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Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17725 February 28, 1962
REPUL!C OF T"E P"!L!PP!NES, plaintiff-appellee,
vs.
M#MUL#O LUMER COMP#N$, ET #L., defendants-
appellants.
Office of the Solicitor General for plaintiff-appellee.
Arthur Tordesillas for defendants-appellants.
#RRER#, J.:
From the decision of the Court of First nstance of Manila !in
Civil Case No. "#$%%& orderin' it to pa( to plaintiff Republic
of the Philippines the sum of P#,)%*."+ ,ith -. interest
thereon from the date of the filin' of the complaint until full(
paid, plus costs, defendant Mambulao /umber Compan(
interposed the present appeal.
$
0he facts of the case are briefl( stated in the decision of the
trial court, to ,it1 .
0he facts of this case are not contested and ma( be
briefl( summari2ed as follo,s1 !a& under the first
cause of action, for forest char'es coverin' the period
from 3eptember $%, $45* to Ma( *#, $45",
defendants admitted that the( have a liabilit( of
P5)+."+, ,hich liabilit( is covered b( a bond
e6ecuted b( defendant 7eneral nsurance 8 3uret(
Corporation for Mambulao /umber Compan(, 9ointl(
and severall( in character, on :ul( *4, $45", in favor
of herein plaintiff; !b& under the second cause of
action, both defendants admitted a 9oint and several
liabilit( in favor of plaintiff in the sum of P*4-.+%,
also covered b( a bond dated November *+, $45";
and !c& under the third cause of action, both
defendants admitted a 9oint and several liabilit( in
favor of plaintiff for P",4*)."%, also covered b( a
bond dated :ul( *%, $45#. 0hese three liabilities
a''re'ate to P#,)%*."+. f the liabilit( of defendants
in favor of plaintiff in the amount alread( mentioned
is admitted, then ,hat is the defense interposed b(
the defendants< 0he defense presented b( the
defendants is =uite unusual in more ,a(s than one. t
appears from E6h. " that from :ul( "$, $4#) to
>ecember *4, $45-, defendant Mambulao /umber
Compan( paid to the Republic of the Philippines
P),*%%.5* for ?reforestation char'es? and for the
period commencin' from April "%, $4#+ to :une *#,
$4#), said defendant paid P4*+.%) to the Republic of
the Philippines for ?reforestation char'es?. 0hese
reforestation ,ere paid to the plaintiff in pursuance of
3ection $ of Republic Act $$5 ,hich provides that
there shall be collected, in addition to the re'ular
forest char'es provided under 3ection *-# of
Common,ealth Act #-- @no,n as the National
nternal Revenue Code, the amount of P%.5% on each
cubic meter of timber... cut out and removed from
an( public forest for commercial purposes. 0he
amount collected shall be e6pended b( the director of
forestr(, ,ith the approval of the secretar( of
a'riculture and commerce, for reforestation and
afforestation of ,atersheds, denuded areas ... and
other public forest lands, ,hich upon investi'ation,
are found needin' reforestation or afforestation ....
0he total amount of the reforestation char'es paid b(
Mambulao /umber Compan( is P4,$*+.5%, and it is
the contention of the defendant Mambulao /umber
Compan( that since the Republic of the Philippines
has not made use of those reforestation char'es
collected from it for reforestin' the denuded area of
the land covered b( its license, the Republic of the
Philippines should refund said amount, or, if it cannot
be refunded, at least it should be compensated ,ith
,hat Mambulao /umber Compan( o,ed the
Republic of the Philippines for reforestation char'es.
n line ,ith this thou'ht, defendant Mambulao
/umber Compan( ,rote the director of forestr(, on
Februar( *$, $45+ letter E6h. $, in para'raph # of
,hich said defendant re=uested Athat our account
,ith (our bureau be credited ,ith all the reforestation
char'es that (ou have imposed on us from :ul( $,
$4#+ to :une $#, $45-, amountin' to around
P*,4)).-* ...A. 0his letter of defendant Mambulao
/umber Compan( ,as ans,ered b( the director of
forestr( on March $*, $45+, mar@ed E6h. *, in ,hich
the director of forestr( =uoted an opinion of the
secretar( of 9ustice, to the effect that he has no
discretion to e6tend the time for pa(in' the
reforestation char'es and also e6plained ,h( not all
denuded areas are bein' reforested.
0he onl( issue to be resolved in this appeal is ,hether the sum
of P4,$*+.5% paid b( defendant-appellant compan( to
plaintiff-appellee as reforestation char'es from $4#+ to $45-
ma( be set off or applied to the pa(ment of the sum of
P#,)%*."+ as forest char'es due and o,in' from appellant to
appellee. t is appellant?s contention that said sum of
P4,$*+.5%, not havin' been used in the reforestation of the
area covered b( its license, the same is refundable to it or ma(
be applied in compensation of said sum of P#,)%*."+ due from
it as forest char'es.1wph1.t
Be find appellant?s claim devoid of an( merit. 3ection $ of
Republic Act No. $$5, provides1
3EC0CN $. 0here shall be collected, in addition to
the re'ular forest char'es provided for under 3ection
t,o hundred and si6t(-four of Common,ealth Act
Numbered Four Dundred 3i6t(-si6, @no,n as the
National nternal Revenue Code, the amount of fift(
centavos on each cubic meter of timber for the first
and second 'roups and fort( centavos for the third
and fourth 'roups cut out and removed from an(
public forest for commercial purposes. 0he amount
collected shall be e6pended b( the >irector of
Forestr(, ,ith the approval of the 3ecretar( of
A'riculture and Natural Resources !commerce&, for
reforestation and afforestation of ,atersheds,
denuded areas and co'on and open lands ,ithin
forest reserves, communal forest, national par@s,
timber lands, sand dunes, and other public forest
lands, ,hich upon investi'ation, are found needin'
reforestation or afforestation, or needin' to be under
forest cover for the 'ro,in' of economic trees for
timber, tannin', oils, 'ums, and other minor forest
products or medicinal plants, or for ,atersheds
protection, or for prevention of erosion and floods
and preparation of necessar( plans and estimate of
costs and for reconnaisance surve( of public forest
lands and for such other e6penses as ma( be deemed
necessar( for the proper carr(in' out of the purposes
of this Act.
All revenues collected b( virtue of, and pursuant to,
the provisions of the precedin' para'raph and from
the sale of bar@s, medical plants and other products
derived from plantations as herein provided shall
constitute a fund to be @no,n as Reforestation Fund,
to be e6pended e6clusivel( in carr(in' out the
purposes provided for under this Act. All provincial
or cit( treasurers and their deputies shall act as a'ents
of the >irector of Forestr( for the collection of the
revenues or incomes derived from the provisions of
this Act. !Emphasis supplied.&
Ender this provision, it seems =uite clear that the amount
collected as reforestation char'es from a timber licenses or
concessionaire shall constitute a fund to be @no,n as the
Reforestation Fund, and that the same shall be e6pended b(
the >irector of Forestr(, ,ith the approval of the 3ecretar( of
A'riculture and Natural Resources for the reforestation or
afforestation, amon' others, of denuded areas ,hich, upon
investi'ation, are found to be needin' reforestation or
afforestation. Note that there is nothin' in the la, ,hich
re=uires that the amount collected as reforestation char'es
should be used e6clusivel( for the reforestation of the area
covered b( the license of a licensee or concessionaire, and that
if not so used, the same should be refunded to him. Cbserve
too, that the licensee?s area ma( or ma( not be reforested at all,
dependin' on ,hether the investi'ation thereof b( the >irector
of Forestr( sho,s that said area needs reforestation. 0he
conclusion seems to be that the amount paid b( a licensee as
reforestation char'es is in the nature of a ta6 ,hich forms a
part of the Reforestation Fund, pa(able b( him irrespective of
,hether the area covered b( his license is reforested or not.
3aid fund, as the la, e6pressl( provides, shall be e6pended in
carr(in' out the purposes provided for thereunder, namel(, the
reforestation or afforestation, amon' others, of denuded areas
needin' reforestation or afforestation.
Appellant maintains that the principle of a compensation in
Article $*+) of the ne, Civil Code
*
is applicable, such that
the sum of P4,$*+.5% paid b( it as reforestation char'es ma(
compensate its indebtedness to appellee in the sum of
P#,)%*."+ as forest char'es. But in the vie, ,e ta@e of this
case, appellant and appellee are not mutuall( creditors and
debtors of each other. Conse=uentl(, the la, on compensation
is inapplicable. Cn this point, the trial court correctl(
observed1 .
Ender Article $*+), NCC, compensation should ta@e
place ,hen t,o persons in their o,n ri'ht are
creditors and debtors of each other. Bith respect to
the forest char'es ,hich the defendant Mambulao
/umber Compan( has paid to the 'overnment, the(
are in the coffers of the 'overnment as ta6es
collected, and the 'overnment does not o,e an(thin',
cr(stal clear that the Republic of the Philippines and
the Mambulao /umber Compan( are not creditors
and debtors of each other, because compensation
refers to mutual debts. ..
And the ,ei'ht of authorit( is to the effect that internal
revenue ta6es, such as the forest char'es in =uestion, can be
the sub9ect of set-off or compensation.
A claim for ta6es is not such a debt, demand, contract
or 9ud'ment as is allo,ed to be set-off under the
statutes of set-off, ,hich are construed uniforml(, in
the li'ht of public polic(, to e6clude the remed( in an
action or an( indebtedness of the state or
municipalit( to one ,ho is liable to the state or
municipalit( for ta6es. Neither are the( a proper
sub9ect of recoupment since the( do not arise out of
the contract or transaction sued on. ... !)% C.:.3. +"-
+#. & .
0he 'eneral rule, based on 'rounds of public polic( is
,ell-settled that no set-off is admissible a'ainst
demands for ta6es levied for 'eneral or local
'overnmental purposes. 0he reason on ,hich the
'eneral rule is based, is that ta6es are not in the
nature of contracts bet,een the part( and part( but
'ro, out of a dut( to, and are the positive acts of the
'overnment, to the ma@in' and enforcin' of ,hich,
the personal consent of individual ta6pa(ers is not
re=uired. ... f the ta6pa(er can properl( refuse to pa(
his ta6 ,hen called upon b( the Collector, because he
has a claim a'ainst the 'overnmental bod( ,hich is
not included in the ta6 lev(, it is plain that some
le'itimate and necessar( e6penditure must be
curtailed. f the ta6pa(er?s claim is disputed, the
collection of the ta6 must a,ait and abide the result
of a la,suit, and mean,hile the financial affairs of
the 'overnment ,ill be thro,n into 'reat confusion.
!#+ Am. :ur. +---+-+.&
BDEREFCRE, the 9ud'ment of the trial court appealed from
is hereb( affirmed in all respects, ,ith costs a'ainst the
defendant-appellant. 3o ordered.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-1899% &u'e 29, 196(
MELEC!O R. )OM!NGO, a* Co++,**,o'er o-
!'.er'a/ Re0e'ue, petitioner,
vs.
"ON. LOREN1O C. G#RL!TOS, ,' 2,* 3a4a3,.y a*
&u56e o- .2e Cour. o- F,r*. !'*.a'3e o- Ley.e,
a'5 S!MEON# 7. PR!CE, a* #5+,',*.ra.r,8 o- .2e
!'.e*.a.e E*.a.e o- .2e /a.e 9a/.er S3o..
Pr,3e,respondents.
Office of the Solicitor General and Atty. G. H. antolino
for petitioner.
!enedicto and artine" for respondents.
L#R#)OR, J.:
0his is a petition for certiorari and #anda#us a'ainst the
:ud'e of the Court of First nstance of /e(te, Ron. /oren2o
C. 7arlitos, presidin', see@in' to annul certain orders of the
court and for an order in this Court directin' the respondent
court belo, to e6ecute the 9ud'ment in favor of the
7overnment a'ainst the estate of Balter 3cott Price for
internal revenue ta6es.
t appears that in Melecio R. >omin'o vs. Don. :ud'e 3. C.
Moscoso, 7.R. No. /-$#-+#, :anuar( "%, $4-%, this Court
declared as final and e6ecutor( the order for the pa(ment
b( the estate of the estate and inheritance ta6es, char'es and
penalties, amountin' to P#%,%5).55, issued b( the Court of
First nstance of /e(te in, special proceedin's No. $#
entitled An the matter of the ntestate Estate of the /ate
Balter 3cott Price.A n order to enforce the claims a'ainst
the estate the fiscal presented a petition dated :une *$,
$4-$, to the court belo, for the e6ecution of the 9ud'ment.
0he petition ,as, ho,ever, denied b( the court ,hich held
that the e6ecution is not 9ustifiable as the 7overnment is
indebted to the estate under administration in the amount of
P*-*,*%%. 0he orders of the court belo, dated Au'ust *%,
$4-% and 3eptember *), $4-%, respectivel(, are as follo,s1
Att(. Benedicto submitted a cop( of the contract
bet,een Mrs. 3imeona F. Price, Administratri6 of
the estate of her late husband Balter 3cott Price
and >irector Goilo Castrillo of the Bureau of
/ands dated 3eptember $4, $45- and
ac@no,led'ed before Notar( Public 3alvador H.
Es'uerra, le'al adviser in MalacaIan' to
E6ecutive 3ecretar( >e /eon dated >ecember $#,
$45-, the note of Dis E6cellenc(, Pres. Carlos P.
7arcia, to >irector Castrillo dated Au'ust *, $45),
directin' the latter to pa( to Mrs. Price the sum
ofP"-),$#%.%%, and an e6tract of pa'e +-5 of
Republic Act No. *+%% appropriatin' the sum of
P*-*.*%%.%% for the pa(ment to the /e(te
Cadastral 3urve(, nc., represented b( the
administratri6 3imeona F. Price, as directed in the
above note of the President. Considerin' these
facts, the Court orders that the pa(ment of
inheritance ta6es in the sum of P#%,%5).55 due the
Collector of nternal Revenue as ordered paid b(
this Court on :ul( 5, $4-% in accordance ,ith the
order of the 3upreme Court promul'ated :ul( "%,
$4-% in 7.R. No. /-$#-+#, be deducted from the
amount of P*-*,*%%.%% due and pa(able to the
Administratri6 3imeona F. Price, in this estate, the
balance to be paid b( the 7overnment to her
,ithout further dela(. !Crder of Au'ust *%, $4-%&
0he Court has nothin' further to add to its order
dated Au'ust *%, $4-% and it orders that the
pa(ment of the claim of the Collector of nternal
Revenue be deferred until the 7overnment shall
have paid its accounts to the administratri6 herein
amountin' to P*-*,*%%.%%. t ma( not be amiss to
repeat that it is onl( fair for the 7overnment, as a
debtor, to its accounts to its citi2ens-creditors
before it can insist in the prompt pa(ment of the
latter?s account to it, speciall( ta@in' into
consideration that the amount due to the
7overnment dra,s interests ,hile the credit due to
the present state does not accrue an( interest.
!Crder of 3eptember *), $4-%&
0he petition to set aside the above orders of the court belo,
and for the e6ecution of the claim of the 7overnment
a'ainst the estate must be denied for lac@ of merit. 0he
ordinar( procedure b( ,hich to settle claims of
indebtedness a'ainst the estate of a deceased person, as an
inheritance ta6, is for the claimant to present a claim before
the probate court so that said court ma( order the
administrator to pa( the amount thereof. 0o such effect is
the decision of this $ourt in Alda#i" %s. &ud'e of the $ourt
of (irst )nstance of indoro, 7.R. No. /-*"-%, >ec. *4,
$4#4, thus1
. . . a ,rit of e6ecution is not the proper procedure
allo,ed b( the Rules of Court for the pa(ment of
debts and e6penses of administration. 0he proper
procedure is for the court to order the sale of
personal estate or the sale or mort'a'e of real
propert( of the deceased and all debts or e6penses
of administrator and ,ith the ,ritten notice to all
the heirs le'atees and devisees residin' in the
Philippines, accordin' to Rule )4, section ", and
Rule 4%, section *. And ,hen sale or mort'a'e of
real estate is to be made, the re'ulations contained
in Rule 4%, section +, should be complied ,ith.1wph1.t
E6ecution ma( issue onl( ,here the devisees,
le'atees or heirs have entered into possession of
their respective portions in the estate prior to
settlement and pa(ment of the debts and e6penses
of administration and it is later ascertained that
there are such debts and e6penses to be paid, in
,hich case Athe court havin' 9urisdiction of the
estate ma(, b( order for that purpose, after hearin',
settle the amount of their several liabilities, and
order ho, much and in ,hat manner each person
shall contribute, and ma(issue e*ecution if
circumstances re=uireA !Rule )4, section -; see
also Rule +#, 3ection #; Emphasis supplied.& And
this is not the instant case.
0he le'al basis for such a procedure is the fact that in the
testate or intestate proceedin's to settle the estate of a
deceased person, the properties belon'in' to the estate are
under the 9urisdiction of the court and such 9urisdiction
continues until said properties have been distributed amon'
the heirs entitled thereto. >urin' the pendenc( of the
proceedin's all the estate is in custodia le'is and the proper
procedure is not to allo, the sheriff, in case of the court
9ud'ment, to sei2e the properties but to as@ the court for an
order to re=uire the administrator to pa( the amount due
from the estate and re=uired to be paid.
Another 'round for den(in' the petition of the provincial
fiscal is the fact that the court havin' 9urisdiction of the
estate had found that the claim of the estate a'ainst the
7overnment has been reco'ni2ed and an amount of
P*-*,*%% has alread( been appropriated for the purpose b(
a correspondin' la, !Rep. Act No. *+%%&. Ender the above
circumstances, both the claim of the 7overnment for
inheritance ta6es and the claim of the intestate for services
rendered have alread( become overdue and demandable is
,ell as full( li=uidated. Compensation, therefore, ta@es
place b( operation of la,, in accordance ,ith the
provisions of Articles $*+4 and $*4% of the Civil Code, and
both debts are e6tin'uished to the concurrent amount, thus1
AR0. $*%%. Bhen all the re=uisites mentioned in
article $*+4 are present, compensation ta@es effect
b( operation of la,, and e6tin'uished both debts to
the concurrent amount, eventhou'h the creditors
and debtors are not a,are of the compensation.
t is clear, therefore, that the petitioner has no clear ri'ht to
e6ecute the 9ud'ment for ta6es a'ainst the estate of the
deceased Balter 3cott Price. Furthermore, the petition
for certiorari and #anda#us is not the proper remed( for
the petitioner. Appeal is the remed(.
0he petition is, therefore, dismissed, ,ithout costs.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-22(69 O3.ober 15, 1966
!N T"E M#TTER OF T"E TEST#TE EST#TE OF P#TR!C!O
PONFERR#)#, deceased.
&O#:U!N COR)ERO, administrator-appellee,
vs.
&OSE GON)#, ,' 2,* 3a4a3,.y a* Re4re*e'.a.,0e o- .2e Co++,**,o'er o-
!'.er'a/ Re0e'ue, claimant-appellant.
Arte#io G. +a,orar for ad#inistrator and appellee.
Office of the Solicitor General for clai#ant and appellant.
S#NC"E1, J.:
Cn 3eptember $), $45", a demand b( letter ,as made on Patricio Ponferrada
b( the Bureau of nternal Revenue
$
for the pa(ment of P",)%5.)), coverin'
forest char'es for the period from November *, $4#- to :anuar( *4,
$4#4.
*
Ponferrada made a partial pa(ment of P*-*."+,
"
leavin' a balance of
P",5#".5$.
Ponferrada died on November *5, $45+. n the 0estate Estate
proceedin's,
#
:oa=uin Cordero ,as named Administrator.
Cn :ul( *4, $454, the BR, thru respondent :ose 7onda, filed in the
proceedin's 9ust mentioned a claim for the said sum of P",5#".5$. 0he
Administrator opposed. 7round1 Prescription.
5
Epon a stipulation of facts, the probate court, on Au'ust *), $4-", declared
that said claim of P",5#".5$ had prescribed.
-
BR no, appeals direct to this Court.
+
$. Cur 0a6 Code
)
provides for t,o main periods of prescription. 0he first
refers to assessment,
4
the second to the remedies of collection.
$%
Not
concerned ,ith the first, ,e are ,ith the second.
0hat an assessment has here been, made, ,e do not doubt. B( the ver( fact
that, on 3eptember $), $45", a formal demand ,as made b( the 'overnment
upon the deceased Patricio Ponferrada for the pa(ment of forest char'es in
a definite amount J P",)%5.)) J assessment is deemed to have been made.
$$
3eptember $), $45" then is a safe startin' point for the statutor( limitation to
commence collection suit. Dere, the court claim ,as filed on :ul( *4, $454.
From 3eptember $), $45" to :ul( *4, $454, a period of 5 (ears, $% months and
$$ da(s has passed. 0he five-(ear prescriptive period had thus elapsed.
3ection ""* !c& of the 0a6 Code reads1
!c& Bhere the assessment of an( internal-revenue ta6 has been
made ,ithin the period of limitation above prescribed such
ta6 #ay ,e collected b( distraint or lev( or ,y a proceedin' in
court, but onl( if be'un !$&within fi%e years after the assess#ent of
the ta*, or !*& prior to the e*piration of any period for collection
a'reed upon in writin' b( the Commissioner of nternal Revenue
and the ta6pa(er before the e6piration of such five-(ear. 0he
period so a'reed upon ma( be e6tended b( subse=uent
a'reements in writin' made before the e6piration of the period
previousl( a'reed upon.
$*
Be note the narro,l(-confined restriction of time ,ithin ,hich a proceedin'
in court ma( be brou'ht1 -,ut only if ,e'un !$& ,ithin five (ears after the
assessment of the ta6A. mplicit in the ,ords but onl( is that, unless other,ise
authori2ed b( statute, the 5-(ear period is absolute.
0he Code itself reco'ni2es but one e6ception1 f suit is started Aprior to the
e6piration of an( period for collectiona'reed upon in writin' b( the
Commissioner of nternal Revenue and the ta6pa(er before the e6piration of
such five-(ear periodA J ,hich ma( be e6tended b( subse=uent ,ritten
a'reements made Abefore the e6piration of the period previousl( a'reed
uponA. n $ollector of )nternal +e%enue %s. .ineda, etc., /-$#5**, Ma( "$,
$4-$, this Court
$"
said in terms e=uall( pertinent here, that1 Athe onl(
a'reement that could have suspended the runnin' of the prescriptive period
for the collection of the ta6 in =uestion is, . . . a written a'reement bet,een
3olano !the ta6pa(er& and the Collector, entered into before the e6piration of
the five-(ear prescriptive period, e6tendin' the period of limitation prescribed
b( la, !3ec. ""* KcL, N..R.C.&.A No such ,ritten a'reement e6ists here. 0he
