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2008 SC TAXATION CASES - DIGEST

FUNDAMENTALS OF TAXATION

PLANTERS PRODUCTS, INC., vs. FERTIPHIL CORPORATION. [G.R. No. 166006. March 14, 2008.]
Facts: President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which provided, among
others, for the imposition by the Fertilizer Pesticide Authority (FPA) of a capital recovery component (CRC) on the
domestic sale of all grades of fertilizers in the Philippines. The goal is to make and keep respondent PPI viable. After the
1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. With the return of democracy, Fertiphil
demanded from PPI a refund of the amounts it paid under LOI No. 1465, but PPI refused to accede to the demand
Fertiphil filed a complaint for collection and damages against FPA and PPI with the RTC in Makati. It questioned the
constitutionality of LOI No. 1465 for being unjust, unreasonable, oppressive, invalid and an unlawful imposition that
amounted to a denial of due process of law. FPA, through the Solicitor General, countered that the issuance of LOI No.
1465 was a valid exercise of the police power of the State in ensuring the stability of the fertilizer industry in the country
Issue/Held: Whether the levy is in exercise of police power or taxation power- TAXATION
Ratio: We agree with the RTC that the imposition of the levy was an exercise by the State of its taxation power. While it
is true that the power of taxation can be used as an implement of police power, the primary purpose of the levy is
revenue generation. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes,
then the exaction is properly called a tax. An inherent limitation on the power of taxation is public purpose. Taxes are
exacted only for a public purpose. They cannot be used for purely private purposes or for the exclusive benefit of
private persons. The purpose of a law is evident from its text or inferable from other secondary sources. Here, we agree
with the RTC and that CA that the levy imposed under LOI No. 1465 was not for a public purpose because it expressly
provided that the levy be imposed to benefit PPI, a private company. The purpose is explicit from Clause 3 of the law

INTRA-STRATA ASSURANCE CORPORATION and PHILIPPINE HOME ASSURANCE CORPORATIONs, vs.
REPUBLIC OF THE PHILIPPINES, represented by the BUREAU OF CUSTOMS. [G.R. No. 156571. July 9, 2008.]
Facts: As computed by the Bureau of Customs, the customs duties, internal revenue taxes, and other charges due on the
importations amounted to P2,363,147.00. To secure the payment of these obligations pursuant to Section 1904 of the
Tariff and Customs Code (Code), Intra-Strata and PhilHome each issued general warehousing bonds in favor of the
Bureau of Customs. These bonds, the terms of which are fully quoted below, commonly provide that the goods shall be
withdrawn from the bonded warehouse "on payment of the legal customs duties, internal revenue, and other charges to
which they shall then be subject".
Without payment of the taxes, customs duties, and charges due and for purposes of domestic consumption, Grand
Textile withdrew the imported goods from storage. The Bureau of Customs demanded payment of the amounts due
from Grand Textile as importer, and from Intra-Strata and PhilHome as sureties. All three failed to pay. The
government responded by filing a collection suit against the parties with the RTC of Manila.
RTC rendered its decision finding Grand Textile (as importer) and the petitioners (as sureties) liable for the taxes, duties,
and charges due on the imported articles.
Issue/ Held: W/N the withdrawal of the stored goods, wares, and merchandise without notice to them as sureties
released them from any liability for the duties, taxes, and charges they committed to pay under the bonds they issued.-
NO
Ratio: It has long been a settled rule that the government is not bound by the errors committed by its agents. Estoppel
does not also lie against the government or any of its agencies arising from unauthorized or illegal acts of public officers.
This is particularly true in the collection of legitimate taxes due where the collection has to be made whether or not there
is error, complicity, or plain neglect on the part of the collecting agents.

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REMEDIES

M.E. HOLDING CORPORATION, vs. THE HON. COURT OF APPEALS, COURT OF TAX APPEALS, and
THE COMMISSIONER OF INTERNAL REVENUE [G.R. No. 160193. March 3, 2008.]
Facts: M.E. Holding Corporation (M.E.) filed its 1995 Corporate Annual Income Tax Return, claiming the 20% sales
discount it granted to qualified senior citizens. M.E. treated the discount as deductions from its gross income
purportedly in accordance with Revenue Regulation No. (RR) 2-94. M.E. sent BIR a letter-claim dated December 6,
1996, 1 stating that it overpaid its income tax owing to the BIR's erroneous interpretation of Sec. 4 (a) of RA 7432.
Due to the inaction of the BIR, and to toll the running of the two-year prescriptive period in filing a claim for refund,
M.E. filed an appeal before the Court of Tax Appeals. TA rendered a Decision in favor of M.E. Unfortunately, what
appears to be the victory of M.E. before the CTA was watered down by the tax court's declaration that, while the
independent auditor M.E. hired found the amount PhP603,923.46 as having been granted as sales discount to qualified
senior citizens, M.E. failed to properly support the claimed discount with corresponding cash slips. Thus, the CTA
reduced M.E.'s claim for PhP603,923.46 sales discount to PhP362,574.57 after the CTA disallowed PhP241,348.89
unsupported claims, and consequently lowered the refundable amount to PhP122,195.74. M.E. went to the CA on a
petition for review. CA pointed out that forgotten evidence is not newly discovered evidence which can be presented to
the appellate tax court, even after it had already rendered its decision.
Issue/ Held: W/N the belatedly submitted cash slips by the petitioner can be considered as sufficient evidence of the sales
discounts- NO
Ratio: Lest it be overlooked, the Rules of Court is of suppletory application in quasi-judicial proceedings. Be this as it
may, the CTA was correct in disallowing and not considering the belatedly-submitted cash slips to be part of the 20%
sales discount for M.E.'s taxable year 1995. This is as it should be in the light of Sec. 34 of Rule 132 prescribing that no
evidence shall be considered unless formally offered with a statement of the purpose why it is being offered. In addition,
the rule is that the best evidence under the circumstance must be adduced to prove the allegations in a complaint,
petition, or protest. Only when the best evidence cannot be submitted may secondary evidence be considered. But, in
the instant case, the disallowed cash slips, the best evidence at that time, were not part of M.E.'s offer of evidence. While
it may be true that the authenticated special record books yield the same data found in the cash slips, they cannot
plausibly be considered by the courts a quo and made to corroborate pieces of evidence that have, in the first place, been
disallowed. Recall also that M.E. offered the disallowed cash slips as evidence only after the CTA had rendered its
assailed decision. Thus, we cannot accept the excuse of inadvertence of the independent auditor as excusable negligence.
As aptly put by the CA, the belatedly-submitted cash slips do not constitute newly-found evidence that may be
submitted as basis for a new trial or reconsideration of the decision

PILIPINAS SHELL PETROLEUM CORPORATION, vs. REPUBLIC OF THE PHILIPPINES, represented by the
BUREAU OF CUSTOMS. [G.R. No. 161953. March 6, 2008.]
Facts: The present controversy sprang from the cancellation of tax debit memos (TDMs) and the corresponding tax
credit certificates (TCCs) assigned to petitioner Pilipinas Shell Petroleum Corporation (Shell) by various entities. Some of
these TCCs were subsequently accepted as payment by the Bureau of Customs (BOC) for petitioner's taxes and import
duties in 1997 and 1998. Secretary Edgardo B. Espiritu of the Department of Finance (DOF) informed petitioner that its
TDMs and TCCs were fraudulently issued and transferred. Petitioner assailed the action of the DOF. Thus, petitioner
filed a formal protest. However, the BOC did not act on this protest. Consequently, petitioner filed a petition for review
questioning the legality of the cancellation of the TCCs in the Court of Tax Appeals Meanwhile, respondent filed a
complaint for collection 16 in the Regional Trial Court (RTC) of Manila. Petitioner essentially contends that the RTC
had no jurisdiction over the collection case inasmuch as the CTA had not yet decided the petition for review. 34
Therefore, the RTC should have dismissed the collection case and transferred it to the CTA where it should be treated
as a counterclaim (in the petition for review).
Issue/Held: W/N it is proper for the BOC to file the collection case in the RTC - YES
Ratio: Import duties constitute a personal debt of the importer that must be paid in full. The importer's liability therefore
constitutes a lien on the article which the government may choose to enforce while the imported articles are either in its
custody or under its control.
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When respondent released petitioner's goods, its (respondent's) lien over the imported goods was extinguished.
Consequently could only enforce the payment of petitioner's import duties in full by filing a case for collection against
petitioner

