Code of ,$%@ - which, in the years concerned /i.e., ,$$-
and ,$$*0, governed enterprises registered with both the
3!I and D4J., provided a more comprehensive
definition of e'port sales, as (uoted below>
".1T. *#. "D'port sales" shall mean the
4hilippine port F.!.3. value, determined from
invoices, bills of lading, inward letters of credit,
landing certificates, and other commercial
documents, of e'port products e'ported directly
by a registered e'port producer or the net selling
price of e'port product sold by a registered
e'port producer or to an e'port trader that
subse(uently e'ports the same> 4rovided, That
sales of e'port products to another producer or
to an e'port trader shall only be deemed e'port
sales whenactually e'ported by the latter, as
evidenced by landing certificates of similar
commercial documents> 4rovided, further,
That without actual e'portation the following
shall be considered constructively e'portedfor
purposes of this provision> /,0 sales to bonded
manufacturing warehouses of e'port-oriented
manufacturers8 /*0 sales to e'port processing
&ones8 /#0 sales to registered e'port traders
operating bonded trading warehouses supplying
raw materials used in the manufacture of e'port
products under guidelines to be set by the 3oard
in consultation with the 3ureau of Internal
1evenue and the 3ureau of Customs8 /20 sales
to foreign military bases, diplomatic missions
and other agencies andOor instrumentalities
granted ta' immunities, of locally manufactured,
assembled or repac6ed products whether paid
for in foreign currency or not> 4rovided, further,
That e'port sales of registered e'port trader
may include commission income8 and 4rovided,
finally, That e'portation of goods on
consignment shall not be deemed e'port sales
until the e'port products consigned are in fact
sold by the consignee.
Aales of locally manufactured or assembled
goods for household and personal use to
Filipinos abroad and other non-residents of the
4hilippines as well as returning !verseas
Filipinos under the Internal D'port 4rogram of
the government and paid for in convertible
foreign currency inwardly remitted through the
4hilippine ban6ing systems shall also be
considered e'port sales. /Cnderscoring ours.0
The afore-cited provision of the !mnibus Investments
Code of ,$%@ recogni&es as e'port sales the sales of
e'port products to another producer or to an e'port
trader, provided that the e'port products are actually
e'ported. For purposes of :.T &ero-rating, such
producer or e'port trader must be registered with the
3!I and is re(uired to actually e'port more than @-N of
its annual production.
;ithout actual e'portation, .rticle *# of the !mnibus
Investments Code of ,$%@ also considers constructive
e'portation as e'port sales. .mong other types of
constructive e'portation specifically identified by the said
provision are sales to e'port processing &ones. Aales to
e'port processing &ones are subected to special ta'
treatment. .rticle @@ of the same Code establishes the
ta' treatment of goods or merchandise brought into the
e'port processing &ones. !f particular relevance herein
is paragraph *, which provides that "Merchandise
purchased by a registered &one enterprise from the
customs territory and subse(uently brought into the
&one, shall be considered as e'port sales and the
e'porter thereof shall be entitled to the benefits allowed
by law for such transaction."
Auch ta' treatment of goods brought into the e'port
processing &ones are only consistent with the
Bestination 4rinciple and Cross 3order Boctrine to which
the 4hilippine :.T system adheres. .ccording to the
Bestination 4rinciple,
**
goods and services are ta'ed
only in the country where these are consumed. In
connection with the said principle, the Cross 3order
Boctrine
*#
mandates that no :.T shall be imposed to
form part of the cost of the goods destined for
consumption outside the territorial border of the ta'ing
authority. 5ence, actual e'port of goods and services
from the 4hilippines to a foreign country must be free of
:.T, while those destined for use or consumption within
the 4hilippines shall be imposed with ,-N :.T.
*2
D'port
processing &ones
*+
are to be managed as a separate
customs territory from the rest of the 4hilippines and,
thus, for ta' purposes, are effectively considered as
foreign territory. For this reason, sales by persons from
the 4hilippine customs territory to those inside the e'port
processing &ones are already ta'ed as e'ports.
4lainly, sales to enterprises operating within the e'port
processing &ones are e'port sales, which, under the Ta'
Code of ,$@@, as amended, were subect to -N :.T. It
is on this ground that petitioner corporation is claiming
refundOcredit of the input :.T on its &ero-rated sales to
4.A.1 and 45I945!A.
The distinction made by this Court in the preceding
paragraphs between the &ero-rated sales to e'port-
oriented 3!I-registered enterprises and &ero-rated sales
to D4J.-registered enterprises operating within e'port
processing &ones is actually supported by subse(uent
development in ta' laws and regulations. In 1evenue
1egulations "o. @-$+, the Consolidated :.T
1egulations, as amended,
*?
the 3I1 defined with more
precision what are &ero-rated e'port sales P
/,0 The sale and actual shipment of goods from
the 4hilippines to a foreign country, irrespective
of any shipping arrangement that may be agreed
upon which may influence or determine the
transfer of ownership of the goods so e'ported
paid for in acceptable foreign currency or its
e(uivalent in goods or services, and accounted
for in accordance with the rules and regulations
of the +angko Sentral ng (ilipinas /3A40;
/*0 The sale of raw materials or pac6aging
materials to a non-resident buyer for delivery to
a resident local e'port-oriented enterprise to be
used in manufacturing, processing, pac6ing or
repac6ing in the 4hilippines of the said buyer7s
goods and paid for in acceptable foreign
currency and accounted for in accordance with
the rules and regulations of the +angko Sentral
ng (ilipinas /3A40;
/#0 The sale of raw materials or pac6aging
materials to an e'port-oriented enterprise whose
e'port sales e'ceed seventy percent /@-N0 of
total annual production8
.ny enterprise whose e'port sales e'ceed @-N
of the total annual production of the preceding
ta'able year shall be considered an e'port-
oriented enterprise upon accreditation as such
under the provisions of the D'port Bevelopment
.ct /1... @%220 and its implementing rules and
regulations8
/20 Aale of gold to the +angko Sentral ng
(ilipinas /3A408 and
/+0 Those considered e'port sales under .rticles
*# and @@ of D'ecutive !rder "o. **?,
otherwise 6nown as the !mnibus Investments
Code of ,$%@, and other special laws, e.g.
1epublic .ct "o. @**@, otherwise 6nown as the
3ases Conversion and Bevelopment .ct of
,$$*.
The Ta' Code of ,$$@, as amended,
*@
later adopted the
foregoing definition of e'port sales, which are subect to
-N :.T.
This Court then reiterates its conclusion that Aection * of
1evenue 1egulations "o. *-%%, which applied to &ero-
rated e'port sales to e'port-oriented 3!I-registered
enterprises, should not be applied to the applications for
refundOcredit of input :.T filed by petitioner corporation
since it based its applications on the &ero-rating of
e'port sales to enterprises registered with the D4J. and
located within e'port processing &ones.
'u((icienc) o( evi!ence
There can be no dispute that the ta'payer-claimant has
the burden of proving the legal and factual bases of its
claim for ta' credit or refund, but once it has submitted
all the re(uired documents, it is the function of the 3I1 to
assess these documents with purposeful dispatch.
*%
It
therefore falls upon herein petitioner corporation to first
establish that its sales (ualify for :.T &ero-rating under
the e'isting laws /legal basis0, and then to present
sufficient evidence that said sales were actually made
and resulted in refundable or creditable input :.T in the
amount being claimed /factual basis0.
It would initially appear that the applications for
refundOcredit filed by petitioner corporation cover only
input :.T on its purportedly &ero-rated sales to 4.A.1
and 45I945!A8 however, a more thorough perusal of its
applications, :.T returns, pleadings, and other records
of these cases would reveal that it is also claiming
refundOcredit of its input :.T on purchases of capital
goods and sales of gold to the Central 3an6 of the
4hilippines /C340.
This Court finds that the claims for refundOcredit of input
:.T of petitioner corporation have sufficient legal bases.
.s has been e'tensively discussed herein, Aection
,-?/b0/*0, in relation to Aection ,--/a0/*0 of the Ta'
Code of ,$@@, as amended, allowed the refundOcredit of
input :.T on e'port sales to enterprises operating within
e'port processing &ones and registered with the D4J.,
since such e'port sales were deemed to be effectively
&ero-rated sales.
*$
The fact that 4.A.1 and 45I945!A,
to whom petitioner corporation sold its products, were
operating inside an e'port processing &one and duly
registered with D4J., was never raised as an issue
herein. Moreover, the same fact was already udicially
recogni&ed in the case Atlas Consolidated -ining <
1evelopment Corporation v. Commissioner of 5nternal
*evenue.
#-
Aection ,-?/c0 of the same Code li6ewise
permitted a :.T-registered ta'payer to apply for
refundOcredit of the input :.T paid on capital goods
imported or locally purchased to the e'tent that such
input :.T has not been applied against its output :.T.
Meanwhile, the effective &ero-rating of sales of gold to
the C34 from ,$%$ to ,$$,
#,
was already affirmed by
this Court in Commissioner of 5nternal *evenue v.
+enguet Corporation,
#*
wherein it ruled that P
.t the time when the subect transactions were
consummated, the prevailing 3I1 regulations
relied upon by respondent ordained that gold
sales to the Central 3an6 were &ero-rated. The
3I1 interpreted Aec. ,-- of the "I1C in relation
to Aec. * of D.!. "o. +%, s. ,$%- which
prescribed that gold sold to the Central 3an6
shall be considered e'port and therefore shall
be subect to the e'port and premium duties. In
coming out with this interpretation, the 3I1 also
considered Aec. ,?$ of Central 3an6 Circular
"o. $?- which states that all sales of gold to the
Central 3an6 are considered constructive
e'ports. ' ' '.
This Court now comes to the (uestion of whether
petitioner corporation has sufficiently established the
factual bases for its applications for refundOcredit of input
:.T. It is in this regard that petitioner corporation has
failed, both in the administrative and udicial level.
.pplications for refundOcredit of input :.T with the 3I1
must comply with the appropriate revenue regulations.
.s this Court has already ruled, 1evenue 1egulations
"o. *-%% is not relevant to the applications for
refundOcredit of input :.T filed by petitioner corporation8
nonetheless, the said applications must have been in
accordance with 1evenue 1egulations "o. #-%%,
amending Aection ,? of 1evenue 1egulations "o. +-%@,
which provided as follows P
ADCTI!" ,?. 1efunds or ta' credits of input ta'.
P
' ' ' '
/c0 Claims for tax credits=refunds. P .pplication
for Ta' CreditO1efund of :alue-.dded Ta' 4aid
/3I1 Form "o. *++*0 shall be filed with the
1evenue Bistrict !ffice of the city or municipality
where the principal place of business of the
applicant is located or directly with the
Commissioner, .ttention> :.T Bivision.
. photocopy of the purchase invoice or receipt
evidencing the value added ta' paid shall be
submitted together with the application. The
original copy of the said invoiceOreceipt,
however, shall be presented for cancellation
prior to the issuance of the Ta' Credit Certificate
or refund. In addition, the following documents
shall be attached whenever applicable>
' ' ' '
"#. Dffectively &ero-rated sale of goods
and services.
"i0 photo copy of approved
application for &ero-rate if filing
for the first time.
"ii0 sales invoice or receipt
showing name of the person or
entity to whom the sale of goods
or services were delivered, date
of delivery, amount of
consideration, and description of
goods or services delivered.