ori'inal five-(ear limit 'overns.
*. Appellant?s brief dra,s our attention to 9urisprudence ,here a ta6pa(er ma(
not avail of the limitations statute.
$#
0hese cases are inapposite. n Arcache,
dela( in ta6 collection ,as e6cused because of Ahis Kta6pa(er?sL o,n repeated
re=uests for re-investi'ation and similarl( repeated re=uests of e6tension of
time to pa(A. n 3ison, Athe ta6pa(er?s petition for reconsideration or
reinvesti'ation had stopped the runnin' of the five-(ear limitation periodA. n
Capitol 3ubdivision, the pendenc( of a ta6pa(er?s petition for clarification
interrupted said period. None of these situations obtains here.
0he 'overnment also ur'es that partial pa(ment is Aac@no,led'ment of the
ta6 obli'ationA, hence, a A,aiver of the defense of prescriptionA. But partial
pa(ment ,ould not prevent the 'overnment from suin' the ta6pa(er. Because,
b( such act of pa(ment, the 'overnment is not thereb( Apersuaded to postpone
collection to ma@e him feel that the demand ,as not unreasonable or that no
harrassment or in9ustice is meantA. Bhich, as stated in $ollector %s. Suyoc
$onsolidated inin' $o./ et al., /-$$5*+, November *5, $45), is the
underl(in' reason behind the rule that prescriptive period is arrested b( the
ta6pa(er?s re=uest for ree6amination or reinvesti'ation J even if he Ahas not
previousl( ,aived it KprescriptionL in ,ritin'A. And, partial pa(ment is no
,aiver Ain ,ritin'A. Particularl( is this true here ,here, out of the claim of
P",)%5.)), but P*-*.*+ ,ere paid; and in reference to the other claim of
P-,**%.-5,
$5
appellee made a substantial pa(ment of P-,%%%.%%
and ac0nowled'ed liabilit( of P**%.-5.
". 0he 'overnment leans heavil( upon the Barretto case
$-
to stren'then its
claim that the action had not (et prescribed. Because, this Court there said1
. . . Moreover, as alread( stated in the decision, forest char'es and
surchar'es are pay#ents for ti#,er ta0en fro# pu,lic forests, and
the( are considered as internal revenue ta6es onl( in the sense that
the( are to be collected b( the Collector of nternal Revenue and
the re'ulations for their collection are contained in the National
nternal Revenue Code. Forest products are obtained under
licenses issued b( the 7overnment and forest char'es are in a
sense contractual in ori'in. 1o prescripti%e period ha%in' ,een
prescri,ed ,y law for this case, 3ec. #" of the Code of Civil
Procedure should appl( . . . .
$+
0his opinion ,as planted on the vie,s of the 0a6 Commission !$4"4&, as
follo,s1
Forest char'es, ,hich are not propert( ta6es but rather the price
paid for e6ploitin' national resources, need to be revised
$)
to ma@e
them more in harmon( ,ith present-da( conditions in the industr(
and ,ith public policies.
Forest char'es are to be distin'uished from ta6es. 0he( are, strictl(
spea@in', the price ,hich the 7overnment char'es for the privile'e
'ranted to concessionaires to e6ploit the public domain, rather than
a ta6 imposed to support the 'eneral services of the
'overnment . . . .
$4
Compellin' reasons there are ,hich constrain us to revise the vie,s e6pressed
in the !arretto case.
B( la,, forest char'es have always been cate'ori2ed as internal revenue ta6es
for J all purposes. Cur statute boo@s sa( so.
Be start ,ith the 0a6 Code. Forest char'es appear belo, the headin' A00/E
H J M3CE//ANECE3 0AME3A, under Chapter H, alon' ,ith such
others as ta6 on ban@s !Chapter &, ta6es on receipts of insurance companies
!Chapter &, franchise ta6 !Chapter &, and amusement ta6es !Chapter H&.
And 3ection $) of the same Code, includes Achar'es on forest productsA in the
list of those that Aare deemed to be national internal revenue ta6esA, thus1
3EC. $). Sources of re%enue.J0he follo,in' ta6es, fees and
char'es are deemed to be national internal revenue ta6es1
!a& ncome ta6;
!b& Estate, inheritance and 'ift ta6es;
!c& 3pecific ta6es on certain articles;
!d& Privile'e ta6es on business or occupation;
!e& >ocumentar( stamp ta6es;
!f& Minin' ta6es;
!'& Miscellaneous ta6es, fees and char'es, namel(, ta6es on ban@s
and insurance companies, franchise ta6es, ta6es on
amusements, char'es on forest products, fees for sealin' ,ei'hts
and measures, firearms license fees, tobacco inspection fees, and
,ater rentals. !As amended b( Rep. Act No. $#+-, approved :une
$5, $45-.&
*%
Bith the e6ception of radio re'istration fees, ,hich ,ere eliminated, the
fore'oin' is a reproduction in toto of the ori'inal 3ection $) of the 0a6 Code
approved on :une $5, $4"4.
3ection $#"), Administrative Code of $4$+, the la, ,hich 3ection $) of the
0a6 Code of $4"4 replaced, states in part1
3EC. $#"). Sources of ta*es.J0he follo,in' ta6es, fees, and
char'es in the nature of ta6 are deemed to be internal revenue
ta6es1
666 666 666
!f& Char'es for forest products.
666 666 666
3ection $#") of the Administrative Code, in turn, proceeded from 3ection *$,
Act *""4 of the Philippine /e'islature @no,n as the nternal Revenue /a, of
$4$#, ,hich provides1
AR0C/E . J 3ources of internal revenue.
3EC. *$. Sources of ta*es.J0he follo,in' ta6es, fees, and char'es
in the nature of ta6 are deemed to be internal-revenue ta6es1
666 666 666
!f& Char'es for forest products;
666 666 666
Predecessor of this provision is 3ection *5 of Act $$)4, @no,n as the nternal
Revenue /a, of $4%#, ,hich reads1
3EC. *5. 0he follo,in' sources of revenue shall be included in the
internal revenue for the Philippine slands, and the ta6es imposed
shall be collected b( the Collector of nternal Revenue . . . and the
revenue obtained therefrom shall be devoted to the support of the
several provinces and of the nsular and municipal 'overnments in
the manner in this Act provided1
666 666 666
$. 0a6 on forestr( products.
666 666 666
#. No,, the la, on prescription in the 0a6 Code does not ma@e an( distinction
at all as to the sources of ta6es to ,hich it is made applicable. ts broad s,eep
is articulated in the terms Ainternal-revenue ta6esA
*$
and Aan( internal-revenue
ta6A.
**
3ince Achar'es on forest productsA are Ainternal-revenue ta6esA, the(
are ,ithin the covera'e of the la, on prescription of actions to collect
Ainternal-revenue ta6esA or Aan( internal-revenue ta6A. Dad the 0a6 Code
intended that forest char'es be outside the operational rule on prescription,
that statute should have so provided. Be cannot insert therein an( such
e6ception no,. Clearl(, that is intrusion into the le'islative domain in
violation of a definite proscription in the Constitution.
5. Authorities are not ,antin' to brin' home the point that forest char'es are
in realit( internal revenue ta6es, as such sub9ect to the other provisions of
internal revenue la,. As earl( as $4$),
*"
this Court held that forest char'es are
in the nature of an internal revenue ta6 on propert( KAforest products removed
from the public forestAL and a distress ,arrant ma( be issued thereon.
Cne month before the !arretto decision came the /acson case.
*#
0here, this
Court made mention of the observations of the 0a6 Commission Kheretofore
te6tuall( copiedL, ,hich recommended the enactment of the $4"4 nternal
Revenue Code. Do,ever, this Court sustained the %iews of the dissentin'
9ud'e of the Court of 0a6 Appeals, thus1
. . . 0here appears to be no le'al basis for not considerin' forest
char'es as ta6es ,hen respondent considers them as ta6es under
Republic Act No. "%#, as amended, thus enablin' holders of
bac@pa( certificates to pa( forest char'es out of their bac@pa(
!B..R. rulin', November **, $455, E6. B&, and as internal revenue
ta6 under Chapter , 0itle M, of the Revenue Code, so as to
authori2e collection of said char'es b( distraint and lev( !Cp. Att(.
7en., Cct. *+, $4**&. 0he ar'ument that forest char'es are not
ta6es because the( are the price paid for the sale b( the
7overnment of forest products o%erloo0s the fact that some forest
char'es are impose on forest products cut and removed from
unre'istered private lands. !3ee 3ec. *--, Revenue Code&. 0he
7overnment cannot sell forest products ,hich it does not o,n.
From this it ma( be inferred that forest char'es are not in
reality the price paid for the sale b( the 7overnment of forest
products; they are essentially ta*es for the pri%ile'e of cuttin' and
removin' forest products . . . They stand on the sa#e footin' as the
#inin' ta*es imposed under 0itle H of the Revenue Code . . . .
*5
Even the Chairman of the $4"4 0a6 Commission later on !November *%,
$4"4&, in a decision he rendered as 3ecretar( of Finance, in the case of the
>ulaI'an Minin' nterests Co., nc., coverin' forest char'es, adverted to the
rulin' in the Don'@on' and 3han'hai Ban@in' Corporation case, supra. De
applied 3ection $5)) of the Administrative Code and declared that ever(
internal revenue ta6 J ,hich includes forest char'es 2 is a lien on the
propert( for ,hich that ta6 is imposed.
*-
5$ Am. :ur. p. $%+* is authorit( for the statement that1
Ta*es ,hich, althou'h imposed under statutes containin' man(
variations as to their precise phraseolo'(, are directed 'enerall(
a'ainst the production, or se%erance from the soil, of such natural
resources asti#,er, oil, natural 'as, ores, or the li@e, and are
normall( measured accordin' to the =uantit( or value of the
articles produced or severed, are usuall(, althou'h not invariabl(,
re'arded as e6cise rather than propert( ta6es.
*+
0he vie, that forest char'es are much li@e ad %alore# ta6es in minin', finds
9urisprudential support. n $e,u .ortland $e#ent $o#pany %s. $o##issioner
of )nternal +e%enue, /-$)-#4, Februar( *+, $4-5, ,e said that thisad
%alore# ta6 !on minerals used for cement& Ais a ta6 not on the minerals, ,ut
upon the pri%ile'e of se%erin' or e*tractin' the sa#e fro# the earth, the
'overnment?s ri'ht to e6act the said impost sprin'in' from the +e'alian
theory of State ownership of its natural resourcesA.
*)
3o sa(in', this Court
there applied 3ection "%-,
*4
under the Administrative Provisions Kof the 0a6
CodeL ,hich include prescription of actions for ta6 collection.
n another case,
"%
upon the premise that forest char'es Aare in the coffers of
the 'overnment as ta6es collectedA, the pronouncement ,as that internal
revenue ta6es cannot be the sub9ect of compensation1 Reason1 'overnment and
ta6pa(er Aare not mutuall( creditors and debtors of each otherA under Article
$*+) of the Civil Code and a Aclaim for ta6es is not such a de,t,
demand, contract or 9ud'ment as is allo,ed to be set-off.A 0his decision
inferentiall( ta@es forest char'es out of the !arretto rule, because the( are
ta6es J not Ain a sense contractual in ori'in.A
0he thou'hts e6pressed in the authorities 9ust cited funnel do,n to one idea1
forest char'es are internal revenue ta6es, ,hether one labels them ta6es on
propert(, or e6cise ta6es, i.e., ta6es upon the privile'e of cuttin' and cartin'
a,a( timber and forest products. And the( fall under the philosoph( of
ta6ation J to support the 'eneral services of 'overnment. 0he( 'o into the
'eneral fund.
"$
-. 0he provisions on prescription fall under 0itle M, entitled 7eneral
Administrative Provisions. 0his title applies to all ta6es, fees,
and char'es collected under the Code. n this title?s first provision !3ection
"%5&, in9unction is unavailin' to a forest concessionaire Ato restrain the
collection of an( national internal-revenue ta6, fee, or char'eimposed b( this
CodeA. B( 3ection "%-, the concessionaire, ma( onl( sue for ta6 refunds
,ithin t,o (ears from the date of pa(ment.
"*
3ection "$- defines the Acivil
remedies for the collection of internal revenue ta6es, fees, orchar'esA to be
distraint and lev(, and 9udicial action.
""
n 3ection ""+, the forest concessionaire
"#
J li@e all other ta6pa(ers J is
obli'ated to preserve his boo@s of account for a period of five (ears Afrom the
date of the last entr( in each boo@.A Bh(< Because the 'overnment is 'iven a
li@e period of five (ears ,ithin ,hich to ma@e assessment. f forest char'es
,ere Ain a sense contractual in ori'inA, then the concessionaire should be
re=uired to @eep his accountin' records not for five (ears onl(, but for ten
(ears, to 9ibe ,ith the $%-(ear prescriptive period in the Civil Code.
"5
n sum, here is the situation of a man called upon to pa( forest char'es.
Applicable to him are the 0a6 Code provisions on distraint and lev(; the t,o-
(ear period for refund; the prohibition a'ainst in9unction; the dut( to @eep his
boo@s for five (ears. But, if ,e ,ere to adhere to the !arretto decision, then
the la, on prescription in the Code of Civil Procedure Kno, Art. $$##, Civil
CodeL
"-
must have to be scissored and pasted over 3ections ""$ and ""* of the
0a6 Code. Eniformit( in the application of the 0a6 Code provisions ,ould
su''est that ,e veer a,a( from this vie,.
+. Cur stand is even fortified b( the facts set forth in the !arretto case.
Assessment ,as not there based on a return. 0he 9ud'ment on prescription
therein ,as 'rounded on fraud. Because, from an e6amination of the boo@s, it
,as found that Aman( purchases of lo's ,ere ,ithout invoices and sales under
declaredA. 0he Adeficiencies amountin' to fraud ,ere discoveredA in $45".
And appl(in' the provisions of the Code of Civil Procedure, it ,as there
declared that the period for prescription should be rec@onedA from $45". But
the situation presented in said case is precisel( covered b( 3ection ""*!a& of
the 0a6 Code, ,hich reads1
!a& n the case of a false or fraudulent
"+
return ,ith intent to evade
ta6 or of a failure to file a return, the ta6 ma( be assessed, or
a proceedin' in court for the collection of such ta6 ma( be be'un
,ithout assessment, at an( time within ten years after the
discover( of the falsit(, fraud, or omission.
")
Cur conclusion, therefore, is that the over,helmin' implication from the te6t
of the 0a6 Code leaves no other reasonable construction e6cept that1 Forest
char'es come ,ithin the compass of the prescriptive periods set forth therein.
0he net result still is1 From 3eptember $), $45" !,hen demand for pa(ment
,as made& to :ul( *4, $45" !,hen court claim ,as filed&, more than five !5&
(ears have elapsed. B( the terms of Article ""*!c& of the 0a6 Code,supra,
action to collect has prescribed.
Epon the premises, the 9ud'ment appealed from is affirmed. No costs. 3o
ordered.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-25299 &u/y 29, 1969
COMM!SS!ONER OF !NTERN#L RE;ENUE, petitioner,
vs.
!TOGON-SU$OC M!NES, !NC., a'5 T"E COURT OF T#<
#PPE#LS, respondents.
Office of the Solicitor General Antonio .. !arredo/ Assistant Solicitor
General (elicisi#o +. +osete and Special Attorney Oscar S. de
$astro for petitioner.
+a#on O. +eynoso/ &r. and elchor +. (lores for respondents.
FERN#N)O, J.:
0he =uestion presented for determination in this petition for the
revie, of a decision of the Court of 0a6 Appeals, one that is of first
impression, ,ould not have arisen had respondent to'on-3u(oc
Mines, nc., the ta6pa(er involved, dul( paid in full its liabilit(
accordin' to its income ta6 return for the fiscal (ear $4-%--$. nstead,
it deducted ri'ht a,a( the amount represented b( claim for refund
filed ei'ht !)& months bac@, for the previous (ear?s income ta6, for
,hich it ,as not liable at all, so it alle'ed, as it suffered a loss
instead, a claim subse=uentl( favorabl( acted on b( petitioner
Commissioner of nternal Revenue but after the date of such pa(ment
of the $4-%-$4-$ ta6. Accordin'l(, an interest in the amount of
P$,5$*.)" ,as char'ed b( petitioner Commissioner of nternal
Revenue on the sum ,ithheld on the 'round that no deduction on
such refund should be allo,ed before its approval. Bhen the matter
,as ta@en up before the Court of 0a6 Appeals, the above assessment
representin' interest ,as set aside in the decision of 3eptember "%,
$4-5. 0hat is the decision no, an appeal b( petitioner Commissioner
of nternal Revenue. Be sustain the Court of 0a6 Appeals.
Respondent to'on-3u(oc Mines, nc., a minin' corporation dul(
or'ani2ed and e6istin' in accordance ,ith the la,s of the Philippines,
filed on :anuar( $", $4-$, its income ta6 return for the fiscal (ear
$454-$4-%. t declared a ta6able income of P$$#,"-).%# and a ta6
due thereon amountin' to P*-,"$%.#$, for ,hich it paid on the same
da(, the amount of P$",$55.*% as the first installment of the income
ta6 due. Cn Ma( $+, $4-$, petitioner filed an amended income ta6
return, reportin' therein a net loss of P""$,+%+."". t thus sou'ht a
refund from the Commissioner of nternal Revenue, no, the
petitioner.1wph1.t
Cn Februar( $#, $4-*, respondent to'on-3u(oc Mines, nc. filed its
income ta6 return for the fiscal (ear $4-%-$4-$, settin' forth its
income ta6 liabilit( to the tune of P4+,"#5.%%, but deductin' the
amount of P$",$55.*% representin' alle'ed ta6 credit for
overpa(ment of the precedin' fiscal (ear $454-$4-%. %n >ecember
$), $4-*, petitioner Commissioner of nternal Revenue assessed
a'ainst the respondent the amount of P$,5$*.)" as $. monthl(
interest on the aforesaid amount of P$",$55.*% from :anuar( $-,
$4-* to >ecember "$, $4-*. 0he basis for such an assessment ,as
the absence of le'al ri'ht to deduct said amount before the refund or
ta6 credit thereof ,as approved b( petitioner Commissioner of
nternal Revenue.
$
3uch an assessment ,as contested b( respondent before the Court of
0a6 Appeals. As alread( noted, it prevailed. 0he decision of
3eptember "%, $4-5, no, on appeal, e6plains ,h(. 0hus1
ARespondent assessed a'ainst the petitioner the amount of P$,5$*.)"
as $. monthl( interest on the sum of P$",$55.*% from :anuar( $-,
$4-* to >ecember "$, $4-* on the 'round that petitioner had no le'al
ri'ht to deduct the said amount from its income ta6 liabilit( for the
fiscal (ear $4-%-$4-$ until the refund or ta6 credit thereof has been
approved b( respondent. As aforestated, petitioner paid the amount of
P$",$55.*% as first installment on its reported income ta6 liabilit( for
the fiscal (ear $454-$4-%. But, it turned out that instead of derivin' a
net 'ain, it sustained a net loss durin' the said fiscal (ear.
Accordin'l(, it filed an amended income ta6 return and a claim for
the refund of the sum of P$",$55.*%, ,hich sum it subse=uentl(,
deducted from its income ta6 liabilit( for the succeedin' fiscal (ear
$4-%-$4-$. 0he overpa(ment for the fiscal (ear $454-$4-% and the
deduction of the overpaid amount from its $4-%-$4-$ ta6 liabilit( are
not denied b( respondent. n this circumstance, ,e find it unfair and
un9ust for the Commissioner to e6act an interest on the said sum of
P$",$55.*%, ,hich, after all, ,as paid to and received b( the
'overnment even before the incidence of the ta6 in =uestion.A
*
0hat is the =uestion before us in this petition for revie, b( the
Commissioner of nternal Revenue. De ar'ues that the Court of 0a6
Appeals should not have absolved respondent corporation Afrom
liabilit( to pa( the sum of P$,5$*.)" as $. monthl( interest for
delin=uenc( in the pa(ment of income ta6 for the fiscal (ear $4-%-
$4-$.A
"
As noted at the outset, ,e find such contention far from
persuasive.
t could not be error for the Court of 0a6 Appeals, considerin' the
admitted fact of overpa(ment, entitlin' respondent to refund, to hold
that petitioner should not repose an interest on the aforesaid sum of
P$",$55.*% A,hich after all ,as paid to and received b( the
'overnment even before the incidence of the ta6 in =uestion.A t
,ould be, accordin' to the Court of 0a6 Appeals, Aunfair and un9ustA
to do so. Be a'ree but ,e 'o farther. 0he imposition of such an
interest b( petitioner is not supported b( la,.
0he National nternal Revenue Code provides that interest upon the
amount determined as a deficienc( shall be assessed and shall be paid
upon notice and demand from the Commissioner of nternal Revenue
at the specified.
#
t is made clear, ho,ever, in an earlier provision
found in the same section that if in an( precedin' (ear, the ta6pa(er
,as entitled to a refund of an( amount due as ta6, such amount, if not
(et refunded, ma( be deducted from the ta6 to be paid.
5
0here is no =uestion respondent ,as entitled to a refund. nstead of
,aitin' for the sum involved to be delivered to it, it deducted the said
amount from the ta6 that it had to pa(. 0hat it had a ri'ht to do
accordin' to the la,. t is true a doubt could have arisen due to the
fact that as of the time such a deduction ,as made, the Commissioner
of nternal Revenue had not as (et approved such a refund. t is an
admitted fact thou'h that respondent ,as clearl( entitled to it, and
petitioner did not alle'e other,ise. Nor could he do so. Ender all the
circumstances disclosed therefore, the applicabilit( of the le'al
provision allo,in' such a deduction from the amount of the ta6 to be
paid cannot be disputed.
0his conclusion is in accordance ,ith the principle announced
in $astro %. $ollector of )nternal +e%enue.
-
Bhile the case is not
directl( in point, it (ields an implication that ma@es even more
formidable the case for respondent ta6pa(er. As there held, the
imposition of the monthl( interest ,as considered as not constitutin'
a penalt( Abut a 9ust compensation to the state for the dela( in pa(in'
the ta6, and for the concomitant use b( the ta6pa(er of funds that
ri'htfull( should be in the 'overnment?s hands ....A
Bhat is therefore sou'ht to be avoided is for the ta6pa(er to ma@e
use of funds that should have been paid to the 'overnment. Dere, in
vie, of the overpa(ment for the fiscal (ear $454-$4-%, the sum of
P$",$55.*% had alread( formed part of the public funds. t cannot be
said, therefore, that respondent ta6pa(er ,as 'uilt( of an( dela(
enablin' it to utili2e a sum of mone( that should have been in the
'overnment treasur(.
Do, then, as a matter of pure la,, even if ,e la( to one side the
demands of fairness and 9ustice, ,hich to the Court of 0a6 Appeals
seem to be uppermost, can its decision be overturned< Accordin'l(,
,e find no valid 'round for this appeal.
BDEREFCRE, the decision of 3eptember "%, $4-5 of the Court of
0a6 Appeals is affirmed. Bithout pronouncement as to
costs.1wph1.t
Republic of the Philippines
SUPREME COURT
Manila
0DR> >H3CN
G.R. No. L-676%9 &u'e 28, 1988
ENGR#C!O FR#NC!#, petitioner,
vs.
!NTERME)!#TE #PPELL#TE COURT a'5 "O
FERN#N)E1, respondents.