BANK OF THE PHILIPPINE ISLANDS (Formerly: Far East Bank and Trust Company), vs. COMMISSIONER OF
INTERNAL REVENUE. [G.R. No. 174942. March 7, 2008.]
Facts: Respondent thru then Revenue Service Chief Cesar M. Valdez, issued to the petitioner a pre-assessment notice
(PAN) dated November 26, 1986.
Petitioner, in a letter dated November 29, 1986, requested for the details of the amounts alleged as 1982-1986 deficiency
taxes mentioned in the November 26, 1986 PAN. On April 7, 1989, respondent issued to the petitioner,
assessment/demand notices for deficiency withholding tax at source (Swap Transactions) and DST involving the
amounts of P190,752,860.82 and P24,587,174.63, respectively, for the years 1982 to 1986.On April 20, 1989, petitioner
filed a protest on the demand/assessment notices and also filed a supplemental protest. Petitioner executed several
Waivers of the Statutes of Limitations. On August 9, 2002, respondent issued a final decision on petitioner's protest
ordering the withdrawal and cancellation of the deficiency withholding tax assessment in the amount of P190,752,860.82
and considered the same as closed and terminated. On the other hand, the deficiency DST assessment in the amount of
P24,587,174.63 was reiterated and the petitioner was ordered to pay the said amount within thirty (30) days from receipt
of such order. Petitioner received a copy of the said decision on January 15, 2003. Thereafter, on January 24, 2003,
petitioner filed a Petition for Review before the Court., which rendered a Decision denying the petitioner's Petition for
Review.
Issue/ Held: W/N the collection of the delinquency taxes in question has already prescribed- YES
Ratio: When it validly issues an assessment within the three (3)-year period, it has another three (3) years within which to
collect the tax due by distraint, levy, or court proceeding. The assessment of the tax is deemed made and the three (3)-
year period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed
or sent to the taxpayer.
As applied to the present case, the CIR had three (3) years from the time he issued assessment notices to BPI on 7 April
1989 or until 6 April 1992 within which to collect the deficiency DST. However, it was only on 9 August 2002 that the
CIR ordered BPI to pay the deficiency.
There is nothing in the records of this case which indicates, expressly or impliedly, that the CIR had granted the request
for reinvestigation filed by BPI. What is reflected in the records is the piercing silence and inaction of the CIR on the
request for reinvestigation, as he considered BPI's letters of protest to be. In order to suspend the running of the
prescriptive periods for assessment and collection, the request for reinvestigation must be granted by the CIR.
Neither did the waiver of the statute of limitations signed by BPI supposedly effective until 31 December 1994 suspend
the prescriptive period. The CIR himself contends that the waiver is void as it shows no date of acceptance in violation
of RMO No. 20-90. 16 At any rate, the records of this case do not disclose any effort on the part of the Bureau of
Internal Revenue to collect the deficiency tax after the expiration of the waiver until eight (8) years thereafter when it
finally issued a decision on the protest.

COMMISSIONER OF INTERNAL REVENUE, vs. FMF DEVELOPMENT CORPORATION. [G.R. No. 167765.
June 30, 2008.]
Facts: FMF filed its Corporate Annual Income Tax Return for taxable year 1995 and declared a loss of P3,348,932. On
May 8, 1996, however, it filed an amended return and declared a loss of P2,826,541. The BIR then sent FMF pre-
assessment notices, all dated October 6, 1998, informing it of its alleged tax liabilities. 4 FMF filed a protest against these
notices with the BIR and requested for a reconsideration/reinvestigationFMF President Enrique Fernandez executed a
waiver of the three-year prescriptive period for the BIR to assess internal revenue taxes, hence extending the assessment
period. The waiver was accepted and signed by RDO Zambarrano. FMF received amended pre-assessment notices 5
dated October 6, 1999 from the BIR. FMF immediately filed a protest on November 3, 1999 but on the same day, it
received BIR's Demand Letter and Assessment Notice No. 33-1-00487-95 dated October 25, 1999 reflecting FMF's
alleged deficiency taxes and accrued interests. FMF filed a letter of protest on the assessment invoking, inter alia, 7 the
defense of prescription by reason of the invalidity of the waiver. In its reply, the BIR insisted that the waiver is valid
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because it was signed by the RDO, a duly authorized representative of petitioner. It also ordered FMF to immediately
settle its tax liabilities; otherwise, judicial action will be taken. Treating this as BIR's final decision, FMF filed a petition
for review with the CTA challenging the validity of the assessment. CTA and CA ruled in favor of respondent.
Issue/ Held: W/N the waiver is valid- NO
Ratio: Applying RMO No. 20-90, the waiver in question here was defective and did not validly extend the original three-
year prescriptive period. Firstly, it was not proven that respondent was furnished a copy of the BIR-accepted waiver.
Secondly, the waiver was signed only by a revenue district officer, when it should have been signed by the Commissioner
as mandated by the NIRC and RMO No. 20-90, considering that the case involves an amount of more than P1 million,
and the period to assess is not yet about to prescribe. Lastly, it did not contain the date of acceptance by the
Commissioner of Internal Revenue, a requisite necessary to determine whether the waiver was validly accepted before
the expiration of the original three-year period. Bear in mind that the waiver in question is a bilateral agreement, thus
necessitating the very signatures of both the Commissioner and the taxpayer to give birth to a valid agreement.

JUDY ANNE L. SANTOS, vs. PEOPLE OF THE PHILIPPINES and BUREAU OF INTERNAL REVENUE[G.R.
No. 173176. August 26, 2008.]
Facts: The CTA First Division admitted the Information against petitioner for filing a fraudulent return and issued a
warrant for the arrest of petitioner. The tax court lifted and recalled the warrant of arrest on 21 December 2005 after
petitioner voluntarily appeared and submitted herself to its jurisdiction and filed the required bail bond Petitioner filed
with the CTA First Division a Motion to Quash the Information. CTA First Division denied petitioner's Motion to
Quash. CTA en banc denied petitioner's Motion for Extension of Time to File Petition for Review. Petitioner's primary
argument is that a resolution of a CTA Division denying a motion to quash is a proper subject of an appeal to the CTA
en banc under Section 18 of Republic Act No. 1125, as amended, because the law does not say that only a resolution
that constitutes a final disposition of a case may be appealed to the CTA en banc. If the interpretation of the law by the
CTA en banc prevails, a procedural void is created leaving the parties, such as petitioner, without any remedy involving
erroneous resolutions of a CTA Division.
Issue/ Held: W/N a resolution of a CTA Division denying a motion to quash is a proper subject of an appeal to the CTA
en banc- NO
Ratio: There is no dispute that a court order denying a motion to quash is interlocutory. The denial of the motion to
quash means that the criminal information remains pending with the court, which must proceed with the trial to
determine whether the accused is guilty of the crime charged therein. Equally settled is the rule that an order denying a
motion to quash, being interlocutory, is not immediately appealable, 38 nor can it be the subject of a petition for
certiorari. Such order may only be reviewed in the ordinary course of law by an appeal from the judgment after trial.
The Court cannot agree in petitioner's contention that there would exist a procedural void following the denial of her
Motion to Quash by the CTA First Division in its Resolutions dated 23 February 2006 and 11 May 2006, leaving her
helpless. The remedy of an accused from the denial of his or her motion to quash has already been clearly laid down as
follows:
An order denying a Motion to Acquit (like an order denying a motion to quash) is interlocutory and not a final order. It
is, therefore, not appealable. Neither can it be the subject of a petition for certiorari. Such order of denial may only be
reviewed, in the ordinary course of law, by an appeal from the judgment, after trial. As stated in Collins vs. Wolfe, and
reiterated in Mill vs. Yatco, the accused, after the denial of his motion to quash, should have proceeded with the trial of
the case in the court below, and if final judgment is rendered against him, he could then appeal, and, upon such appeal,
present the questions which he sought to be decided by the appellate court in a petition for certiorari.(Gamboa v Cruz)

COMMISSIONER OF INTERNAL REVENUE, vs. DOMINADOR MENGUITO. [G.R. No. 167560. September
17, 2008.]
Facts: Through a letter dated July 28, 1997, Spouses Dominador Menguito and Jeanne Menguito (Spouses Menguito)
were informed by the Assessment Division of the said office that they have underdeclared sales totaling P48,721,555.96.
This was followed by a Preliminary Ten (10) Day Letter dated August 11, 1997, informing Petitioner [herein respondent]
that in the investigation of his 1991, 1992 and 1993 income, business and withholding tax case, it was found out that
there is still due from him the total sum of P34,193,041.55 as deficiency income and percentage tax. The assessment
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notices subject of the instant petition were issued. These were protested by Ms. Jeanne Menguito, through a letter. BIR
Baguio wrote a letter to Spouses Menguito, informing the latter that a reinvestigation or reconsideration cannot be given
due course by the mere submission of an uncertified photocopy of the Certificate of Incorporation. Thus, it avers that
the amendment issued is still valid and enforceable. Respondent filed the present case, praying for the cancellation and
withdrawal of the deficiency income tax and percentage tax assessments on account of prescription, whimsical factual
findings, violation of procedural due process on the issuance of assessment notices, erroneous address of notices and
multiple credit/investigation by the petitioner of respondent's books of accounts and other related records for the same
tax year. Instead of filing an Answer, petitioner moved to dismiss the instant petition on July 1, 1999, on the ground of
lack of jurisdiction. According to petitioner, the assessment had long become final and executory when respondent failed
to comply with the letter.
Issue/ Held: W/N there was a valid formal assessment notice- NO
Ratio: It should be emphasized that the stringent requirement that an assessment notice be satisfactorily proven to have
been issued and released or, if receipt thereof is denied, that said assessment notice have been served on the taxpayer,
applies only to formal assessments prescribed under Section 228 of the National Internal Revenue Code, but not to
post-reporting notices or pre-assessment notices. The issuance of a valid formal assessment is a substantive prerequisite
to tax collection, for it contains not only a computation of tax liabilities but also a demand for payment within a
prescribed period, thereby signaling the time when penalties and interests begin to accrue against the taxpayer and
enabling the latter to determine his remedies therefor. Due process requires that it must be served on and received by
the taxpayer. A post-reporting notice and pre-assessment notice do not bear the gravity of a formal assessment notice.
The post-reporting notice and pre-assessment notice merely hint at the initial findings of the BIR against a taxpayer and
invites the latter to an "informal" conference or clarificatory meeting. Neither notice contains a declaration of the tax
liability of the taxpayer or a demand for payment thereof. Hence, the lack of such notices inflicts no prejudice on the
taxpayer for as long as the latter is properly served a formal assessment notice.