"iii0 evidence of actual receipt of
goods or services.
"2. 4urchase of capital goods.
"i0 original copy of invoice or
receipt showing the date of
purchase, purchase price,
amount of value-added ta' paid
and description of the capital
e(uipment locally purchased.
"ii0 with respect to capital
e(uipment imported, the photo
copy of import entry document
for internal revenue ta'
purposes and the confirmation
receipt issued by the 3ureau of
Customs for the payment of the
value-added ta'.
"+. In applicable cases,
where the applicant7s &ero-rated transactions are
regulated by certain government agencies, a
statement therefrom showing the amount and
description of sale of goods and services, name
of persons or entities /e'cept in case of e'ports0
to whom the goods or services were sold, and
date of transaction shall also be submitted.
In all cases, the amount of refund or ta' credit
that may be granted shall be limited to the
amount of the value-added ta' /:.T0 paid
directly and entirely attributable to the &ero-rated
transaction during the period covered by the
application for credit or refund.
;here the applicant is engaged in &ero-rated
and other ta'able and e'empt sales of goods
and services, and the :.T paid /inputs0 on
purchases of goods and services cannot be
directly attributed to any of the aforementioned
transactions, the following formula shall be used
to determine the creditable or refundable input
ta' for &ero-rated sale>
.mount of Jero-rated Aale
Total Aales
H
Total .mount of Input Ta'es
Q
.mount CreditableO1efundable
In case the application for refundOcredit of input :.T was
denied or remained unacted upon by the 3I1, and
before the lapse of the two-year prescriptive period, the
ta'payer-applicant may already file a 4etition for 1eview
before the CT.. If the ta'payer7s claim is supported by
voluminous documents, such as receipts, invoices,
vouchers or long accounts, their presentation before the
CT. shall be governed by CT. Circular "o. ,-$+, as
amended, reproduced in full below P
In the interest of speedy administration of
ustice, the Court hereby promulgates the
following rules governing the presentation of
voluminous documents andOor long accounts,
such as receipts, invoices and vouchers, as
evidence to establish certain facts pursuant to
Aection #/c0, 1ule ,#- of the 1ules of Court and
the doctrine enunciated in Compania -aritima
vs. Allied Free >orkers 7nion !88 SC*A ?@", as
well as Aection % of 1epublic .ct "o. ,,*+>
,. The party who desires to introduce as
evidence such voluminous documents must,
after motion and approval by the Court, present>
/a0 a Aummary containing, among
others, a chronological listing of the
numbers, dates and amounts covered
by the invoices or receipts and the
amountOs of ta' paid8 and /b0 a
Certification of an independent Certified
4ublic .ccountant attesting to the
correctness of the contents of the
summary after ma6ing an e'amination,
evaluation and audit of the voluminous
receipts and invoices. The name of the
accountant or partner of the firm in
charge must be stated in the motion so
that heOshe can be commissioned by the
Court to conduct the audit and,
thereafter, testify in Court relative to
such summary and certification pursuant
to 1ule #* of the 1ules of Court.
*. The method of individual presentation of each
and every receipt, invoice or account for
mar6ing, identification and comparison with the
originals thereof need not be done before the
Court or Cler6 of Court anymore after the
introduction of the summary and C4.
certification. It is enough that the receipts,
invoices, vouchers or other documents covering
the said accounts or payments to be introduced
in evidence must be pre-mar6ed by the party
concerned and submitted to the Court in order to
be made accessible to the adverse party who
desires to chec6 and verify the correctness of
the summary and C4. certification. 9i6ewise,
the originals of the voluminous receipts, invoices
or accounts must be ready for verification and
comparison in case doubt on the authenticity
thereof is raised during the hearing or resolution
of the formal offer of evidence.
Aince CT. Cases "o. 2%#,, 2%+$, 2$22,
##
and
+,-*,
#2
were still pending before the CT. when the said
Circular was issued, then petitioner corporation must
have complied therewith during the course of the trial of
the said cases.
In Commissioner of 5nternal *evenue v. -anila -ining
Corporation,
#+
this Court denied the claim of therein
respondent, Manila Mining Corporation, for refund of the
input :.T on its supposed &ero-rated sales of gold to the
C34 because it was unable to substantiate its claim. In
the same case, this Court emphasi&ed the importance of
complying with the substantiation re(uirements for
claiming refundOcredit of input :.T on &ero-rated sales,
to wit P
For a udicial claim for refund to prosper,
however, respondent must not only prove that it
is a :.T registered entity and that it filed its
claims within the prescriptive period. 5t
must su*stantiate the input /A) paid $y
purchase invoices or o((icial receipts.
This respondent failed to do.
1evenue 1egulations "o. #-%% amending
1evenue 1egulations "o. +-%@ provides the
re(uirements in claiming ta' creditsOrefunds.
' ' ' '
Cnder Aection % of 1.,,*+, the CT. is
described as a court of record. .s cases filed
before it are litigatedde novo, party litigants
should prove every minute aspect of their cases.
"o evidentiary value can be given the purchase
invoices or receipts submitted to the 3I1 as the
rules on documentary evidence re(uire that
these documents must be formally offered
before the CT..
This Court thus notes with approval the following
findings of the CT.>
' ' ' KALale of gold to the Central 3an6
should not be subect to the ,-N :.T-
output ta' but this does not ipso
fact mean that Kthe sellerL is entitled to
the amount of refund sought as it is
re0uired $y la to present evidence
shoing the input taxes it paid during
the year in 0uestion. ;hat is being
claimed in the instant petition is the
refund of the input ta'es paid by the
herein petitioner on its purchase of
goods and services. 5ence, it is
necessary for the (etitioner to sho
proof that it had indeed paid the input
taxes during the year :AA:. 5n the case
at $ar# (etitioner failed to discharge this
duty. 5t did not adduce in evidence the
sales invoice# receipts or other
documents shoing the input value
added tax on the purchase of goods and
services.
' ' '
Section B of *epu$lic Act ::?C !An Act Creating
the Court of )ax Appeals" provides categorically
that t"e Court o( +a$ ,ppeals s"all *e a court
o( recor! an! as suc" it is re%uire! to
con!uct a (or&al trial -trial !e novo. /"ere
t"e parties &ust present t"eir evi!ence
accor!ingl) if they desire the Court to take
such evidence into consideration. /Dmphasis
and italics supplied0
. "sales or commercial invoice" is a written
account of goods sold or services rendered
indicating the prices charged therefor or a list by
whatever name it is 6nown which is used in the
ordinary course of business evidencing sale and
transfer or agreement to sell or transfer goods
and services.
. "receipt" on the other hand is a written
ac6nowledgment of the fact of payment in
money or other settlement between seller and
buyer of goods, debtor or creditor, or person
rendering services and client or customer.
These sales invoices or receipts issued by the
supplier are necessary to substantiate the actual
amount or (uantity of goods sold and their
selling price, and ta6en collectively are the best
means to prove the input :.T payments.
#?
.lthough the foregoing decision focused only on the
proof re(uired for the applicant for refundOcredit to
establish the input :.T payments it had made on
its purchases from suppliers, 1evenue 1egulations "o.
#-%% also re(uired it to present evidence proving actual
&ero-rated :.T sales to (ualified buyers, such as /,0
photocopy of the approved application for &ero-rate if
filing for the first time8 /*0 sales invoice or receipt
showing the name of the person or entity to whom the
goods or services were delivered, date of delivery,
amount of consideration, and description of goods or
services delivered8 and /#0 the evidence of actual receipt
of goods or services.
.lso worth noting in the same decision is the weight
given by this Court to the certification by the independent
certified public accountant /C4.0, thus P
1espondent contends, however, that the
certification of the independent C4. attesting to
the correctness of the contents of the summary
of suppliers7 invoices or receipts which were
e'amined, evaluated and audited by said C4. in
accordance with CT. Circular "o. ,-$+ as
amended by CT. Circular "o. ,--$@ should
substantiate its claims.
There is nothing, however, in CT. Circular "o.
,-$+, as amended by CT. Circular "o. ,--$@,
which either e'pressly or impliedly suggests that
summaries and schedules of input :.T
payments, even if certified by an independent
C4., suffice as evidence of input :.T
payments.
' ' ' '
The circular, in the interest of speedy
administration of ustice, was promulgated to
avoid the time-consuming procedure of
presenting, identifying and mar6ing of
documents before the Court. It does not relieve
respondent of its imperative tas6 of pre-
marking photocopies of sales receipts and
invoices andsu$mitting the same to the
court after the independent C4. shall have
e'amined and compared them with the originals.
;ithout presenting these pre-mar6ed
documents as evidence P from which the
summary and schedules were based, the court
cannot verify the authenticity and veracity of the
independent auditor7s conclusions.
There is, moreover, a need to subect these
invoices or receipts to e'amination by the CT.
in order to confirm whether they are :.T
invoices. Cnder Aection *, of 1evenue
1egulation, "o. +-%@, all purchases covered by
invoices other than a :.T invoice shall not be
entitled to a refund of input :.T.
' ' ' '
;hile the CT. is not governed strictly by
technical rules of evidence, as rules of
procedure are not ends in themselves but are
primarily intended as tools in the administration
of ustice, the presentation of the purchase
receipts andOor invoices is not mere procedural
technicality which may be disregarded
considering that it is the only means by which
the CT. may ascertain and verify the truth of the
respondent7s claims.
The records further show that respondent
miserably failed to substantiate its claims for
input :.T refund for the first semester of :AA:.
D'cept for the summary and schedules of input
:.T payments prepared by respondent itself, no
other evidence was adduced in support of its
claim.
.s for respondent7s claim for input :.T refund
for the second semester of :AA:, it employed
the services of )oa(uin Cunanan F Co. on
account of which it /)oa(uin Cunanan F Co.0
e'ecuted a certification that>
;e have e'amined the information
shown below concerning the input ta'
payments made by the Ma6ati !ffice of
Manila Mining Corporation for the period
from )uly , to Becember #,, ,$$,. !ur
e'amination included inspection of the
pertinent suppliers7 invoices and official
receipts and such other auditing
procedures as we considered necessary
in the circumstances. ' ' '
.s the certification merely stated that it used
"auditing procedures considered necessary" and
not auditing procedures which are in accordance
with generally accepted auditing principles and
standards, and that the e'amination was made
on "input ta' payments by the Manila Mining
Corporation," without specifying that the said
input ta' payments are attributable to the sales
of gold to the Central 3an6, this Court cannot
rely thereon and regard it as sufficient proof of
the respondent7s input :.T payments for the
second semester.
#@
.s for the 4etition in <.1. "o. ,2,,-2, involving the
input :.T of petitioner corporation on its &ero-rated
sales in the first (uarter of ,$$*, this Court already found
that the petitioner corporation failed to comply with
Aection ,-?/b0 of the Ta' Code of ,$@@, as amended,
imposing the two-year prescriptive period for the filing of
the application for refundOcredit thereof. This bars the
grant of the application for refundOcredit, whether
administratively or udicially, by e'press mandate of
Aection ,-?/e0 of the same Code.