GUT!ERRE1, &R., J.:
0he petitioner invo@es le'al and e=uitable 'rounds to reverse the =uestioned
decision of the ntermediate Appellate Court, to set aside the auction sale of
his propert( ,hich too@ place on >ecember 5, $4++, and to allo, him to
recover a *%" s=uare meter lot ,hich ,as, sold at public auction to Do
Fernande2 and ordered titled in the latter?s name.
0he antecedent facts are as follo,s1
En'racio Francia is the re'istered o,ner of a residential lot and a t,o-stor(
house built upon it situated at Barrio 3an sidro, no, >istrict of 3ta. Clara,
Pasa( Cit(, Metro Manila. 0he lot, ,ith an area of about "*) s=uare meters, is
described and covered b( 0ransfer Certificate of 0itle No. #+"4 !"++45& of the
Re'istr( of >eeds of Pasa( Cit(.
Cn Cctober $5, $4++, a $*5 s=uare meter portion of Francia?s propert( ,as
e6propriated b( the Republic of the Philippines for the sum of P#,$$-.%%
representin' the estimated amount e=uivalent to the assessed value of the
aforesaid portion.
3ince $4-" up to $4++ inclusive, Francia failed to pa( his real estate ta6es.
0hus, on >ecember 5, $4++, his propert( ,as sold at public auction b( the
Cit( 0reasurer of Pasa( Cit( pursuant to 3ection +" of Presidential >ecree No.
#-# @no,n as the Real Propert( 0a6 Code in order to satisf( a ta6 delin=uenc(
of P*,#%%.%%. Do Fernande2 ,as the hi'hest bidder for the propert(.
Francia ,as not present durin' the auction sale since he ,as in li'an Cit( at
that time helpin' his uncle ship bananas.
Cn March ", $4+4, Francia received a notice of hearin' of /RC Case No.
$54"-P An re1 Petition for Entr( of Ne, Certificate of 0itleA filed b( Do
Fernande2, see@in' the cancellation of 0C0 No. #+"4 !"++45& and the
issuance in his name of a ne, certificate of title. Epon verification throu'h his
la,(er, Francia discovered that a Final Bill of 3ale had been issued in favor of
Do Fernande2 b( the Cit( 0reasurer on >ecember $$, $4+). 0he auction sale
and the final bill of sale ,ere both annotated at the bac@ of 0C0 No. #+"4
!"++45& b( the Re'ister of >eeds.
Cn March *%, $4+4, Francia filed a complaint to annul the auction sale. De
later amended his complaint on :anuar( *#, $4)%.
Cn April *", $4)$, the lo,er court rendered a decision, the dispositive portion
of ,hich reads1
BDEREFCRE, in vie, of the fore'oin', 9ud'ment is
hereb( rendered dismissin' the amended complaint and
orderin'1
!a& 0he Re'ister of >eeds of Pasa( Cit( to issue a ne, 0ransfer Certificate of
0itle in favor of the defendant Do Fernande2 over the parcel of land includin'
the improvements thereon, sub9ect to ,hatever encumbrances appearin' at the
bac@ of 0C0 No. #+"4 !"++45& and orderin' the same 0C0 No. #+"4 !"++45&
cancelled.
!b& 0he plaintiff to pa( defendant
Do Fernande2 the sum of
P$,%%%.%% as attorne(?s fees. !p.
"%, Record on Appeal&
0he ntermediate Appellate Court affirmed the decision of the lo,er court in
toto.
Dence, this petition for revie,.
Francia prefaced his ar'uments ,ith the follo,in' assi'nments of 'rave errors
of la,1