FITNESS BY DESIGN, INC., vs. COMMISSIONER ON INTERNAL REVENUE. [G.R. No. 177982. October 17,
2008.]
Facts: Commissioner on Internal Revenue assessed Fitness by Design, Inc. (petitioner) for deficiency income taxes for
the tax year 1995. Petitioner protested the assessment on the ground that it was issued beyond the three-year
prescriptive period under Section 203 of the Tax Code. Additionally, petitioner claimed that since it was incorporated
only on May 30, 1995, there was no basis to assume that it had already earned income for the tax year 1995. Respondent
issued a warrant of distraint and/or levy against petitioner, 4 drawing petitioner to file a Petition for Review (with
Motion to Suspend Collection of Income Tax, Value Added Tax, Documentary Stamp Tax and Surcharges and Interests
subject of this Petition) before the Court of Tax Appeals (CTA) before which it reiterated its defense of prescription.
On motion of petitioner in CTA Case No. 7160, a preliminary hearing on the issue of prescription was conducted during
which petitioner's former bookkeeper attested that a former colleague certified public accountant Leonardo Sablan
(Sablan) illegally took custody of petitioner's accounting records, invoices, and official receipts and turned them over
to the BIR. On petitioner's request, a subpoena ad testificandum was issued to Sablan for the hearing before the CTA
but he failed to appear.
Petitioner thus requested for the issuance of another subpoena ad testificandum to Sablan for the hearing , and of
subpoena duces tecum to the chief of the National Investigation Division of the BIR for the production of the Affidavit
of the Informer bearing on the assessment in question. In any event, the CTA held that there was no need to issue a
subpoena duces tecum to obtain the Affidavit of the Informer as the same formed part of the BIR records of the case,
the production of which had been ordered by it.
Issue/ Held: W/N the CTA arbitrarily disallowed the granting of a subpoena duces tecum- NO
Ratio: The law allows the BIR access to all relevant or material records and data in the person of the taxpayer, and the
BIR can accept documents which cannot be admitted in a judicial proceeding where the Rules of Court are strictly
observed. To require the consent of the taxpayer would defeat the intent of the law to help the BIR assess and collect
the correct amount of taxes.
Petitioner's invocation of the rights of an accused in a criminal prosecution to cross examine the witness against him and
to have compulsory process issued to secure the attendance of witnesses and the production of other evidence in his
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behalf does not lie. CTA Case No. 7160 is not a criminal prosecution, and even granting that it is related to I.S. No.
2005-203, the respondents in the latter proceeding are the officers and accountant of petitioner-corporation, not
petitioner.

CJH DEVELOPMENT CORPORATION, vs. BUREAU OF INTERNAL REVENUE, BUREAU OF CUSTOMS,
DISTRICT COLLECTOR OF CUSTOMS EDWARD O. BALTAZAR[G.R. No. 172457. December 24, 2008.].
Facts: BOC demanded 12 of CJH the payment of P71,983,753.00 representing the duties and taxes due on all the
importations made by CJH from 1998 to 2004. For its part, the BIR sent a letter to CJH wherein it treated CJH as an
ordinary corporation subject to the regular corporate income tax as well as to the Value Added Tax of 1997. CJH
questioned the retroactive application by the BOC of the Supreme Court decision in G.R. No. 119775 (Section 3 of the
Proclamation , which granted to the newly created SEZ the same incentives then already enjoyed by the Subic SEZ,
including tax exemptions, was declared unconstitutional) It claimed that the assessment was null and void because it
violated the non-retroactive principle under the Tariff and Customs Code. held that the decision in G.R. No. 119775
applies retroactively because the tax exemption granted by Proclamation No. 420 is null and void from the beginning.
The RTC also ruled that the petition for declaratory relief is not the appropriate remedy. A judgment of the court cannot
be the proper subject of a petition for declaratory relief; the enumeration in Rule 64 is exclusive. Moreover, the RTC
held that Commonwealth Act No. 55 (CA No. 55) which proscribes the use of declaratory relief in cases where a
taxpayer questions his tax liability is still in force and effect.
Issues/ Held:
W/N the remedy of declaratory relief proper in this case-NO
W/N the decision in G.R. No. 119775 be applied retroactively- NOT RESOLVED
Ratio: Ultimately, the Court is asked to determine whether the decision of the Court en banc in G.R. No. 119775 has a
retroactive effect. This approach cannot be countenanced. A petition for declaratory relief cannot properly have a court
decision as its subject matter.
The Tariff and Customs Code (TCC) provides for the administrative and judicial remedies available to a taxpayer who is
minded to contest an assessment, subject of course to certain reglementary periods. The TCC provides that a protest can
be raised provided that payment first be made of the amount due. The decision of the Collector can be reviewed by the
Commissioner of Customs who can approve, modify or reverse the decision or action of the Collector. If the party is
not satisfied with the ruling of the Commissioner, he may file the necessary appeal to the Court of Tax Appeals.
Afterwards, the decision of the Court of Tax Appeals can be appealed to the Supreme Court.
The petition in G.R. No. 169234 was filed with the Supreme Court in September 2005, in John Hay Peoples Alternative
Coalition had attained finality. CJH therein raised the same question of law, as in this case, whether the doctrine of
operative fact applies to G.R. No. 119775. Clearly, the Court in G.R. No. 169234 is better positioned to resolve that
question of law, there being no antecedent jurisdictional defects that would preclude the Court from squarely deciding
that particular issue. CJH is free to reiterate this current point of clarification as it litigates the petition in G.R. No.
169234.

TAX EXEMPTION

QUEZON CITY and THE CITY TREASURER OF QUEZON CITYs, vs. ABS-CBN BROADCASTING
CORPORATION. [G.R. No. 166408. October 6, 2008.]
Facts: Under Section 31, Article 13 of the Quezon City Revenue Code of 1993, 3 a franchise tax was imposed on
businesses operating within its jurisdiction. ABS-CBN had been paying local franchise tax imposed by Quezon City.
However, in view of the provision in R.A. No. 9766 that it "shall pay a franchise tax . . . in lieu of all taxes", the
corporation developed the opinion that it is not liable to pay the local franchise tax imposed by Quezon City.
Consequently, ABS-CBN paid under protest the local franchise tax imposed by Quezon City on the dates, in the
amounts and under the official receipts. For failure to obtain any response from the Quezon City Treasurer, ABS-CBN
filed a complaint before the RTC in Quezon City seeking the declaration of nullity of the imposition of local franchise
tax by the City Government of Quezon City for being unconstitutional. It likewise prayed for the refund of local
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franchise tax. RTC and CA rendered judgment declaring as invalid the imposition on and collection from ABS-CBN of
local franchise tax.
Issue/ Held: W/N ABS-CBN is liable for franchise taxes imposed by a local government unit- NO
Ratio: The "in lieu of all taxes" provision in the franchise of ABS-CBN does not expressly provide what kind of taxes
ABS-CBN is exempted from. It is not clear whether the exemption would include both local, whether municipal, city or
provincial, and national tax. What is clear is that ABS-CBN shall be liable to pay three (3) percent franchise tax and
income taxes under Title II of the NIRC. But whether the "in lieu of all taxes provision" would include exemption from
local tax is not unequivocal. The right to exemption from local franchise tax must be clearly established and cannot be
made out of inference or implications but must be laid beyond reasonable doubt. Verily, the uncertainty in the "in lieu of
all taxes" provision should be construed against ABS-CBN. ABS-CBN has the burden to prove that it is in fact covered
by the exemption so claimed. ABS-CBN miserably failed in this regard.

DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC., vs. CITY GOVERNMENT OF BATANGAS
represented by HON. ANGELITO DONDON A. DIMACUHA, Batangas City Mayor, MR. BENJAMIN S. PARGAS,
Batangas City Treasurer, and ATTY. TEODULFO A. DEQUITO, Batangas City Legal Officers. [G.R. No. 156040.
December 11, 2008.]
Facts: Republic Act No. 7678 (RA 7678) granted petitioner a 25-year franchise to install, operate and maintain
telecommunications systems throughout the Philippines. After the installation of the facilities, petitioner applied with the
Mayor's office of Batangas City for a permit to operate. Petitioner was advised to settle its unpaid realty taxes. However,
petitioner claimed exemption from the payment of realty tax, citing the first sentence of Section 5 of RA 7678, the
Letter-Opinion of the Bureau of Local Government Finance (BLGF) and the letter of the Office of the President
petitioner instituted a complaint for prohibition and mandamus with prayer for a temporary restraining order or writ of
preliminary injunction. The RTC initially ruled in favor of petitioner, but upon granting respondents motion for
reconsideration, ruled that petitioner is not exempt from real property taxes.

Issue/ Held: W/N petitioner is exempt from the realty tax under Section 5 of RA 7678- NO
Ratio: Nowhere in the language of the first sentence of Section 5 of RA 7678 does it expressly or even impliedly provide
that petitioner's real properties that are actually, directly and exclusively used in its telecommunications business are
exempt from payment of realty tax. On the contrary, the first sentence of Section 5 specifically states that the petitioner,
as the franchisee, shall pay the "same taxes on its real estate, buildings, and personal property exclusive of this franchise
as other persons or corporations are now or hereafter may be required by law to pay".
The heading of Section 5 is "Tax Provisions", not Tax Exemptions. To reiterate, the phrase "exemption from real estate
tax" or other words conveying exemption from realty tax do not appear in the first sentence of Section 5. The phrase
"exclusive of this franchise" in the first sentence of Section 5 merely qualifies the phrase "personal property" to exclude
petitioner's legislative franchise, which is an intangible personal property. Petitioner's franchise is subject to tax in the
second sentence of Section 5 which imposes the "franchise tax". Thus, there is no grant of tax exemption in the first
sentence of Section 5.