<ranting arguendo that the application of petitioner
corporation for the refundOcredit of the input :.T on its
&ero-rated sales in the first (uarter of ,$$* was actually
and timely filed, petitioner corporation still failed to
present together with its application the re(uired
supporting documents, whether before the 3I1 or the
CT.. .s the Court of .ppeals ruled P
In actions involving claims for refund of ta'es
assessed and collected, the burden of proof
rests on the ta'payer. .s clearly discussed in
the CT.7s decision, petitioner failed to
substantiate its claim for ta' refunds. Thus>
";e note, however, that in the cases at
bar, petitioner has relied totally on
1evenue 1egulations "o. *-%% in
determining compliance with the
documentary re(uirements for a
successful refund or issuance of ta'
credit. Cnmentioned is the applicable
and specific amendment later
introduced by 1evenue 1egulations "o.
#-%% dated .pril @, ,$%% /issued barely
after two months from the promulgation
of 1evenue 1egulations "o. *-%% on
February ,+, ,$%%0, which amended
Aection ,? of 1evenue 1egulations "o.
+-%@ on refunds or ta' credits of input
ta'. ' ' '.
' ' ' '
". thorough e'amination of the evidence
submitted by the petitioner before this
court reveals outright the failure to
satisfy documentary re(uirements laid
down under the above-cited regulations.
Apecifically, petitioner was not able to
present the following documents, to wit>
"a0 sales invoices or receipts8
"b0 purchase invoices or
receipts8
"c0 evidence of actual receipt of
goods8
"d0 3!I statement showing the
amount and description of sale
of goods, etc.
"e0 original or attested copies of
invoice or receipt on capital
e(uipment locally purchased8
and
"f0 photocopy of import entry
document and confirmation
receipt on imported capital
e(uipment.
"There is the need to e'amine the sales
invoices or receipts in order to ascertain
the actual amount or (uantity of goods
sold and their selling price. ;ithout
them, this Court cannot verify the
correctness of petitioner7s claim
inasmuch as the regulations re(uire that
the input ta'es being sought for refund
should be limited to the portion that is
directly and entirely attributable to the
particular &ero-rated transaction. In this
instance, the best evidence of such
transaction are the said sales invoices
or receipts.
".lso, even if sales invoices are
produced, there is the further need to
submit evidence that such goods were
actually received by the buyer, in this
case, by C34, 4hilpKhLos and 4.A.1.
' ' ' '
"9astly, this Court cannot determine
whether there were actual local and
imported purchase of capital goods as
well as domestic purchase of non-
capital goods without the re(uired
purchase invoice or receipt, as the case
may be, and confirmation receipts.
"There is, thus, the imperative need to
submit before this Court the original or
attested photocopies of petitioner7s
invoices or receipts, confirmation
receipts and import entry documents in
order that a full ascertainment of the
claimed amount may be achieved.
"4etitioner should have ta6en the
foresight to introduce in evidence all of
the missing documentsabovementioned.
Cases filed before this Court are
litigated de novo. This means that party
litigants should endeavor to prove at the
first instance every minute aspect of
their cases strictly in accordance with
the 1ules of Court, most especially on
documentary evidence." /pp. #@-2*,
1ollo0
Ta' refunds are in the nature of ta' e'emptions.
It is regarded as in derogation of the sovereign
authority, and should be construed in strictissimi
Duris against the person or entity claiming the
e'emption. The ta'payer who claims for
e'emption must ustify his claim by the clearest
grant of organic or statute law and should not be
permitted to stand on vague implications /.siatic
4etroleum Co. v. 9lanes, 2$ 4hil. 2??8 "orthern
4hil. Tobacco Corp. v. Mun. of .goo, 9a Cnion,
#, AC1. #-28 1eagan v. Commissioner, #-
AC1. $?%8 .sturias Augar Central, Inc. v.
Commissioner of Customs, *$ AC1. ?,@8
Bavao 9ight and 4ower Co., Inc. v.
Commissioner of Customs, 22 AC1. ,**0.
There is no cogent reason to fault the CT.7s
conclusion that the A<:7s certificate is "self-
destructive", as it finds comfort in the very A<:7s
stand, as follows>
"It is our understanding that the above
procedure are sufficient for the purpose
of the Company. ;e ma6e no
presentation regarding the sufficiency of
these procedures for such purpose. ;e
did not compare the total of the input ta'
claimed each (uarter against the
pertinent :.T returns and boo6s of
accounts. The above procedures do not
constitute an audit made in accordance
with generally accepted auditing
standards. .ccordingly, we do not
e'press an opinion on the company7s
claim for input :.T refund or credit. 5ad
we performed additional procedures, or
had we made an audit in accordance
with generally accepted auditing
standards, other matters might have
come to our attention that we would
have accordingly reported on."
The A<:7s "disclaimer of opinion" carries much
weight as it is petitioner7s independent auditor.
Indeed, A<: e'pressed that it "did not compare
the total of the input ta' claimed each (uarter
against the :.T returns and boo6s of
accounts."
#%
Moving on to the 4etition in <.1. "o. ,2%@?#,
concerning the input :.T of petitioner corporation on its
&ero-rated sales in the second, third, and fourth (uarters
of ,$$-, the appellate court li6ewise found that petitioner
corporation failed to sufficiently establish its claims.
.lready disregarding the declarations made by the Court
of .ppeals on its erroneous application of 1evenue
1egulations "o. *-%%, (uoted hereunder is the rest of
the findings of the appellate court after evaluating the
evidence submitted in accordance with the re(uirements
under 1evenue 1egulations "o. #-%% P
The Aecretary of Finance validly adopted
1evenue 1egulations K"o.L ' ' ' #-$% pursuant
to Aec. *2+ of the "ational Internal 1evenue
Code, which recogni&ed his power to
"promulgate all needful rules and regulations for
the effective enforcement of the provisions of
this Code." Thus, it is incumbent upon a
ta'payer intending to file a claim for refund of
input :.Ts or the issuance of a ta' credit
certificate with the 3I1 ' ' ' to prove sales to
such buyers as re(uired by 1evenue
1egulations "o. #-$%. 9ogically, the same
evidence should be presented in support of an
action to recover ta'es which have been paid.
' ' ' "either has Kherein petitioner corporationL
presented sales invoices or receipts showing
sales of gold, copper concentrates, and pyrite to
the C34, K4.A.1L, and K45I945!AL,
respectively, and the dates and amounts of the
same, nor any evidence of actual receipt by the
said buyers of the mineral products. It merely
presented receipts of purchases from suppliers
on which input :.Ts were allegedly paid. Thus,
the Court of Ta' .ppeals correctly denied the
claims for refund of input :.Ts or the issuance
of ta' credit certificates of petitioner
KcorporationL. Aignificantly, in the resolution,
dated @ )une *---, this Court directed the
parties to file memoranda discussing, among
others, the submission of proof for "its
Kpetitioner7sL sales of gold, copper concentrates,
and pyrite to buyers." "evertheless, the parties,
including the petitioner, failed to address this
issue, thereby necessitating the affirmance of
the ruling of the Court of Ta' .ppeals on this
point.
#$
This Court is, therefore, bound by the foregoing facts, as
found by the appellate court, for well-settled is the
general rule that the urisdiction of this Court in cases
brought before it from the Court of .ppeals, by way of a
4etition for 1eview on Certiorari under 1ule 2+ of the
1evised 1ules of Court, is limited to reviewing or
revising errors of law8 findings of fact of the latter are
conclusive.
2-
This Court is not a trier of facts. It is not its
function to review, e'amine and evaluate or weigh the
probative value of the evidence presented.
2,
The distinction between a (uestion of law and a (uestion
of fact is clear-cut. It has been held that "KtLhere is a
(uestion of law in a given case when the doubt or
difference arises as to what the law is on a certain state
of facts8 there is a (uestion of fact when the doubt or
difference arises as to the truth or falsehood of alleged
facts."
2*
;hether petitioner corporation actually made &ero-rated
sales8 whether it paid input :.T on these sales in the
amount it had declared in its returns8 whether all the
input :.T subect of its applications for refundOcredit can
be attributed to its &ero-rated sales8 and whether it had
not previously applied the input :.T against its output
:.T liabilities, are all (uestions of fact which could only
be answered after reviewing, e'amining, evaluating, or
weighing the probative value of the evidence it
presented, and which this Court does not have the
urisdiction to do in the present 4etitions for 1eview
on Certiorari under 1ule 2+ of the revised 1ules of
Court.
<ranting that there are e'ceptions to the general rule,
when this Court loo6ed into (uestions of fact under
particular circumstances,
2#
none of these e'ist in the
instant cases. The Court of .ppeals, in both cases,
found a dearth of evidence to support the claims for
refundOcredit of the input :.T of petitioner corporation,
and the records bear out this finding. 4etitioner
corporation itself cannot dispute its non-compliance with
the re(uirements set forth in 1evenue 1egulations "o.
#-%% and CT. Circular "o. ,-$+, as amended. It
concentrated its arguments on its assertion that the
substantiation re(uirements under 1evenue 1egulations
"o. *-%% should not have applied to it, while being
conspicuously silent on the evidentiary re(uirements
mandated by other relevant regulations.
Reopening o( cases0"ol!ing o( ne/ trial *e(ore t"e
C+,
This Court now faces the final issue of whether the
prayer of petitioner corporation for the re-opening of its
cases or holding of new trial before the CT. for the
reception of additional evidence, may be granted.
4etitioner corporation prays that the Court e'ercise its
discretion on the matter in its favor, consistent with the
policy that rules of procedure be liberally construed in
pursuance of substantive ustice.
This Court, however, cannot grant the prayer of
petitioner corporation.
.n aggrieved party may file a motion for new trial or
reconsideration of a udgment already rendered in
accordance with Aection ,, 1ule #@ of the revised 1ules
of Court, which provides P
ADCTI!" ,. &rounds of and period for filing
motion for ne trial or reconsideration. P ;ithin
the period for ta6ing an appeal, the aggrieved
party may move the trial court to set aside the
udgment or final order and grant a new trial for
one or more of the following causes materially
affecting the substantial rights of said party>
/a0 Fraud, accident, mista6e or e'cusable
negligence which ordinary prudence could not
have guarded against and by reason of which
such aggrieved party has probably been
impaired in his rights8 or
/b0 "ewly discovered evidence, which he could
not, with reasonable diligence, have discovered
and produced at the trial, and which if presented
would probably alter the result.
;ithin the same period, the aggrieved party may
also move fore reconsideration upon the
grounds that the damages awarded are
e'cessive, that the evidence is insufficient to
ustify the decision or final order, or that the
decision or final order is contrary to law.
In <.1. "o. ,2%@?#, petitioner corporation attempts to
ustify its motion for the re-opening of its cases andOor
holding of new trial before the CT. by contending that
the "KfLailure of its counsel to adduce the necessary
evidence should be construed as e'cusable negligence
or mista6e which should constitute basis for such re-
opening of trial as for a new trial, as counsel was of the
belief that such evidence was rendered unnecessary by
the presentation of unrebutted evidence indicating that
respondent KCommissionerL has ac6nowledged the sale
of KsicL 4.A.1 and K45I945!AL to be &ero-
rated."
22
The CT. denied such motion on the ground
that it was not accompanied by an affidavit of merit as
re(uired by Aection *, 1ule #@ of the revised 1ules of
Court. The Court of .ppeals affirmed the denial of the
motion, but apart from this technical defect, it also found
that there was no ustification to grant the same.
