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G.R. No.

183868 November 22, 2010 COMMISSIONER OF CUSTOMS vs MARINA SALES INC

In this petition for review on certiorari[1] under Rule 45, the Commissioner of Customs (Commissioner), represented
by the Office of the Solicitor General (OSG), assails the April 11, 2008 Resolution[2] of the Court of Tax Appeals En
Banc (CTA-En Banc), in C.T.A. E.B. No. 333, dismissing his petition for review for his failure to file a motion for
reconsideration before the Court of Tax Appeals Division (CTA-Division).
Respondent Marina Sales, Inc. (Marina) is engaged in the manufacture of Sunquick juice concentrates. It was
appointed by CO-RO Food A/S of Denmark, maker of Sunquick Juice Concentrates, to be its manufacturing arm in
the Philippines. As such, Marina usually imports raw materials into the country for the purpose. In the past, the
Bureau of Customs (BOC) assessed said type of importations under Tariff Heading H.S. 2106.90 10 with a 1%
import duty rate.[3]

On March 6, 2003, Marinas importation, labeled as Import Entry No. C-33771-03, arrived at the Manila
International Container Port (MICP) on board the vessel APL Iris V-111.Said Import Entry No. C-33771-03
consisted of a 1 x 20 container STC with a total of 80 drums: (a) 56 drums of 225 kilograms Sunquick Orange
Concentrate; and (b) 24 drums of 225 kilograms of Sunquick Lemon Concentrate. [4] It was supported by the following
documents: (a) Bill of Lading No. APLU 800452452 dated February 2, 2003;[5] and (b) CO-RO Food A/S of Denmark
Invoice No. 1619409 dated January 27, 2003.[6]

Marina computed and paid the duties under Tariff Harmonized System Heading H.S. 2106.90 10 at 1% import duty
rate.

This time, however, the BOC examiners contested the tariff classification of Marinas Import Entry No. C-33771-03
under Tariff Heading H.S. 2106.90 10. The BOC examiners recommended to the Collector of Customs, acting as
Chairman of the Valuation and Classification Review Committee (VCRC) of the BOC, to reclassify Marinas
importation as Tariff Heading H.S. 2106.90 50 (covering composite concentrates for simple dilution with water to
make beverages) with a corresponding 7% import duty rate.
The withheld importation being necessary to its business operations, Marina requested the District Collector of the
BOC to release Import Entry No. C-33771-03 under its Tentative Release System. [7] Marina undertook to pay the
reclassified rate of duty should it be finally determined that such reclassification was correct. The District Collector
granted the request.

On April 15, 2003, the VCRC directed Marina to appear in a deliberation on May 15, 2003 and to explain why its
shipment under Import Entry No. C-33771-03 should not be classified under Tariff Heading H.S. 2106.90 50 with
import duty rate of 7%.[8]

On May 15, 2003, Marina, through its Product Manager Rowena T. Solidum and Customs Broker Juvenal A.
Llaneza, attended the VCRC deliberation and submitted its explanation, [9] dated May 13, 2003, along with samples
of the importation under Import Entry No. C-33771-03.
On May 21, 2003, another importation of Marina arrived at the MICP designated as Import Entry No. C-67560-
03. It consisted of another 1 x 20 container STC with a total of 80 drums: (a) 55 drums of 225 kilograms of Sunquick
Orange Concentrate; (b) 1 drum of 225 kilograms of Sunquick Tropical Fruit Concentrate; (c) 17 drums of 225
kilograms of Sunquick Lemon Concentrate; (d) 3 drums of 225 kilograms of Sunquick Ice Lemon Concentrate; and
(e) 4 drums of 225 kilograms Sunquick Peach Orange Concentrate. The said importation was accompanied by the
following documents: (a) Bill of Lading No. KKLUCPH060291 dated April 17, 2003;[10] and (b) CO-RO Foods A/S
Denmark Invoice No. 1619746 dated April 15, 2003.[11]

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Again, the BOC examiners disputed the tariff classification of Import Entry No. C-67560-03 and recommended to the
VCRC that the importation be classified at Tariff Heading H.S. 2106.90 50 with the corresponding 7% duty rate.

In order for Import Entry No. C-67560-03 to be released, Marina once again signed an undertaking under the
Tentative Release System.[12]

In a letter dated July 7, 2003, the VCRC scheduled another deliberation requiring Marina to explain why Import
Entry No. C-67560-03 should not be classified under Tariff Heading H.S. 2106.90 50 at the import duty rate of 7%. [13]

On July 17, 2003, Marina again attended the VCRC deliberation and submitted its explanation [14] dated July 17,
2003 together with samples in support of its claim that the imported goods under Import Entry No. C-67560-03
should not be reclassified under Tariff Heading H.S. 2106.90 50.

Thereafter, the classification cases for Import Entry No. C-33771-03 and Import Entry No. C-67560-03 were
consolidated.