MA. ISABEL T. SANTOS, represented by ANTONIO P. SANTOS, vs. SERVIER PHILIPPINES, INC. and
NATIONAL LABOR RELATIONS COMMISSION. [G.R. No. 166377. November 28, 2008.]
Facts: As a consequence of petitioner's termination from employment (unfit to work due to an ailment contracted in
Paris) , respondent offered a retirement package. Of the promised retirement benefits amounting to P1,063,841.76, only
P701,454.89 was released to petitioner's husband, the balance thereof was withheld allegedly for taxation purposes.
Respondent also failed to give the other benefits listed above. Petitioner, represented by her husband, instituted the
instant case for unpaid salaries; unpaid separation pay; unpaid balance of retirement package plus interest; insurance
pension for permanent disability; educational assistance for her son; medical assistance; reimbursement of medical and
rehabilitation expenses; moral, exemplary, and actual damages, plus attorney's fees.
Issues/Held:
W/N the NLRC has jurisdiction over the deduction claim- YES
W/N the retirement benefits are taxable- YES
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Ratio: The issue of deduction for tax purposes is intertwined with the main issue of whether or not petitioner's benefits
have been fully given her. It is, therefore, a money claim arising from the employer-employee relationship, which clearly
falls within the jurisdiction 41 of the Labor Arbiter and the NLRC.
For the retirement benefits to be exempt from the withholding tax, the taxpayer is burdened to prove the concurrence
of the following elements: (1) a reasonable private benefit plan is maintained by the employer; (2) the retiring official or
employee has been in the service of the same employer for at least ten (10) years; (3) the retiring official or employee is
not less than fifty (50) years of age at the time of his retirement; and (4) the benefit had been availed of only once.
As discussed above was qualified for disability retirement. At the time of such retirement was only 41 years of age; and
had been in the service for more or less eight (8) years. As such, the above provision is not applicable for failure to
comply with the age and length of service requirements. Therefore cannot be faulted for deducting from petitioner's
total retirement benefits the amount of P362,386.87, for taxation purposes.

REFUND AND CREDIT

STATE LAND INVESTMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE. [G.R. No.
171956. January 18, 2008.]
Facts: Petitioner filed with the Bureau of Internal Revenue (BIR) its annual income tax return for the calendar year
ending December 31, 1997. Its taxable income was P27,723,328.00 with tax due in the amount of P9,703,165.54. Its total
tax credits for the same year amounted to P23,632,959.05, inclusive of its prior year's excess tax credits of P9,289,084.00.
Thus, after applying its total tax credits of P23,632,959.05 against its income tax liability of P9,703,165.54, the amount of
P13,929,793.51 remained unutilized. Petitioner opted to apply this amount as tax credit to the succeeding taxable year
1998.
On April 15, 1999, petitioner again filed with the BIR its annual income tax return for the calendar year ending
December 31, 1998, declaring a minimum corporate income tax due in the amount of P4,187,523.00. Petitioner charged
the said amount against its 1997 excess credit of P13,929,793.51, leaving a balance of P9,742,270.51.
On April 7, 2000, petitioner filed with the BIR a claim for refund of its unutilized tax credit for the year 1997 in the
amount P9,742,270. CTA denied petitioner's claim for refund of its unutilized tax credit for 1997.
Issue/Held: W/N petitioner can claim a refund of its unutilized tax credit for 1997 - YES
Ratio: Under Section 69 (now Section 76) of the Tax Code then in force, it is clearly provided that a taxable corporation
is entitled to a tax refund when the sum of the quarterly income taxes it paid during a taxable year exceeds its total
income tax due also for that year. Consequently, the refundable amount that is shown on its final adjustment return may
be credited, at its option, against its quarterly income tax liabilities for the next taxable year. Excess income taxes paid in
a year that could not be applied to taxes due the following year may be refunded the next year. Thus, if the excess
income taxes paid in a given taxable year have not been entirely used by a taxable corporation against its quarterly
income tax liabilities for the next taxable year, the unused amount of the excess may still be refunded, provided that the
claim for such a refund is made within two years after payment of the tax.

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, vs. COMMISSIONER OF INTERNAL REVENUE.
[G.R. No. 157264. January 31, 2008.]
Facts: Petitioner, the Philippine Long Distance Telephone Company (PLDT), claiming that it terminated in 1995 the
employment of several rank-and-file, supervisory, and executive employees due to redundancy; that in compliance with
labor law requirements, it paid those separated employees separation pay and other benefits; and that as employer and
withholding agent, it deducted from the separation pay withholding taxes in the total amount of P23,707,909.20 which it
remitted to the Bureau of Internal Revenue (BIR), filed on November 20, 1997 with the BIR a claim for tax credit or
refund of the P23,707,909.20, invoking Section 28 (b) (7) (B) of the 1977 National Internal Revenue Code.
As the BIR took no action on its claim, PLDT filed a claim for judicial refund before the Court of Tax Appeals (CTA).
CTA denied PLDT's claim on the ground that it "failed to sufficiently prove that the terminated employees received
separation pay and that taxes were withheld therefrom and remitted to the BIR.
Issue/Held: W/N PLDT is entitled to the claim for tax credit or refund on behalf of the separated employees?
-NO
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Ratio: Under Section 28 (b) (7) (B) of the National Internal Revenue Code of 1977 (now Section 32 (B) 6 (b) of the
National Internal Revenue Code of 1997), it is incumbent on PLDT as a claimant for refund on behalf of each of the
separated employees to show that each employee did reflect in his or its own return the income upon which any
creditable tax is required to be withheld at the source. Only when there is an excess of the amount of tax so withheld
over the tax due on the payee's return can a refund become possible. A taxpayer must thus do two things to be able to
successfully make a claim for the tax refund: (a) declare the income payments it received as part of its gross income and
(b) establish the fact of withholding. This PLDT failed to do because the CTA found that PLDT failed to establish that
the redundant employees actually received separation pay and that it withheld taxes therefrom and remitted the same to
the BIR

SILKAIR (SINGAPORE) PTE. LTD., vs. COMMISSIONER OF INTERNAL REVENUE. [G.R. No. 173594.
February 6, 2008.], also the ruling in SILKAIR (SINGAPORE) PTE. LTD., vs. COMMISSIONER OF INTERNAL
REVENUE[G.R. Nos. 171383 & 172379. November 14, 2008.]
Facts: Silkair filed with the Bureau of Internal Revenue (BIR) a written application for the refund of P4,567,450.79 excise
taxes it claimed to have paid on its purchases of jet fuel from Petron Corporation from January to June 2000.
As the BIR had not yet acted on the application as of December 26, 2001, Silkair filed a Petition for Review before the
CTA.
The Second Division of the CTA denied Silkair's petition on the ground that as the excise tax was imposed on Petron
Corporation as the manufacturer of petroleum products, any claim for refund should be filed by the latter; and where
the burden of tax is shifted to the purchaser, the amount passed on to it is no longer a tax but becomes an added cost of
the goods purchased. CTA en banc dismissed Silkairs petition for review.
Issue/Held: W/N Silkair is the proper party to seek the refund of the excise taxes- NO
Ratio: The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom
the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. 37 Section 130 (A) (2)
of the NIRC provides that "[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid by the
manufacturer or producer before removal of domestic products from place of production." Thus, Petron Corporation,
not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 135 of the NIRC of 1997 and
Article 4 (2) of the Air Transport Agreement between RP and Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for jet fuel
is not a tax but part of the price which Silkair had to pay as a purchaser.

CAGAYAN VALLEY DRUG CORPORATION, vs. COMMISSIONER OF INTERNAL REVENUE. [G.R. No.
151413. February 13, 2008.] also the ruling in COMMISSIONER OF INTERNAL REVENUE vs. CENTRAL
LUZON DRUG CORPORATION [G.R. No. 159610. June 12, 2008.]
Facts: Petitioner alleged that in 1995, it granted 20% sales discounts to qualified senior citizens on purchases of medicine
pursuant to Republic Act No. (RA) 7432 3 and its implementing rules and regulations.
In compliance with Revenue Regulation No. (RR) 2-94, petitioner treated the 20% sales discounts granted to qualified
senior citizens in 1995 as deductions from the gross sales in order to arrive at the net sales, instead of treating them as
tax credit as provided by Section 4 of RA 7432.
On December 27, 1996, however, petitioner filed with the Bureau of Internal Revenue (BIR) a claim for tax refund/tax
credit of the full amount of the 20% sales discount it granted to senior citizens for the year 1995, allegedly totaling to
PhP123,083 in accordance with Sec. 4 of RA 7432.
The BIR's inaction on petitioner's claim for refund/tax credit compelled petitioner to file on March 18, 1998 a petition
for review before the CTA
CTA rendered a Decision dismissing the petition for review for lack of merit. First, the CTA rejected the refund as it is
clear that RA 7432 only grants the 20% sales discounts extended to qualified senior citizens as tax credit and not as tax
refund. Second, in rejecting the tax credit, the CTA reasoned that while petitioner may be qualified for a tax credit, it
cannot be so extended to petitioner on account of its net loss in 1995.
Issues/ Held:
W/N petitioner can claim the sales discounts as tax credit- NO, the claim must be for a tax credit
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W/N petitioner can claim the sales discounts as tax refund even if it suffered a net loss for the taxable year- YES
Ratio: The appellate tax court correctly ruled that the 20% sales discounts petitioner granted to qualified senior citizens
should be deducted from petitioner's income tax due and not from petitioner's gross sales as erroneously provided in RR
2-94. However, the CTA erred in denying the tax credit to petitioner on the ground that petitioner had suffered net loss
in 1995, and ruling that the tax credit is unavailing.
The fact that petitioner suffered a net loss in 1995 will not make the tax credit due to petitioner unavailable. This is the
core issue resolved in Central Luzon (G.R. No. 159647, April 15, 2005, 456 SCRA 414), where we ruled that the net loss
for a taxable year does not bar the grant of the tax credit to a taxpayer pursuant to RA 7432 and that prior tax payments
are not required for such grant.It is true that petitioner did not pay any tax in 1995 since it suffered a net loss for that
taxable year. This fact, however, without more, does not preclude petitioner from availing of its statutory right to a tax
credit for the 20% sales discounts it granted to qualified senior citizens. The law then applicable on this point is clear and
without any qualification.

ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION, vs. COMMISSIONER OF
INTERNAL REVENUE. [G.R. No. 159490. February 18, 2008.]
Facts: For the first quarter of 1993, Atlas' export sales amounted to PhP642,685,032.24. Its proceeds were received in
acceptable foreign currency and inwardly remitted in accordance with Central Bank regulations. For the same period,
Atlas paid PhP7,907,662.53 for input taxes, as follows:
Local PhP7,117,222.53
Importation 790,440.00

Total PhP7,907,662.53
Thereafter, Atlas filed a VAT return for the first quarter of 1993 with the Bureau of Internal Revenue (BIR) and also
filed an amended VAT return.
Atlas applied with the BIR for the issuance of a tax credit certificate or refund under Section 106 (b) of the Tax Code.
The certificate would represent the VAT it paid for the first quarter of 1993 in the amount of PhP7,907,662.53, which
corresponded to the input taxes not applied against any output VAT.
Atlas then filed a petition for review with the CTA. In denying Atlas' claim for tax credit or refund, the CTA held that
Atlas failed to present sufficient evidence to warrant the grant of tax credit or refund for the alleged input taxes paid by
Atlas. Relying on Revenue Regulation No. (RR) 3-88 which was issued to implement the then VAT law and list the
documents to be submitted in actions for refunds or tax credits of input taxes in export sales, it found that the
documents submitted by Atlas did not comply with said regulation. It pointed out that Atlas failed to submit
photocopies of export documents, invoices, or receipts evidencing the sale of goods and others. Moreover, the
Certification by Atlas' bank, Hongkong Shanghai Banking Corporation, did not indicate any conversion rate for US
dollars to pesos. Thus, the CTA could not ascertain the veracity of the contents indicated in Atlas' VAT return as export
sales and creditable or refundable input VAT.
Issue/Held: W/N Atlas submitted sufficient evidence in its claim for Input VAT- NO
Ratio: The summary presented by Atlas does not replace the pertinent invoices, receipts, and export sales documents as
competent evidence to prove the fact of refundable or creditable input VAT. Indeed, the summary presented with the
certification by an independent Certified Public Accountant (CPA) and the testimony of Atlas' Accounting and Finance
Manager are merely corroborative of the actual input VAT it paid and the actual export sales. Otherwise, the pertinent
invoices, receipts, and export sales documents are the best and competent pieces of evidence required to substantiate
Atlas' claim for tax credit or refund which is merely corroborated by the summary duly certified by a CPA and the
testimony of Atlas' employee on the export sales. And when these pertinent documents are not presented, these could
not be corroborated as is true in the instant case.

COMMISSIONER OF INTERNAL REVENUE, vs. PERF REALTY CORPORATION. [G.R. No. 163345. July 4,
2008.]
Facts: After deducting creditable withholding taxes in the total amount of P3,531,125.00 from its total income tax due of
P2,250,621.00, PERF showed in its 1997 ITR an overpayment of income taxes in the amount of P1,280,504.00.PERF
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filed an administrative claim with the appellate division of the BIR for refund of overpaid income taxes in the amount of
P1,280,504.00.Due to the inaction of the BIR, PERF filed a petition for review with the Court of Tax Appeals (CTA)
seeking for the refund of the overpaid income taxes in the amount of P1,280,504.00. CTA denied the petition of PERF
on the ground of insufficiency of evidence. The CTA noted that PERF did not indicate in its 1997 ITR the option to
either claim the excess income tax as a refund or tax credit pursuant to Section 69 2 (now 76) of the National Internal
Revenue Code (NIRC).
Further, the CTA likewise found that PERF failed to present in evidence its 1998 annual ITR. It held that the failure of
PERF to signify its option on whether to claim for refund or opt for an automatic tax credit and to present its 1998 ITR
left the Court with no way to determine with certainty whether or not PERF has applied or credited the refundable
amount sought for in its administrative and judicial claims for refund.
Issue/ Held: W/N PERFs failure to indicate choice of refund or credit will bar the taxpayers request- NO
Ratio: Section 76 offers two options: (1) filing for tax refund and (2) availing of tax credit. The two options are
alternative and the choice of one precludes the other. However, in Philam Asset Management, Inc. v. Commissioner of
Internal Revenue, the Court ruled that failure to indicate a choice, however, will not bar a valid request for a refund,
should this option be chosen by the taxpayer later on. The requirement is only for the purpose of easing tax
administration particularly the self-assessment and collection aspects.

COMMISSIONER OF INTERNAL REVENUE, vs. FORTUNE TOBACCO CORPORATION [G.R. Nos. 167274-
75. July 21, 2008.].
Facts: After much wrangling in the Court of Tax Appeals (CTA) and the Court of Appeals, Fortune Tobacco
Corporation (Fortune Tobacco) was granted a tax refund or tax credit representing specific taxes erroneously collected
from its tobacco products. The tax refund is being re-claimed by the Commissioner of Internal Revenue (Commissioner)
in this petition. Section 145 of the Tax Code mandates a 12% increase effective on 1 January 2000 based on the taxes
indicated under paragraph C, sub-paragraph (1)-(4). However, Revenue Regulation No. 17-99 went further and added
that "the new specific tax rate for any existing brand of cigars, cigarettes packed by machine, distilled spirits, wines and
fermented liquor shall not be lower than the excise tax that is actually being paid prior to January 1, 2000". Fortune now
assails the validity of said Revenue Regulation.
Issue/ Held: W/N Revenue Regulation No. 17-99 is valid- NO
Ratio: Parenthetically, Section 145 states that during the transition period, i.e., within the next three (3) years from the
effectivity of the Tax Code, the excise tax from any brand of cigarettes shall not be lower than the tax due from each
brand on 1 October 1996. This qualification, however, is conspicuously absent as regards the 12% increase which is to
be applied on cigars and cigarettes packed by machine, among others, effective on 1 January 2000. Clearly and
unmistakably, Section 145 mandates a new rate of excise tax for cigarettes packed by machine due to the 12% increase
effective on 1 January 2000 without regard to whether the revenue collection starting from this period may turn out to
be lower than that collected prior to this date.
By adding the qualification that the tax due after the 12% increase becomes effective shall not be lower than the tax
actually paid prior to 1 January 2000, Revenue Regulation No. 17-99 effectively imposes a tax which is the higher
amount between the ad valorem tax being paid at the end of the three (3)-year transition period and the specific tax
under paragraph C, sub-paragraph (1)-(4), as increased by 12% a situation not supported by the plain wording of
Section 145 of the Tax Code.
Tax refunds or tax credits are not founded principally on legislative grace but on the legal principle which underlies all
quasi-contracts abhorring a person's unjust enrichment at the expense of another. The dynamic of erroneous payment of
tax fits to a tee the prototypic quasi-contract, solutio indebiti, which covers not only mistake in fact but also mistake in
law. The Government is not exempt from the application of solutio indebiti. Indeed, the taxpayer expects fair dealing
from the Government, and the latter has the duty to refund without any unreasonable delay what it has erroneously
collected. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, it must hold itself
against the same standard in refunding excess (or erroneous) payments of such taxes. It should not unjustly enrich itself
at the expense of taxpayers. And so, given its essence, a claim for tax refund necessitates only preponderance of evidence
for its approbation like in any other ordinary civil case.

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DEDUCTIONS FROM GROSS INCOME

PHILEX MINING CORPORATION, vs. COMMISSIONER OF INTERNAL REVENUE. [G.R. No. 148187. April
16, 2008.]
Facts: Philex Mining Corporation (Philex Mining), entered into an agreement with Baguio Gold Mining Company
("Baguio Gold") for the former to manage and operate the latter's mining claim. The parties' agreement was
denominated as "Power of Attorney". The mine suffered continuing losses over the years which resulted to petitioner's
withdrawal as manager of the mine and in the eventual cessation of mine operations. the parties executed an
"Amendment to Compromise with Dation in Payment" where the parties determined that Baguio Gold's indebtedness
to petitioner actually amounted to P259,137,245.00, which sum included liabilities of Baguio Gold to other creditors that
petitioner had assumed as guarantor. These liabilities pertained to long-term loans amounting to US$11,000,000.00
contracted by Baguio Gold from the Bank of America NT & SA and Citibank N.A. This time, Baguio Gold undertook
to pay petitioner in two segments by first assigning its tangible assets for P127,838,051.00 and then transferring its
equitable title in its Philodrill assets for P16,302,426.00. The parties then ascertained that Baguio Gold had a remaining
outstanding indebtedness to petitioner in the amount of P114,996,768.00. In its 1982 annual income tax return,
petitioner deducted from its gross income the amount of P112,136,000.00 as "loss on settlement of receivables from
Baguio Gold against reserves and allowances." However, the Bureau of Internal Revenue (BIR) disallowed the amount
as deduction for bad debt and assessed petitioner a deficiency income tax. The petition for review filed in the CTA was
also denied
Issue/ Held: W/N the amounts in question can be considered as bad debts that can be deducted from gross income- NO.
Ratio: All told, the lower courts did not err in treating petitioner's advances as investments in a partnership known as the
Sto. Nio mine. The advances were not "debts" of Baguio Gold to petitioner inasmuch as the latter was under no
unconditional obligation to return the same to the former under the "Power of Attorney". In sum cannot claim the
advances as a bad debt deduction from its gross income. Deductions for income tax purposes partake of the nature of
tax exemptions and are strictly construed against the taxpayer, who must prove by convincing evidence that he is entitled
to the deduction claimed. In this case failed to substantiate its assertion that the advances were subsisting debts of
Baguio Gold that could be deducted from its gross income. Consequently, it could not claim the advances as a valid bad
debt deduction.