!n the matter of the denial of the motion of the petitioner
corporation for the re-opening of its cases andOor holding
of new trial based on the technicality that said motion
was unaccompanied by an affidavit of merit, this Court
rules in favor of the petitioner corporation. The facts
which should otherwise be set forth in a separate
affidavit of merit may, with e(ual effect, be alleged and
incorporated in the motion itself8 and this will be deemed
a substantial compliance with the formal re(uirements of
the law, provided, of course, that the movant, or other
individual with personal 6nowledge of the facts, ta6e
oath as to the truth thereof, in effect converting the entire
motion for new trial into an affidavit.
2+
The motion of
petitioner corporation was prepared and verified by its
counsel, and since the ground for the motion was
premised on said counsel7s e'cusable negligence or
mista6e, then the obvious conclusion is that he had
personal 6nowledge of the facts relating to such
negligence or mista6e. 5ence, it can be said that the
motion of petitioner corporation for the re-opening of its
cases andOor holding of new trial was in substantial
compliance with the formal re(uirements of the revised
1ules of Court.
Dven so, this Court finds no sufficient ground for granting
the motion of petitioner corporation for the re-opening of
its cases andOor holding of new trial.
In <.1. "o. ,2,,-2, petitioner corporation invo6es the
1esolution,
2?
dated *- )uly ,$$%, by the CT. in another
case, CT. Case "o. +*$?, involving the claim of
petitioner corporation for refundOcredit of input :.T for
the third (uarter of ,$$#. The said 1esolution allowed
the re-opening of CT. Case "o. +*$?, earlier dismissed
by the CT., to give the petitioner corporation the
opportunity to present the missing e'port documents.
The rule that the grant or denial of motions for new trial
rests on the discretion of the trial court,
2@
may li6ewise
be e'tended to the CT.. ;hen the denial of the motion
rests upon the discretion of a lower court, this Court will
not interfere with its e'ercise, unless there is proof of
grave abuse thereof.
2%
That the CT. granted the motion for re-opening of one
case for the presentation of additional evidence and, yet,
deny a similar motion in another case filed by the same
party, does not necessarily demonstrate grave abuse of
discretion or arbitrariness on the part of the CT..
.lthough the cases involve identical parties, the causes
of action and the evidence to support the same can very
well be different. .s can be gleaned from the 1esolution,
dated *- )uly ,$$%, in CT. Case "o. +*$?, petitioner
corporation was claiming refundOcredit of the input :.T
on its &ero-rated sales, consisting of actual e'port sales,
to Mitsubishi Metal Corporation in To6yo, )apan. The
CT. too6 into account the presentation by petitioner
corporation of inward remittances of its e'port sales for
the (uarter involved, its Aupply Contract with Mitsubishi
Metal Corporation, its ,$$# .nnual 1eport showing its
sales to the said foreign corporation, and its application
for refund. In contrast, the present 4etitions involve the
claims of petitioner corporation for refundOcredit of the
input :.T on its purchases of capital goods and on
its effectively &ero-rated sales to C34 and D4J.-
registered enterprises 4.A.1 and 45I945!A for the
second, third, and fourth (uarters of ,$$- and first
(uarter of ,$$*. There being a difference as to the
bases of the claims of petitioner corporation for
refundOcredit of input :.T in CT. Case "o. +$*? and in
the 4etitions at bar, then, there are resulting variances
as to the evidence re(uired to support them.
Moreover, the very same 1esolution, dated *- )uly
,$$%, in CT. Case "o. +*$?, invo6ed by petitioner
corporation, emphasi&es that the decision of the CT. to
allow petitioner corporation to present evidence "is
applicable pro hac vice or in this occasion only as it is
the finding of Kthe CT.L that petitioner KcorporationL has
established a few of the aforementioned material
points regarding the possible e'istence of the e'port
documents together with the prior and succeeding
returns for the (uarters involved, ' ' '" KDmphasis
supplied.L Therefore, the CT., in the present cases,
cannot be bound by its ruling in CT. Case "o. +*$?,
when these cases do not involve the e'act same
circumstances that compelled it to grant the motion of
petitioner corporation for re-opening of CT. Case "o.
+*$?.
Finally, assuming for the sa6e of argument that the non-
presentation of the re(uired documents was due to the
fault of the counsel of petitioner corporation, this Court
finds that it does not constitute e'cusable negligence or
mista6e which would warrant the re-opening of the cases
andOor holding of new trial.
Cnder Aection ,, 1ule #@ of the 1evised 1ules of Court,
the "negligence" must be e'cusable and generally
imputable to the party because if it is imputable to the
counsel, it is binding on the client. To follow a contrary
rule and allow a party to disown his counsel7s conduct
would render proceedings indefinite, tentative, and
subect to re-opening by the mere subterfuge of
replacing the counsel. ;hat the aggrieved litigant should
do is see6 administrative sanctions against the erring
counsel and not as6 for the reversal of the court7s
ruling.
2$
.s elucidated by this Court in another case,
+-
the
general rule is that the client is bound by the action of his
counsel in the conduct of his case and he cannot
therefore complain that the result of the litigation might
have been otherwise had his counsel proceeded
differently. It has been held time and again that blunders
and mista6es made in the conduct of the proceedings in
the trial court as a result of the ignorance, ine'perience
or incompetence of counsel do not (ualify as a ground
for new trial. If such were to be admitted as valid
reasons for re-opening cases, there would never be an
end to litigation so long as a new counsel could be
employed to allege and show that the prior counsel had
not been sufficiently diligent, e'perienced or learned.
Moreover, negligence, to be "e'cusable," must be one
which ordinary diligence and prudence could not have
guarded against.
+,
1evenue 1egulations "o. #-%%, which
was issued on ,+ February ,$%%, had been in effect
more than two years prior to the filing by petitioner
corporation of its earliest application for refundOcredit of
input :.T involved herein on *, .ugust ,$$-. CT.
Circular "o. ,-$+ was issued only on *+ )anuary ,$$+,
after petitioner corporation had filed its 4etitions before
the CT., but still during the pendency of the cases of
petitioner corporation before the ta' court. The counsel
of petitioner corporation does not allege ignorance of the
foregoing administrative regulation and ta' court circular,
only that he no longer deemed it necessary to present
the documents re(uired therein because of the
presentation of alleged unrebutted evidence of the &ero-
rated sales of petitioner corporation. It was a udgment
call made by the counsel as to which evidence to
present in support of his client7s cause, later proved to
be unwise, but not necessarily negligent.
"either is there any merit in the contention of petitioner
corporation that the non-presentation of the re(uired
documentary evidence was due to the e'cusable
mista6e of its counsel, a ground under Aection ,, 1ule
#@ of the revised 1ules of Court for the grant of a new
trial. "Mista6e," as it is referred to in the said rule, must
be a mista6e of fact, not of law, which relates to the
case.
+*
In the present case, the supposed mista6e made
by the counsel of petitioner corporation is one of law, for
it was grounded on his interpretation and evaluation that
1evenue 1egulations "o. #-%% and CT. Circular "o. ,-
$+, as amended, did not apply to his client7s cases and
that there was no need to comply with the documentary
re(uirements set forth therein. .nd although the counsel
of petitioner corporation advocated an erroneous legal
position, the effects thereof, which did not amount to a
deprivation of his client7s right to be heard, must bind
petitioner corporation. The (uestion is not whether
petitioner corporation succeeded in establishing its
interests, but whether it had the opportunity to present its
side.
+#
3esides, litigation is a not a "trial and error" proceeding.
. party who moves for a new trial on the ground of
mista6e must show that ordinary prudence could not
have guarded against it. . new trial is not a refuge for
the obstinate.
+2
!rdinary prudence in these cases would
have dictated the presentation of all available evidence
that would have supported the claims for refundOcredit of
input :.T of petitioner corporation. ;ithout sound legal
basis, counsel for petitioner corporation concluded that
1evenue 1egulations "o. #-%%, and later on, CT.
Circular "o. ,-$+, as amended, did not apply to its
client7s claims. The obstinacy of petitioner corporation
and its counsel is demonstrated in their failure, nay,
refusal, to comply with the appropriate administrative
regulations and ta' court circular in pursuing the claims
for refundOcredit, now subect of <.1. "os. ,2,,-2 and
,2%@?#, even though these were separately instituted in
a span of more than two years. It is also evident in the
failure of petitioner corporation to address the issue and
to present additional evidence despite being given the
opportunity to do so by the Court of .ppeals. .s pointed
out by the appellate court, in its Becision, dated ,+
Aeptember *---, in C.-<.1. A4 "o. 2?@,% P
' ' ' Aignificantly, in the resolution, dated @
)une *---, this Court directed the parties to file
memoranda discussing, among others, the
submission of proof for "its Kpetitioner7sL sales of
gold, copper concentrates, and pyrite to buyers."
"evertheless, the parties, including the
petitioner, failed to address this issue, thereby
necessitating the affirmance of the ruling of the
Court of Ta' .ppeals on this point.
++
'u&&ar)
5ence, although this Court agreed with the petitioner
corporation that the two-year prescriptive period for the
filing of claims for refundOcredit of input :.T must be
counted from the date of filing of the (uarterly :.T
return, and that sales to D4J.-registered enterprises
operating within economic processing &ones were
effectively &ero-rated and were not covered by 1evenue
1egulations "o. *-%%, it still denies the claims of
petitioner corporation for refund of its input :.T on its
purchases of capital goods and effectively &ero-rated
sales during the second, third, and fourth (uarters of
,$$- and the first (uarter of ,$$*, for not being
established and substantiated by appropriate and
sufficient evidence. 4etitioner corporation is also not
entitled to the re-opening of its cases andOor holding of
new trial since the non-presentation of the re(uired
documentary evidence before the 3I1 and the CT. by
its counsel does not constitute e'cusable negligence or
mista6e as contemplated in Aection ,, 1ule #@ of the
revised 1ules of Court.
/HERE"RE, premises considered, the instant
4etitions for 1eview are hereby !ENIE!, and the
Becisions, dated ? )uly ,$$$ and ,+ Aeptember *---, of
the Court of .ppeals in C.-<.1. A4 "os. 2@?-@ and
2?@,%, respectively, are hereby A""IRME!. Costs
against petitioner.
3nares-Santiago# Chairperson# Austria--artinez#
2achura# %%.# concur.
G.R. No. L-22794 S%&(%-.%' 15, 1967
CMMISSINER " INTERNAL
REVENUE, petitioner,
vs.
MANUEL B. PINE!A, a+ o*% o5 (6% 6%)'+ o5 3%,%a+%3
ATANASI PINE!A, respondent.
'ffice of the Solicitor &eneral for petitioner.
-anuel +. (ineda for and in his on $ehalf as
respondent.

BENG0N, 1.P., J.:
!n May *#, ,$2+ .tanasio 4ineda died, survived by his
wife, Felicisima 3agtas, and ,+ children, the eldest of
whom is Manuel 3. 4ineda, a lawyer. Dstate
proceedings were had in the Court of First Instance of
Manila /Case "o. @,,*$0 wherein the surviving widow
was appointed administratri'. The estate was divided
among and awarded to the heirs and the proceedings
terminated on )une %, ,$2%. Manuel 3. 4ineda7s share
amounted to about 4*,+--.--.