On September 11, 2003, as reflected in its 1 st Indorsement, the VCRC reclassified Import Entry No. C-33771-03 and
Import Entry No. C-67560-03 under Tariff Heading H.S. 2106.90 50 at 7% import duty rate. [15]

On October 7, 2003, Marina appealed before the Commissioner challenging VCRCs reclassification.[16]

In its 1st Indorsement of November 13, 2003,[17] the VCRC modified its earlier ruling and classified Marinas Import
Entry No. C-33771-03 and Import Entry No. C-67560-03 under Tariff Heading H.S. 2009 19 00 at 7% duty rate, H.S.
2009.80 00 at 7% duty rate and H.S. 2009.90 00 at 10% duty rate.

Apparently not in conformity, Marina interposed a petition for review before the CTA on February 3, 2004, which
was docketed as CTA Case No. 6859.

On October 31, 2007, the CTA Second Division ruled in favor of Marina[18] holding that its classification under Tariff
Heading H.S. 2106.90 10 was the most appropriate and descriptive of the disputed importations. [19] It opined
that Marinas importations were raw materials used for the manufacture of its Sunquick products, not ready-to-drink
juice concentrates as argued by the Commissioner.[20] Thus, the decretal portion of the CTA - Second Division reads:

WHEREFORE, finding merit in petitioners Petition for Review, the same is hereby GRANTED. Accordingly, the
Resolution/Decision dated November 13, 2003 of the Valuation and Classification Review Committee of the Bureau
of Customs is hereby SET ASIDE and petitioners importation covered by Import Entry Nos. C-33771-03 and C-
67560-03 are reclassified under Tariff Harmonized System Heading H.S. 2106.90 10 with an import duty rate of 1%.

SO ORDERED.
The Commissioner disagreed and elevated the case to the CTA-En Banc via a petition for review.[21]

In its Resolution of April 11, 2008, the CTA En Banc dismissed the petition. The pertinent portions of the decision
including the fallo read:
A careful scrutiny of the record of this case showed that petitioner failed to file before the Second Division the
required Motion for Reconsideration before elevating his case to the CTA En Banc.

Section 1, Rule 8 of the Revised Rules of the Court of Tax Appeals provided for the following rule, to wit:

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RULE 8
PROCEDURE IN CIVIL CASES

SECTION 1. Review of Cases in the Court en banc.- In cases falling under the exclusive appellate jurisdiction of the
Court en banc, the petition for review of a decision or resolution of the Court in Division must be preceded by the
filing of a timely motion for reconsideration or new trial with the Division.

In statutory construction, the use of the word must indicates that the requirement is mandatory. Furthermore, the
word must connote an imperative act or operates to simply impose a duty which may be enforced. It is true the word
must is sometimes construed as may permissive but this is only when the context requires it. Where the context
plainly shows the provision to be mandatory, the word must is a command and cannot be construed as permissive,
but must be given the signification which it imparts.

It is worthy to note that the Supreme Court ruled that a Motion for Reconsideration is mandatory as a precondition
to the filing of a Petition for Review under Rule 43 of the Rules of Court.

WHEREFORE, applying by analogy the above ruling of the Supreme Court and taking into consideration the
mandatory provision provided by Section 1 of Rule 8 of the Revised Rules of the Court of Tax Appeals and
considering further that petitioner did not file a Motion for Reconsideration with the Second Division before
elevating the case to the Court En Banc, which eventually deprived the Second Division of an opportunity to amend,
modify, reverse or correct its mistake or error, if there be, petitioners Petition for Review is hereby DISMISSED.

SO ORDERED.[22]
The Commissioner sought reconsideration of the disputed decision, but the CTA En Banc issued a denial in its July
14, 2008 Resolution.[23]Hence, this petition.

In his Memorandum,[24] the Commissioner submits the following issues for resolution:

A.WHETHER THE DISMISSAL BY THE COURT OF TAX APPEALS EN BANC OF PETITIONERS


PETITION BASED ON MERE TECHNICALITY WILL RESULT IN INJUSTICE AND UNFAIRNESS TO
PETITIONER.

B.WHETHER THE CHALLENGED DECISION OF THE COURT OF TAX APPEALS SECOND DIVISION
HOLDING THAT RESPONDENTS IMPORTATION ARE COVERED BY IMPORT ENTRY NOS. C-33771-03
AND C-67560-03 ARE CLASSIFIED UNDER TARIFF HARMONIZED SYSTEM HEADING H.S. 2106.90 10
WITH AN IMPORT DUTY RATE OF ONE PERCENT (1%) IS NOT CORRECT.[25]

The Commissioner argues that the dismissal of his petition before the CTA-En Banc is inconsistent with the
principle of the liberal application of the rules of procedure. [26] He points out that due to the dismissal of the petition,
the government would only be collecting 1% import duty rate from Marina instead of 7%.[27] This, if sanctioned,
would result in grave injustice and unfairness to the government. [28]

The Commissioner also contends that the testimony of Marinas expert witness, Aurora Kimura, pertaining to
Sunquick Lemon compound shows that it could be classified as heavy syrup [29] falling under the category of H.S.
2190.90 50 with a 7% import duty rate.[30]

The Court finds no merit in the petition.