ESTATE TAX

RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial Administrator of the Estate of the deceased JOSE P.
FERNANDEZ, vs. COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE [G.R. No.
140944. April 30, 2008.]
Facts: Jose P. Fernandez (Jose) died. Assistant Commissioner for Collection of the BIR, Themistocles Montalban, issued
Estate Tax Assessment Notice, demanding the payment of P66,973,985.40 as deficiency estate tax. CTA did not fully
adopt the assessment made by the BIR and it came up with its own computation of the deficiency estate tax, which is in
a reduced amount. CA affirmed the CTA's ruling. The petitioner claims that in as much as the valid claims of creditors
against the Estate are in excess of the gross estate, no estate tax was due.
Issue/Held: W/N the actual claims of the aforementioned creditors may be fully allowed as deductions from the gross
estate of Jose despite the fact that the said claims were reduced or condoned through compromise agreements entered
into by the Estate with its creditors- YES
Ratio: "Claims against the estate", as allowable deductions from the gross estate under Section 79 of the Tax Code, are
basically a reproduction of the deductions allowed under Section 89 (a) (1) (C) and (E) of Commonwealth Act No. 466
(CA 466), otherwise known as the National Internal Revenue Code of 1939, and which was the first codification of
Philippine tax laws. Philippine tax laws were, in turn, based on the federal tax laws of the United States. Thus, pursuant
to established rules of statutory construction, the decisions of American courts construing the federal tax code are
entitled to great weight in the interpretation of our own tax lawsWe express our agreement with the date-of-death
valuation rule, made pursuant to the ruling of the U.S. Supreme Court in Ithaca Trust Co. v. United States. First. There
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is no law, nor do we discern any legislative intent in our tax laws, which disregard the date-of-death valuation principle
and particularly provides that post-death developments must be considered in determining the net value of the estate. It
bears emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond what the statute expressly
and clearly imports, tax statutes being construed strictissimi juris against the government. Any doubt on whether a
person, article or activity is taxable is generally resolved against taxation. Second. Such construction finds relevance and
consistency in our Rules on Special Proceedings wherein the term "claims" required to be presented against a decedent's
estate is generally construed to mean debts or demands of a pecuniary nature which could have been enforced against
the deceased in his lifetime, or liability contracted by the deceased before his death. Therefore, the claims existing at the
time of death are significant to, and should be made the basis of, the determination of allowable deductions.

EXCISE TAX

BRITISH AMERICAN TOBACCO, vs. JOSE ISIDRO N. CAMACHO, in his capacity as Secretary of the Department
of Finance and GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of the Bureau of Internal Revenues.
[G.R. No. 163583. August 20, 2008.]
Facts: To implement RA 8240, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 1-97, 2 which
classified the existing brands of cigarettes as those duly registered or active brands prior to January 1, 1997. New brands,
or those registered after January 1, 1997, shall be initially assessed at their suggested retail price until such time that the
appropriate survey to determine their current net retail price is conducted. In June 2001, petitioner British American
Tobacco introduced into the market Lucky Strike Filter, Lucky Strike Lights and Lucky Strike Menthol Lights cigarettes,
with a suggested retail price of P9.90 per pack. 3 Pursuant to Sec. 145 (c) quoted above, the Lucky Strike brands were
initially assessed the excise tax at P8.96 per pack.
On February 17, 2003, Revenue Regulations No. 9-2003, amended Revenue Regulations No. 1-97 by providing, among
others, a periodic review every two years or earlier of the current net retail price of new brands and variants thereof for
the purpose of establishing and updating their tax classificationPursuant thereto, Revenue Memorandum Order No. 6-
2003 5 was issued on March 11, 2003, prescribing the guidelines and procedures in establishing current net retail prices
of new brands of cigarettes and alcohol products.Subsequently, Revenue Regulations No. 22-2003 6 was issued on
August 8, 2003 to implement the revised tax classification of certain new brands introduced in the market after January
1, 1997, based on the survey of their current net retail price. The survey revealed that Lucky Strike Filter, Lucky Strike
Lights, and Lucky Strike Menthol Lights, are sold at the current net retail price of P22.54, P22.61 and P21.23, per pack,
respectively. 7 Respondent Commissioner of the Bureau of Internal Revenue thus recommended the applicable tax rate
of P13.44 per pack inasmuch as Lucky Strike's average net retail price is above P10.00 per pack. Thus, petitioner filed
before the Regional Trial Court (RTC) of Makati, Branch 61, a petition for injunction with prayer for the issuance of a
temporary restraining order (TRO) and/or writ of preliminary injunction, docketed as Civil Case No. 03-1032. Said
petition sought to enjoin the implementation of Section 145 of the NIRC, Revenue Regulations Nos. 1-97, 9-2003, 22-
2003 and Revenue Memorandum Order No. 6-2003 on the ground that they discriminate against new brands of
cigarettes, in violation of the equal protection and uniformity provisions of the Constitution. The trial court rendered a
decision upholding the constitutionality of Section 145 of the NIRC, Revenue Regulations Nos. 1-97, 9-2003, 22-2003
and Revenue Memorandum Order No. 6-2003
Issue/ Held: W/N the classification freeze provision violates the equal protection and uniformity of taxation clauses of
the Constitution.- NO
Ratio: To our mind, the classification freeze provision (NIRC Sec. 145)was in the main the result of Congress's earnest
efforts to improve the efficiency and effectivity of the tax administration over sin products while trying to balance the
same with other state interests. In particular, the questioned provision addressed Congress's administrative concerns
regarding delegating too much authority to the DOF and BIR as this will open the tax system to potential areas for
abuse and corruption. Congress may have reasonably conceived that a tax system which would give the least amount of
discretion to the tax implementers would address the problems of tax avoidance and tax evasion.
It is clear that the questioned portions of Revenue Regulations No. 1-97, as amended by Section 2 of Revenue
Regulations 9-2003, and Revenue Memorandum Order No. 6-2003 unjustifiably emasculate the operation of Section 145
of the NIRC because they authorize the Commissioner of Internal Revenue to update the tax classification of new
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brands every two years or earlier subject only to its issuance of the appropriate Revenue Regulations, when nowhere in
Section 145 is such authority granted to the Bureau. Unless expressly granted to the BIR, the power to reclassify
cigarette brands remains a prerogative of the legislature which cannot be usurped by the former.

LOCAL TAXATION

PETRON CORPORATION, vs. MAYOR TOBIAS M. TIANGCO, and MUNICIPAL TREASURER MANUEL T.
ENRIQUEZ of the MUNICIPALITY OF NAVOTAS, METRO MANILAs. [G.R. No. 158881. April 16, 2008.]
Facts: Petron maintains a depot or bulk plant at the Navotas Fishport Complex in Navotas. Petron received a letter from
the office of Navotas Mayor, respondent Toby Tiangco, wherein the corporation was assessed taxes "relative to the
figures covering sale of diesel declared by your Navotas Terminal from 1997 to 2001." Petron duly filed with Navotas a
letter-protest to the notice of assessment. The letter-protest was denied by the Navotas Municipal Treasurer,
This was followed by a letter from the Mayor dated 15 May 2002, captioned "Final Demand to Pay", requiring that
Petron pay the assessed amount within five (5) days from receipt thereof, with a threat of closure of Petron's operations
within Navotas should there be no payment. 5 Petron, through counsel, replied to the Mayor by another letter posing
objections to the threat of closure. The Mayor did not respond to this last letter. Thus, on 20 May 2002, Petron filed
with the Malabon RTC a Complaint for Cancellation of Assessment for Deficiency Taxes. Malabon RTC rendered its
Decision dismissing Petron's complaint and ordering the payment of the assessed amount. Eleven days later, Petron
received a Closure Order from the Mayor, directing Petron to cease and desist from operating the bulk plant. Petron
sought a TRO from the Malabon RTC, but this was denied.
Issue/Held: W/N a local government unit is empowered under the Local Government Code (the LGC) to impose
business taxes on persons or entities engaged in the sale of petroleum product- NO
Ratio: We can concede that a tax on a business is distinct from a tax on the article itself, or for that matter, that a
business tax is distinct from an excise tax. However, such distinction is immaterial insofar as the latter part of Section
133 (h) of the Local Government Code is concerned, for the phrase "taxes, fees or charges on petroleum products" does
not qualify the kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the provision. It
would have been a different matter had Congress, in crafting Section 133 (h), barred "excise taxes" or "direct taxes", or
any category of taxes only, for then it would be understood that only such specified taxes on petroleum products could
not be imposed under the prohibition. The absence of such a qualification leads to the conclusion that all sorts of taxes
on petroleum products, including business taxes, are prohibited by Section 133 (h). Where the law does not distinguish,
we should not distinguish.