RE3PCN>EN0 N0ERME>A0E APPE//A0E CCER0 CCMM00E> A


7RAHE ERRCR CF /AB N NC0 DC/>N7 PE00CNER?3
CB/7A0CN 0C PAN P*,#%%.%% FCR 3EPPC3E> 0AM >E/NOEENCN
BA3 3E0-CFF BN 0DE AMCEN0 CF P#,$$-.%% BDCD 0DE
7CHERNMEN0 3 N>EB0E> 0C 0DE FCRMER.

RE3PCN>EN0 N0ERME>A0E APPE//A0E CCER0 CCMM00E> A


7RAHE AN> 3ERCE3 ERRCR N NC0 DC/>N7 0DA0 PE00CNER
BA3 NC0 PRCPER/N AN> >E/N NC0FE> 0DA0 AN AEC0CN
3A/E CF D3 PRCPER0N BA3 0C 0AFE P/ACE CN >ECEMBER 5,
$4++ 0C 3A03FN AN A//E7E> 0AM >E/NOEENCN CF P*,#%%.%%.

RE3PCN>EN0 N0ERME>A0E APPE//A0E CCER0 FER0DER


CCMM00E> A 3ERCE3 ERRCR AN> 7RAHE ABE3E CF
>3CRE0CN N NC0 DC/>N7 0DA0 0DE PRCE CF P*,#%%.%% PA>
BN RE3PCN0>EN0 DC FERNAN>EG BA3 7RC33/N NA>EOEA0E
A3 0C 3DCCF CNE?3 CCN3CENCE AMCEN0N7 0C FRAE> AN> A
>EPRHA0CN CF PRCPER0N B0DCE0 >EE PRCCE33 CF /AB,
AN> CCN3EOEEN0/N, 0DE AEC0CN 3A/E MA>E 0DERECF 3
HC>. !pp. $%, $+, *%-*$, Rollo&
Be 'ave due course to the petition for a more thorou'h in=uir( into the
petitioner?s alle'ations that his propert( ,as sold at public auction ,ithout
notice to him and that the price paid for the propert( ,as shoc@in'l(
inade=uate, amountin' to fraud and deprivation ,ithout due process of la,.
A careful revie, of the case, ho,ever, discloses that Mr. Francia brou'ht the
problems raised in his petition upon himself. Bhile ,e commiserate ,ith him
at the loss of his propert(, the la, and the facts militate a'ainst the 'rant of his
petition. Be are constrained to dismiss it.
Francia contends that his ta6 delin=uenc( of P*,#%%.%% has been e6tin'uished
b( le'al compensation. De claims that the 'overnment o,ed him P#,$$-.%%
,hen a portion of his land ,as e6propriated on Cctober $5, $4++. Dence, his
ta6 obli'ation had been set-off b( operation of la, as of Cctober $5, $4++.
0here is no le'al basis for the contention. B( le'al compensation, obli'ations
of persons, ,ho in their o,n ri'ht are reciprocall( debtors and creditors of
each other, are e6tin'uished !Art. $*+), Civil Code&. 0he circumstances of the
case do not satisf( the re=uirements provided b( Article $*+4, to ,it1
!$& that each one of the obli'ors be bound principall(
and that he be at the same time a principal creditor of
the other;
666 666 666
!"& that the t,o debts be due.
666 666 666
0his principal contention of the petitioner has no merit. Be have consistentl(
ruled that there can be no off-settin' of ta6es a'ainst the claims that the
ta6pa(er ma( have a'ainst the 'overnment. A person cannot refuse to pa( a
ta6 on the 'round that the 'overnment o,es him an amount e=ual to or 'reater
than the ta6 bein' collected. 0he collection of a ta6 cannot a,ait the results of
a la,suit a'ainst the 'overnment.
n the case of +epu,lic %. a#,ulao 3u#,er $o. !# 3CRA -**&, this Court
ruled that nternal Revenue 0a6es can not be the sub9ect of set-off or
compensation. Be stated that1
A claim for ta6es is not such a debt, demand, contract
or 9ud'ment as is allo,ed to be set-off under the
statutes of set-off, ,hich are construed uniforml(, in the
li'ht of public polic(, to e6clude the remed( in an
action or an( indebtedness of the state or municipalit(
to one ,ho is liable to the state or municipalit( for
ta6es. Neither are the( a proper sub9ect of recoupment
since the( do not arise out of the contract or transaction
sued on. ... !)% C.:.3., +"+#&. A0he 'eneral rule based
on 'rounds of public polic( is ,ell-settled that no set-
off admissible a'ainst demands for ta6es levied for
'eneral or local 'overnmental purposes. 0he reason on
,hich the 'eneral rule is based, is that ta6es are not in
the nature of contracts bet,een the part( and part( but
'ro, out of dut( to, and are the positive acts of the
'overnment to the ma@in' and enforcin' of ,hich, the
personal consent of individual ta6pa(ers is not re=uired.
...A
Be stated that a ta6pa(er cannot refuse to pa( his ta6 ,hen called upon b( the
collector because he has a claim a'ainst the 'overnmental bod( not included
in the ta6 lev(.
0his rule ,as reiterated in the case of $orders %. Gonda !$) 3CRA ""$& ,here
,e stated that1 A... internal revenue ta6es can not be the sub9ect of
compensation1 Reason1 'overnment and ta6pa(er are not mutuall( creditors
and debtors of each other? under Article $*+) of the Civil Code and a Aclaim
for ta6es is not such a debt, demand, contract or 9ud'ment as is allo,ed to be
set-off.A
0here are other factors ,hich compel us to rule a'ainst the petitioner. 0he ta6
,as due to the cit( 'overnment ,hile the e6propriation ,as effected b( the
national 'overnment. Moreover, the amount of P#,$$-.%% paid b( the national
'overnment for the $*5 s=uare meter portion of his lot ,as deposited ,ith the
Philippine National Ban@ lon' before the sale at public auction of his
remainin' propert(. Notice of the deposit dated 3eptember *), $4++ ,as
received b( the petitioner on 3eptember "%, $4++. 0he petitioner admitted in
his testimon( that he @ne, about the P#,$$-.%% deposited ,ith the ban@ but he
did not ,ithdra, it. t ,ould have been an eas( matter to ,ithdra, P*,#%%.%%
from the deposit so that he could pa( the ta6 obli'ation thus abortin' the sale
at public auction.
Petitioner had one (ear ,ithin ,hich to redeem his propert( althou'h, as ,ell
be sho,n later, he claimed that he poc@eted the notice of the auction sale
,ithout readin' it.
Petitioner contends that Athe auction sale in =uestion ,as made ,ithout
compl(in' ,ith the mandator( provisions of the statute 'overnin' ta6 sale. No
evidence, oral or other,ise, ,as presented that the procedure outlined b( la,
on sales of propert( for ta6 delin=uenc( ,as follo,ed. ... Since defendant Ho
(ernande" has the affir#ati%e of this issue/ the ,urden of proof therefore rests
upon hi# to show that plaintiff was duly and properly notified ... .!Petition for
Revie,, Rollo p. $); emphasis supplied&
Be a'ree ,ith the petitioner?s claim that Do Fernande2, the purchaser at the
auction sale, has the burden of proof to sho, that there ,as compliance ,ith
all the prescribed re=uisites for a ta6 sale.
0he case of 4alencia %. &i#ene" !$$ Phil. #4*& laid do,n the doctrine that1
666 666 666
... K>Lue process of la, to be follo,ed in ta6
proceedin's must be established b( proof and
the'eneral rule is that the purchaser of a ta* title is
,ound to ta0e upon hi#self the ,urden of showin' the
re'ularity of all proceedin's leadin' up to the
sale. !emphasis supplied&
0here is no presumption of the re'ularit( of an( administrative action ,hich
results in deprivin' a ta6pa(er of his propert( throu'h a ta6 sale. !Camo v.
Riosa Bo(co, *4 Phil. #"+&; >eno'a v. nsular 7overnment, $4 Phil. *-$&.
0his is actuall( an e6ception to the rule that administrative proceedin's are
presumed to be re'ular.
But even if the burden of proof lies ,ith the purchaser to sho, that all le'al
prere=uisites have been complied ,ith, the petitioner can not, ho,ever, den(
that he did receive the notice for the auction sale. 0he records sustain the
lo,er court?s findin' that1
K0Lhe plaintiff claimed that it ,as ille'al and irre'ular.
De insisted that he ,as not properl( notified of the
auction sale. 3urprisin'l(, ho,ever, he admitted in his
testimon( that he received the letter dated November
*$, $4++ !E6hibit AA& as sho,n b( his si'nature
!E6hibit A-AA& thereof. De claimed further that he ,as
not present on >ecember 5, $4++ the date of the auction
sale because he ,ent to li'an Cit(. As lon' as there
,as substantial compliance ,ith the re=uirements of the
notice, the validit( of the auction sale can not be
assailed ... .
Be =uote the follo,in' testimon( of the petitioner on cross-e6amination, to
,it1
O. M( =uestion to (ou is this letter mar@ed as E6hibit for Do Fernande2
notified (ou that the propert( in =uestion shall be sold at public auction to the
hi'hest bidder on >ecember 5, $4++ pursuant to 3ec. +# of P> #-#. Bill (ou
tell the Court ,hether (ou received the ori'inal of this letter<
A. 9ust si'ned it because ,as not able to read the same. t ,as 9ust sent b(
mail carrier.
O. 3o (ou admit that (ou received the ori'inal of E6hibit and (ou si'ned
upon receipt thereof but (ou did not read the contents of it<
A. Nes, sir, as ,as in a hurr(.
O. After (ou received that ori'inal ,here did (ou place it<
A. placed it in the usual place ,here place m( mails.
Petitioner, therefore, ,as notified about the auction sale. t ,as ne'li'ence on
his part ,hen he i'nored such notice. B( his ver( o,n admission that he
received the notice, his no, comin' to court assailin' the validit( of the
auction sale loses its force.
Petitioner?s third assi'nment of 'rave error li@e,ise lac@s merit. As a 'eneral
rule, 'ross inade=uac( of price is not material !>e /eon v. 3alvador, "- 3CRA
5-+; Ponce de /eon v. Rehabilitation Finance Corporation, "- 3CRA *)4;
0olentino v. A'caoili, 4$ Phil. 4$+ Enrep.&. 3ee also !arro"o 4da. de Gordon
%. $ourt of Appeals !$%4 3CRA "))& ,e held that Aalle'ed 'ross inade=uac(
of price is not material ,hen the la, 'ives the o,ner the ri'ht to redeem as
,hen a sale is made at public auction, upon the theor( that the lesser the price,
the easier it is for the o,ner to effect redemption.A n 4elas5ue" %. $oronel !5
3CRA 4)5&, this Court held1
... KRLespondent treasurer no, claims that the prices for
,hich the lands ,ere sold are unconscionable
considerin' the ,ide diver'ence bet,een their assessed
values and the amounts for ,hich the( had been
actuall( sold. Do,ever, ,hile in ordinar( sales for
reasons of e=uit( a transaction ma( be invalidated on
the 'round of inade=uac( of price, or ,hen such
inade=uac( shoc@s one?s conscience as to 9ustif( the
courts to interfere, such does not follo, ,hen the la,
'ives to the o,ner the ri'ht to redeem, as ,hen a sale is
made at public auction, upon the theor( that the lesser
the price the easier it is for the o,ner to effect the
redemption. And so it ,as aptl( said1 ABhen there is
the ri'ht to redeem, inade=uac( of price should not be
material, because the 9ud'ment debtor ma( reac=uire
the propert( or also sell his ri'ht to redeem and thus
recover the loss he claims to have suffered b( reason of
the price obtained at the auction sale.A
0he reason behind the above rulin's is ,ell enunciated in the case of Hilton
et. u*. %. 6e 3on'/ et al. !$)) Bash. $-*, -$ P. *d, $*4%&1
f mere inade=uac( of price is held to be a valid
ob9ection to a sale for ta6es, the collection of ta6es in
this manner ,ould be 'reatl( embarrassed, if not
rendered alto'ether impracticable. n Blac@ on 0a6
0itles !*nd Ed.& *"), the correct rule is stated as
follo,s1 A,here land is sold for ta6es, the inade=uac(
of the price 'iven is not a valid ob9ection to the sale.A
0his rule arises from necessit(, for, if a fair price for the
land ,ere essential to the sale, it ,ould be useless to
offer the propert(. ndeed, it is notorious that the prices
habituall( paid b( purchasers at ta6 sales are 'rossl(
out of proportion to the value of the land. !Rothchild
Bros. v. Rollin'er, "* Bash. "%+, +" P. "-+, "-4&.
n this case no, before us, ,e can aptl( use the lan'ua'e of cGuire/ et al. %.
!ean/ et al. !*-+ P. 555&1
/i@e most cases of this character there is here a certain
element of hardship from ,hich ,e ,ould be 'lad to
relieve, but do so ,ould unsettle lon'-established rules
and lead to uncertaint( and difficult( in the collection
of ta6es ,hich are the life blood of the state. Be are
convinced that the present rules are 9ust, and that the(
brin' hardship onl( to those ,ho have invited it b(
their o,n ne'lect.
Be are inclined to believe the petitioner?s claim that the value of the lot has
'reatl( appreciated in value. Precisel( because of the ,idenin' of Buendia
Avenue in Pasa( Cit(, ,hich necessitated the e6propriation of ad9oinin' areas,
real estate values have 'one up in the area. Do,ever, the price =uoted b( the
petitioner for a *%" s=uare meter lot appears =uite e6a''erated. At an( rate,
the fore'oin' reasons ,hich ans,er the petitioner?s claims lead us to den( the
petition.
And finall(, even if ,e are inclined to 'ive relief to the petitioner on e=uitable
'rounds, there are no stron' considerations of substantial 9ustice in his favor.
Mr. Francia failed to pa( his ta6es for $# (ears from $4-" up to the date of the
auction sale. De claims to have poc@eted the notice of sale ,ithout readin' it
,hich, if true, is still an act of ine6plicable ne'li'ence. De did not ,ithdra,
from the e6propriation pa(ment deposited ,ith the Philippine National Ban@
an amount sufficient to pa( for the bac@ ta6es. 0he petitioner did not pa(
attention to another notice sent b( the Cit( 0reasurer on November ", $4+),
durin' the period of redemption, re'ardin' his ta6 delin=uenc(. 0here is
furthermore no sho,in' of bad faith or collusion in the purchase of the
propert( b( Mr. Fernande2. 0he petitioner has no standin' to invo@e e=uit( in
his attempt to re'ain the propert( b( belatedl( as@in' for the annulment of the
sale.
BDEREFCRE, N HEB CF 0DE FCRE7CN7, the petition for revie, is
>3M33E>. 0he decision of the respondent court is affirmed.
3C CR>ERE>.
Republic of the Philippines
SUPREME COURT
Manila
FR30 >H3CN
G.R. No. L-(52(8 #4r,/ 21, 1989
REPUL!C OF T"E P"!L!PP!NES, petitioner,
vs.
"ON. &U)GE ;!CENTE G. ER!CT# a'5 S#MP#GU!T#
P!CTURES, !NC., respondents.
The Solicitor General for petitioner.
6o#in'o 7. 6e 3ara and (loro 6.
$arpio for respondent Sa#pa'uita .ictures/ )nc.