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On the procedure, the Court agrees with the CTA En Banc that the Commissioner failed to comply with the
mandatory provisions of Rule 8, Section 1 of the Revised Rules of the Court of Tax Appeals [31] requiring that the
petition for review of a decision or resolution of the Court in Division must be preceded by the filing of a timely
motion for reconsideration or new trial with the Division. The word "must" clearly indicates the mandatory -- not merely
directory -- nature of a requirement.[32]

The rules are clear. Before the CTA En Banc could take cognizance of the petition for review concerning a case
falling under its exclusive appellate jurisdiction, the litigant must sufficiently show that it sought prior
reconsideration or moved for a new trial with the concerned CTA division. Procedural rules are not to be trifled with
or be excused simply because their non-compliance may have resulted in prejudicing a partys substantive rights.
[33]
Rules are meant to be followed. They may be relaxed only for very exigent and persuasive reasons to relieve a
litigant of an injustice not commensurate to his careless non-observance of the prescribed rules. [34]

At any rate, even if the Court accords liberality, the position of the Commissioner has no merit. After examining the
records of the case, the Court is of the view that the import duty rate of 1%, as determined by the CTA Second
Division, is correct.

The table shows the different classification of Tariff import duties relevant to the case at bar:
TARIFF HEADING IMPORT COVERAGE
DUTY RATE
H.S. 2106.90 10 1% Covers flavouring materials, nes., of kind used in
food and drink industries; other food preparations
to be used as raw material in preparing composite
concentrates for making beverages
H.S. 2106.90 50 7% Covers composite concentrate for simple dilution
with water to make beverages
H.S. 2009. 19 00 7% Covers orange juice, not frozen
H.S. 2009.80 00 7% Covers juice of any other single fruit or vegetable
H.S. 2009.90 00 10% Covers mixtures of juices

The Commissioner insists that Marinas two importations should be classified under Tariff Heading H.S. 2106.90 50
with an import duty rate of 7% because the concentrates are ready for consumption by mere dilution with water.

The Court is not persuaded.

As extensively discussed by the CTA Second Division, to fit into the category listed under the Tariff Harmonized
System Headings calling for a higher import duty rate of 7%, the imported articles must not lose its original
character. In this case, however, the laboratory analysis of Marinas samples yielded a different result.[35] The report
supported Marinas position that the subject importations are not yet ready for human
consumption. Moreover, Marinas plant manager, Rebecca Maronilla, testified that the juice compounds could not be
taken in their raw form because they are highly concentrated and must be mixed with other additives before they
could be marketed as Sunquick juice products. If taken in their unprocessed form, the concentrates without the
mixed additives would produce a sour taste.[36] In other words, the concentrates, to be consumable, must have to lose
their original character. To quote the CTA Second Division:
Verily, to fall under the assailed Tariff Harmonized System Headings, petitioners (herein respondent) articles of
importation, as fruit juices/mixtures, should not have lost its original character, in spite of the addition of certain

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standardizing agents/constituents. Contrary thereto, We find the subject importations categorized as non-alcoholic
composite concentrates to have apparently lost their original character due to the addition of ingredients in such
quantity that the concentrated fruit juice mixture only comprises a small percentage of the entire compound.

This was clearly explained by the VCRC in its subsequent Resolution/Decision (1 st Indorsement) issued on February
17, 2005 pertaining to subsequent similar importations of petitioner, effectively correcting its findings in the assailed
Resolution/Decision dated November 13, 2003 concerning the same party-importer, issues and articles of importation,
[37]
to wit:

SUB-GROUP OBSERVATIONS/FINDINGS:

The classification issue was divided into two regimes. The era under the old Harmonized Commodity Description
and Coding System, while the other is the latest revised edition, the Asean Harmonized Tariff Nomenclature.

The previous committee resolution was promulgated technically not on the merit of the case but failure on the part
of the importer to submit their position paper/arguments within the prescriptive period given by the committee.

Importer submitted samples of subject shipment for laboratory analysis to Philippine Customs laboratory to validate
the veracity of product information given by the supplier and to determine the correct tariff classification.
Xxx xxx xxx
Based on the report of the Laboratory Analysis, compound is made up to water 57.9%, Invert Sugar 34.34%, Citric
Acid 2.94%, Vitamin C (Ascorbic Acid) 105 mg.

Since the item is compound which is composed of water, sugar, concentrated juice, flavourings, citric acid, stabilizer,
preservatives, vitamins C and colouring to produce beverage ready to drink. Consequently the concentrated
citrus juice has lost its original character due to the fact that it comprises only 12% of the total
compound.[38]

Items (fruit juices) classifiable under HS 2009 are fruit juices generally obtained by pressing fresh, healthy and ripe
fruit. Per item 4 of the Explanatory Notes to the Harmonized Commodity Description and Coding System apparently
subject article has lost its original character as concentrated fruit juice drink to the compounding ingredients which
reduces the fruit juices to 12% of the total compound.