NATIONAL HOUSING AUTHORITY, vs. ILOILO CITY, as represented by its Mayor, HON. JERRY TREAS,
ILOILO CITY TREASURER CATHERINE TINGSON, and ROSALINA FRANCISCO. [G.R. No. 172267. August
20, 2008.]
Facts: The National Housing Authority (NHA) assails the Decision 1 of the Court of Appeals dated 22 March 2006
which declared it not exempt from posting a deposit as a jurisdictional requisite before the court can take cognizance of
cases filed by it questioning the validity of a sale of real property at public auction.
Issue: W/N NHA is required to post a bond even with its being a tax-exempt entity- NO
Held: Clearly, the deposit precondition is an ingenious legal device to guarantee the satisfaction of the tax delinquency,
with the local government unit keeping the payment on the bid price no matter the final outcome of the suit to nullify
the tax sale. Thus, the requirement is not applicable if the plaintiff is the government or any of its agencies as it is
presumed to be solvent, and more so where the tax exempt status of such plaintiff as basis of the suit is acknowledged.
In this case, NHA is indisputably a tax-exempt entity whose exemption covers real property taxes and so its property
should not even be subjected to any delinquency sale. Perforce, the bond mandated in Section 267, whose purpose it is
to ensure the collection of the tax delinquency should not be required of NHA before it can bring suit assailing the
validity of the auction sale.

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SMART COMMUNICATIONS, INC., vs. THE CITY OF DAVAO, represented herein by its Mayor HON.
RODRIGO R. DUTERTE, and the SANGGUNIANG PANLUNGSOD OF DAVAO CITY. [G.R. No. 155491.
September 16, 2008.]
Facts: Smart filed a special civil action for declaratory relief 3 under Rule 63 of the Rules of Court, for the ascertainment
of its rights and obligations under the Tax Code of the City of Davao. Smart contends that its telecenter in Davao City is
exempt from payment of franchise tax to the City, on the following grounds: (a) the issuance of its franchise under
Republic Act (R.A.) No. 7294 subsequent to R.A. No. 7160 shows the clear legislative intent to exempt it from the
provisions of R.A. 7160; (b) Section 137 of R.A. No. 7160 can only apply to exemptions already existing at the time of
its effectivity and not to future exemptions; (c) the power of the City of Davao to impose a franchise tax is subject to
statutory limitations such as the "in lieu of all taxes" clause found in Section 9 of R.A. No. 7294; and (d) the imposition
of franchise tax by the City of Davao would amount to a violation of the constitutional provision against impairment of
contracts. RTC denied the petition.
Issue/ Held: W/N Smart is exempt from franchise and local taxes- NO
Ratio: We pay heed that R.A. No. 7294 is not definite in granting exemption to Smart from local taxation. Section 9 of
R.A. No. 7294 imposes on Smart a franchise tax equivalent to three percent (3%) of all gross receipts of the business
transacted under the franchise and the said percentage shall be in lieu of all taxes on the franchise or earnings thereof.
R.A. No 7294 does not expressly provide what kind of taxes Smart is exempted from. It is not clear whether the "in lieu
of all taxes" provision in the franchise of Smart would include exemption from local or national taxation. What is clear is
that Smart shall pay franchise tax equivalent to three percent (3%) of all gross receipts of the business transacted under
its franchise. But whether the franchise tax exemption would include exemption from exactions by both the local and
the national government is not unequivocal In this case, the doubt must be resolved in favor of the City of Davao. The
"in lieu of all taxes" clause applies only to national internal revenue taxes and not to local taxes.

REAL PROPERTY TAXATION

EMERLINDA S. TALENTO, in her capacity as the Provincial Treasurer of the Province of Bataan, vs. HON.
REMIGIO M. ESCALADA, JR., Presiding Judge of the Regional Trial Court of Bataan, Branch 3, and PETRON
CORPORATION [G.R. No. 180884. June 27, 2008.]
Facts: Petron received from the Provincial Assessor's Office of Bataan a notice of revised assessment over its
machineries and pieces of equipment in Lamao, Limay, Bataan. Petron filed a petition with the LBAA. Petron received
from petitioner a final notice of delinquent real property tax with a warning that the subject properties would be levied
and auctioned should Petron fail to settle the revised assessment due.
Consequently, Petron sent a letter to petitioner stating that in view of the pendency of its appeal with the LBAA, any
action by the Treasurer's Office on the subject properties would be premature. However, petitioner replied that only
Petron's payment under protest shall bar the collection of the realty taxes due, pursuant to Sections 231 and 252 of the
LGC. On even date, Petron filed with the Regional Trial Court of Bataan the instant case (docketed as Civil Case No.
8801) for prohibition with prayer for the issuance of a temporary restraining order (TRO) and preliminary injunction.
The trial court issued the assailed Order granting Petron's petition for issuance of writ of preliminary injunction, subject
to Petron's posting of a P444,967,503.52 bond in addition to its previously posted surety bond of P1,286,057,899.54, to
complete the total amount equivalent to the revised assessment of P1,731,025,403.06. The trial court held that in
scheduling the sale of the properties despite the pendency of Petron's appeal and posting of the surety bond with the
LBAA, petitioner deprived Petron of the right to appeal.
Issue/Held: W/N the trial court properly issued the injunction order- YES
Ratio: We are not unaware of the doctrine that taxes are the lifeblood of the government, without which it cannot
properly perform its functions; and that appeal shall not suspend the collection of realty taxes. However, there is an
exception to the foregoing rule, i.e., where the taxpayer has shown a clear and unmistakable right to refuse or to hold in
abeyance the payment of taxes. In the instant case, we note that respondent contested the revised assessment on the
following grounds: that the subject assessment pertained to properties that have been previously declared; that the
assessment covered periods of more than 10 years which is not allowed under the LGC; that the fair market value or
replacement cost used by petitioner included items which should be properly excluded; that prompt payment of
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discounts were not considered in determining the fair market value; and that the subject assessment should take effect a
year after or on January 1, 2008. To our mind, the resolution of these issues would have a direct bearing on the
assessment made by petitioner. Hence, it is necessary that the issues must first be passed upon before the properties of
respondent is sold in public auction.

DOCUMENTARY STAMP TAX

PHILIPPINE HEALTH CARE PROVIDERS, INC., vs. COMMISSIONER OF INTERNAL REVENUE. [G.R. No.
167330. June 12, 2008.]
Facts: Commissioner of Internal Revenue sent petitioner a formal demand letter and the corresponding assessment
notices demanding the payment of deficiency taxes, including surcharges and interest, for the taxable years 1996 and
1997 in the total amount of P224,702,641.18. Petitioner protested the assessment in a letter dated February 23, 2000. As
respondent did not act on the protest, petitioner filed a petition for review in the Court of Tax Appeals (CTA) seeking
the cancellation of the deficiency VAT and DST assessments. CTA partially granted the petition. Upon petition for
review, CA ruled in favor of respondent. Petitioner essentially argues that its health care agreement is not a contract of
insurance but a contract for the provision on a prepaid basis of medical services, including medical check-up, that are
not based on loss or damage. Petitioner also insists that it is not engaged in the insurance business. It is a health
maintenance organization regulated by the Department of Health, not an insurance company under the jurisdiction of
the Insurance Commission. For these reasons, petitioner asserts that the health care agreement is not subject to DST.
Issue/Held: W/N the health care agreements are subject to Documentary Stamp Tax- YES
Ratio: The DST is levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or
termination of specific legal relationships through the execution of specific instruments. 12 It is an excise upon the
privilege, opportunity, or facility offered at exchanges for the transaction of the business. 13 In particular, the DST
under Section 185 of the 1997 Tax Code is imposed on the privilege of making or renewing any policy of insurance
(except life, marine, inland and fire insurance), bond or obligation in the nature of indemnity for loss, damage, or
liability.
Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue Cross Healthcare,
Inc. v. Olivares, the Supreme Court ruled that a health care agreement is in the nature of a non-life insurance policy.
Contrary to petitioner's claim, its health care agreement is not a contract for the provision of medical services. Petitioner
does not actually provide medical or hospital services but merely arranges for the same and pays for them up to the
stipulated maximum amount of coverage. It is also incorrect to say that the health care agreement is not based on loss or
damage because, under the said agreement assumes the liability and indemnifies its member for hospital, medical and
related expenses (such as professional fees of physicians). The term "loss or damage" is broad enough to cover the
monetary expense or liability a member will incur in case of illness or injury.

FIRST PLANTERS PAWNSHOP, INC., vs. COMMISSIONER OF INTERNAL REVENUE. [G.R. No. 174134.
July 30, 2008.], also the ruling in ANTAM PAWNSHOP CORPORATION, vs. COMMISSIONER OF INTERNAL
REVENUE. [G.R. No. 167962. September 19, 2008.]
Facts: First Planters Pawnshop, Inc. (petitioner) contests the deficiency value-added and documentary stamp taxes
imposed upon it by the Bureau of Internal Revenue (BIR) for the year 2000. The core of petitioner's argument is that it
is not a lending investor within the purview of Section 108 (A) of the National Internal Revenue Code (NIRC), as
amended, and therefore not subject to value-added tax (VAT). Petitioner also contends that a pawn ticket is not subject
to documentary stamp tax (DST) because it is not proof of the pledge transaction, and even assuming that it is so, still, it
is not subject to tax since a documentary stamp tax is levied on the document issued and not on the transaction.
Issues/ Held:
W/N FPPI (/Antam) is liable for VAT- NO
W/N FPPI (/Antam) is liable for DST- YES
Ratio:
Pawnshops are non-bank financial intermediaries that are not liable for VAT from the passing of RA 9238. Since
petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax years 1996 to 2002; however, with
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the levy, assessment and collection of VAT from non-bank financial intermediaries being specifically deferred by law,
then petitioner is not liable for VAT during these tax years. But with the full implementation of the VAT system on non-
bank financial intermediaries starting January 1, 2003 is liable for 10% VAT for said tax year. And beginning 2004 up to
the present, by virtue of R.A. No. 9238 is no longer liable for VAT but it is subject to percentage tax on gross receipts
from 0% to 5%, as the case may be.
Pawnshops are subject to Documentary Stamp Tax. The subject of DST is not limited to the document alone. Pledge,
which is an exercise of a privilege to transfer obligations, rights or properties incident thereto, is also subject to DST

VALUE ADDED TAX

PHILIPPINE HEALTH CARE PROVIDERS, INC., vs. COMMISSIONER OF INTERNAL REVENUE. [G.R. No.
167330. June 12, 2008.]
The DST is levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or
termination of specific legal relationships through the execution of specific instruments. 12 It is an excise upon the
privilege, opportunity, or facility offered at exchanges for the transaction of the business. 13 In particular, the DST
under Section 185 of the 1997 Tax Code is imposed on the privilege of making or renewing any policy of insurance
(except life, marine, inland and fire insurance), bond or obligation in the nature of indemnity for loss, damage, or
liability.
Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue Cross Healthcare,
Inc. v. Olivares, the Supreme Court ruled that a health care agreement is in the nature of a non-life insurance
policy.Contrary to petitioner's claim, its health care agreement is not a contract for the provision of medical services.
Petitioner does not actually provide medical or hospital services but merely arranges for the same 17 and pays for them
up to the stipulated maximum amount of coverage. It is also incorrect to say that the health care agreement is not based
on loss or damage because, under the said agreement assumes the liability and indemnifies its member for hospi tal,
medical and related expenses (such as professional fees of physicians). The term "loss or damage" is broad enough to
cover the monetary expense or liability a member will incur in case of illness or injury.