N#R;#S#, J.:
0his case has to do ,ith the so-called Abac@ pa( certificatesA issued
b( the Philippine 7overnment in the aftermath of the Pacific Bar,
pursuant to Republic Act No. "%#, as amended b( Republic Act No.
)%%. 0hese enactments 'enerall( reco'ni2ed the ri'ht of persons ,ho
at the outbrea@ of the ,ar ,ere emplo(ed in the classified and
unclassified civil service as ,ell as in 'overnment-o,ned or
controlled corporations, and those ,ho had served in the free local
civil 'overnments or'ani2ed for purposes of resistance a'ainst the
invaders, to salaries, ,a'es, emoluments, per die#s, not received b(
them b( reason of the ,ar. 0he 0reasurer of the Philippines ,as
empo,ered to receive applications for bac@ pa( and to issue in favor
of the applicants certificates of indebtedness redeemable b( the
7overnment ,ithin ten (ears for the amounts determined to be 9ustl(
due them.
t appears that in relation to its business of producin' motion pictures,
3ampa'uita Pictures, nc., hereafter simpl( 3ampa'uita, came to
incur an obli'ation for percenta'e, ,ithholdin' and amusement ta6es
in the amount of P$%,*-).#$ in favor of the Republic of the
Philippines. 1 n satisfaction thereof, and of another obli'ation of the same nature due from Hera-Pere2
Corporation, 3ampa'uita Pictures, nc. tendered and delivered to the Cffice of the Municipal 0reasurer of Bocaue,
Bulacan, on :une 4, $4-$, si6teen !$-& bac@ pa( ne'otiable certificates of indebtedness in the a''re'ate sum of
P$-,+-".-%, ,hich had earlier been ne'otiated to them b( the ori'inal holders thereof, and official receipts
therefor ,ere dul( issued. 2
0hirteen !$"& da(s later, ho,ever, the Assistant Re'ional >irector of
the BR ,rote to Hera-Pere2 Corporation !his letter is dated :une **,
$4-$& advisin' that the acceptance of the Ne'otiable Certificates of
ndebtedness in pa(ment of amusement, percenta'e and ,ithholdin'
ta6es !in the total sum of P$-,+5".5%& ,as erroneous and the pa(ment
,as invalid, because actuall( said certificates ,ere Anot acceptable as
pa(ments of internal revenue ta6es in accordance ,ith the provisions
of .. 7eneral Circular No. H-*)4 dated Ma( ), $454.A Re=uest ,as
thus made for the pa(ment of the ta6 liabilities in cash. ( Evidentl( neither
corporations responded one ,a( or the other to this letter. An(,a(, the ne6t letter adverted to b( the 7overnment
is that dated Au'ust $), $4-+, ,ritten b( the Actin' >eput( Commissioner of nternal Revenue to both
3ampa'uita and Hera-Pere2 Corporation. % 0hat letter 'ave the corporations Aa last $5-da( period ,ithin ,hich to
pa( the said amount of P$-,+-".5% in cash or certified chec@.A A'ain, no acceptable response seems to have been
made b( the corporations. 3o on :une 4, $4-4, ei'ht !)& (ears to the da( ,hen the ne'otiable certificates of
indebtedness ,ere accepted in pa(ment of ta6es b( the Municipal 0reasurer at Bocaue, Bulacan, the 3olicitor
7eneral brou'ht suit in behalf of the Republic of the Philippines in relation thereto. 5 0he case ,as doc@eted as
Civil Case No. O-$"*+% of the Court of First nstance at Oue2on Cit(, and assi'ned to Branch MH thereof, then
presided over b( herein respondent, Don. Hicente 7. Ericta. 6
0he 3olicitor 7eneral?s complaint 7 impleaded onl( 3ampa'uita as defendant. Bh( he
e6cluded the other corporation is not disclosed b( the record. n his complaint he alle'ed that 3ampa'uita?s
essa(ed pa(ment ,as void since it ,as Anot the ori'inal holder of the .. certificates .. but .. onl( a mere assi'nee
thereof,A and tinder the la,,A onl( ori'inal holders of bac@ pa( certificates .. are allo,ed to use the same in
pa(ment of their o,n ta6es,A invo@in' this Court?s decision to that effect in de !or8a %. Gella 8 promul'ated on
:ul( "$, $4-".
3ampa'uita?s ans,er admitted the basic facts, but asserted that the
plaintiffs cause of action had alread( prescribed; that the tender of the
certificates in $4-$ had been Amade in absolute 'ood faith,A Aprior to
the promul'ation of the decision .. !in& de !or8a %s. 4icente Gella et
al. on :ul( "$, $4-";A that the certificates Ahavin' dul( matured .. in
the (ear $45), !and& plaintiff .. !bein' then& alread( dut( bound to
redeem them and pa( for their value,A 3ampa'uita and the Republic
became Amutual creditors and debtors of each other for the amount of
P$%,*-).#$A ,ith the result that their obli'ations ,ere e6tin'uished
b( le'al compensation.A 0hese averments ,ereinter alia reproduced
and set up also as a counterclaim, ,ith the additional plea that Ain the
remote possibilit( that ..!it K3ampa'uita $& be still re=uired .. to pa(
plaintiff the amount of P$%,*-).#$ for alle'ed unpaid ta6es, the
plaintiff be ordered to pa( the defendant the same amount of Pl
%,*-).#$ representin' the face value of the ne'otiable certificates of
indebtedness.A
Cn >ecember *4, $4+$, 9ud'ment ,as rendered b( the 0rial :ud'e
Adismissin' both the complaint and the counterclaim ,ithout
pronouncement as to costs.A 9 Dis Donor held that deliver( of the bac@ pa( certificates b(
3ampa'uita had not produced the effect of pa(ment in vie, of the doctrine in !or8a %. Gella 1= that Athe ri'ht to
use bac@pa( certificates of indebtedness in the settlement of ta6es is 'iven onl( to ori'inal holders and not to mere
assi'nees thereof;A this not,ithstandin', 3ampa'uita, as assi'nee of the certificates of indebtedness, had
Asucceeded to the ori'inal ri'hts of the holders thereof,A and ,as therefore authori2ed to demand pa(ment b( the
Republic of the indebtedness thereb( represented; and ,hile there ,as Aopinion that !le'al& compensation cannot
ta@e place a'ainst the Republic ,ith respect to ta6es, fees, duties and similar forced contributions due to it !Civil
Code, Holume H, p. "#4, 0olentino; 7asperi *%#; * Hon 0uhr O,li'aciones, p. $-5&, there could be no 'ainsa(in'
the proposition that, under the facts, Sa#pa'uita was entitled to 8ud'#ent upon its counterclai# for the pa(ment
b( the Republic of its indebtedness in virtue of the bac@ pa( certificates in =uestion, ,ith the Aultimate result ..
that the claim and counter-claim of the plaintiff and the defendant, respectivel( ,ill offset each other.A
0he 3olicitor 7eneral presented a motion of reconsideration. Bhen
this ,as denied, he appealed to this Court b( certiorari positin'
reversible le'al error on the part of respondent :ud'e in holdin' that
!$& the Republic?s claim is offset b( 3ampa'uita?s counterclaim, and
!*& the ne'otiable certificates of indebtedness in =uestion ,ere Alon'
overdue and redeemable.A 0he petitioner?s postulations are untenable.
$. 0he 0rial Court ruled that the ta6es sou'ht to
be collected b( the Republic from 3ampa'uita
,ere still unpaid, its tender of the certificates of
indebtedness in =uestion not constitutin'
pa(ment; hence, it ou'ht properl( to be sentenced
to pa( the ta6es. t also ruled that even assumin'
the contrar(, le'al compensation as a mode of
e6tin'uishin' an obli'ation to pa( ta6es ,as
nonetheless unavailin' a'ainst the 'overnment,
conformabl( ,ith de !or8a %. Gella.
Cn the other hand, accordin' to the 0rial Court, at least as of date of
9ud'ment, more than $% (ears from :une $), $45), the date ,hen, as
e6pressl( stated in the certificates of indebtedness, the same ,ere
redeemable, the obli'ation thereb( evidenced ,as un=uestionabl(
alread( due and pa(able; hence, 3ampa'uita ,as entitled to a
9ud'ment a'ainst the Republic for the pa(ment of the face value of
the certificates, the same havin' alread( been presented and
surrendered ,ithin the said period of ten (ears !on :une 4, $4-$& to
the 0reasurer of the Philippines !thru the Municipal 0reasurer of
Bocaue, Bulacan & 11 0his is correct. n other ,ords, even if as the 3olicitor 7eneral points out,
Athere is no certainty when the certificates are actually redee#a,leA because the la, sa( Athat the( are
redeemable .. ,ithin ten (ears from the date of issuance A 12 there can be no =uestion that after the lapse of ten
!$%& (ears from the declared date of redeemabilit(, pa(ment of the indebtedness ,as alread( e6i'ible 0he 0rial
Court ,as sa(in' in effect that ,hile 9ud'ment should be rendered in favor of the Republic a'ainst 3ampa'uita
for unpaid ta6es in the amount of P$%,*-).#$, 9ud'ment ou'ht at the same time to issue for 3ampa'uita
commandin' pa(ment to it b( the Republic of the same sum, representin' the face value of the certificates of
indebtedness assi'ned to it and for recover( of ,hich it had specificall( pra(ed in its counterclaim.
*. Bhat has 9ust been said confutes the
petitioner?s second ar'ument that redemption of
the certificates of indebtedness ,as not (et
demandable of it because Athere is no certaint(
,hen the certificates are actuall( redeemable,
,ithin the meanin' of the la,.A t is true that, as
the 3olicitor 7eneral contends, Athe la, does not
sa( that the( are redeemable from its approval on
:une $), $45) but ?,ithin ten (ears from the date
of issuance? of the certificates, A 1( the ineludible ineluctable
fact is that more than ten !$%& (ears have alread( elapsed since their issuance and
demand for pa(ment had been made ,ithin said $%-(ear period. t is useless to
=uibble about the precise time A,ithin ten (earsA ,hen an obli'ation becomes
demandable, ,hen that period of ten (ears has alread( e6pired. Bhatever
ine6actitude mi'ht inhere in the phrase, A,ithin ten (ears,A as fi6in' the time of
e6ibilit( of the obli'ation in =uestion, there can be no debate about the
proposition that the obli'ation became due and demandable after ten years. t
,ould be absurd and unfair to sanction the theor( subsumed in the Republic?s
petition that its obli'ation ,as not demandable ,ithin ten (ears because of
ine6actitude (et became time-barred upon the lapse of that self-same period.
BDEREFCRE, the petition is >ENE>, and the 9ud'ment sub9ect
thereof, bein' in accord ,ith the facts and the la,, is AFFRME> in
toto. No costs.
3C CR>ERE>.
Republic of the Philippines
SUPREME COURT
Manila
FR30 >H3CN
G.R. No*. L-285=2-=( #4r,/ 18, 1989
COMM!SS!ONER OF !NTERN#L RE;ENUE, petitioner,
vs.
ESSO ST#N)#R) E#STERN, !NC. a'5 T"E COURT OF T#<
#PPE#LS, respondents.

N#R;#S#, J.:
n t,o !*& cases appealed to it 1 b( the private respondent, hereafter simpl(
referred to as E33C, the Court of 0a6 Appeals rendered 9ud'ment2 sustainin'
the decisions of the Commissioner of nternal Revenue e6cepted to, save Athe
refund-claim .. in the amount of P"4,+)+.4# as overpaid interest ,hich it
ordered refunded to E33C
Reversal of this decision is sou'ht b( the Commissioner b( a petition for
revie, on certiorari filed ,ith this Court. De ascribes to the 0a6 Court one
sole error1 Aof appl(in' the ta6 credit for overpa(ment of the $454 income ta6
of .. E33C, 'ranted b( the petitioner !Commissioner&, to .. !E33C?s& basic
$4-% deficienc( income ta6 liabilit( 6 6 and imposin' the $-$P*. monthl(
interests ( onl( on the remainin' balance thereof in the sum of
P$#-,4-$.%%A % !instead of the full amount of the $4-% deficienc( liabilit( in
the amount of P"-+,44#.%%&. Reversal of the same 9ud'ment of the Court of
0a6 Appeals is also sou'ht b( E33C in its o,n appeal !doc@eted as 7.R. Nos.
/*)5%)-%4&; but in the brief filed b( it in this case, it indicates that it ,ill not
press its appeal in the event that Athe instant petition for revie, be denied and
that 9ud'ment be rendered affirmin' the decision of the Court of 0a6
Appeals.A
0he facts are simple enou'h and are =uite =uic@l( recounted. E33C overpaid
its $454 income ta6 b( P**$,%"".%%. t ,as accordin'l( 'ranted a ta6 credit in
this amount b( the Comissioner on Au'ust 5,$4-#. Do,ever, E33Cs pa(ment
of its income ta6 for $4-% ,as found to be short b( P"-+,44#.%%. 3o, on :ul(
$%, $4-#, the Commissioner ,rote to E33C demandin' pa(ment of the
deficienc( ta6, to'ether ,ith interest thereon for the period from April
$),$4-$ to April $),$4-#. Cn Au'ust $%, $4-#, E33C paid under protest the
amount alle'ed to be due, includin' the interest as rec@oned b( the
Commissioner. t protested the computation of interest, contendin' it ,as
more than that properl( due. t claimed that it should not have been re=uired
to pa( interest on the total amount of the deficienc( ta6, P"-+,44#.%%, but onl(
on the amount of P$#-,4-$.%%Jrepresentin' the difference bet,een said
deficienc(, P"-+,44#.%%, and E33Cs earlier overpa(ment of P**$,%"".%% !for
,hich it had been 'ranted a ta6 credit&. E33C thus as@ed for a refund.
0he nternal Revenue Commissioner denied the claim for refund. E33C
appealed to the Court of 0a6 Appeals. As aforestated. that Court ordered
pa(ment to E33C of its Arefund-claim 6 6 in the amount of P"4,+)+.4# as
overpaid interest. Dence, this appeal b( the Commissioner. 0he C0A 9ustified
its a,ard of the refund as follo,s1
... n the letter of Au'ust 5, $4-#, .. !the Commissioner& admitted that .. E33C
had overpaid its $454 income ta6 b( P**$,%"".%%. Accordin'l( .. !the
Commissioner& 'ranted to .. E33C a ta6 credit of P**$,%"".%%. n short, the
said sum of P**$,%"".%% of E33C?s mone( ,as in the 7overnment?s hands at
the latest on :ul( $5, $4-% ,hen it E33C paid in full its second installment of
income ta6 for $454. Cn :ul( $%, $4-# .. !the Commissioner& claimed that for
$4-%, .. E33C underpaid its income ta6 b( P"-+,44#.%%. Do,ever, instead of
deductin' from P"-+,44#.%% the ta6 credit of P**$,%"".%% ,hich .. !the
Commissioner& had alread( admitted ,as due .. E33C .. !the Commissioner&
still insists in collectin' the interest on the full amount of P"-+,44#.%% for the
period April $), $4-$ to April $),$4-# ,hen the 7overnment had alread( in
its hands the sum of P**$,%"".%% of .. E33Cs mone( even before the latter?s
income ta6 for $4-% ,as due and pa(able. f the imposition of interest does
not amount to a penalt( but merel( a 9ust compensation to the 3tate for the
dela( in pa(in' the ta6, and for the concomitant use b( the ta6pa(er of funds
that ri'htfull( should be in the 7overnment?s hand !Castro v. Collector, 7.R.
No. /-$*+#, >ec. *), $4-*&, the collection of the interest on the full amount of
P"-+,44#.%% ,ithout deductin' first the ta6 credit of P**$,%"".%%, ,hich has
lon' been in the hands of the 7overnment, becomes erroneous, ille'al and
arbitrar(.
.. !E33C& could hardl( be char'ed of delin=uenc( in pa(in' P**$,%"".%% out
of the deficienc( income ta6 of P"-+,44#.%%, for ,hich the 3tate should be
compensated b( the pa(ment of interest, because the said amount of
P**$,%"".%% ,as alread( in the coffers of the 7overnment. Neither could ..
E33C be char'ed for the concomitant use of funds that ri'htfull( belon' to the
7overnment because as earl( as :ul( $5, $4-%, it ,as the 7overnment that ,as
usin' .. E33Cs funds of P**$,%"".%%. n the circumstances, ,e find it unfair and
un9ust for .. !the Commissioner& to e6act the interest on the said sum of
P**$,%"".%% ,hich, after all, ,as paid to and received b( the 7overnment even
before the incidence of the deficienc( income ta6 of P"-+,44#.%%. !to'on-3u(oc
Mines, nc. v. Commissioner, C.0.A. Case No. $"*+, 3ept. "%,$4-5&. Cn the
contrar(, the 7overnment should be the first to bla2e the trail and set the e6ample
of fairness and honest dealin' in the administration of ta6 la,s.
Accordin'l(, ,e hold that the ta6 credit of P**$,%"".%% for $454 should first be
deducted from the basic deficienc( ta6 of P"-+,44#.%% for $4-% and the resultin'
difference of P$#-,4-$.%% ,ould be sub9ect to the $). interest prescribed b(
3ection 5$ !d& of the Revenue Code. Accordin' to the pra(er of ..!E33C& .. !the
Commissioner& is hereb( ordered to refund to .. !E33C& the amount of P"4,+)+.4#
as overpaid interest in the settlement of its $4-% income ta6 liabilit(. Do,ever, as
the collection of the ta6 ,as not attended ,ith arbitrariness because .. !E33C& itself
follo,ed 6 6 !the Commissioner?s& manner of computin' the ta6 in pa(in' the sum
of P*$",$)4.4" on Au'ust $%, $4-#, the pra(er of .. !E33C& that it be 'ranted the
le'al rate of interest on its overpa(ment of P"4,+)+.4# from Au'ust $%, $4-# to the
time it is actuall( refunded is denied. !3ee Collector of nternal Revenue v.
Binalba'an Estate, nc., 7.R. No. $,$*+5*, :an. "%, $4-5&.
0he Commissioner?s position is that income ta6es are determined and paid on an
annual basis, and that such determination and pa(ment of annual ta6es are separate
and independent transactions; and that a ta6 credit could not be so considered until
it has been finall( approved and the ta6pa(er dul( notified thereof. 3ince in this
case, he ar'ues, the ta6 credit of P**$,%"".%% ,as approved onl( on Au'ust 5,
$4-#, it could not be availed of in reduction of E33Cs earlier ta6 deficienc( for the
(ear $4-%; as of that (ear, $4-%, there ,as as (et no ta6 credit to spea@ of, ,hich
,ould reduce the deficienc( ta6 liabilit( for $4-%. n support of his position, the
Commissioner invo@es the provisions of 3ection 5$ of the 0a6 Code pertinentl(
readin' as follo,s1
!c& >efinition of deficienc(. As used in this Chapter in respect of ta6 imposed b(
this 0itle, the term ?deficienc(? means1
!$& 0he amount b( ,hich the ta6 imposed b( this 0itle e6ceeds the amount sho,n
as the ta6 b( the ta6pa(er upon his return; but the amount so sho,n on the return
shall first be increased b( the amounts previousl( assessed !or collected ,ithout
assessment& as a deficienc(, and decreased b( the amount previousl( abated
credited, returned, or other,ise in respect of such ta6; ..
666 666 666
!d& nterest on deficienc(. J nterest upon the amount determined as deficienc(
shall be assessed at the same time as the deficienc( and shall be paid upon notice
and demand from the Commissioner of nternal Revenue; and shall be collected as
a part of the ta6, at the rate of si6 per centum per annum from the date prescribed
for the pa(ment of the ta6 !or, if the ta6 is paid in installments, from the date
prescribed for the pa(ment of the first installment& to the date the deficienc( is
assessed; .ro%ided, 0hat the amount that ma( be collected as interest on deficienc(
shall in no case e6ceed the amount correspondin' to a period of three (ears, the
present provision re'ardin' prescription to the contrar( not,ithstandin'.
0he fact is that, as respondent Court of 0a6 Appeals has stressed, as earl( as :ul(
$5, $4-%, the 7overnment alread( had in its hands the sum of P**$,%"".%%
representin' e6cess pa(ment. Davin' been paid and received b( mista@e, as
petitioner Commissioner subse=uentl( ac@no,led'ed, that sum un=uestionabl(
belon'ed to E33C, and the 7overnment had the obli'ation to return it to E33C
0hat ac@no,led'ment of the erroneous pa(ment came some four !#& (ears
after,ards in no,ise ne'ates or detracts from its actualit(. 0he obli'ation to return
mone( mista@enl( paid arises from the moment that pa(ment is made, and not from
the time that the pa(ee admits the obli'ation to reimburse. 0he obli'ation of the
pa(ee to reimburse an amount paid to him results from the mista@e, not from the
pa(ee?s confession of the mista@e or reco'nition of the obli'ation to reimburse. n
other ,ords, since the amount of P**$,%"".%% belon'in' to E33C ,as alread( in
the hands of the 7overnment as of :ul(, $4-%, althou'h the latter had no ri'ht
,hatever to the amount and indeed ,as bound to return it to E33C, it ,as neither
le'all( nor lo'icall( possible for E33C thereafter to be considered a debtor of the
7overnment in that amount of P**$,%"".%%; and ,hatever other obli'ation E33C
mi'ht subse=uentl( incur in favor of the 7overnment ,ould have to be reduced b(
that sum, in respect of ,hich no interest could be char'ed. 0o interpret the ,ords of
the statute in such a manner as to subvert these truisms simpl( can not and should
not be countenanced. ANothin' is better settled than that courts are not to 'ive
,ords a meanin' ,hich ,ould lead to absurd or unreasonable conse=uences. 0hat
is a principle that 'oes bac@ to )n re Allen !* Phil. -"%& decided on Cctober *4,
$4%", ,here it ,as held that a literal interpretation is to be re9ected if it ,ould be
un9ust or lead to absurd results.A 6A3tatutes should receive a sensible construction,
such as ,ill 'ive effect to the le'islative intention and so as to avoid an un9ust or
absurd conclusion.A 7
BDEREFCRE, the petition for revie, is >ENE>, and the >ecision of the Court
of 0a6 Appeals dated Cctober *), $4-+ sub9ect of the petition is AFFRME>,
,ithout pronouncement as to costs.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 92585 May 8, 1992
C#LTE< P"!L!PP!NES, !NC., petitioner,
vs.
T"E "ONOR#LE COMM!SS!ON ON #U)!T, "ONOR#LE
COMM!SS!ONER #RTOLOME C. FERN#N)E1 a'5 "ONOR#LE
COMM!SS!ONER #LERTO P. CRU1, respondents.