In view of the foregoing subject article is classifiable under Tariff Heading H.S. 2106.90 10 at 1% for entries filed
under the old regime. For those filed under the new regime tariff heading AHTN 2106.90 51 at 1% where the item
are specifically provided.

RESOLUTION: To apply sub-group recommendation which is to adopt H.S. 2106.90 10 at 1% for entries filed
under the old regime and for those filed under the new regime, AHTN 2106.90 51 at 1% where the item are
specifically provided.[39]

To manufacture is to make or fabricate raw materials by hand, art or machinery, and work into forms convenient for
use.[40] Stated differently, it is to transform by any process into another form suitable for its intended use. Marina, as
the manufacturing arm of CO-RO Food A/S of Denmark, transforms said juice compounds, being raw materials, into
a substance suitable for human consumption. This is evident from the Commissioners Report [41] of Executive Clerk of
Court II, CTA, Jesus P. Inocando, Jr., who conducted an ocular inspection of Marinas manufacturing plant in Taguig
City. Pertinent excerpts of the Commissioners Report are herein reproduced:

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On our ocular inspection of the manufacturing plant of petitioner, Ms. Solidum and Mr. Domingo showed us the
sample of the imported compounds (raw materials), showed to us the step by step manufacturing process of
petitioner and even showed us the bottling and packaging of the finished product.

Per observation of the undersigned, the imported compounds (raw materials) are very sticky, the plant is clean and
that the personnel of petitioner in the plant strictly following the manufacturing process as presented in Annex A
and Annex B of this report.

Upon questioning by the counsel for respondent, Mr. Domingo said that while the imported compounds (raw
materials) can be mixed with water and may be drinkable, he is not sure if the same is suitable for human
consumption. None of us dared to taste the sample of imported compounds (raw materials) diluted in water. The
imported compounds (raw materials) mixed with water produces bubbles on top of the mixture, not like the one that
has gone through the manufacturing process. Counsel for respondent requested for the marking of Label of Sunquick
Lemon (840 ml.), [Annex C], as Exhibit 1 for the respondent. [42]

Contrary to the Commissioners assertions, empirical evidence shows that the subject importations would have to
undergo a laborious method, as shown by its manufacturing flowchart [43] and manufacturing process,[44] to achieve
their marketable juice consistency. Accordingly, the 1% tariff import duty rate under Tariff Heading H.S. 2106.90 10
was correctly applied to the subject importations.

In any case, the VCRC in its 1st Indorsement[45] of February 17, 2005 (a subsequent proceeding involving the same
type of importation) rectified the disputed tariff reclassification rate. Thus, in Marinas succeeding importations, the
VCRC already adopted the 1% import duty rate as paid by Marina in the past.

WHEREFORE, the petition is DENIED.

G.R. NO. 169225 NOVEMBER 17, 2010 CIR VS. HAMBRECHT & QUIST PHILIPPINES INC.

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the
Decision[1] dated August 12, 2005 of the Court of Tax Appeals (CTA) En Banc in C.T.A. E.B. No. 73 (C.T.A. Case No.
6362), entitled Commissioner of Internal Revenue vs. Hambrecht & Quist Philippines, Inc., which affirmed the
Decision[2] dated September 24, 2004 of the CTA Original Division in C.T.A. Case No. 6362 canceling the assessment
issued against respondent for deficiency income and expanded withholding tax for the year 1989 for failure of
petitioner Commissioner of Internal Revenue (CIR) to enforce collection within the period allowed by law.

The CTA summarized the pertinent facts of this case, as follows:

In a letter dated February 15, 1993, respondent informed the Bureau of Internal Revenue (BIR), through its West-
Makati District Office of its change of business address from the 2 nd Floor Corinthian Plaza, Paseo de Roxas, Makati
City to the 22nd Floor PCIB Tower II, Makati Avenue corner H.V. De la Costa Streets, Makati City. Said letter was
duly received by the BIR-West Makati on February 18, 1993.

On November 4, 1993, respondent received a tracer letter or follow-up letter dated October 11, 1993 issued by the
Accounts Receivable/Billing Division of the BIRs National Office and signed by then Assistant Chief Mr. Manuel B.
Mina, demanding for payment of alleged deficiency income and expanded withholding taxes for the taxable year
1989 amounting to P2,936,560.87.

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On December 3, 1993, respondent, through its external auditors, filed with the same Accounts Receivable/Billing
Division of the BIRs National Office, its protest letter against the alleged deficiency tax assessments for 1989 as
indicated in the said tracer letter dated October 11, 1993.