.fter the estate proceedings were closed, the 3ureau of
Internal 1evenue investigated the income ta' liability of
the estate for the years ,$2+, ,$2?, ,$2@ and ,$2% and
it found that the corresponding income ta' returns were
not filed. Thereupon, the representative of the Collector
of Internal 1evenue filed said returns for the estate on
the basis of information and data obtained from the
aforesaid estate proceedings and issued an assessment
for the following>
,. Beficiency income ta'
,$2
+
4,#+.%#
,$2
?
2#?.$+
,$2
@
,,*-?.$, 4,,@@$.?$
.dd> +N surcharge %%.$%
,N monthly interest from
"ovember #-, ,$+# to .pril
,+, ,$+@ @*-.@@
Compromise for late filing %-.--
Compromise for late
payment 2-.--
Total amount due
4*,@-@.22
QQQQQQQQQ
QQ
*. .dditional residence ta' for ,$2+
4,2.+-
QQQQQQQQQ
QQ
#. 1eal Dstate dealer7s ta' for the
fourth (uarter of ,$2? and the
whole year of ,$2@
4*-@.+-
QQQQQQQQQ
QQ
Manuel 3. 4ineda, who received the assessment,
contested the same. Aubse(uently, he appealed to the
Court of Ta' .ppeals alleging that he was appealing
"only that proportionate part or portion pertaining to him
as one of the heirs."
.fter hearing the parties, the Court of Ta' .ppeals
rendered udgment reversing the decision of the
Commissioner on the ground that his right to assess and
collect the ta' has prescribed. The Commissioner
appealed and this Court affirmed the findings of the Ta'
Court in respect to the assessment for income ta' for the
year ,$2@ but held that the right to assess and collect
the ta'es for ,$2+ and ,$2? has not prescribed. For
,$2+ and ,$2? the returns were filed on .ugust *2,
,$+#8 assessments for both ta'able years were made
within five years therefrom or on !ctober ,$, ,$+#8 and
the action to collect the ta' was filed within five years
from the latter date, on .ugust @, ,$+@. For ta'able year
,$2@, however, the return was filed on March ,, ,$2%8
the assessment was made on !ctober ,$, ,$+#, more
than five years from the date the return was filed8 hence,
the right to assess income ta' for ,$2@ had prescribed.
.ccordingly, ;e remanded the case to the Ta' Court for
further appropriate proceedings.
,
In the Ta' Court, the parties submitted the case for
decision without additional evidence.
!n "ovember *$, ,$?# the Court of Ta' .ppeals
rendered udgment holding Manuel 3. 4ineda liable for
the payment corresponding to his share of the following
ta'es>
Beficiency income ta'
,$2+
4,#+.%
#
,$2? 2#?.$+
1eal estate dealer7s
fi'ed ta' 2th (uarter of
,$2? and whole year of
,$2@
4,%@.+
-
The Commissioner of Internal 1evenue has appealed to
Cs and has proposed to hold Manuel 3. 4ineda liable for
the payment of all the ta'es found by the Ta' Court to be
due from the estate in the total amount of 4@?-.*%
instead of only for the amount of ta'es corresponding to
his share in the estate.:aphEl.nFt
Manuel 3. 4ineda opposes the proposition on the
ground that as an heir he is liable for unpaid income ta'
due the estate only up to the e'tent of and in proportion
to any share he received. 5e relies on &overnment of
the (hilippine 5slands v. (amintuan
*
where ;e held that
"after the partition of an estate, heirs and distributees are
liable individually for the payment of all lawful
outstanding claims against the estate in proportion to the
amount or value of the property they have respectively
received from the estate."
;e hold that the <overnment can re(uire Manuel 3.
4ineda to pay the full amount of the ta'es assessed.
4ineda is liable for the assessment as an heir and as a
holder-transferee of property belonging to the
estateOta'payer. .s an heir he is individually answerable
for the part of the ta' proportionate to the share he
received from the inheritance.
#
5is liability, however,
cannot e'ceed the amount of his share.
2
.s a holder of property belonging to the estate, 4ineda is
liable for he ta' up to the amount of the property in his
possession. The reason is that the <overnment has a
lien on the 4*,+--.-- received by him from the estate as
his share in the inheritance, for unpaid income
ta'es
2a
for which said estate is liable, pursuant to the last
paragraph of Aection #,+ of the Ta' Code, which we
(uote hereunder>
If any person, corporation, partnership, oint-
account /cuenta en participacion0, association,
or insurance company liable to pay the income
ta', neglects or refuses to pay the same after
demand, the amount shall be a lien in favor of
the <overnment of the 4hilippines from the time
when the assessment was made by the
Commissioner of Internal 1evenue until paid
with interest, penalties, and costs that may
accrue in addition thereto upon all property and
rights to property belonging to the ta'payer> . . .
3y virtue of such lien, the <overnment has the right to
subect the property in 4ineda7s possession, i.e., the
4*,+--.--, to satisfy the income ta' assessment in the
sum of 4@?-.*%. .fter such payment, 4ineda will have a
right of contribution from his co-heirs,
+
to achieve an
adustment of the proper share of each heir in the
distributable estate.
.ll told, the <overnment has two ways of collecting the
ta' in (uestion. !ne, by going after all the heirs and
collecting from each one of them the amount of the ta'
proportionate to the inheritance received. This remedy
was adopted in &overnment of the (hilippine 5slands v.
(amintuan, supra. In said case, the <overnment filed an
action against all the heirs for the collection of the ta'.
This action rests on the concept that hereditary property
consists only of that part which remains after the
settlement of all lawful claims against the estate, for the
settlement of which the entire estate is first liable.
?
The
reason why in case suit is filed against all the heirs the
ta' due from the estate is levied proportionately against
them is to achieve thereby two results> first, payment of
the ta'8 and second, adustment of the shares of each
heir in the distributed estate as lessened $y the tax.
.nother remedy, pursuant to the lien created by Aection
#,+ of the Ta' Code upon all property and rights to
property belonging to the ta'payer for unpaid income
ta', is by subecting said property of the estate which is
in the hands of an heir or transferee to the payment of
the ta' due, the estate. This second remedy is the very
avenue the <overnment too6 in this case to collect the
ta'. The 3ureau of Internal 1evenue should be given, in
instances li6e the case at bar, the necessary discretion
to avail itself of the most e'peditious way to collect the
ta' as may be envisioned in the particular provision of
the Ta' Code above (uoted, because ta'es are the
lifeblood of government and their prompt and certain
availability is an imperious need.
@
.nd as afore-stated in
this case the suit see6s to achieve only one obective>
payment of the ta'. The adustment of the respective
shares due to the heirs from the inheritance, as lessened
by the ta', is left to await the suit for contribution by the
heir from whom the <overnment recovered said ta'.
;5D1DF!1D, the decision appealed from is modified.
Manuel 3. 4ineda is hereby ordered to pay to the
Commissioner of Internal 1evenue the sum of 4@?-.*%
as deficiency income ta' for ,$2+ and ,$2?, and real
estate dealer7s fi'ed ta' for the fourth (uarter of ,$2?
and for the whole year ,$2@, without preudice to his
right of contribution for his co-heirs. "o costs. Ao
ordered.
Concepcion# C.%.# *eyes# %.+.,.# 1izon# -akalintal#
4aldivar# Sanchez# Castro# Angeles and Fernando# %%.#
concur.
G.R. No. 112:24 1a*2a'y 28, 1999
PHILIPPINE BAN< "
CMMUNICATINS, petitioner,
vs.
CMMISSINER " INTERNAL REVENUE, CURT
" TA= APPEALS a*3 CURT "
APPEALS, respondent.

>UISUMBING, J.:
This petition for review assails the 1esolution
1
of the
Court of .ppeals dated Aeptember **,
,$$# affirming the Becision
2
and a 1esolution
9
of the
Court !f Ta' .ppeals which denied the claims of the
petitioner for ta' refund and ta' credits, anddisposing as
follows>
I" :ID; !F .99, T5D F!1D<!I"<,
the instant petition for review, is
BD"IDB due course. The Becision of
the Court of Ta' .ppeals dated May *-,
,$$# and its resolution dated )uly *-,
,$$#, are hereby .FFI1MDB in toto.
A! !1BD1DB.
4
The Court of Ta' .ppeals earlier ruled as follows>
;5D1DF!1D, 4etitioner7s claim for
refundOta' credits of overpaid income
ta' for ,$%+ in the amount of
4+,*$$,@2$.$+ is hereby denied for
having been filed beyond the
reglementary period. The ,$%? claim for
refund amounting to 4*#2,-@@.?$ is
li6ewise denied since petitioner has
opted and in all li6elihood automatically
credited the same to the succeeding
year. The petition for review is
dismissed for lac6 of merit.
A! !1BD1DB.
5
The facts on record show the antecedent circumstances
pertinent to this case.
4etitioner, 4hilippine 3an6 of Communications /43Com0,
a commercial ban6ing corporation duly organi&ed under
4hilippine laws, filed its (uarterly income ta' returns for
the first and second (uarters of ,$%+, reported profits,
and paid the total income ta' of 4+,-,?,$+2.--. The
ta'es due were settled by applying 43Com7s ta' credit
memos and accordingly, the 3ureau of Internal 1evenue
/3I10 issued Ta' Bebit Memo "os. -@2?-%+ and -@2@-
%+ for 4#,2-,,@-,.-- and 4,,?,+,*+#.--, respectively.
Aubse(uently, however, 43Com suffered losses so that
when it filed its .nnual Income Ta' 1eturns for the year-
ended Becember #,, ,$%?, the petitioner li6ewise
reported a net loss of 4,2,,*$,?-*.--, and thus
declared no ta' payable for the year.
3ut during these two years, 43Com earned rental
income from leased properties. The lessees withheld
and remitted to the 3I1 withholding creditable ta'es of
4*%*,@$+.+- in ,$%+ and 4*#2,-@@.?$ in ,$%?.
!n .ugust @, ,$%@, petitioner re(uested the
Commissioner of Internal 1evenue, among others, for a
ta' credit of 4+,-,?,$+2.-- representing the
overpayment of ta'es in the first and second (uarters of
,$%+.
Thereafter, on )uly *+, ,$%%, petitioner filed a claim for
refund of creditable ta'es withheld by their lessees from
property rentals in ,$%+ for 4*%*,@$+.+- and in ,$%? for
4*#2,-@@.?$.
4ending the investigation of the respondent
Commissioner of Internal 1evenue, petitioner instituted a
4etition for 1eview on "ovember ,%, ,$%% before the
Court of Ta' .ppeals /CT.0. The petition was doc6eted
as CT. Case "o. 2#-$ entitled> "4hilippine 3an6 of
Communications vs. Commissioner of Internal
1evenue."
The losses petitioner incurred as per the summary of
petitioner7s claims for refund and ta' credit for ,$%+ and
,$%?, filed before the Court of Ta' .ppeals, are as
follows>
,$%+ ,$%?
=== ===
"et Income /9oss0 /4*+,#,@,*%%.--0
/4,2,,*$,?-*.--0
Ta' Bue "I9 "I9
Iuarterly ta'.
4ayments Made +,-,?,$+2.-- =
Ta' ;ithheld at Aource *%*,@$+.+-
*#2,-@@.?$
======== =======
D'cess Ta' 4ayments 4+,*$$,@2$.+-?