)#;!)E, &R., J.:
0his is a petition erroneousl( brou'ht under Rule ## of the Rules of
Court
1
=uestionin' the authorit( of the Commission on Audit !CCA& in
disallo,in' petitioner?s claims for reimbursement from the Cil Price
3tabili2ation Fund !CP3F& and see@in' the reversal of said Commission?s
decision den(in' its claims for recover( of financin' char'es from the Fund
and reimbursement of underrecover( arisin' from sales to the National Po,er
Corporation, Atlas Consolidated Minin' and >evelopment Corporation
!A0/A3& and Marcopper Minin' Corporation !MAR-CCPPER&, preventin' it
from e6ercisin' the ri'ht to offset its remittances a'ainst its
reimbursement %is-a-%is the CP3F and disallo,in' its claims ,hich are still
pendin' resolution before the Cffice of Ener'( Affairs !CEA& and the
>epartment of Finance !>CF&.
Pursuant to the $4)+ Constitution,
2
an( decision, order or rulin' of the
Constitutional Commissions
(
ma( be brou'ht to this Court on certiorari b(
the a''rieved part( ,ithin thirt( !"%& da(s from receipt of a cop( thereof.
0he certiorari referred to is the special civil action for certiorari under Rule
-5 of the Rules of Court.
%
Considerin', ho,ever, that the alle'ations that the CCA acted ,ith1
!a& total lac@ of 9urisdiction in completel( i'norin' and sho,in' absolutel( no
respect for the findin's and rulin's of the administrator of the fund itself and
in disallo,in' a claim ,hich is still pendin' resolution at the CEA level, and
!b& A'rave abuse of discretion and completel( ,ithout 9urisdictionA
5
in
declarin' that petitioner cannot avail of the ri'ht to offset an( amount that it
ma( be re=uired under the la, to remit to the CP3F a'ainst an( amount that it
ma( receive b( ,a( of reimbursement therefrom are sufficient to brin' this
petition ,ithin Rule -5 of the Rules of Court, and, considerin' further the
importance of the issues raised, the error in the desi'nation of the remed(
pursued ,ill, in this instance, be e6cused.
0he issues raised revolve around the CP3F created under 3ection ) of
Presidential >ecree !P.>.& No. $45-, as amended b( E6ecutive Crder !E.C.&
No. $"+. As amended, said 3ection ) reads as follo,s1
3ec. ) . 0here is hereb( created a 0rust Account in the boo@s of accounts of
the Ministr( of Ener'( to be desi'nated as Cil Price 3tabili2ation Fund
!CP3F& for the purpose of minimi2in' fre=uent price chan'es brou'ht about
b( e6chan'e rate ad9ustments andPor chan'es in ,orld mar@et prices of crude
oil and imported petroleum products. 0he Cil Price 3tabili2ation Fund ma( be
sourced from an( of the follo,in'1
a& An( increase in the ta6 collection from ad %alore# ta6 or customs dut(
imposed on petroleum products sub9ect to ta6 under this >ecree arisin' from
e6chan'e rate ad9ustment, as ma( be determined b( the Minister of Finance in
consultation ,ith the Board of Ener'(;
b& An( increase in the ta6 collection as a result of the liftin' of ta6 e6emptions
of 'overnment corporations, as ma( be determined b( the Minister of Finance
in consultation ,ith the Board of Ener'(;
c& An( additional amount to be imposed on petroleum products to au'ment the
resources of the Fund throu'h an appropriate Crder that ma( be issued b( the
Board of Ener'( re=uirin' pa(ment b( persons or companies en'a'ed in the
business of importin', manufacturin' andPor mar@etin' petroleum products;
d& An( resultin' peso cost differentials in case the actual peso costs paid b( oil
companies in the importation of crude oil and petroleum products is less than
the peso costs computed usin' the reference forei'n e6chan'e rate as fi6ed b(
the Board of Ener'(.
0he Fund herein created shall be used for the follo,in'1
$& 0o reimburse the oil companies for cost increases in crude oil and imported
petroleum products resultin' from e6chan'e rate ad9ustment andPor increase in
,orld mar@et prices of crude oil;
*& 0o reimburse the oil companies for possible cost under-recover( incurred as
a result of the reduction of domestic prices of petroleum products. 0he
ma'nitude of the underrecover(, if an(, shall be determined b( the Ministr( of
Finance. ACost underrecover(A shall include the follo,in'1
i. Reduction in oil compan( ta@e as directed b( the Board of Ener'( ,ithout
the correspondin' reduction in the landed cost of oil inventories in the
possession of the oil companies at the time of the price chan'e;
ii. Reduction in internal ad %alore# ta6es as a result of fore'oin' 'overnment
mandated price reductions;
iii. Cther factors as ma( be determined b( the Ministr( of Finance to result in
cost underrecover(.
0he Cil Price 3tabili2ation Fund !CP3F& shall be administered b( the Ministr(
of Ener'(.
0he material operative facts of this case, as 'athered from the pleadin's of the
parties, are not disputed.
Cn * Februar( $4)4, the CCA sent a letter to Calte6 Philippines, nc. !CP&,
hereinafter referred to as Petitioner, directin' the latter to remit to the CP3F
its collection, e6cludin' that unremitted for the (ears $4)- and $4)), of the
additional ta6 on petroleum products authori2ed under the aforesaid 3ection )
of P.>. No. $45- ,hich, as of "$ >ecember $4)+, amounted to
P""5,%"+,-#4.%% and informin' it that, pendin' such remittance, all of its
claims for reimbursement from the CP3F shall be held in abe(ance.
6
Cn 4 March $4)4, the CCA sent another letter to petitioner informin' it that
partial verification ,ith the CEA sho,ed that the 'rand total of its unremitted
collections of the above ta6 is P$,*)+,--),)*%.%%, bro@en do,n as follo,s1
$4)- J P*"",$4%,4$-.%%
$4)+ J ""5,%-5,-5%.%%
$4)) J +$4,#$*,*5#.%%;
directin' it to remit the same, ,ith interest and surchar'es thereon, ,ithin
si6t( !-%& da(s from receipt of the letter; advisin' it that the CCA ,ill hold in
abe(ance the audit of all its claims for reimbursement from the CP3F; and
directin' it to desist from further offsettin' the ta6es collected a'ainst
outstandin' claims in $4)4 and subse=uent periods.
7
n its letter of " Ma( $4)4, petitioner re=uested the CCA for an earl( release
of its reimbursement certificates from the CP3F coverin' claims ,ith the
Cffice of Ener'( Affairs since :une $4)+ up to March $4)4, invo@in' in
support thereof CCA Circular No. )4-*44 on the liftin' of pre-audit of
'overnment transactions of national 'overnment a'encies and 'overnment-
o,ned or controlled corporations. 8
n its Ans,er dated ) Ma( $4)4, the CCA denied petitioner?s re=uest for the
earl( release of the reimbursement certificates from the CP3F and repeated its
earlier directive to petitioner to for,ard pa(ment of the latter?s unremitted
collections to the CP3F to facilitate CCA?s audit action on the reimbursement
claims.
9
B( ,a( of a repl(, petitioner, in a letter dated "$ Ma( $4)4, submitted to the
CCA a proposal for the pa(ment of the collections and the recover( of claims,
since the outri'ht pa(ment of the sum of P$.*)+ billion to the CEA as a
prere=uisite for the processin' of said claims a'ainst the CP3F ,ill cause a
ver( serious impairment of its cash position.
1=
0he proposal reads1
Be, therefore, ver( respectfull( propose the follo,in'1
!$& An( procedural arran'ement acceptable to CCA to facilitate monitorin' of
pa(ments and reimbursements ,ill be administered b( the ERBPFinance
>ept.PCEA, as a'encies desi'nated b( la, to administerPre'ulate CP3F.
!*& For the retroactive period, Calte6 ,ill deliver to CEA, P$.*)+ billion as
pa(ment to CP3F, similarl( CEA ,ill deliver to Calte6 the same amount in
cash reimbursement from CP3F.
!"& 0he CCA audit ,ill commence immediatel( and ,ill be conducted
e6peditiousl(.
!#& 0he revie, of current claims !$4)4& ,ill be conducted e6peditiousl( to
preclude further accumulation of reimbursement from CP3F.
Cn + :une $4)4, the CCA, ,ith the Chairman ta@in' no part, handed do,n
>ecision No. 4*$ acceptin' the above-stated proposal but prohibitin'
petitioner from further offsettin' remittances and reimbursements for the
current and ensuin' (ears.
11
>ecision No. 4*$ reads1
0his pertains to the ,ithin separate re=uests of Mr. Manuel A. Estrella,
President, Petron Corporation, and Mr. Francis Ablan, President and
Mana'in' >irector, Calte6 !Philippines& nc., for reconsideration of this
Commission?s adverse action embodied in its letters dated Februar( *, $4)4
and March 4, $4)4, the former directin' immediate remittance to the Cil Price
3tabili2ation Fund of collections made b( the firms pursuant to P.>. $45-, as
amended b( E.C. No. $"+, 3. $4)+, and the latter reiteratin' the same
directive but further advisin' the firms to desist from offsettin' collections
a'ainst their claims ,ith the notice that Athis Commission ,ill hold in
abe(ance the audit of all . . . claims for reimbursement from the CP3F.A
t appears that under letters of authorit( issued b( the Chairman, Ener'(
Re'ulator( Board, the aforenamed oil companies ,ere allo,ed to offset the
amounts due to the Cil Price 3tabili2ation Fund a'ainst their outstandin'
claims from the said Fund for the calendar (ears $4)+ and $4)), pendin' ,ith
the then Ministr( of Ener'(, the 'overnment entit( char'ed ,ith administerin'
the CP3F. 0his Commission, ho,ever, e6pressin' serious doubts as to the
propriet( of the offsettin' of all t(pes of reimbursements from the CP3F
a'ainst all cate'ories of remittances, advised these oil companies that such
offsettin' ,as bereft of le'al basis. A''rieved thereb(, these companies no,
see@ reconsideration and in support thereof clearl( manifest their intent to
ma@e arran'ements for the remittance to the Cffice of Ener'( Affairs of the
amount of collections e=uivalent to ,hat has been previousl(
offset, provided that this Commission authori2es the Cffice of Ener'( Affairs
to prepare the correspondin' chec@s representin' reimbursement from the
CP3F. t is alle'ed that the implementation of such an arran'ement, ,hereb(
the remittance of collections due to the CP3F and the reimbursement of
claims from the Fund shall be made ,ithin a period of not more than one
,ee@ from each other, ,ill benefit the Fund and not undul( 9eopardi2e the
continuin' dail( cash re=uirements of these firms.
Epon a circumspect evaluation of the circumstances herein obtainin', this
Commission perceives no further ob9ectionable feature in the proposed
arran'ement, provided that $5. of ,hatever amount is due from the Fund is
retained b( the Cffice of Ener'( Affairs, the same to be ans,erable for
suspensions or disallo,ances, errors or discrepancies ,hich ma( be noted in
the course of audit and surchar'es for late remittances ,ithout pre9udice to
similar future retentions to ans,er for an( deficienc( in such surchar'es, and
provided further that no offsettin' of remittances and reimbursements for the
current and ensuin' (ears shall be allo,ed.
Pursuant to this decision, the CCA, on $) Au'ust $4)4, sent the follo,in'
letter to E6ecutive >irector Benceslao R. >e la Pa2 of the Cffice of Ener'(
Affairs1
12
>ear Att(. dela Pa21
Pursuant to the Commission on Audit >ecision No. 4*$ dated :une +, $4)4,
and based on our initial verification of documents submitted to us b( (our
Cffice in support of Calte6 !Philippines&, nc. offsets !sic& for the (ear $4)- to
Ma( "$, $4)4, as ,ell as its outstandin' claims a'ainst the Cil Price
3tabili2ation Fund !CP3F& as of Ma( "$, $4)4, ,e are pleased to inform (our
Cffice that Calte6 !Philippines&, nc. shall be re=uired to remit to CP3F an
amount of P$,5%5,--),4%-, representin' remittances to the CP3F ,hich ,ere
offset a'ainst its claims reimbursements !net of unsubmitted claims&. n
addition, the Commission hereb( authori2e !sic& the Cffice of Ener'( Affairs
!CEA& to cause pa(ment of P$,454,$)*,-$* to Calte6, representin' claims
initiall( allo,ed in audit, the details of ,hich are presented hereunder1 . . .
As presented in the fore'oin' computation the disallo,ances totalled
P")+,-)",5"5, ,hich included P$"%,#*%,*"5 representin' those claims
disallo,ed b( CEA, details of ,hich is !sic& sho,n in 3chedule $ as
summari2ed as follo,s1
6isallowance of $OA
.articulars A#ount
Recover( of financin' char'es P$-*,+*),#+5 Pa
Product sales #),#%*,"4) Pb
nventor( losses
Borro, loan arran'ement $#,%"#,+)- Pc
3ales to AtlasPMarcopper "*,%4+,%)" Pd
3ales to NPC 55)
JJJJJJ
P*5+,*-","%%
>isallo,ances of CEA $"%,#*%,*"5
JJJJJJJJJ JJJJJJ
0otal P")+,-)",5"5
0he reasons for the disallo,ances are discussed hereunder1
a. +eco%ery of (inancin' $har'es
Revie, of the provisions of P.>. $54- as amended b( E.C. $"+ seems to
indicate that recover( of financin' char'es b( oil companies is not amon' the
items for ,hich the CP3F ma( be utili2ed. 0herefore, it is our vie, that
recover( of financin' char'es has no le'al basis. 0he mechanism for such
claims is provided in >CF Circular $-)+.
b. .roduct Sales 99 Sales to )nternational 4essels:Airlines
BCE Resolution No. )+-%$ dated Februar( +, $4)+ as implemented b( CEA
Crder No. )+-%"-%45 indicatin' that !sic& Februar( +, $4)+ as the effectivit(
date that !sic& oil companies should pa( CP3F impost on e6port sales of
petroleum products. Effective Februar( +, $4)+ sales to international
vesselsPairlines should not be included as part of its domestic sales. Chan'in'
the effectivit( date of the resolution from Februar( +, $4)+ to Cctober *%,
$4)+ as covered b( subse=uent ERB Resolution No. ))-$* dated November
$), $4)) has allo,ed Calte6 to include in their domestic sales volumes to
international vesselsPairlines and claim the correspondin' reimbursements
from CP3F durin' the period. t is our opinion that the effectivit( of the said
resolution should be Februar( +, $4)+.
c. )n%entory losses 99 Settle#ent of Ad 4alore#
Be revie,ed the s(stem of handlin' Borro, and /oan !B/A& transactions
includin' the related B/A a'reement, as the( affect the claims for
reimbursements of ad %alore# ta6es. Be observed that oil companies
immediatel( settle ad %alore# ta6es for B/A transaction !sic&. /oan balances
therefore are not ta6 paid inventories of Calte6 sub9ect to reimbursements but
those of the borro,er. Dence, ,e recommend reduction of the claim for :ul(,
Au'ust, and November, $4)+ amountin' to P$#,%"#,+)-.
d. Sales to Atlas:arcopper
/C No. $#$- dated :ul( $+, $4)# provides that A hereb( order and direct the
suspension of pa(ment of all ta6es, duties, fees, imposts and other char'es
,hether direct or indirect due and pa(able b( the copper minin' companies in
distress to the national and local 'overnments.A t is our opinion that /C
$#$- ,hich implements the e6emption from pa(ment of CP3F imposts as
effected b( CEA has no le'al basis.
Furthermore, ,e ,ish to emphasi2e that pa(ment to Calte6 !Phil.& nc., of the
amount as herein authori2ed shall be sub9ect to availabilit( of funds of CP3F
as of Ma( "$, $4)4 and applicable auditin' rules and re'ulations. Bith re'ard
to the disallo,ances, it is further informed that the a''rieved part( has "%
da(s ,ithin ,hich to appeal the decision of the Commission in accordance
,ith la,.
Cn ) 3eptember $4)4, petitioner filed an Cmnibus Re=uest for the
Reconsideration of the decision based on the follo,in' 'rounds1
1(
A& CCA->3A//CBE> C/AM3 ARE AE0DCRGE> EN>ER
EM30N7 RE/E3, CR>ER3, RE3C/E0CN3, CRCE/AR3 33EE> BN
0DE >EPAR0MEN0 CF FNANCE AN> 0DE ENER7N RE7E/A0CRN
BCAR> PER3EAN0 0C EMECE0HE CR>ER NC. $"+.
666 666 666
B& A>MN30RA0HE N0ERPRE0A0CN3 N 0DE CCER3E CF
EMERC3E CF EMECE0HE PCBER BN >EPAR0MEN0 CF FNANCE
AN> ENER7N RE7E/A0CRN BCAR> ARE /E7A/ AN> 3DCE/> BE
RE3PEC0E> AN> APP/E> EN/E33 >EC/ARE> NE// AN> HC> BN
CCER03 CR REPEA/E> BN /E73/A0CN.
666 666 666
C& /E7A/ BA33 FCR RE0EN0CN CF CFF3E0 ARRAN7EMEN0, A3
AE0DCRGE> BN 0DE EMECE0HE BRANCD CF 7CHERNMEN0,
REMAN3 HA/>.
666 666 666
Cn - November $4)4, petitioner filed ,ith the CCA a 3upplemental Cmnibus
Re=uest for Reconsideration.
1%
Cn $- Februar( $44%, the CCA, ,ith Chairman >omin'o ta@in' no part and
,ith Commissioner Fernande2 dissentin' in part, handed do,n >ecision No.
$$+$ affirmin' the disallo,ance for recover( of financin' char'es, inventor(
losses, and sales to MARCCPPER and A0/A3, ,hile allo,in' the recover(
of product sales or those arisin' from e6port sales.
15
>ecision No. $$+$ reads
as follo,s1
Anent the recover( of financin' char'es (ou contend that Calte6 Phil. nc. has
the .authorit( to recover financin' char'es from the CP3F on the basis of
>epartment of Finance !>CF& Circular $-)+, dated Februar( $), $4)+, ,hich
allo,ed oil companies to Arecover cost of financin' ,or@in' capital
associated ,ith crude oil shipments,A and provided a schedule of
reimbursement in terms of peso per barrel. t appears that on November -,
$4)4, the >CF issued a memorandum to the President of the Philippines
e6plainin' the nature of these financin' char'es and 9ustif(in' their
reimbursement as follo,s1
As part of (our pro'ram to promote economic recover(, . . . oil companies
!,ere authori2ed& to refinance their imports of crude oil and petroleum
products from the normal trade credit of "% da(s up to "-% da(s from date of
loadin' . . . Conformabl( . . ., the oil companies deferred their forei'n
e6chan'e remittances for purchases b( refinancin' their import bills from the
normal "%-da( pa(ment term up to the desired "-% da(s. 0his refinancin' of
importations carried additional costs !financin' char'es& ,hich then became,
due to 'overnment mandate, an inherent part of the cost of the purchases of
our countr(?s oil re=uirement.
Be be' to disa'ree ,ith such contention. 0he 9ustification that financin'
char'es increased oil costs and the schedule of reimbursement rate in peso per
barrel !E6hibit $& used to support alle'ed increase !sic& ,ere not validated in
our independent in=uir(. As manifested in E6hibit *, usin' the same formula
,hich the >CF used in arrivin' at the reimbursement rate but usin'
comparable percenta'es instead of pesos, the ineluctable conclusion is that the
oil companies are actuall( 'ainin' rather than losin' from the e6tension of
credit because such e6tension enables them to invest the collections in
mar@etable securities ,hich have much hi'her rates than those the( incur due
to the e6tension. 0he >ata ,e used ,ere obtained from CP !CA/0EM&
Mana'ement and can easil( be verified from our records.
Bith respect to product sales or those arisin' fro# sales to international
%essels or airlines, . . ., it is believed that e6port sales !product sales& are
entitled to claim refund from the CP3F.
As re'ard (our claim for underreco%ery arisin' fro# in%entory losses, . . . t is
the considered vie, of this Commission that the CP3F is not liable to refund
such surta6 on inventor( losses because these are paid to BR and not CP3F,
in vie, of ,hich CP !CA/0EM& should see@ refund from BR. . . .
Finall(, as re'ards the sales to Atlas and arcopper, it is represented that (ou
are entitled to claim recover( from the CP3F pursuant to /C $#$- issued on
:ul( $+, $4)#, since these copper minin' companies did not pa( CP
!CA/0EM& and CP3F imposts ,hich ,ere added to the sellin' price.
Epon a circumspect evaluation, this Commission believes and so holds that
the CP !CA/0EM& has no authorit( to claim reimbursement for this
uncollected CP3F impost because /C $#$- dated :ul( $+, $4)#, ,hich
e6empts distressed minin' companies from Aall ta6es, duties, import fees and
other char'esA ,as issued ,hen CP3F ,as not (et in e6istence and could not
have contemplated CP3F imposts at the time of its formulation. Moreover, it
is evident that CP3F ,as not created to aid distressed minin' companies but
rather to help the domestic oil industr( b( stabili2in' oil prices.
Ensatisfied ,ith the decision, petitioner filed on *) March $44% the present
petition ,herein it imputes to the CCA the commission of the follo,in'
errors1
16