The alleged deficiency income tax assessment apparently resulted from an adjustment made to respondents taxable
income for the year 1989, on account of the disallowance of certain items of expense, namely, professional fees paid,
donations, repairs and maintenance, salaries and wages, and management fees. The latter item of expense, the
management fees, made up the bulk of the disallowance, the examiner alleging, among others, that petitioner failed
to withhold the appropriate tax thereon. This is also the same basis for the imposition of the deficiency withholding
tax assessment on the management fees. Revenue Regulations No. 6-85 (EWT Regulations) does not impose or
prescribe EWT on management fees paid to a non-resident.
On November 7, 2001, nearly eight (8) years later, respondents external auditors received a letter from herein
petitioner Commissioner of Internal Revenue dated October 27, 2001. The letter advised the respondent that
petitioner had rendered a final decision denying its protest on the ground that the protest against the disputed tax
assessment was allegedly filed beyond the 30-day reglementary period prescribed in then Section 229 of the National
Internal Revenue Code.

On December 6, 2001, respondent filed a Petition for Review docketed as CTA Case No. 6362 before the then Court of
Tax Appeals, pursuant to Section 7 of Republic Act No. 1125, otherwise known as an Act Creating the Court of Tax
Appeals and Section 228 of the NIRC, to appeal the final decision of the Commissioner of Internal Revenue denying
its protest against the deficiency income and withholding tax assessments issued for taxable year 1989. [3]

In a Decision dated September 24, 2004, the CTA Original Division held that the subject assessment notice sent by
registered mail on January 8, 1993 to respondents former place of business was valid and binding since respondent
only gave formal notice of its change of address on February 18, 1993. Thus, the assessment had become final and
unappealable for failure of respondent to file a protest within the 30-day period provided by law. However, the CTA
(a) held that the CIR failed to collect the assessed taxes within the prescriptive period; and (b) directed the
cancellation and withdrawal of Assessment Notice No. 001543-89-5668. Petitioners Motion for Reconsideration and
Supplemental Motion for Reconsideration of said Decision filed on October 14, 2004 and November 22, 2004,
respectively, were denied for lack of merit.

Undaunted, the CIR filed a Petition for Review with the CTA En Banc but this was denied in a Decision dated
August 12, 2005, the dispositive portion reads:

WHEREFORE, the Petition for Review is DENIED DUE COURSE and the case is accordingly DISMISSED for
lack of merit.[4]

Hence, the instant Petition wherein the following issues are raised:
I WHETHER OR NOT THE COURT OF TAX APPEALS HAS JURISDICTION TO RULE THAT THE
GOVERNMENTS RIGHT TO COLLECT THE TAX HAS PRESCRIBED.

II WHETHER OR NOT THE PERIOD TO COLLECT THE ASSESSMENT HAS PRESCRIBED. [5]
The petition is without merit.

Anent the first issue, petitioner argues that the CTA had no jurisdiction over the case since the CTA itself had ruled
that the assessment had become final and unappealable.Citing Protectors Services, Inc. v. Court of Appeals,[6] the
CIR argued that, after the lapse of the 30-day period to protest, respondent may no longer dispute the correctness of
the assessment and its appeal to the CTA should be dismissed. The CIR took issue with the CTAs pronouncement
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that it had jurisdiction to decide other matters related to the tax assessment such as the issue on the right to collect
the same since the CIR maintains that when the law says that the CTA has jurisdiction over other matters, it
presupposes that the tax assessment has not become final and unappealable.

We cannot countenance the CIRs assertion with regard to this point. The jurisdiction of the CTA is governed by
Section 7 of Republic Act No. 1125, as amended, and the term other matters referred to by the CIR in its argument
can be found in number (1) of the aforementioned provision, to wit:

Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal,
as herein provided

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the
National Internal Revenue Code or other law as part of law administered by the Bureau of Internal
Revenue. (Emphasis supplied.)

Plainly, the assailed CTA En Banc Decision was correct in declaring that there was nothing in the foregoing
provision upon which petitioners theory with regard to the parameters of the term other matters can be supported or
even deduced. What is rather clearly apparent, however, is that the term other matters is limited only by the
qualifying phrase that follows it.

Thus, on the strength of such observation, we have previously ruled that the appellate jurisdiction of the CTA is not
limited to cases which involve decisions of the CIR on matters relating to assessments or refunds. The second part of
the provision covers other cases that arise out of the National Internal Revenue Code (NIRC) or related laws
administered by the Bureau of Internal Revenue (BIR).[7]

In the case at bar, the issue at hand is whether or not the BIRs right to collect taxes had already prescribed and that
is a subject matter falling under Section 223(c) of the 1986 NIRC, the law applicable at the time the disputed
assessment was made. To quote Section 223(c):

Any internal revenue tax which has been assessed within the period of limitation above-prescribed may be
collected by distraint or levy or by a proceeding in court within three years following the assessment of the
tax. (Emphases supplied.)