4*#2,-@@.?$
QQQQQQQQQQQQQQQ QQQQQQQQQQQQQ
? CT.7s decision
reflects 43Com7s ,$%+
ta' claim as
4+,*$$,@2$.$+. . forty
five centavo difference
was noted.
!n May *-, ,$$#, the CT. rendered a decision which,
as stated on the outset, denied the re(uest of petitioner
for a ta' refund or credit in the sum amount of
4+,*$$,@2$.$+, on the ground that it was filed beyond
the two-year reglementary period provided for by law.
The petitioner7s claim for refund in ,$%? amounting to
4*#2,-@@.?$ was li6ewise denied on the assumption that
it was automatically credited by 43Com against its ta'
payment in the succeeding year.
!n )une **, ,$$#, petitioner filed a Motion for
1econsideration of the CT.7s decision but the same was
denied due course for lac6 of merit.
6
Thereafter, 43Com filed a petition for review of said
decision and resolution of the CT. with the Court of
.ppeals. 5owever on Aeptember **, ,$$#, the Court of
.ppeals affirmed in toto the CT.7s resolution dated )uly
*-, ,$$#. 5ence this petition now before us.
The issues raised by the petitioner are>
I. ;hether ta'payer
43Com = which relied
in good faith on the
formal assurances of
3I1 in 1MC "o. @-%+
and did not immediately
file with the CT. a
petition for review
as6ing for the refundOta'
credit of its ,$%+-%?
e'cess (uarterly income
ta' payments = can be
preudiced by the
subse(uent 3I1
reection, applied
retroactivity, of its
assurances in 1MC "o.
@-%+ that the
prescriptive period for
the refundOta' credit of
e'cess (uarterly income
ta' payments is not two
years but ten /,-0.
7
II. ;hether the Court of
.ppeals seriously erred
in affirming the CT.
decision which denied
43Com7s claim for the
refund of 4*#2,-@@.?$
income ta' overpaid in
,$%? on the mere
speculation, without
proof, that there were
ta'es due in ,$%@ and
that 43Com availed of
ta'-crediting that year.
8
Aimply stated, the main (uestion is> ;hether or not the
Court of .ppeals erred in denying the plea for ta' refund
or ta' credits on the ground of prescription, despite
petitioner7s reliance on 1MC "o. @-%+, changing the
prescriptive period of two years to ten yearsM
4etitioner argues that its claims for refund and ta'
credits are not yet barred by prescription relying on the
applicability of 1evenue Memorandum Circular "o. @-%+
issued on .pril ,, ,$%+. The circular states that overpaid
income ta'es are not covered by the two-year
prescriptive period under the ta' Code and that
ta'payers may claim refund or ta' credits for the e'cess
(uarterly income ta' with the 3I1 within ten /,-0 years
under .rticle ,,22 of the Civil Code. The pertinent
portions of the circular reads>
1D:D"CD MDM!1."BCM
CI1CC9.1 "!. @-%+
AC3)D
CT>
41!CD
AAI"<
!F
1DFC"
B !1
T.H
C1DBI
T !F
DHCDA
A
C!14
!1.TD
I"C!M
D T.H
1DAC9
TI"<
F1!M
T5D
FI9I"<
!F
T5D
FI".9
.B)CA
TMD"T
1DTC1
".
T!> .ll Internal 1evenue !fficers and
!thers Concerned.
Aec. %+ .nd %? !f the "ational Internal
1evenue Code provide>
''' ''' '''
The foregoing provisions are
implemented by Aection @ of 1evenue
1egulations "os. ,--@@ which provide8
''' ''' '''
It has been observed, however, that
because of the e'cess ta' payments,
corporations file claims for recovery of
overpaid income ta' with the Court of
Ta' .ppeals within the two-year period
from the date of payment, in accordance
with sections *$* and *$+ of the
"ational Internal 1evenue Code. It is
obvious that the filing of the case in
court is to preserve the udicial right of
the corporation to claim the refund or ta'
credit.
It should he noted, however, that this is
not a case of erroneously or illegally
paid ta' under the provisions of
Aections *$* and *$+ of the Ta' Code.
In the above provision of the
1egulations the corporation may
re(uest for the refund of the overpaid
income ta' or claim for automatic ta'
credit. To insure prompt action on
corporate annual income ta' returns
showing refundable amounts arising
from overpaid (uarterly income ta'es,
this !ffice has promulgated 1evenue
Memorandum !rder "o. #*-@? dated
)une ,,, ,$@?, containing the procedure
in processing said returns. Cnder these
procedures, the returns are merely pre-
audited which consist mainly of
chec6ing mathematical accuracy of the
figures of the return. .fter which, the
refund or ta' credit is granted, and, this
procedure was adopted to facilitate
immediate action on cases li6e this.
In this regard, therefore, there is no
need to file petitions for review in the
Court of Ta' .ppeals in order to
preserve the right to claim refund or ta'
credit the two year period. .s already
stated, actions hereon by the 3ureau
are immediate after only a cursory pre-
audit of the income ta' returns.
Moreover, a ta'payer may recover from
the 3ureau of Internal 1evenue e'cess
income ta' paid under the provisions of
Aection %? of the Ta' Code within ,-
years from the date of payment
considering that it is an obligation
created by law /.rticle ,,22 of the Civil
Code0.
9
/Dmphasis supplied.0
4etitioner argues that the government is barred from
asserting a position contrary to its declared circular if it
would result to inustice to ta'payers. Citing A+S C+2
+roadcasting Corporation vs. Court of )ax
Appeals
1:
petitioner claims that rulings or circulars
promulgated by the Commissioner of Internal 1evenue
have no retroactive effect if it would be preudicial to
ta'payers, In .3A-C3" case, the Court held that the
government is precluded from adopting a position
inconsistent with one previously ta6en where inustice
would result therefrom or where there has been a
misrepresentation to the ta'payer.
4etitioner contends that Aec. *2? of the "ational Internal
1evenue Code e'plicitly provides for this rules as
follows>
Aec. *2? 2on-retroactivity of rulings
G .ny revocation, modification or
reversal of any of the rules and
regulations promulgated in accordance
with the preceding section or any of the
rulings or circulars promulgated by the
Commissioner shall not be given
retroactive application if the revocation,
modification or reversal will be
preudicial to the ta'payers e'cept in the
following cases>
a0.
where
the
ta'paye
r
delibera
tely
misstat
es or
omits
material
facts
from his
return
or in
any
docume
nt
re(uire
d of him
by the
3ureau
of
Internal
1evenu
e8
b0.
where
the
facts
subse(
uently
gathere
d by the
3ureau
of
Internal
1evenu
e are
material
ly
differen
t from
the
facts on
which
the
ruling is
based8
c0.
where
the
ta'paye
r acted
in bad
faith.
1espondent Commissioner of Internal 1evenue, through
Aolicitor <eneral, argues that the two-year prescriptive
period for filing ta' cases in court concerning income ta'
payments of Corporations is rec6oned from the date of
filing the Final .dusted Income Ta' 1eturn, which is
generally done on .pril ,+ following the close of the
calendar year. .s precedents, respondent
Commissioner cited cases which adhered to this
principle, to wit ACC*A 5nvestments Corp. vs. Court of
Appeals# et al.#
11
and Commissioner of 5nternal
*evenue vs. )-6 Sales, 5nc., et al..
12
1espondent
Commissioner also states that since the Final .dusted
Income Ta' 1eturn of the petitioner for the ta'able year
,$%+ was supposed to be filed on .pril ,+, ,$%?, the
latter had only until .pril ,+, ,$%% to see6 relief from the
court. Further, respondent Commissioner stresses that
when the petitioner filed the case before the CT. on
"ovember ,%, ,$%%, the same was filed beyond the time
fi'ed by law, and such failure is fatal to petitioner7s cause
of action.
.fter a careful study of the records and applicable
urisprudence on the matter, we find that, contrary to the
petitioner7s contention, the rela'ation of revenue
regulations by 1MC @-%+ is not warranted as it
disregards the two-year prescriptive period set by law.
3asic is the principle that "ta'es are the lifeblood of the
nation." The primary purpose is to generate funds for the
Atate to finance the needs of the citi&enry and to
advance the common weal.
19
Bue process of law under
the Constitution does not re(uire udicial proceedings in
ta' cases. This must necessarily be so because it is
upon ta'ation that the government chiefly relies to obtain
the means to carry on its operations and it is of utmost
importance that the modes adopted to enforce the
collection of ta'es levied should be summary and
interfered with as little as possible.
14
From the same perspective, claims for refund or ta'
credit should be e'ercised within the time fi'ed by law
because the 3I1 being an administrative body enforced
to collect ta'es, its functions should not be unduly
delayed or hampered by incidental matters.
Aec. *#- of the "ational Internal 1evenue Code /"I1C0
of ,$@@ /now Aec. **$, "I1C of ,$$@0 provides for the
prescriptive period for filing a court proceeding for the
recovery of ta' erroneously or illegally collected, viz.>
Aec. *#-. *ecovery of tax erroneously
or illegally collected. = "o suit or
proceeding shall be maintained in any
court for the recovery of any national
internal revenue ta' hereafter alleged to
have been erroneously or illegally
assessed or collected, or of any penalty
claimed to have been collected without
authority, or of any sum alleged to have
been e'cessive or in any manner
wrongfully collected, until a claim for
refund or credit has been duly filed with
the Commissioner8 but such suit or
proceeding may be maintained, whether
or not such ta', penalty, or sum has
been paid under protest or duress.
In any case, no such suit or proceedings
shall $egun after the expiration of to
years from the date of payment of the
tax or penalty regardless of any
supervening cause that may arise after
payment8(rovided hoever, That the
Commissioner may, even without a
written claim therefor, refund or credit
any ta', where on the face of the return
upon which payment was made, such
payment appears clearly to have been
erroneously paid. /Dmphasis supplied0
The rule states that the ta'payer may file a claim for
refund or credit with the Commissioner of Internal
1evenue, within two /*0 years after payment of ta',
before any suit in CT. is commenced. The two-year
prescriptive period provided, should be computed from
the time of filing the .dustment 1eturn and final
payment of the ta' for the year.
In Commissioner of 5nternal *evenue vs. (hilippine
American ,ife 5nsurance Co.,
15
this Court e'plained the
application of Aec. *#- of ,$@@ "I1C, as follows>
Clearly, the prescriptive period of two
years should commence to run only
from the time that the refund is
ascertained, which can only be
determined after a final adustment
return is accomplished. In the present
case, this date is .pril ,?, ,$%2, and two
years from this date would be .pril ,?,
,$%?. . . . .s we have earlier said in the
TMH Aales case, Aections
?%.
16
?$,
17
and @-
18
on Iuarterly
Corporate Income Ta' 4ayment and
Aection #*, should be considered in
conunction with it
19
;hen the .cting Commissioner of Internal 1evenue
issued 1MC @-%+, changing the prescriptive period of
two years to ten years on claims of e'cess (uarterly
income ta' payments, such circular created a clear
inconsistency with the provision of Aec. *#- of ,$@@
"I1C. In so doing, the 3I1 did not simply interpret the
law8 rather it legislated guidelines contrary to the statute
passed by Congress.