FIRST PLANTERS PAWNSHOP, INC., vs. COMMISSIONER OF INTERNAL REVENUE. [G.R. No. 174134.
July 30, 2008.]

Pawnshops are non-bank financial intermediaries that are not liable for Vat from the passing of RA 9238. Since
petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax years 1996 to 2002; however, with
the levy, assessment and collection of VAT from non-bank financial intermediaries being specifically deferred by law,
then petitioner is not liable for VAT during these tax years. But with the full implementation of the VAT system on non-
bank financial intermediaries starting January 1, 2003 is liable for 10% VAT for said tax year. And beginning 2004 up to
the present, by virtue of R.A. No. 9238 is no longer liable for VAT but it is subject to percentage tax on gross receipts
from 0% to 5%, as the case may be.
Pawnshops are subject to documentary Stamp Tax. The subject of DST is not limited to the document alone. Pledge,
which is an exercise of a privilege to transfer obligations, rights or properties incident thereto, is also subject to DST.
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TARIFF AND CUSTOMS CODE

CHEVRON PHILIPPINES, INC., vs. COMMISSIONER OF THE BUREAU OF CUSTOMS. [G.R. No. 178759.
August 11, 2008.]
Facts: The importations subject of this case arrived and were covered by eight bills of lading. Subsequently, the import
entry declarations (IEDs) were filed and 90% of the total customs duties were paid. The import entry and internal
revenue declarations (IEIRDs) of the shipments were thereafter filed. Petitioner received from the District Collector of
Customs of the Port of Batangas (District Collector) a demand letter requiring the immediate settlement of the amount
of P73,535,830 representing the difference between the 10% and 3% tariff rates on the shipments. In response,
petitioner wrote the District Collector to inform him of the pending request for the creation of a unified team with the
exclusive authority to investigate the matter. Furthermore, petitioner objected to the demand for payment of customs
duties using the 10% duty rate and reiterated its position that the 3% tariff rate should instead be applied. It likewise
raised the defense of prescription against the assessment pursuant to Section 1603 of the Tariff and Customs Code
(TCC). Thus, it prayed that the assessment for deficiency customs duties be cancelled and the notice of demand be
withdrawn. CTA First Division ruled that respondent was correct when he affirmed the findings of the IPD-CIIS on the
existence of fraud. Therefore, prescription was not applicable. Ironically, however, it also held that petitioner did not
abandon the shipments.
CTA en banc held that it was the filing of the IEIRDs that constituted entry under the TCC. Since these were filed
beyond the 30-day period, they were not seasonably "entered" in accordance with Section 1301 in relation to Section 205
of the TCC. Consequently, they were deemed abandoned under Sections 1801 and 1802 of the TCC
Issue/ Held: W/N it is the IEIRD which constitutes entry- YES
Ratio: The term "entry" in customs law has a triple meaning. It means (1) the documents filed at the customs house; (2)
the submission and acceptance of the documents and (3) the procedure of passing goods through the customs house.
Clearly, the operative act that constitutes "entry" of the imported articles at the port of entry is the filing and acceptance
of the "specified entry form" together with the other documents required by law and regulations.
The filing of the IEIRDs has several important purposes: to ascertain the value of the imported articles, collect the
correct and final amount of customs duties and avoid smuggling of goods into the country. Petitioner's interpretation
would have an absurd implication: the 30-day period applies only to the IED while no deadline is specified for the
submission of the IEIRD. Strong issues of public policy militate against petitioner's interpretation. It is the IEIRD
which accompanies the final payment of duties and taxes. These duties and taxes must be paid in full before the BOC
can allow the release of the imported articles from its custody.

EL GRECO SHIP MANNING AND MANAGEMENT CORPORATION, vs. COMMISSIONER OF CUSTOMS.
[G.R. No. 177188. December 4, 2008.]
Facts: The vessel M/V Criston docked at the Port of Tabaco, Albay, carrying a shipment of 35,000 bags of imported rice,
consigned to Antonio Chua, Jr. (Chua) and Carlos Carillo (Carillo), payable upon its delivery to Albay. Glucer Shipping
Company, Inc. (Glucer Shipping) is the operator of M/V Criston. Upon the directive of then Commissioner Titus
Villanueva of the Bureau of Customs (BOC), a Warrant of Seizure and Detention was issued by the Legaspi District
Collectorfor the 35,000 bags of imported rice shipped by M/V Criston, on the ground that it left the Port of Manila
without the necessary clearance from the Philippine Coast Guard. Asubsequent Warrant of Seizure and Detention, was
issued particularly for the said vessel. The BOC District Collector of the Port of Legaspi thereafter commenced
proceedings for the forfeiture of M/V Criston and its. Chua and Carillo filed before the Regional Trial Court (RTC) of
Tabaco, Albay, a Petition for Prohibition with Prayer for the Issuance of Preliminary Injunction and Temporary
Restraining Order (TRO) assailing the authority of the Legaspi District Collectors to issue the Warrants of Seizure and
Detention and praying for a permanent injunction against the implementation of the said Warrants.In the meantime,
while M/V Criston was berthing at the Port of Tabaco under the custody of the BOC, the Province of Albay was hit by
typhoon "Manang". In order to avert any damage which could be caused by the typhoon, the vessel was allowed to
proceed to another anchorage area to temporarily seek shelter. After typhoon "Manang" had passed through Albay
province, M/V Criston, however, failed to return to the Port of Tabaco and was nowhere to be found.Manila District
Collector issued an Order quashing the Warrant of Seizure and Detention it issued against M/V Neptune Breeze in
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Seizure Identification No. 2001-208 for lack of probable cause. The BOC Commissioner, CTA Second Division and
CTA en banc all ruled that M/V Neptune Breeze is one and the same as M/V Criston which had been detained at the
Port of Tabaco, Albay, for carrying smuggled imported rice and had fled the custody of the customs authorities to evade
its liabilities and ardered its forfeiture.
Issues/ Held:
W/N M/V Neptune Breeze is one and the same as M/V Criston- YES
W/N the order of forfeiture of the M/V Neptune Breeze is valid- YES
Ratio: The crime laboratory report of the PNP shows that the serial numbers of the engines and generators of the two
vessels are identical.
There is no question that M/V Neptune Breeze, then known as M/V Criston, was carrying 35,000 bags of imported rice
without the necessary papers showing that they were entered lawfully through a Philippine port after the payment of
appropriate taxes and duties thereon. This gives rise to the presumption that such importation was illegal. Consequently,
the rice subject of the importation, as well as the vessel M/V Neptune Breeze used in importation are subject to
forfeiture. The burden is on El Greco, as the owner of M/V Neptune Breeze, to show that its conveyance of the rice
was actually legal.

PILIPINAS SHELL PETROLEUM CORPORATION, vs. REPUBLIC OF THE PHILIPPINES, represented by the
BUREAU OF CUSTOMS. [G.R. No. 161953. March 6, 2008.]
Facts: The present controversy sprang from the cancellation of tax debit memos (TDMs) and the corresponding tax
credit certificates (TCCs) assigned to petitioner Pilipinas Shell Petroleum Corporation (Shell) by various entities. Some of
these TCCs were subsequently accepted as payment by the Bureau of Customs (BOC) for petitioner's taxes and import
duties in 1997 and 1998. Secretary Edgardo B. Espiritu of the Department of Finance (DOF) informed petitioner that its
TDMs and TCCs were fraudulently issued and transferred. Petitioner assailed the action of the DOF. Thus, petitioner
filed a formal protest. However, the BOC did not act on this protest. Consequently, petitioner filed a petition for review
questioning the legality of the cancellation of the TCCs in the Court of Tax Appeals Meanwhile, respondent filed a
complaint for collection 16 in the Regional Trial Court (RTC) of Manila. Petitioner essentially contends that the RTC
had no jurisdiction over the collection case inasmuch as the CTA had not yet decided the petition for review. Therefore,
the RTC should have dismissed the collection case and transferred it to the CTA where it should be treated as a
counterclaim (in the petition for review).
Issue/Held: W/N it is proper for the BOC to file the collection case in the RTC - YES
Ratio: Import duties constitute a personal debt of the importer that must be paid in full. The importer's liability therefore
constitutes a lien on the article which the government may choose to enforce while the imported articles are either in its
custody or under its control. When respondent released petitioner's goods, its (respondent's) lien over the imported
goods was extinguished. Consequently could only enforce the payment of petitioner's import duties in full by filing a
case for collection against petitioner