In connection therewith, Section 3 of the 1986 NIRC states that the collection of taxes is one of the duties of the BIR,
to wit:

Sec. 3. Powers and duties of Bureau. - The powers and duties of the Bureau of Internal Revenue shall comprehend
the assessment and collection of all national internal revenue taxes, fees, and charges and the enforcement
of all forfeitures, penalties, and fines connected therewith including the execution of judgments in all cases decided
in its favor by the Court of Tax Appeals and the ordinary courts. Said Bureau shall also give effect to and administer
the supervisory and police power conferred to it by this Code or other laws. (Emphasis supplied.)

Thus, from the foregoing, the issue of prescription of the BIRs right to collect taxes may be considered as covered by
the term other matters over which the CTA has appellate jurisdiction.

Furthermore, the phraseology of Section 7, number (1), denotes an intent to view the CTAs jurisdiction over disputed
assessments and over other matters arising under the NIRC or other laws administered by the BIR as separate and
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independent of each other. This runs counter to petitioners theory that the latter is qualified by the status of the
former, i.e., an other matter must not be a final and unappealable tax assessment or, alternatively, must be a
disputed assessment.

Likewise, the first paragraph of Section 11 of Republic Act No. 1125,


as amended by Republic Act No. 9282, [8] belies petitioners assertion as the provision is explicit that, for as long as a
party is adversely affected by any decision, ruling or inaction of petitioner, said party may file an appeal with the
CTA within 30 days from receipt of such decision or ruling. The wording of the provision does not take into account
the CIRs restrictive interpretation as it clearly provides that the mere existence of an adverse decision, ruling or
inaction along with the timely filing of an appeal operates to validate the exercise of jurisdiction by the CTA.

To be sure, the fact that an assessment has become final for failure of the taxpayer to file a protest within the time
allowed only means that the validity or correctness of the assessment may no longer be questioned on
appeal. However, the validity of the assessment itself is a separate and distinct issue from the issue of whether the
right of the CIR to collect the validly assessed tax has prescribed. This issue of prescription, being a matter provided
for by the NIRC, is well within the jurisdiction of the CTA to decide.

With respect to the second issue, the CIR insists that its right to collect the tax deficiency it assessed on respondent
is not barred by prescription since the prescriptive period thereof was allegedly suspended by respondents request
for reinvestigation.

Based on the facts of this case, we find that the CIRs contention is without basis. The pertinent provision of the 1986
NIRC is Section 224, to wit:

Section 224. Suspension of running of statute. The running of the statute of limitations provided in Sections 203 and
223 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in
respect of any deficiency, shall be suspended for the period during which the Commissioner is prohibited from
making the assessment or beginning distraint or levy or a proceeding in court and for sixty days thereafter; when
the taxpayer requests for a re-investigation which is granted by the Commissioner; when the taxpayer
cannot be located in the address given by him in the return filed upon which a tax is being assessed or
collected: Provided, That, if the taxpayer informs the Commissioner of any change in address, the statute will not be
suspended; when the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative,
or a member of his household with sufficient discretion, and no property could be located; and when the taxpayer is
out of the Philippines. (Emphasis supplied.)

The plain and unambiguous wording of the said provision dictates that two requisites must concur before the period
to enforce collection may be suspended: (a) that the taxpayer requests for reinvestigation, and (b) that petitioner
grants such request.

On this point, we have previously held that:

The above section is plainly worded. In order to suspend the running of the prescriptive periods for assessment and
collection, the request for reinvestigation must be granted by the CIR.[9] (Emphasis supplied.)
Consequently, the mere filing of a protest letter which is not granted does not operate to suspend the running of the
period to collect taxes. In the case at bar, the records show that respondent filed a request for reinvestigation on
December 3, 1993, however, there is no indication that petitioner acted upon respondents protest. As the CTA
Original Division in C.T.A. Case No. 6362 succinctly pointed out in its Decision, to wit:

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It is evident that the respondent did not conduct a reinvestigation, the protest having been dismissed on the ground
that the assessment has become final and executory. There is nothing in the record that would show what action was
taken in connection with the protest of the petitioner. In fact, petitioner did not hear anything from the respondent
nor received any communication from the respondent relative to its protest, not until eight years later when the final
decision of the Commissioner was issued (TSN, March 7, 2002, p. 24). In other words, the request for
reinvestigation was not granted. x x x.[10] (Emphasis supplied.)

Since the CIR failed to disprove the aforementioned findings of fact of the CTA which are borne by substantial
evidence on record, this Court is constrained to uphold them as binding and true. This is in consonance with our oft-
cited ruling that instructs this Court to not lightly set aside the conclusions reached by the CTA, which, by the very
nature of its functions, is dedicated exclusively to the resolution of tax problems and has accordingly developed an
expertise on the subject unless there has been an abuse or improvident exercise of authority. [11]

Indeed, it is contradictory for the CIR to argue that respondents December 3, 1993 protest which contained a request
for reinvestigation was filed beyond the reglementary period but still claim that the same request for reinvestigation
was implicitly granted by virtue of its October 27, 2001 letter. We find no cogent reason to reverse the CTA when it
ruled that the prescriptive period for the CIRs right to collect was not suspended under the circumstances of this
case.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Tax Appeals (CTA) En Banc dated
August 12, 2005 is AFFIRMED. No costs.
SO ORDERED.