It bears repeating that 1evenue memorandum-circulars
are considered administrative rulings /in the sense of
more specific and less general interpretations of ta'
laws0 which are issued from time to time by the
Commissioner of Internal 1evenue. It is widely accepted
that the interpretation placed upon a statute by the
e'ecutive officers, whose duty is to enforce it, is entitled
to great respect by the courts. "evertheless, such
interpretation is not conclusive and will be ignored if
udicially found to be erroneous.
2:
Thus, courts will not
countenance administrative issuances that override,
instead of remaining consistent and in harmony with the
law they see6 to apply and implement.
21
In the case of (eople vs. ,im,
22
it was held that rules
and regulations issued by administrative officials to
implement a law cannot go beyond the terms and
provisions of the latter.
.ppellant contends that Aection * of
F.! "o. #@-, is void because it is not
only inconsistent with but is contrary to
the provisions and spirit of .ct. "o 2--#
as amended, because whereas the
prohibition prescribed in said Fisheries
.ct was for any single period of time not
e'ceeding five years duration, F.! "o
#@-, fi'ed no period, that is to say, it
establishes an absolute ban for all time.
This discrepancy between .ct "o. 2--#
and F.! "o. #@-, was probably due to
an oversight on the part of Aecretary of
.griculture and "atural 1esources. !f
course, in case of discrepancy, the
basic .ct prevails, for the reason that
the regulation or rule issued to
implement a law cannot go beyond the
terms and provisions of the
latter. . . . In this connection, the
attention of the technical men in the
offices of Bepartment 5eads who draft
rules and regulation is called to the
importance and necessity of closely
following the terms and provisions of the
law which they intended to implement,
this to avoid any possible
misunderstanding or confusion as in the
present case.
29
Further, fundamental is the rule that the Atate cannot be
put in estoppel by the mista6es or errors of its officials or
agents.
24
.s pointed out by the respondent courts, the
nullification of 1MC "o. @-%+ issued by the .cting
Commissioner of Internal 1evenue is an administrative
interpretation which is not in harmony with Aec. *#- of
,$@@ "I1C. for being contrary to the e'press provision
of a statute. 5ence, his interpretation could not be given
weight for to do so would, in effect, amend the statute.
It is li6ewise argued that the
Commissioner of Internal 1evenue, after
promulgating 1MC "o. @-%+, is
estopped by the principle of non-
retroactively of 3I1 rulings. .gain ;e do
not agree. The Memorandum Circular,
stating that a ta'payer may recover the
e'cess income ta' paid within ,- years
from date of payment because this is an
obligation created by law, was issued by
the .cting Commissioner of Internal
1evenue. !n the other hand, the
decision, stating that the ta'payer
should still file a claim for a refund or ta'
credit and corresponding petition fro
review within the
two-year prescription period, and that
the lengthening of the period of
limitation on refund from two to ten
years would be adverse to public policy
and run counter to the positive mandate
of Aec. *#-, "I1C, - was the ruling and
udicial interpretation of the Court of Ta'
.ppeals. Dstoppel has no application in
the case at bar because it was not the
Commissioner of Internal 1evenue who
denied petitioner7s claim of refund or ta'
credit. 1ather, it was the Court of Ta'
.ppeals who denied /albeit correctly0
the claim and in effect, ruled that the
1MC "o. @-%+ issued by the
Commissioner of Internal 1evenue is an
administrative interpretation which is out
of harmony with or contrary to the
e'press provision of a statute
/specifically Aec. *#-, "I1C0, hence,
cannot be given weight for to do so
would in effect amend the statute.
25
.rt. % of the Civil Code
26
recogni&es udicial decisions,
applying or interpreting statutes as part of the legal
system of the country. 3ut administrative decisions do
not enoy that level of recognition. . memorandum-
circular of a bureau head could not operate to vest a
ta'payer with shield against udicial action. For there are
no vested rights to spea6 of respecting a wrong
construction of the law by the administrative officials and
such wrong interpretation could not place the
<overnment in estoppel to correct or overrule the
same.
27
Moreover, the non-retroactivity of rulings by the
Commissioner of Internal 1evenue is not applicable in
this case because the nullity of 1MC "o. @-%+ was
declared by respondent courts and not by the
Commissioner of Internal 1evenue. 9astly, it must be
noted that, as repeatedly held by this Court, a claim for
refund is in the nature of a claim for e'emption and
should be construed in strictissimi Duris against the
ta'payer.
28
!n the second issue, the petitioner alleges that the
Court of .ppeals seriously erred in affirming CT.7s
decision denying its claim for refund of 4*#2,-@@.?$ /ta'
overpaid in ,$%?0, based on mere speculation, without
proof, that 43Com availed of the automatic ta' credit in
,$%@.
Aec. ?$ of the ,$@@ "I1C
29
/now Aec. @? of the ,$$@
"I1C0 provides that any e'cess of the total (uarterly
payments over the actual income ta' computed in the
adustment or final corporate income ta' return, shall
either /a0 be refunded to the corporation, or /b0 may be
credited against the estimated (uarterly income ta'
liabilities for the (uarters of the succeeding ta'able year.
The corporation must signify in its annual corporate
adustment return /by mar6ing the option bo' provided in
the 3I1 form0 its intention, whether to re(uest for a
refund or claim for an automatic ta' credit for the
succeeding ta'able year. To ease the administration of
ta' collection, these remedies are in the alternative, and
the choice of one precludes the other.
.s stated by respondent Court of .ppeals>
Finally, as to the claimed refund of
income ta' over-paid in ,$%? = the
Court of Ta' .ppeals, after e'amining
the adusted final corporate annual
income ta' return for ta'able year ,$%?,
found out that petitioner opted to apply
for automatic ta' credit. This was the
basis used /vis-avis the fact that the
,$%@ annual corporate ta' return was
not offered by the petitioner as
evidence0 by the CT. in concluding that
petitioner had indeed availed of and
applied the automatic ta' credit to the
succeeding year, hence it can no longer
as6 for refund, as to KsicL the two
remedies of refund and ta' credit are
alternative.
9:
That the petitioner opted for an automatic ta' credit in
accordance with Aec. ?$ of the ,$@@ "I1C, as specified
in its ,$%? Final .dusted Income Ta' 1eturn, is a
finding of fact which we must respect. Moreover, the
,$%@ annual corporate ta' return of the petitioner was
not offered as evidence to contovert said fact. Thus, we
are bound by the findings of fact by respondent courts,
there being no showing of gross error or abuse on their
part to disturb our reliance thereon.
91
;5D1DF!1D, the, petition is hereby BD"IDB, The
decision of the Court of .ppeals appealed from is
.FFI1MDB, with C!ATA against the
petitioner.:Hphi:.nIt
A! !1BD1DB.
G.R. No. 1257:4 A282+( 28, 1998
PHILE= MINING CRPRATIN, petitioner,
vs.
CMMISSINER " INTERNAL REVENUE, CURT
" APPEALS, a*3 THE CURT " TA=
APPEALS,respondents.

RMER, J.:
4etitioner 4hile' Mining Corp. assails the decision of the
Court of .ppeals promulgated on .pril %, ,$$? in C.-
<.1. A4 "o. #?$@+
1
affirming the Court of Ta' .ppeals
decision in CT. Case "o. 2%@* dated March ,?,
,$$+
2
ordering it to pay the amount of 4,,-,?@@,??%.+*
as e'cise ta' liability for the period from the *nd (uarter
of ,$$, to the *nd (uarter of ,$$* plus *-N annual
interest from .ugust ?, ,$$2 until fully paid pursuant to
Aections *2% and *2$ of the Ta' Code of ,$@@.
The facts show that on .ugust +, ,$$*, the 3I1 sent a
letter to 4hile' as6ing it to settle its ta' liabilities for the
*nd, #rd and 2th (uarter of ,$$, as well as the ,st and
*nd (uarter of ,$$* in the total amount of
4,*#,%*,.$%*.+* computed as follows>
4D1I!B C!:D1DB 3.AIC T.H *+N
AC1C5.1<D I"TD1DAT T!T.9 DHCIAD
T.H BCD
*nd Itr., ,$$, ,*,$,,,,*2.?- #,**@,@%,.,+
#,#@%,,,?.,? ,$,+,@,-*,.$,
#rd Itr., ,$$, ,2,$$2,@2$.*, #,@2%,?%@.#-
*,$@%,2-$.-$ *,,@*,,%2+.?-
2th Itr., ,$$, ,$,2-?,2%-.,# 2,%+,,?*-.-#
*,?#,,%#@.@* *?,%%$,$#@.%%
===== ===== ====== ====
==
2@,#,*,#+#.$2
,,,%*%,-%%.2%
%,$%%,#?*.$@
?%,,*%,%-+.#$
===== ===== ====== ====
==
,st Itr., ,$$* *#,#2,,%2$.$2 +,%#+,2?*.2$
,,@,-,??$.%* #-,%%@,$%*.*+
*nd Itr., ,$$* ,$,?@,,?$,.@? 2,$,@,$**.$2
*,+,+%-.,% *2,%-+,,$2.%%
===== ===== ====== ====
==
2#,-,#,+2,.@-
,-,@+#,#%+.2#
,,$*?,*+-.--
++,?$#,,@@.,#
===== ===== ====== ====
==
$-,#*+,%$+.?2
**,+%,,2@#.$,
,-,$,2,?,*.$@
,*#,%*,,$%*.+*
9
QQQQQQQQQ QQQQQQQQQ
QQQQQQQQQ QQQQQQQQQ
In a letter dated .ugust *-, ,$$*,
4
4hile' protested the
demand for payment of the ta' liabilities stating that it
has pending claims for :.T input creditOrefund for the
ta'es it paid for the years ,$%$ to ,$$, in the amount of
4,,$,$@@,-#@.-* plus interest. Therefore these claims
for ta' creditOrefund should be applied against the ta'
liabilities, citing our ruling inCommissioner of 5nternal
*evenue v. 5togon-Suyoc -ines# 5nc.
5
In reply, the 3I1, in a letter dated Aeptember @,
,$$*,
6
found no merit in 4hile'7s position. Aince these
pending claims have not yet been established or
determined with certainty, it follows that no legal
compensation can ta6e place. 5ence, the 3I1 reiterated
its demand that 4hile' settle the amount plus interest
within #- days from the receipt of the letter.
In view of the 3I17s denial of the offsetting of 4hile'7s
claim for :.T input creditOrefund against its e'cise ta'
obligation, 4hile' raised the issue to the Court of Ta'
.ppeals on "ovember ?, ,$$*.
7
In the course of the
proceedings, the 3I1 issued Ta' Credit Certificate A"
--,@$+ in the amount of 4,#,,22,#,#.%% which, applied
to the total ta' liabilities of 4hile' of 4,*#,%*,,$%*.+*8
effectively lowered the latter7s ta' obligation to
4,,-,?@@,?%%.+*.
Bespite the reduction of its ta' liabilities, the CT. still
ordered 4hile' to pay the remaining balance of
4,,-,?@@,?%%.+* plus interest, elucidating its reason, to
wit>
Thus, for legal compensation to ta6e
place, both obligations must
be li0uidated and demanda$le.