RE3PCN>EN0 CCMM33CN ERRE> N >3A//CBN7 RECCHERN


CF FNANCN7 CDAR7E3 FRCM 0DE CP3F.

RE3PCN>EN0 CCMM33CN ERRE> N >3A//CBN7


CP?s
17
C/AM FCR REMBER3EMEN0 CF EN>ERRECCHERN
AR3N7 FRCM 3A/E3 0C NPC.

RE3PCN>EN0 CCMM33CN ERRE> N >ENNN7 CP?s C/AM3 FCR


REMBER3EMEN0 CN 3A/E3 0C A0/A3 AN> MARCCPPER.
H
RE3PCN>EN0 CCMM33CN ERRE> N PREHEN0N7 CP FRCM
EMERC3N7 03 /E7A/ R7D0 0C CFF3E0 03 REM00ANCE3
A7AN30 03 REMBER3EMEN0 4)S-A-4)S 0DE CP3F.
H
RE3PCN>EN0 CCMM33CN ERRE> N >3A//CBN7 CP?s
C/AM3 BDCD ARE 30// PEN>N7 RE3C/E0CN BN !S)$& 0DE
CEA AN> 0DE >CF.
n the Resolution of 5 April $44%, this Court re=uired the respondents to
comment on the petition ,ithin ten !$%& da(s from notice.
18
Cn - 3eptember $44%, respondents CCA and Commissioners Fernande2 and
Cru2, assisted b( the Cffice of the 3olicitor 7eneral, filed their Comment.
19
0his Court resolved to 'ive due course to this petition on "% Ma( $44$ and
re=uired the parties to file their respective Memoranda ,ithin t,ent( !*%&
da(s from notice.
2=
n a Manifestation dated $) :ul( $44$, the Cffice of the 3olicitor 7eneral
pra(s that the Comment filed on - 3eptember $44% be considered as the
Memorandum for respondents.
21
Epon the other hand, petitioner filed its Memorandum on $# Au'ust $44$.
. Petitioner d,ells len'thil( on its first assi'ned error contendin', in support
thereof, that1
!$& n vie, of the e6panded role of the CP3F pursuant to E6ecutive Crder No.
$"+, ,hich added a second purpose, to ,it1
*& 0o reimburse the oil companies for possible cost underrecover( incurred as
a result of the reduction of domestic prices of petroleum products. 0he
ma'nitude of the underrecover(, if an(, shall be determined b( the Ministr( of
Finance. ACost underrecover(A shall include the follo,in'1
i. Reduction in oil compan( ta@e as directed b( the Board of Ener'( ,ithout
the correspondin' reduction in the landed cost of oil inventories in the
possession of the oil companies at the time of the price chan'e;
ii. Reduction in internal ad %alore# ta6es as a result of fore'oin' 'overnment
mandated price reductions;
iii. Cther factors as ma( be determined b( the Ministr( of Finance to result in
cost underrecover(.
the Aother factorsA mentioned therein that ma( be determined b( the Ministr(
!no, >epartment& of Finance ma( include financin' char'es for Ain essence,
financin' char'es constitute unrecovered cost of ac=uisition of crude oil
incurred b( the oil companies,A as e6plained in the - November $4)4
Memorandum to the President of the >epartment of Finance; the( Adirectl(
translate to cost underrecover( in cases ,here the mone( mar@et placement
rates decline and at the same time the ta6 on interest income increases. 0he
relationship is such that the presence of underrecover( or overrecover( is
directl( dependent on the amount and e6tent of financin' char'es.A
!*& 0he claim for recover( of financin' char'es has clear le'al and factual
basis; it ,as filed on the basis of >epartment of Finance Circular No.
$-)+, dated $) Februar( $4)+, ,hich provides1
0o allo, oil companies to recover the costs of financin' ,or@in' capital
associated ,ith crude oil shipments, the follo,in' 'uidelines on the utili2ation
of the Cil Price 3tabili2ation Fund pertainin' to the pa(ment of the fore'oin'
!sic& e6chan'e ris@ premium and recover( of financin' char'es ,ill be
implemented1
$. 0he CP3F forei'n e6chan'e premium shall be reduced to a flat rate of one
!$& percent for the first !-& months and $P"* of one percent per month
thereafter up to a ma6imum period of one (ear, to be applied on crude oil?
shipments from :anuar( $, $4)+. 3hipments ,ith outstandin' financin' as of
:anuar( $, $4)+ shall be char'ed on the basis of the fee applicable to the
remainin' period of financin'.
*. n addition, for shipments loaded after :anuar( $4)+, oil companies shall be
allo,ed to recover financin' char'es directl( from the CP3F per barrel of
crude oil based on the follo,in' schedule1
Financin' Period Reimbursement Rate
Pesos per Barrel
/ess than $)% da(s None
$)% da(s to *"4 da(s $.4%
*#$ !sic& da(s to *44 #.%*
"%% da(s to "-4 !sic& da(s -.$-
"-% da(s or more ).*)
0he above rates shall be sub9ect to revie, ever( si6t(
da(s.
22
Pursuant to this circular, the >epartment of Finance, in its letter of $)
Februar( $4)+, advised the Cffice of Ener'( Affairs as follo,s1
DCN. HCEN0E 0. PA0ERNC
>eput( E6ecutive 3ecretar(
For Ener'( Affairs
Cffice of the President
Ma@ati, Metro Manila
>ear 3ir1
0his refers to the letters of the Cil ndustr( dated >ecember #, $4)- and
Februar( 5, $4)+ and subse=uent discussions held b( the Price Revie,
committee on Februar( -, $4)+.
Cn the basis of the representations made, the >epartment of Finance
reco'ni2es the necessit( to reduce the forei'n e6chan'e ris@ premium
accruin' to the Cil Price 3tabili2ation Fund !CP3F&. 3uch a reduction ,ould
allo, the industr( to recover partl( associated financin' char'es on crude oil
imports. Accordin'l(, the CP3F forei'n e6chan'e ris@ fee shall be reduced to
a flat char'e of $. for the first si6 !-& months plus $P"*. of $. per month
thereafter up to a ma6imum period of one (ear, effective :anuar( $, $4)+. n
addition, since the prevailin' compan( ta@e ,ould still leave unrecovered
financin' char'es, reimbursement ma( be secured from the CP3F in
accordance ,ith the provisions of the attached >epartment of Finance
circular.
2(
Actin' on this letter, the CEA issued on # Ma( $4)+ Crder No. )+-%5-%4-
,hich contains the 'uidelines for the computation of the forei'n e6chan'e ris@
fee and the recover( of financin' char'es from the CP3F, to ,it1
B. ()1A1$7 $HA+G7S
$. Cil companies shall be allo,ed to recover financin' char'es directl( from
the CP3F for both crude and product shipments loaded after :anuar( $, $4)+
based on the follo,in' rates1
Financin' Period Reimbursement Rate
!PBbl.&
/ess than $)% da(s None
$)% da(s to *"4 da(s $.4%
*#% da(s to **4 !sic& da(s #.%*
"%% da(s to "54 da(s -.$-
"-% da(s to more ).*)
*. 0he above rates shall be sub9ect to revie, ever( si6t( da(s.
2%
0hen on ** November $4)), the >epartment of Finance issued Circular No.
#-)) imposin' further 'uidelines on the recoverabilit( of financin' char'es, to
,it1
Follo,in' are the supplemental rules to >epartment of Finance Circular No.
$-)+ dated Februar( $), $4)+ ,hich allo,ed the recover( of financin'
char'es directl( from the Cil Price 3tabili2ation Fund. !CP3F&1
$. 0he Claim for reimbursement shall be on a per shipment basis.
*. 0he claim shall be filed ,ith the Cffice of Ener'( Affairs to'ether ,ith the
claim on peso cost differential for a particular shipment and dul( certified
supportin' documents provided for under Ministr( of Finance No. $$-)5.
". 0he reimbursement shall be on the form of reimbursement certificate
!Anne6 A& to be issued b( the Cffice of Ener'( Affairs. 0he said certificate
ma( be used to offset a'ainst amounts pa(able to the CP3F. 0he oil
companies ma( also redeem said certificates in cash if not utili2ed, sub9ect to
availabilit( of funds.
25
0he CEA disseminated this Circular to all oil companies in its Memorandum
Circular No. ))-$*-%$+.
26
0he CCA can neither i'nore these issuances nor formulate its o,n
interpretation of the la,s in the li'ht of the determination of e6ecutive
a'encies. 0he determination b( the >epartment of Finance and the CEA that
financin' char'es are recoverable from the CP3F is entitled to 'reat ,ei'ht
and consideration.
27
0he function of the CCA, particularl( in the matter of
allo,in' or disallo,in' certain e6penditures, is limited to the promul'ation of
accountin' and auditin' rules for, amon' others, the disallo,ance of irre'ular,
unnecessar(, e6cessive, e6trava'ant, or unconscionable e6penditures, or uses
of 'overnment funds and properties.
28
!"& >enial of petitioner?s claim for reimbursement ,ould be ine=uitable.
Additionall(, CCA?s claim that petitioner is 'ainin', instead of losin', from
the e6tension of credit, is belatedl( raised and not supported b( e6pert
anal(sis.
n impeachin' the validit( of petitioner?s assertions, the respondents ar'ue
that1
$. 0he Constitution 'ives the CCA discretionar( po,er to disapprove irre'ular
or unnecessar( 'overnment e6penditures and as the monetar( claims of
petitioner are not allo,ed b( la,, the CCA acted ,ithin its 9urisdiction in
den(in' them;
*. P.>. No. $45- and E.C. No. $"+ do not allo, reimbursement of financin'
char'es from the CP3F;
". Ender the principle of e8usde# 'eneris, the Aother factorsA mentioned in the
second purpose of the CP3F pursuant to E.C. No. $"+ can onl( include
Afactors ,hich are of the same nature or analo'ous to those enumerated;A
#. n allo,in' reimbursement of financin' char'es from CP3F, Circular No.
$-)+ of the >epartment of Finance violates P.>. No. $45- and E.C. No. $"+;
and
5. >epartment of Finance rules and re'ulations implementin' P.>. No. $45-
do not li@e,ise allo, reimbursement of financin'
char'es.
29
Be find no merit in the first assi'ned error.
As to the po,er of the CCA, ,hich must first be resolved in vie, of its
primac(, Be find the theor( of petitioner QQ that such does not e6tend to the
disallo,ance of irre'ular, unnecessar(, e6cessive, e6trava'ant, or
unconscionable e6penditures, or use of 'overnment funds and properties, but
onl( to the promul'ation of accountin' and auditin' rules for, amon' others,
such disallo,ance QQ to be untenable in the li'ht of the provisions of the $4)+
Constitution and related la,s.
3ection *, 3ubdivision >, Article M of the $4)+ Constitution e6pressl(
provides1
3ec. *!l&. 0he Commission on Audit shall have the po,er, authorit(, and dut(
to e6amine, audit, and settle all accounts pertainin' to the revenue and receipts
of, and e6penditures or uses of funds and propert(, o,ned or held in trust b(,
or pertainin' to, the 7overnment, or an( of its subdivisions, a'encies, or
instrumentalities, includin' 'overnment-o,ned and controlled corporations
,ith ori'inal charters, and on a post-audit basis1 !a& constitutional bodies,
commissions and offices that have been 'ranted fiscal autonom( under this
Constitution; !b& autonomous state colle'es and universities; !c& other
'overnment-o,ned or controlled corporations and their subsidiaries; and !d&
such non-'overnmental entities receivin' subsid( or e=uit(, directl( or
indirectl(, from or throu'h the 'overnment, ,hich are re=uired b( la, or the
'rantin' institution to submit to such audit as a condition of subsid( or e=uit(.
Do,ever, ,here the internal control s(stem of the audited a'encies is
inade=uate, the Commission ma( adopt such measures, includin' temporar(
or special pre-audit, as are necessar( and appropriate to correct the
deficiencies. t shall @eep the 'eneral accounts, of the 7overnment and, for
such period as ma( be provided b( la,, preserve the vouchers and other
supportin' papers pertainin' thereto.
!*& 0he Commission shall have e6clusive authorit(, sub9ect to the limitations
in this Article, to define the scope of its audit and e6amination, establish the
techni=ues and methods re=uired therefor, and promul'ate accountin' and
auditin' rules and re'ulations, includin' those for the prevention and
disallo,ance of irre'ular, unnecessar(, e6cessive, e6trava'ant, or,
unconscionable e6penditures, or uses of 'overnment funds and properties.
0hese present po,ers, consistent ,ith the declared independence of the
Commission,
(=
are broader and more e6tensive than that conferred b( the
$4+" Constitution. Ender the latter, the Commission ,as empo,ered to1
E6amine, audit, and settle, in accordance ,ith la, and re'ulations, all
accounts pertainin' to the revenues, and receipts of, and e6penditures or uses
of funds and propert(, o,ned or held in trust b(, or pertainin' to, the
7overnment, or an( of its subdivisions, a'encies, or instrumentalities
includin' 'overnment-o,ned or controlled corporations, @eep the 'eneral
accounts of the 7overnment and, for such period as ma( be provided b( la,,
preserve the vouchers pertainin' thereto; and promul'ate accountin' and
auditin' rules and re'ulations includin' those for the prevention of irre'ular,
unnecessar(, e6cessive, or e6trava'ant e6penditures or uses of funds and
propert(.
(1
Epon the other hand, under the $4"5 Constitution, the po,er and authorit( of
the CCA?s precursor, the 7eneral Auditin' Cffice, ,ere, unfortunatel(,
limited; its ver( role ,as mar@edl( passive. 3ection * of Article M
thereofprovided1
3ec. *. 0he Auditor 7eneral shall e6amine, audit, and settle all accounts
pertainin' to the revenues and receipts from ,hatever source, includin' trust
funds derived from bond issues; and audit, in accordance ,ith la, and
administrative re'ulations, all e6penditures of funds or propert( pertainin' to
or held in trust b( the 7overnment or the provinces or municipalities thereof.
De shall @eep the 'eneral accounts of the 7overnment and the preserve the
vouchers pertainin' thereto. t shall be the dut( of the Auditor 7eneral to
brin' to the attention of the proper administrative officer e6penditures of
funds or propert( ,hich, in his opinion, are irre'ular, unnecessar(, e6cessive,
or e6trava'ant. De shall also perform such other functions as ma( be
prescribed b( la,.
As clearl( sho,n above, in respect to irre'ular, unnecessar(, e6cessive or
e6trava'ant e6penditures or uses of funds, the $4"5 Constitution did not 'rant
the Auditor 7eneral the po,er to issue rules and re'ulations to prevent the
same. Dis ,as merel( to brin' that matter to the attention of the proper
administrative officer.
0he rulin' on this particular point, =uoted b( petitioner from the cases
of Gue%arra %s. Gi#ene"
(2
and +a#os %s.A5uino,
((
are no lon'er controllin'
as the t,o !*& ,ere decided in the li'ht of the $4"5 Constitution.
0here can be no doubt, ho,ever, that the audit po,er of the Auditor 7eneral
under the $4"5 Constitution and the Commission on Audit under the $4+"
Constitution authori2ed them to disallo, ille'al e6penditures of funds or uses
of funds and propert(. Cur present Constitution retains that same po,er and
authorit(, further stren'thened b( the definition of the CCA?s 'eneral
9urisdiction in 3ection *- of the 7overnment Auditin' Code of the
Philippines
(%
and Administrative Code of $4)+.
(5
Pursuant to its po,er to
promul'ate accountin' and auditin' rules and re'ulations for the prevention of
irre'ular, unnecessar(, e6cessive or e6trava'ant e6penditures or uses of
funds,
(6
the CCA promul'ated on *4 March $4++ CCA Circular No. ++-55.
3ince the CCA is responsible for the enforcement of the rules and re'ulations,
it 'oes ,ithout sa(in' that failure to compl( ,ith them is a 'round for
disapprovin' the pa(ment of the proposed e6penditure. As observed b( one of
the Commissioners of the $4)- Constitutional Commission, Fr. :oa=uin 7.
Bernas1
(7
t should be noted, ho,ever, that ,hereas under Article M, 3ection *, of the
$4"5 Constitution the Auditor 7eneral could not correct Airre'ular,
unnecessar(, e6cessive or e6trava'antA e6penditures of public funds but could
onl( Abrin' Kthe matterL to the attention of the proper administrative officer,A
under the $4)+ Constitution, as also under the $4+" Constitution, the
Commission on Audit can Apromul'ate accountin' and auditin' rules and
re'ulations includin' those for the prevention and disallo,ance of irre'ular,
unnecessar(, e6cessive, e6trava'ant, or unconscionable e6penditures or uses
of 'overnment funds and properties.A Dence, since the Commission on Audit
must ultimatel( be responsible for the enforcement of these rules and
re'ulations, the failure to compl( ,ith these re'ulations can be a 'round for
disapprovin' the pa(ment of a proposed e6penditure.
ndeed, ,hen the framers of the last t,o !*& Constitutions conferred upon the
CCA a more active role and invested it ,ith broader and more e6tensive
po,ers, the( did not intend merel( to ma@e the CCA a toothless ti'er, but
rather envisioned a d(namic, effective, efficient and independent ,atchdo' of
the 7overnment.
0he issue of the financin' char'es boils do,n to the validit( of >epartment of
Finance Circular No. $-)+, >epartment of Finance Circular No. #-)) and the
implementin' circulars of the CEA, issued pursuant to 3ection ), P.>. No.
$45-, as amended b( E.C. No. $"+, authori2in' it to determine Aother factorsA
,hich ma( result in cost underrecover( and a conse=uent reimbursement from
the CP3F.
0he 3olicitor 7eneral maintains that, follo,in' the doctrine of e8usde#
'eneris, financin' char'es are not included in Acost underrecover(A and,
therefore, cannot be considered as one of the Aother factors.A 3ection ) of P.>.
No. $45-, as amended b( E.C. No. $"+, does not e6plicitl( define ,hat Acost
underrecover(A is. t merel( states ,hat it includes. 0hus1
. . . ACost underrecover(A shall include the follo,in'1
i. Reduction in oil compan( ta@es as directed b( the Board of Ener'( ,ithout
the correspondin' reduction in the landed cost of oil inventories in the
possession of the oil companies at the time of the price chan'e;
ii. Reduction in internal ad %alore# ta6es as a result of fore'oin' 'overnment
mandated price reductions;
iii. Cther factors as ma( be determined b( the Ministr( of Finance to result in
cost underrecover(.
0hese Aother factorsA can include onl( those ,hich are of the same class or
nature as the t,o specificall( enumerated in subpara'raphs !i& and !ii&. A
common characteristic of both is that the( are in the nature of 'overnment
mandated price reductions. Dence, an( other factor ,hich see@s to be a part of
the enumeration, or ,hich could =ualif( as a cost underrecover(, must be of
the same class or nature as those specificall( enumerated.
Petitioner, ho,ever, su''ests that E.C. No. $"+ intended to 'rant the
>epartment of Finance broad and unrestricted authorit( to determine or define
Aother factors.A
Both vie,s are unacceptable to this Court.
0he rule of e8usde# 'eneris states that AK,Lhere 'eneral ,ords follo, an
enumeration of persons or thin's, b( ,ords of a particular and specific
meanin', such 'eneral ,ords are not to be construed in their ,idest e6tent, but
are held to be as appl(in' onl( to persons or thin's of the same @ind or class
as those specificall( mentioned.
(8
A readin' of subpara'raphs !i& and !ii&
easil( discloses that the( do not have a common characteristic. 0he first
relates to price reduction as directed b( the Board of Ener'( ,hile the second
refers to reduction in internal ad %alore# ta6es. 0herefore, subpara'raph !iii&
cannot be limited b( the enumeration in these subpara'raphs. Bhat should be
considered for purposes of determinin' the Aother factorsA in subpara'raph
!iii& is the first sentence of para'raph !*& of the 3ection ,hich e6plicitl(
allo,s cost underrecover( onl( if such ,ere incurred as a result of the
reduction of do#estic prices of petroleu# products.
Althou'h petitioner?s financin' losses, if indeed incurred, ma( constitute cost
underrecover( in the sense that such ,ere incurred as a result of the inabilit(
to full( offset financin' e6penses from (ields in mone( mar@et placements,
the( do not, ho,ever, fall under the fore'oin' provision of P.>. No. $45-, as
amended, because the same did not result from the reduction of the domestic
price of petroleum products. Entil para'raph !*&, 3ection ) of the decree, as
amended, is further amended b( Con'ress, this Court can do nothin'. 0he
dut( of this Court is not to le'islate, but to appl( or interpret the la,. Be that
as it ma(, this Court ,ishes to emphasi2e that as the facts in this case have
sho,n, it ,as at the behest of the 7overnment that petitioner refinanced its oil
import pa(ments from the normal "%-da( trade credit to a ma6imum of "-%
da(s. Petitioner could be correct in its assertion that o,in' to the e6tended
period for pa(ment, the financial institution ,hich refinanced said pa(ments
char'ed a hi'her interest, thereb( resultin' in hi'her financin' e6penses for
the petitioner. t ,ould appear then that e=uit( considerations dictate that
petitioner should someho, be allo,ed to recover its financin' losses, if an(,
,hich ma( have been sustained because it accommodated the re=uest of the
7overnment. Althou'h under 3ection *4 of the National nternal Revenue
Code such losses ma( be deducted from 'ross income, the effect of that loss
,ould be merel( to reduce its ta6able income, but not to actuall( ,ipe out
such losses. 0he 7overnment then ma( consider some positive measures to
help petitioner and others similarl( situated to obtain substantial relief. An
amendment, as aforestated, ma( then be in order.
Epon the other hand, to accept petitioner?s theor( of Aunrestricted authorit(A
on the part of the >epartment of Finance to determine or define Aother
factorsA is to uphold an undue dele'ation of le'islative po,er, it clearl(
appearin' that the sub9ect provision does not provide an( standard for the
e6ercise of the authorit(. t is a fundamental rule that dele'ation of le'islative
po,er ma( be sustained onl( upon the 'round that some standard for its
e6ercise is provided and that the le'islature, in ma@in' the dele'ation, has
prescribed the manner of the e6ercise of the dele'ated authorit(.
(9
Finall(, ,hether petitioner 'ained or lost b( reason of the e6tensive credit is
rendered irrelevant b( reason of the fore'oin' dis=uisitions. t ma(
nevertheless be stated that petitioner failed to disprove CCA?s claim that it had
in fact 'ained in the process. Cther,ise stated, petitioner failed to sufficientl(
sho, that it incurred a loss. 3uch bein' the case, ho, can petitioner claim for
reimbursement< t cannot have its ca@e and eat it too.
. Anent the claims arisin' from sales to the National Po,er Corporation, Be
find for the petitioner. 0he respondents themselves admit in their Comment
that underrecover( arisin' from sales to NPC are reimbursable because NPC
,as 'ranted full e6emption from the pa(ment of ta6es; to prove this,
respondents trace the la,s providin' for such e6emption.
%=
0he last la, cited
is the Fiscal ncentives Re'ulator( Board?s Resolution No. $+-)+ of *# :une
$4)+ ,hich provides, in part, Athat the ta6 and dut( e6emption privile'es of
the National Po,er Corporation, includin' those pertainin' to its domestic
purchases of petroleum and petroleum products . . . are restored effective
March $%, $4)+.A n a Memorandum issued on 5 Cctober $4)+ b( the Cffice
of the President, NPC?s ta6 e6emption ,as confirmed and approved.
Furthermore, as pointed out b( respondents, the intention to e6empt sales of
petroleum products to the NPC is evident in the recentl( passed Republic Act
No. -45* establishin' the Petroleum Price 3tandb( Fund to support the
CP3F.
%1
0he pertinent part of 3ection *, Republic Act No. -45* provides1
3ec. *. Application of the Fund shall be sub9ect to the follo,in' conditions1
!$& 0hat the Fund shall be used to reimburse the oil companies for !a& cost
increases of imported crude oil and finished petroleum products resultin' from
forei'n e6chan'e rate ad9ustments andPor increases in ,orld mar@et prices of
crude oil; !b& cost underreco%ery incurred as a result of fuel oil sales to the
1ational .ower $orporation ;1.$<= and !c& other cost underrecoveries
incurred as ma( be finall( decided b( the 3upreme
Court; . . .
Dence, petitioner can recover its claim arisin' from sales of petroleum
products to the National Po,er Corporation.
. Bith respect to its claim for reimbursement on sales to A0/A3 and
MARCCPPER, petitioner relies on /etter of nstruction !/C& $#$-, dated $+
:ul( $4)#, ,hich ordered the suspension of pa(ments of all ta6es, duties, fees
and other char'es, ,hether direct or indirect, due and pa(able b( the copper
minin' companies in distress to the national 'overnment. Pursuant to this
/C, then Minister of Ener'(, Don. 7eronimo Helasco, issued Memorandum
Circular No. )#-$$-** advisin' the oil companies that Atlas Consolidated
Minin' Corporation and Marcopper Minin' Corporation are amon' those
declared to be in distress.
n den(in' the claims arisin' from sales to A0/A3 and MARCCPPER, the
CCA, in its $) Au'ust $4)4 letter to E6ecutive >irector Benceslao R. de la
Pa2, states that Ait is our opinion that /C $#$- ,hich implements the
e6emption from pa(ment of CP3F imposts as effected b( CEA has no le'al
basis;A
%2
in its >ecision No. $$+$, it ruled that Athe CP !CA/0EM& !Calte6&
has no authorit( to claim reimbursement for this uncollected impost because
/C $#$- dated :ul( $+, $4)#, . . . ,as issued ,hen CP3F ,as not (et in
e6istence and could not have contemplated CP3F imposts at the time of its
formulation.A
%(
t is further stated that1 AMoreover, it is evident that CP3F ,as
not created to aid distressed minin' companies but rather to help the domestic
oil industr( b( stabili2in' oil prices.A
n sustainin' CCA?s stand, respondents vi'orousl( maintain that /C $#$-
could not have intended to e6empt said distressed minin' companies from the
pa(ment of CP3F dues for the follo,in' reasons1
a. /C $#$- 'rantin' the alle'ed e6emption ,as issued on :ul( $+, $4)#. P.>.
$45- creatin' the CP3F ,as promul'ated on Cctober $%, $4)#, ,hile E.C.
$"+, amendin' P.>. $45-, ,as issued on Februar( *5, $4)+.
b. /C $#$- ,as issued in $4)# to assist distressed copper minin' companies
in line ,ith the 'overnment?s effort to prevent the collapse of the copper
industr(. P.> No. $45-, as amended, ,as issued for the purpose of minimi2in'
fre=uent price chan'es brou'ht about b( e6chan'e rate ad9ustments andPor
chan'es in ,orld mar@et prices of crude oil and imported petroleum product?s;
and
c. /C $#$- caused the Asuspension of all ta6es, duties, fees, imposts and
other char'es, ,hether direct or indirect, due and pa(able b( the copper
minin' companies in distress to the Notional and /ocal 7overnments . . .A Cn
the other hand, CP3F dues are not pa(able b( !sic& distressed copper
companies but b( oil companies. t is to be noted that the copper minin'
companies do not pa( CP3F dues. Rather, such imposts are built in or alread(
incorporated in the prices of oil products.
%%
/astl(, respondents alle'e that ,hile /C $#$- suspends the pa(ment of ta6es
b( distressed minin' companies, it does not accord petitioner the same
privile'e ,ith respect to its obli'ation to pa( CP3F dues.
Be concur ,ith the dis=uisitions of the respondents. Aside from such reasons,
ho,ever, it is apparent that /C $#$- ,as never published in the Cfficial
7a2ette
%5
as re=uired b( Article * of the Civil Code, ,hich reads1
/a,s shall ta@e effect after fifteen da(s follo,in' the completion of their
publication in the Cfficial 7a2ette, unless it is other,ise provided. . . .
n appl(in' said provision, this Court ruled in the case of Taada %s. Tu%era1
%6
BDEREFCRE, the Court hereb( orders respondents to publish in the Cfficial
7a2ette all unpublished presidential issuances ,hich are of 'eneral
application, and unless so published the( shall have no bindin' force and
effect.
Resolvin' the motion for reconsideration of said decision, this Court, in its
Resolution promul'ated on *4 >ecember $4)-,
%7
ruled1
Be hold therefore that all statutes, includin' those of local application and
private la,s, shall be published as a condition for their effectivit(, ,hich shall
be'in fifteen da(s after publication unless a different effectivit( date is fi6ed
b( the le'islature.
Covered b( this rule are presidential decrees and e6ecutive orders
promul'ated b( the President in the e6ercise of le'islative po,ers ,henever
the same are validl( dele'ated b( the le'islature or, at present, directl(
conferred b( the Constitution. Administrative rules and re'ulations must also
be published if their purpose is to enforce or implement e6istin' la,s pursuant
also to a valid dele'ation.
666 666 666
BDEREFCRE, it is hereb( declared that all la,s as above defined shall
immediatel( upon their approval, or as soon thereafter as possible, be
published in full in the Cfficial 7a2ette, to become effective onl( after fifteen
da(s from their publication, or on another date specified b( the le'islature, in
accordance ,ith Article * of the Civil Code.
/C $#$- has, therefore, no bindin' force or effect as it ,as never published
in the Cfficial 7a2ette after its issuance or at an( time after the decision in the
abovementioned cases.
Article * of the Civil Code ,as, ho,ever, later amended b( E6ecutive Crder
No. *%%, issued on $) :une $4)+. As amended, the said provision no, reads1
/a,s shall ta@e effect after fifteen da(s follo,in' the completion of their
publication either in the Cfficial 7a2ette or in a ne,spaper of 'eneral
circulation in the Philippines, unless it is other,iseprovided.
Be are not a,are of the publication of /C $#$- in an( ne,spaper of 'eneral
circulation pursuant to E6ecutive Crder No. *%%.
Furthermore, even 'rantin' ar'uendo that /C $#$- has force and effect,
petitioner?s claim must still fail. 0a6 e6emptions as a 'eneral rule are
construed strictl( a'ainst the 'rantee and liberall( in favor of the ta6in'
authorit(.
%8
0he burden of proof rests upon the part( claimin' e6emption to
prove that it is in fact covered b( the e6emption so claimed. 0he part(
claimin' e6emption must therefore be e6pressl( mentioned in the e6emptin'
la, or at least be ,ithin its purvie, b( clear le'islative intent.
n the case at bar, petitioner failed to prove that it is entitled, as a conse=uence
of its sales to A0/A3 and MARCCPPER, to claim reimbursement from the
CP3F under /C $#$-. 0hou'h /C $#$- ma( suspend the pa(ment of ta6es
b( copper minin' companies, it does not 'ive petitioner the same privile'e
,ith respect to the pa(ment of CP3F dues.
H. As to CCA?s disallo,ance of the amount of P$"%,#*%,*"5.%%, petitioner
maintains that the >epartment of Finance has still to issue a final and
definitive rulin' thereon; accordin'l(, it ,as premature for CCA to disallo,
it. B( doin' so, the latter acted be(ond its 9urisdiction.
%9
Respondents, on the
other hand, contend that said amount ,as alread( disallo,ed b( the CEA for
failure to substantiate it.
5=
n fact, ,hen CEA submitted the claims of
petitioner for pre-audit, the abovementioned amount ,as alread( e6cluded.
An e6amination of the records of this case sho,s that petitioner failed to
prove or substantiate its contention that the amount of P$"%,#*%,*"5.%% is still
pendin' before the CEA and the >CF. Additionall(, Be find no reason to
doubt the submission of respondents that said amount has alread( been passed
upon b( the CEA. Dence, the rulin' of respondent CCA disapprovin' said
claim must be upheld.
H. 0he last issue to be resolved in this case is ,hether or not the amounts due
to the CP3F from petitioner ma( be offset a'ainst petitioner?s outstandin'
claims from said fund. Petitioner contends that it should be allo,ed to offset
its claims from the CP3F a'ainst its contributions to the fund as this has been
allo,ed in the past, particularl( in the (ears $4)+ and $4)).
51
Furthermore, petitioner cites, as bases for offsettin', the provisions of the Ne,
Civil Code on compensation and 3ection *$, Boo@ H, 0itle -B of the Revised
Administrative Code ,hich provides for ARetention of Mone( for 3atisfaction
of ndebtedness to 7overnment.A
52
Petitioner also mentions communications
from the Board of Ener'( and the >epartment of Finance that supposedl(
authori2e compensation.
Respondents, on the other hand, citin' (rancia %s. )A$ and
(ernande",
5(
contend that there can be no offsettin' of ta6es a'ainst the
claims that a ta6pa(er ma( have a'ainst the 'overnment, as ta6es do not arise
from contracts or depend upon the ,ill of the ta6pa(er, but are imposed b(
la,. Respondents also alle'e that petitioner?s reliance on 3ection *$, Boo@ H,
0itle -B of the Revised Administrative Code, is misplaced because A,hile this
provision empo,ers the CCA to ,ithhold pa(ment of a 'overnment
indebtedness to a person ,ho is also indebted to the 'overnment and appl( the
'overnment indebtedness to the satisfaction of the obli'ation of the person to
the 'overnment, li@e authorit( or ri'ht to ma@e compensation is not 'iven to
the private person.A
5%
0he reason for this, as stated in $o##issioner of
)nternal +e%enue %s.Al'ue/ )nc.,
55
is that mone( due the 'overnment, either in
the form of ta6es or other dues, is its lifeblood and should be collected ,ithout
hindrance. 0hus, instead of 'ivin' petitioner a reason for compensation or set-
off, the Revised Administrative Code ma@es it the respondents? dut( to collect
petitioner?s indebtedness to the CP3F.
Refutin' respondents? contention, petitioner claims that the amounts due from
it do not arise as a result of ta6ation because AP.>. $45-, amended, did not
create a source of ta6ation; it instead established a special fund . . .,A
56
and that
the CP3F contributions do not 'o to the 'eneral fund of the state and are not
used for public purpose, i.e., not for the support of the 'overnment, the
administration of la,, or the pa(ment of public e6penses. 0his alle'ed lac@ of
a public purpose behind CP3F e6actions distin'uishes such from a ta6. Dence,
the rulin' in the (rancia case is inapplicable.
/astl(, petitioner cites R.A. No. -45* creatin' the Petroleum Price 3tandb(
Fund to support the CP3F; the said la, provides in part that1
3ec. *. Application of the fund shall be sub9ect to the follo,in' conditions1
666 666 666
!"& 0hat no amount of the Petroleum Price 3tandb( Fund shall be used to pa(
an( oil compan( ,hich has an outstandin' obli'ation to the 7overnment
,ithout said obli'ation bein' offset first, sub9ect to the re=uirements of
compensation or offset under the Civil Code.
Be find no merit in petitioner?s contention that the CP3F contributions are not
for a public purpose because the( 'o to a special fund of the 'overnment.
0a6ation is no lon'er envisioned as a measure merel( to raise revenue to
support the e6istence of the 'overnment; ta6es ma( be levied ,ith a
re'ulator( purpose to provide means for the rehabilitation and stabili2ation of
a threatened industr( ,hich is affected ,ith public interest as to be ,ithin the
police po,er of the state.
57
0here can be no doubt that the oil industr( is
'reatl( imbued ,ith public interest as it vitall( affects the 'eneral ,elfare.
An( unre'ulated increase in oil prices could hurt the lives of a ma9orit( of the
people and cause economic crisis of untold proportions. t ,ould have a chain
reaction in terms of, amon' others, demands for ,a'e increases and up,ard
spirallin' of the cost of basic commodities. 0he stabili2ation then of oil prices
is of prime concern ,hich the state, via its police po,er, ma( properl(
address.
Also, P.>. No. $45-, as amended b( E.C. No. $"+, e6plicitl( provides that the
source of CP3F is ta6ation. No amount of semantical 9u''leries could dim this
fact.
t is settled that a ta6pa(er ma( not offset ta6es due from the claims that he
ma( have a'ainst the 'overnment.
58
0a6es cannot be the sub9ect of
compensation because the 'overnment and ta6pa(er are not mutuall( creditors
and debtors of each other and a claim for ta6es is not such a debt, demand,
contract or 9ud'ment as is allo,ed to be set-off.
59
Be ma( even further state that technicall(, in respect to the ta6es for the
CP3F, the oil companies merel( act as a'ents for the 7overnment in the
latter?s collection since the ta6es are, in realit(, passed unto the end-users QQ
the consumin' public. n that capacit(, the petitioner, as one of such
companies, has the primar( obli'ation to account for and remit the ta6es
collected to the administrator of the CP3F. 0his dut( stems from the fiduciar(
relationship bet,een the t,o; petitioner certainl( cannot be considered merel(
as a debtor. n respect, therefore, to its collection for the CP3F %is-a-%is its
claims for reimbursement, no compensation is li@e,ise le'all( feasible.
Firstl(, the 7overnment and the petitioner cannot be said to be mutuall(
debtors and creditors of each other. 3econdl(, there is no proof that petitioner?s
claim is alread( due and li=uidated. Ender Article $*+4 of the Civil Code, in
order that compensation ma( be proper, it is necessar( that1
!$& each one of the obli'ors be bound principall(, and that he be at the same
time a principal creditor of the other;
!*& both debts consist in a sum of 1mone(, or if the thin's due are consumable,
the( be of the same @ind, and also of the same =ualit( if the latter has been
stated;
!"& the t,o !*& debts be due;
!#& the( be li=uidated and demandable;
!5& over neither of them there be an( retention or controvers(, commenced b(
third persons and communicated in due time to the debtor.
0hat compensation had been the practice in the past can set no valid
precedent. 3uch a practice has no le'al basis. /astl(, R.A. No. -45* does not
authori2e oil companies to offset their claims a'ainst their CP3F
contributions. nstead, it prohibits the 'overnment from pa(in' an( amount
from the Petroleum Price 3tandb( Fund to oil companies ,hich have
outstandin' obli'ations ,ith the 'overnment, ,ithout said obli'ation bein'
offset first sub9ect to the rules on compensation in the Civil Code.
BDEREFCRE, in vie, of the fore'oin', 8ud'#ent is hereb( rendered
A(()+)1G the challen'ed decision of the $o##ission on Audit/ e6cept that
portion thereof disallo,in' petitioner?s claim for reimbursement of
underrecover( arisin' from sales to the National Po,er Corporation, ,hich is
hereb( allo,ed.
Bith costs a'ainst petitioner.
3C CR>ERE>.
Republic of the Philippines
SUPREME COURT
Manila
0DR> >H3CN