G.R. No. 183880 January 20, 2014 CIR vs TOLEDO POWER INC.

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Court of Tax Appeals (CTA) En Banc Decision1 dated May 7, 2008, and Resolution2 dated July 18, 2008.
The pertinent facts, as narrated by the CT A First Division, are as follows:
Petitioner (herein respondent Toledo Power, Inc.) is a general partnership duly organized and existing under
Philippine laws, with principal office at Sangi, Toledo City, Cebu. It is principally engaged in the business of power
generation and subsequent sale thereof to the National Power Corporation (NPC), Cebu Electric Cooperative III
(CEBECO), Atlas Consolidated Mining and Development Corporation, Atlas Fertilizer Corporation and Cebu
Industrial Park Development, Inc., and is registered with the Bureau of Internal Revenue (BIR) as a Value
Added Tax taxpayer in accordance with Section 236 of the National Internal Revenue Code (NIRC) with Tax
Identification No. 003-883-626-VAT and BIR Certificate of Registration bearing RDO Control No. 94-083-000300.
On June 20, 2002, petitioner filed an application with the Energy Regulatory Commission (ERC) for the issuance of
a Certificate of Compliance pursuant to the Implementing Rules and Regulations of R.A. 9136, otherwise known as
the "Electric Power Industry Reform Act of 2007" (EPIRA).
On October 25, 2001, petitioner filed with the BIR Revenue District Office (RDO) No. 83 at Toledo City, Province of
Cebu, its Quarterly VAT Return for the third quarter of 2001, declaring among others, the following:
Zero-rated Sales/Receipts P 143,000,032.37

Taxable Sales-Sale of Scrap/Others 378,651.74

Output Tax 34,422.89

Less: Input Tax

On Domestic Purchases 4,765,458.58

10
On Importation of Goods 1,242,792.00

Total Available Input Tax 6,008,250.58

Excess Input Tax & Overpayment P 5,973,827.69


However, an amended Quarterly VAT Return for the same quarter of 2001was filed on November 22, 2001. The
amended return shows unutilized input VAT credits of P5,909,588.96 arising from petitioners taxable purchases for
the third quarter of 2001 and the following other information:
Zero-rated Sales/Receipts P 143,000,032.37

Taxable Sales-Sale of Scrap/Others 378,651.74

Output Tax 34,422.89

Less: Input Tax

On Domestic Purchases 4,718,099.85

On Importation of Goods 1,225,912.00

Total Available Input Tax 5,944,011.85

Excess Input Tax & Overpayment P 5,909,588.96


Thus, for the third quarter of 2001, petitioner allegedly has unutilized input VAT in the total amount
of P5,909,588.96 on its domestic purchase of taxable goods and services and importation of goods, which purchases
and importations are all attributable to its zero-rated sale of power generation services to NPC, CEBECO, Atlas
Consolidated Mining and Development Corporation, Atlas Fertilizer Corporation and Cebu Industrial Park
Development, Inc. Said input VAT of P5,909,588.96 paid by petitioner on its domestic purchase of goods and services
for the third quarter of 2001 allegedly remained unutilized against output VAT liability in said period or even in
subsequent matters.
On January 25, 2002, petitioner filed with the BIR RDO No. 83 at Toledo City, Province of Cebu, its Quarterly VAT
Return for the fourth quarter of 2001 declaring, among others, the following:
Zero-rated Sales/Receipts P 127,259,720.44

Taxable Sales-Sale of Scrap/Others 309,697.50

Output Tax 28,154.33

Less: Input Tax

On Domestic Purchases 1,374,608.64

On Importation of Goods 1,873,327.00

Total Available Input Tax 3,247,935.64

Excess Input Tax & Overpayment P 3,219,781.31


Thus, petitioner allegedly had an excess input VAT credits of P3,219,781.31 for the fourth quarter of 2001 which
remained unutilized against output VAT liability in said period or even in the subsequent quarters.
For the third and fourth quarters of 2001, petitioner incurred and accumulated input VAT from its domestic
purchase of goods and services, which are all attributable to its zero-rated sales of power generation services to
NPC, CEBECO, Atlas Consolidated Mining and Development