"9i(uidated" debts are those where the
e'act amount has already been
determined /4.1.A, Civil Code of the
4hilippines, .nnotated, :ol. I:, "inth
Ddition, p. *+$0. In the instant case, the
claims of the 4etitioner for :.T refund is
still pending litigation, and still has to be
determined by this Court /C.T... Case
"o. 2@-@0. . fortiori, the li0uidated
de$t of the 4etitioner to the government
cannot, therefore, be set-off against
the unli0uidated claim which 4etitioner
conceived to e'ist in its favor /see
CompaRia <eneral de Tabacos vs.
French and Cnson, "o. ,2-*@,
"ovember %, ,$,%, #$ 4hil. #20.
8
Moreover, the Court of Ta' .ppeals ruled that "ta'es
cannot be subect to set-off on compensation since claim
for ta'es is not a debt or contract."
9
The dispositive
portion of the CT. decision
1:
provides>
In all the foregoing, this 4etition for
1eview is hereby BD"IDB for lac6 of
merit and 4etitioner is hereby
!1BD1DB to 4.G the 1espondent the
amount of 4,,-,?@@,??%.+*
representing e'cise ta' liability for the
period from the *nd (uarter of ,$$, to
the *nd (uarter of ,$$* plus *-N
annual interest from .ugust ?, ,$$2 until
fully paid pursuant to Aection *2% and
*2$ of the Ta' Code, as amended.
.ggrieved with the decision, 4hile' appealed the case
before the Court of .ppeals doc6eted as C.-<1. C: "o.
#?$@+.
11
"onetheless, on .pril %, ,$$?, the Court of
.ppeals a .ffirmed the Court of Ta' .ppeals
observation. The pertinent portion of which reads>
12
;5D1DF!1D, the appeal by way of
petition for review is hereby BIAMIAADB
and the decision dated March ,?, ,$$+
is .FFI1MDB.
4hile' filed a motion for reconsideration which was,
nevertheless, denied in a 1esolution dated )uly ,,,
,$$?.
19
5owever, a few days after the denial of its motion for
reconsideration, 4hile' was able to obtain its :.T input
creditOrefund not only for the ta'able year ,$%$ to ,$$,
but also for ,$$* and ,$$2, computed as follows>
14
4eriod Covered Ta' Credit Bate
3y Claims For Certificate of
:.T refundOcredit "umber Issue
.mount
,$$2 /*nd Iuarter0 --@@#- ,, )uly
,$$? 4*+,#,@,+#2.-,
,$$2 /2th Iuarter0 --@@#, ,, )uly ,$$?
4*,,@$,,-*-.?,
,$%$ --@@#* ,, )uly ,$$?
4#@,#**,@$$.,$
,$$--,$$, --@@+, ,? )uly ,$$?
4%2,??*,@%@.2?
,$$* /,st-#rd Iuarter0 --@@++ *# )uly
,$$? 4#?,+-,,,2@.$+
In view of the grant of its :.T input creditOrefund, 4hile'
now contends that the same should, ipso Dure, off-set its
e'cise ta' liabilities
15
since both had already become
"due and demandable, as well as fully
li(uidated8"
16
hence, legal compensation can properly
ta6e place.
;e see no merit in this contention.
In several instances prior to the instant case, we have
already made the pronouncement that ta'es cannot be
subect to compensation for the simple reason that the
government and the ta'payer are not creditors and
debtors of each other.
17
There is a material distinction
between a ta' and debt. Bebts are due to the
<overnment in its corporate capacity, while ta'es are
due to the <overnment in its sovereign capacity.
18
;e
find no cogent reason to deviate from the
aforementioned distinction.
4rescinding from this premise, in Francia v. 5ntermediate
Appellate Court,
19
we categorically held that ta'es
cannot be subect to set-off or compensation, thus>
;e have consistently ruled that there
can be no off-setting of ta'es against
the claims that the ta'payer may have
against the government. . person
cannot refuse to pay a ta' on the ground
that the government owes him an
amount e(ual to or greater than the ta'
being collected. The collection of a ta'
cannot await the results of a lawsuit
against the government.
The ruling in Francia has been applied to the
subse(uent case of Caltex (hilippines# 5nc. v.
Commission on Audit,
2:
which reiterated that>
. . . a ta'payer may not offset ta'es due
from the claims that he may have
against the government. Ta'es cannot
be the subect of compensation because
the government and ta'payer are not
mutually creditors and debtors of each
other and a claim for ta'es is not such a
debt, demand, contract or udgment as
is allowed to be set-off.
Further, 4hile'7s reliance on our holding
in Commissioner of 5nternal *evenue v. 5togon-Suyoc
-ines 5nc., wherein we ruled that a pending refund may
be set off against an e'isting ta' liability even though the
refund has not yet been approved by the
Commissioner,
21
is no longer without any support in
statutory law.
It is important to note, that the premise of our ruling in
the aforementioned case was anchored on Aection +,
/d0 of the "ational 1evenue Code of ,$#$. 5owever,
when the "ational Internal 1evenue Code of ,$@@ was
enacted, the same provision upon which the 5togon-
Suyoc pronouncement was based was
omitted.
22
.ccordingly, the doctrine enunciated
in 5togon-Suyoc cannot be invo6ed by 4hile'.
Bespite the foregoing rulings clearly adverse to 4hile'7s
position, it asserts that the imposition of surcharge and
interest for the non-payment of the e'cise ta'es within
the time prescribed was unustified. 4hile' posits the
theory that it had no obligation to pay the e'cise ta'
liabilities within the prescribed period since, after all, it
still has pending claims for :.T input creditOrefund with
3I1.
29
;e fail to see the logic of 4hile'7s claim for this is an
outright disregard of the basic principle in ta' law that
ta'es are the lifeblood of the government and so should
be collected without unnecessary
hindrance.
24
Dvidently, to countenance 4hile'7s
whimsical reason would render ineffective our ta'
collection system. Too simplistic, it finds no support in
law or in urisprudence.
To be sure, we cannot allow 4hile' to refuse the
payment of its ta' liabilities on the ground that it has a
pending ta' claim for refund or credit against the
government which has not yet been granted. It must be
noted that a distinguishing feature of a ta' is that it is
compulsory rather than a matter of bargain.
25
5ence, a
ta' does not depend upon the consent of the
ta'payer.
26
If any ta'payer can defer the payment of
ta'es by raising the defense that it still has a pending
claim for refund or credit, this would adversely affect the
government revenue system. . ta'payer cannot refuse
to pay his ta'es when they fall due simply because he
has a claim against the government or that the collection
of the ta' is contingent on the result of the lawsuit it filed
against the government.
27
Moreover, 4hile'7s theory that
would automatically apply its :.T input creditOrefund
against its ta' liabilities can easily give rise to confusion
and abuse, depriving the government of authority over
the manner by which ta'payers credit and offset their ta'
liabilities.
Corollarily, the fact that 4hile' has pending claims for
:.T input claimOrefund with the government is
immaterial for the imposition of charges and penalties
prescribed under Aection *2% and *2$ of the Ta' Code
of ,$@@. The payment of the surcharge is mandatory and
the 3I1 is not vested with any authority to waive the
collection thereof.
28
The same cannot be condoned for
flimsy reasons,
29
similar to the one advanced by 4hile'
in ustifying its non-payment of its ta' liabilities.
Finally, 4hile' asserts that the 3I1 violated Aection ,-?
/e0
9:
of the "ational Internal 1evenue Code of ,$@@,
which re(uires the refund of input ta'es within ?-
days,
91
when it too6 five years for the latter to grant its
ta' claim for :.T input creditOrefund.
92
In this regard, we agree with 4hile'. ;hile there is no
dispute that a claimant has the burden of proof to
establish the factual basis of his or her claim for ta'
credit or refund,
99
however, once the claimant has
submitted all the re(uired documents it is the function of
the 3I1 to assess these documents with purposeful
dispatch. .fter all, since ta'payers owe honestly to
government it is but ust that government render fair
service to the ta'payers.
94
In the instant case, the :.T input ta'es were paid
between ,$%$ to ,$$, but the refund of these
erroneously paid ta'es was only granted in ,$$?.
!bviously, had the 3I1 been more diligent and udicious
with their duty, it could have granted the refund earlier.
;e need not remind the 3I1 that simple ustice re(uires
the speedy refund of wrongly-held ta'es.
95
Fair dealing
and nothing less, is e'pected by the ta'payer from the
3I1 in the latter7s discharge of its function. .s aptly held
in *oxas v. Court of )ax Appeals>
96
The power of ta'ation is sometimes
called also the power to destroy.
Therefore it should be e'ercised with
caution to minimi&e inury to the
proprietary rights of a ta'payer. It must
be e'ercised fairly, e(ually and
uniformly, lest the ta' collector 6ill the
"hen that lays the golden egg" .nd, in
order to maintain the general public7s
trust and confidence in the <overnment
this power must be used ustly and not
treacherously.
Bespite our concern with the lethargic manner by which
the 3I1 handled 4hile'7s ta' claim, it is a settled rule that
in the performance of governmental function, the Atate is
not bound by the neglect of its agents and officers.
"owhere is this more true than in the field of
ta'ation.
97
.gain, while we understand 4hile'7s
predicament, it must be stressed that the same is not a
valid reason for the non-payment of its ta' liabilities.
To be sure, this is not to state that the ta'payer is devoid
of remedy against public servants or employees,
especially 3I1 e'aminers who, in investigating ta'
claims are seen to drag their feet needlessly. First, if the
3I1 ta6es time in acting upon the ta'payer7s claim for
refund, the latter can see6 udicial remedy before the
Court of Ta' .ppeals in the manner prescribed by
law.
98
Aecond, if the inaction can be characteri&ed as
willful neglect of duty, then recourse under the Civil
Code and the Ta' Code can also be availed of.
.rt. *@ of the Civil Code provides>
.rt. *@. .ny person suffering material or
moral loss because a public servant or
employee refuses or neglects, without
ust cause, to perform his official duty
may file an action for damages and
other relief against the latter, without
preudice to any disciplinary action that
may be ta6en.
More importantly, Aection *?$ /c0 of the "ational Internal
1evenue .ct of ,$$@ states>
''' ''' '''
/c0 ;ilfully neglecting to give receipts,
as by law re(uired for any sum collected
in the performance of duty or ilfully
neglecting to perform# any other duties
enDoyed $y la.
Aimply put, both provisions abhor official inaction, willful
neglect and unreasonable delay in the performance of
official duties.
99
In no uncertain terms must we stress
that every public employee or servant must strive to
render service to the people with utmost diligence and
efficiency. Insolence and delay have no place in
government service. The 3I1, being the government
collecting arm, must and should do no less. It simply
cannot be apathetic and laggard in rendering service to
the ta'payer if it wishes to remain true to its mission of
hastening the country7s development. ;e ta6e udicial
notice of the ta'payer7s generally negative perception
towards the 3I18 hence, it is up to the latter to prove its
detractors wrong.
In sum, while we can never condone the 3I17s apparent
callousness in performing its duties, still, the same
cannot ustify 4hile'7s non-payment of its ta' liabilities.
The adage "no one should ta6e the law into his own
hands" should have guided 4hile'7s action.
;5D1DF!1D, in view of the foregoing, the instant
petition is hereby BIAMIAADB. The assailed decision of
the Court of .ppeals dated .pril %, ,$$? is hereby
.FFI1MDB.
A! !1BD1DB.
2arvasa# C.%.# Japunan and (urisima# %%.# concur.