G.R. No. 1257=% #u6u*. 28, 1998
P"!LE< M!N!NG CORPOR#T!ON, petitioner,
vs.
COMM!SS!ONER OF !NTERN#L RE;ENUE, COURT OF
#PPE#LS, a'5 T"E COURT OF T#< #PPE#LS,respondents.

ROMERO, J.:
Petitioner Phile6 Minin' Corp. assails the decision of the Court of
Appeals promul'ated on April ), $44- in CA-7.R. 3P No.
"-4+5
1
affirmin' the Court of 0a6 Appeals decision in C0A Case No.
#)+* dated March $-, $445
2
orderin' it to pa( the amount of
P$$%,-++,--).5* as e6cise ta6 liabilit( for the period from the *nd =uarter
of $44$ to the *nd =uarter of $44* plus *%. annual interest from Au'ust
-, $44# until full( paid pursuant to 3ections *#) and *#4 of the 0a6 Code
of $4++.
0he facts sho, that on Au'ust 5, $44*, the BR sent a letter to Phile6
as@in' it to settle its ta6 liabilities for the *nd, "rd and #th =uarter of $44$
as ,ell as the $st and *nd =uarter of $44* in the total amount of
P$*",)*$.4)*.5* computed as follo,s1
PERC> CCHERE> BA3C 0AM *5. 3ERCDAR7E
N0ERE30 0C0A/ EMC3E
0AM >EE
*nd Otr., $44$ $*,4$$,$*#.-% ",**+,+)$.$5 ","+),$$-.$-
$4,5$+,%*$.4$
"rd Otr., $44$ $#,44#,+#4.*$ ",+#),-)+."% *,4+),#%4.%4
*$,+*$,)#5.-%
#th Otr., $44$ $4,#%-,#)%.$" #,)5$,-*%.%" *,-"$,)"+.+*
*-,))4,4"+.))
JJJJJ JJJJJ JJJJJJ JJJJJJ
#+,"$*,"5".4# $$,)*),%)).#)
),4)),"-*.4+ -),$*),)%5."4
JJJJJ JJJJJ JJJJJJ JJJJJJ
$st Otr., $44* *","#$,)#4.4# 5,)"5,#-*.#4 $,+$%,--4.)*
"%,))+,4)*.*5
*nd Otr., $44* $4,-+$,-4$.+- #,4$+,4**.4# *$5,5)%.$)
*#,)%5,$4#.))
JJJJJ JJJJJ JJJJJJ JJJJJJ
#",%$",5#$.+% $%,+5",")5.#"
$,4*-,*5%.%% 55,-4",$++.$"
JJJJJ JJJJJ JJJJJJ JJJJJJ
4%,"*5,)45.-# **,5)$,#+".4$
$%,4$#,-$*.4+
$*",)*$,4)*.5*
(
RRRRRRRRR RRRRRRRRR
RRRRRRRRR RRRRRRRRR
n a letter dated Au'ust *%, $44*,
%
Phile6 protested the demand for
pa(ment of the ta6 liabilities statin' that it has pendin' claims for HA0
input creditPrefund for the ta6es it paid for the (ears $4)4 to $44$ in the
amount of P$$4,4++,%"+.%* plus interest. 0herefore these claims for ta6
creditPrefund should be applied a'ainst the ta6 liabilities, citin' our rulin'
in$o##issioner of )nternal +e%enue %. )to'on-Suyoc ines/ )nc.
5
n repl(, the BR, in a letter dated 3eptember +, $44*,
6
found no merit in
Phile6?s position. 3ince these pendin' claims have not (et been
established or determined ,ith certaint(, it follo,s that no le'al
compensation can ta@e place. Dence, the BR reiterated its demand that
Phile6 settle the amount plus interest ,ithin "% da(s from the receipt of
the letter.
n vie, of the BR?s denial of the offsettin' of Phile6?s claim for HA0
input creditPrefund a'ainst its e6cise ta6 obli'ation, Phile6 raised the
issue to the Court of 0a6 Appeals on November -, $44*.
7
n the course of
the proceedin's, the BR issued 0a6 Credit Certificate 3N %%$+45 in the
amount of P$",$##,"$".)) ,hich, applied to the total ta6 liabilities of
Phile6 of P$*",)*$,4)*.5*; effectivel( lo,ered the latter?s ta6 obli'ation
to P$$%,-++,-)).5*.
>espite the reduction of its ta6 liabilities, the C0A still ordered Phile6 to
pa( the remainin' balance of P$$%,-++,-)).5* plus interest, elucidatin'
its reason, to ,it1
0hus, for le'al compensation to ta@e place, both
obli'ations must be li5uidated and de#anda,le.
A/i=uidatedA debts are those ,here the e6act amount
has alread( been determined !PARA3, Civil Code of
the Philippines, Annotated, Hol. H, Ninth Edition, p.
*54&. n the instant case, the claims of the Petitioner
for HA0 refund is still pendin' liti'ation, and still
has to be determined b( this Court !C.0.A. Case No.
#+%+&. A fortiori, the li5uidated de,t of the
Petitioner to the 'overnment cannot, therefore, be
set-off a'ainst the unli5uidated clai# ,hich
Petitioner conceived to e6ist in its favor !see
CompaIia 7eneral de 0abacos vs. French and
Enson, No. $#%*+, November ), $4$), "4 Phil.
"#&.
8
Moreover, the Court of 0a6 Appeals ruled that Ata6es cannot be sub9ect to
set-off on compensation since claim for ta6es is not a debt or
contract.A
9
0he dispositive portion of the C0A decision
1=
provides1
n all the fore'oin', this Petition for Revie, is
hereb( >ENE> for lac@ of merit and Petitioner is
hereb( CR>ERE> to PAN the Respondent the
amount of P$$%,-++,--).5* representin' e6cise ta6
liabilit( for the period from the *nd =uarter of $44$
to the *nd =uarter of $44* plus *%. annual interest
from Au'ust -, $44# until full( paid pursuant to
3ection *#) and *#4 of the 0a6 Code, as amended.
A''rieved ,ith the decision, Phile6 appealed the case before the Court of
Appeals doc@eted as CA-7R. CH No. "-4+5.
11
Nonetheless, on April ),
$44-, the Court of Appeals a Affirmed the Court of 0a6 Appeals
observation. 0he pertinent portion of ,hich reads1
12
BDEREFCRE, the appeal b( ,a( of petition for
revie, is hereb( >3M33E> and the decision
dated March $-, $445 is AFFRME>.
Phile6 filed a motion for reconsideration ,hich ,as, nevertheless, denied
in a Resolution dated :ul( $$, $44-.
1(
Do,ever, a fe, da(s after the denial of its motion for reconsideration,
Phile6 ,as able to obtain its HA0 input creditPrefund not onl( for the
ta6able (ear $4)4 to $44$ but also for $44* and $44#, computed as
follo,s1
1%
Period Covered 0a6 Credit >ate
B( Claims For Certificate of
HA0 refundPcredit Number ssue Amount
$44# !*nd Ouarter& %%++"% $$ :ul( $44-
P*5,"$+,5"#.%$
$44# !#th Ouarter& %%++"$ $$ :ul( $44-
P*$,+4$,%*%.-$
$4)4 %%++"* $$ :ul( $44- P"+,"**,+44.$4
$44%-$44$ %%++5$ $- :ul( $44- P)#,--*,+)+.#-
$44* !$st-"rd Ouarter& %%++55 *" :ul( $44-
P"-,5%$,$#+.45
n vie, of the 'rant of its HA0 input creditPrefund, Phile6 no, contends
that the same should, ipso 8ure, off-set its e6cise ta6 liabilities
15
since
both had alread( become Adue and demandable, as ,ell as full(
li=uidated;A
16
hence, le'al compensation can properl( ta@e place.
Be see no merit in this contention.
n several instances prior to the instant case, ,e have alread( made the
pronouncement that ta6es cannot be sub9ect to compensation for the
simple reason that the 'overnment and the ta6pa(er are not creditors and
debtors of each other.
17
0here is a material distinction bet,een a ta6 and
debt. >ebts are due to the 7overnment in its corporate capacit(, ,hile
ta6es are due to the 7overnment in its soverei'n capacit(.
18
Be find no
co'ent reason to deviate from the aforementioned distinction.
Prescindin' from this premise, in (rancia %. )nter#ediate Appellate
$ourt,
19
,e cate'oricall( held that ta6es cannot be sub9ect to set-off or
compensation, thus1
Be have consistentl( ruled that there can be no off-
settin' of ta6es a'ainst the claims that the ta6pa(er
ma( have a'ainst the 'overnment. A person cannot
refuse to pa( a ta6 on the 'round that the
'overnment o,es him an amount e=ual to or 'reater
than the ta6 bein' collected. 0he collection of a ta6
cannot a,ait the results of a la,suit a'ainst the
'overnment.
0he rulin' in (rancia has been applied to the subse=uent case of $alte*
.hilippines/ )nc. %. $o##ission on Audit,
2=
,hich reiterated that1
. . . a ta6pa(er ma( not offset ta6es due from the
claims that he ma( have a'ainst the 'overnment.
0a6es cannot be the sub9ect of compensation
because the 'overnment and ta6pa(er are not
mutuall( creditors and debtors of each other and a
claim for ta6es is not such a debt, demand, contract
or 9ud'ment as is allo,ed to be set-off.
Further, Phile6?s reliance on our holdin' in $o##issioner of )nternal
+e%enue %. )to'on-Suyoc ines )nc., ,herein ,e ruled that a pendin'
refund ma( be set off a'ainst an e6istin' ta6 liabilit( even thou'h the
refund has not (et been approved b( the Commissioner,
21
is no lon'er
,ithout an( support in statutor( la,.
t is important to note, that the premise of our rulin' in the
aforementioned case ,as anchored on 3ection 5$ !d& of the National
Revenue Code of $4"4. Do,ever, ,hen the National nternal Revenue
Code of $4++ ,as enacted, the same provision upon ,hich the )to'on-
Suyoc pronouncement ,as based ,as omitted.
22
Accordin'l(, the
doctrine enunciated in )to'on-Suyoc cannot be invo@ed b( Phile6.
>espite the fore'oin' rulin's clearl( adverse to Phile6?s position, it
asserts that the imposition of surchar'e and interest for the non-pa(ment
of the e6cise ta6es ,ithin the time prescribed ,as un9ustified. Phile6
posits the theor( that it had no obli'ation to pa( the e6cise ta6 liabilities
,ithin the prescribed period since, after all, it still has pendin' claims for
HA0 input creditPrefund ,ith BR.
2(
Be fail to see the lo'ic of Phile6?s claim for this is an outri'ht disre'ard
of the basic principle in ta6 la, that ta6es are the lifeblood of the
'overnment and so should be collected ,ithout unnecessar(
hindrance.
2%
Evidentl(, to countenance Phile6?s ,himsical reason ,ould
render ineffective our ta6 collection s(stem. 0oo simplistic, it finds no
support in la, or in 9urisprudence.
0o be sure, ,e cannot allo, Phile6 to refuse the pa(ment of its ta6
liabilities on the 'round that it has a pendin' ta6 claim for refund or
credit a'ainst the 'overnment ,hich has not (et been 'ranted. t must be
noted that a distin'uishin' feature of a ta6 is that it is compulsor( rather
than a matter of bar'ain.
25
Dence, a ta6 does not depend upon the consent
of the ta6pa(er.
26
f an( ta6pa(er can defer the pa(ment of ta6es b(
raisin' the defense that it still has a pendin' claim for refund or credit,
this ,ould adversel( affect the 'overnment revenue s(stem. A ta6pa(er
cannot refuse to pa( his ta6es ,hen the( fall due simpl( because he has a
claim a'ainst the 'overnment or that the collection of the ta6 is
contin'ent on the result of the la,suit it filed a'ainst the
'overnment.
27
Moreover, Phile6?s theor( that ,ould automaticall( appl(
its HA0 input creditPrefund a'ainst its ta6 liabilities can easil( 'ive rise to
confusion and abuse, deprivin' the 'overnment of authorit( over the
manner b( ,hich ta6pa(ers credit and offset their ta6 liabilities.
Corollaril(, the fact that Phile6 has pendin' claims for HA0 input
claimPrefund ,ith the 'overnment is immaterial for the imposition of
char'es and penalties prescribed under 3ection *#) and *#4 of the 0a6
Code of $4++. 0he pa(ment of the surchar'e is mandator( and the BR is
not vested ,ith an( authorit( to ,aive the collection thereof.
28
0he same
cannot be condoned for flims( reasons,
29
similar to the one advanced b(
Phile6 in 9ustif(in' its non-pa(ment of its ta6 liabilities.
Finall(, Phile6 asserts that the BR violated 3ection $%- !e&
(=
of the
National nternal Revenue Code of $4++, ,hich re=uires the refund of
input ta6es ,ithin -% da(s,
(1
,hen it too@ five (ears for the latter to 'rant
its ta6 claim for HA0 input creditPrefund.
(2
n this re'ard, ,e a'ree ,ith Phile6. Bhile there is no dispute that a
claimant has the burden of proof to establish the factual basis of his or her
claim for ta6 credit or refund,
((
ho,ever, once the claimant has submitted
all the re=uired documents it is the function of the BR to assess these
documents ,ith purposeful dispatch. After all, since ta6pa(ers o,e
honestl( to 'overnment it is but 9ust that 'overnment render fair service
to the ta6pa(ers.
(%
n the instant case, the HA0 input ta6es ,ere paid bet,een $4)4 to $44$
but the refund of these erroneousl( paid ta6es ,as onl( 'ranted in $44-.
Cbviousl(, had the BR been more dili'ent and 9udicious ,ith their dut(,
it could have 'ranted the refund earlier. Be need not remind the BR that
simple 9ustice re=uires the speed( refund of ,ron'l(-held ta6es.
(5
Fair
dealin' and nothin' less, is e6pected b( the ta6pa(er from the BR in the
latter?s dischar'e of its function. As aptl( held in +o*as %. $ourt of Ta*
Appeals1
(6
0he po,er of ta6ation is sometimes called also the
po,er to destro(. 0herefore it should be e6ercised
,ith caution to minimi2e in9ur( to the proprietar(
ri'hts of a ta6pa(er. t must be e6ercised fairl(,
e=uall( and uniforml(, lest the ta6 collector @ill the
Ahen that la(s the 'olden e''A And, in order to
maintain the 'eneral public?s trust and confidence in
the 7overnment this po,er must be used 9ustl( and
not treacherousl(.
>espite our concern ,ith the lethar'ic manner b( ,hich the BR handled
Phile6?s ta6 claim, it is a settled rule that in the performance of
'overnmental function, the 3tate is not bound b( the ne'lect of its a'ents
and officers. No,here is this more true than in the field of
ta6ation.
(7
A'ain, ,hile ,e understand Phile6?s predicament, it must be
stressed that the same is not a valid reason for the non-pa(ment of its ta6
liabilities.
0o be sure, this is not to state that the ta6pa(er is devoid of remed(
a'ainst public servants or emplo(ees, especiall( BR e6aminers ,ho, in
investi'atin' ta6 claims are seen to dra' their feet needlessl(. First, if the
BR ta@es time in actin' upon the ta6pa(er?s claim for refund, the latter
can see@ 9udicial remed( before the Court of 0a6 Appeals in the manner
prescribed b( la,.
(8
3econd, if the inaction can be characteri2ed as
,illful ne'lect of dut(, then recourse under the Civil Code and the 0a6
Code can also be availed of.
Art. *+ of the Civil Code provides1
Art. *+. An( person sufferin' material or moral loss
because a public servant or emplo(ee refuses or
ne'lects, ,ithout 9ust cause, to perform his official
dut( ma( file an action for dama'es and other relief
a'ainst the latter, ,ithout pre9udice to an(
disciplinar( action that ma( be ta@en.
More importantl(, 3ection *-4 !c& of the National nternal Revenue Act
of $44+ states1
666 666 666
!c& Bilfull( ne'lectin' to 'ive receipts, as b( la,
re=uired for an( sum collected in the performance of
dut( or wilfully ne'lectin' to perfor#/ any other
duties en8oyed ,y law.
3impl( put, both provisions abhor official inaction, ,illful ne'lect and
unreasonable dela( in the performance of official duties.
(9
n no
uncertain terms must ,e stress that ever( public emplo(ee or servant
must strive to render service to the people ,ith utmost dili'ence and
efficienc(. nsolence and dela( have no place in 'overnment service. 0he
BR, bein' the 'overnment collectin' arm, must and should do no less. t
simpl( cannot be apathetic and la''ard in renderin' service to the
ta6pa(er if it ,ishes to remain true to its mission of hastenin' the
countr(?s development. Be ta@e 9udicial notice of the ta6pa(er?s 'enerall(
ne'ative perception to,ards the BR; hence, it is up to the latter to prove
its detractors ,ron'.
n sum, ,hile ,e can never condone the BR?s apparent callousness in
performin' its duties, still, the same cannot 9ustif( Phile6?s non-pa(ment
of its ta6 liabilities. 0he ada'e Ano one should ta@e the la, into his o,n
handsA should have 'uided Phile6?s action.
BDEREFCRE, in vie, of the fore'oin', the instant petition is hereb(
>3M33E>. 0he assailed decision of the Court of Appeals dated April
), $44- is hereb( AFFRME>.
3C CR>ERE>.

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