11
Corporation, Atlas Fertilizer Corporation and Cebu Industrial Park Development Inc., in the total amount
of P9,129,370.27. Said excess and unutilized input VAT was allegedly not utilized against any output VAT liability in
the subsequent quarters nor carried over to the succeeding taxable quarters.
On September 30, 2003, pursuant to the procedure prescribed in Revenue Regulations No. 7-95, as amended,
petitioner filed with the BIR RDO No. 83, an administrative claim for refund or unutilized input VAT for the third
and fourth quarter of 2001 in the amounts of P5,909,588.96 and P3,219,781.31, respectively, or the aggregate
amount of P9,129,370.27.
Respondent (herein petitioner Commissioner of Internal Revenue) has not ruled upon petitioners administrative
claim and in order to preserve its right to file a judicial claim for the refund or issuance of a tax credit certificate of
its unutilized input VAT, petitioner filed a Petition for
Review to suspend the running of the two-year prescriptive period under Section 112(D) of the 1997 NIRC and
Section 4.106-2(c) of Revenue Regulations No. 7-95, as amended. On October 24, 2003, petitioner filed a Petition for
Review for the refund or issuance of a tax credit certificate in the amount of P5,909,588.96 for the third quarter of
2001, docketed as CTA Case No. 6805 and, on January 22, 2004, filed another Petition for Review for the refund or
issuance of tax credit certificate in the amount of P3,219,781.31 for the fourth quarter of 2001, docketed as CTA Case
No. 6851, both for its unutilized input VAT paid by petitioner on its domestic purchases of goods and services and
importation of goods attributable to zero-rated sales.
On January 30, 2004, petitioner filed a Motion for Consolidation CTA Case Nos. 6805 and 6851, since these cases
involve the same parties, same facts and issues. The said Motion was granted in open court on February 27, 2004
and confirmed in a Resolution dated March 8, 2004.
xxxx
After presenting its testimonial and documentary evidence, petitioner formally offered its evidence on February 16,
2006. On March 24, 2006, this Court promulgated a Resolution admitting all the exhibits offered by petitioner.
Respondent, on the other hand, failed to adduce any evidence.
In a Resolution dated July 6, 2006, this consolidated case was ordered submitted for decision with only petitioners
Memorandum, as respondent failed to file one within the period given by the Court. 3
Acting on the petition, the CTA First Division issued a Decision dated May 17, 2007 partially granting Toledo Power,
Inc.s (TPI) refund claim or issuance of tax credit certificate. Pertinent portions of the Decision read:
In sum, petitioner was able to show its entitlement to the refund or issuance of tax credit certificate in the amount
of P8,553,050.44 computed as follows:
Total Available Input VAT P 9,191,947.49

Less: Disallowed Input VAT


(P20,696.34+P52,363.64+P277,207.50) 350,267.48

Substantiated available input VAT P 8,841,680.01

Less: Output VAT 62,577.22

Substantiated Unutilized Input VAT P 8,779,102.79

Multiply by the ratio of substantiated


zero-rated sales to the total zero-rated
sales

Substantiated zero-rated sales 263,300,858.02

Total zero-rated sales 270,259,752.81

Refundable Input VAT P 8,553,050.44

12
IN VIEW OF THE FOREGOING, the Petition for Review is PARTIALLY GRANTED. Respondent is hereby
ORDERED to refund or to issue a tax credit certificate in favor of petitioner in the reduced amount of P8,553,050.44
representing the substantiated unutilized input VAT for the third and fourth quarters of 2001.
SO ORDERED.4
The Commissioner of Internal Revenue (CIR), thereafter, filed a Motion for Reconsideration against said Decision.
However, the same was denied in a Resolution dated October 15, 2007.
On appeal to the CTA En Banc, the CIR argued that TPI failed to comply with the invoicing requirements to prove
entitlement to the refund or issuance of tax credit certificate. In addition, he challenged the jurisdiction of the CTA
First Division to entertain respondents petition for review for failure on its part to comply with the provisions of
Section 112 (C) of the Tax Code.
In a Decision dated May 7, 2008, the CTA En Banc affirmed with modification the First Divisions assailed decision.
It held
x x x after re-examination of the records of this case, out of the alleged Zero-rated sales amounting
to P270,259,752.81, only the amount of P248,989,191.87 is fully substantiated. Therefore, respondent is entitled to
the refund or issuance of tax credit certificate in the amount of P8,088,151.07 computed as follows:
Total Available Input VAT P 9,191,947.49

Less: Disallowed Input VAT


(P20,696.34+P52,363.64+P277,207.50) 350,267.48

Substantiated available input VAT P 8,841,680.01

Less: Output VAT 62,577.22

Substantiated Unutilized Input VAT P 8,779,102.79

Multiply by the ratio of substantiated


zero-rated sales to the total zero-rated
sales

Substantiated zero-rated sales 248,989,191.87

Total zero-rated sales 270,259,752.81

Refundable Input VAT P 8,088,151.07


WHEREFORE, premises considered, the Petition for Review En Banc is DENIED for lack of merit. Accordingly, the
Decision dated May 17, 2007 and Resolution dated October 15, 2007 are AFFIRMED with MODIFICATION.
Petitioner is hereby ORDERED TO REFUND to respondent the sum of EIGHT MILLION EIGHTY-EIGHT
THOUSAND ONE HUNDRED FIFTY-ONE PESOS AND SEVEN CENTAVOS (P8,088,151.07) only for the third and
fourth quarters of taxable year 2001.
SO ORDERED.5
In a Resolution dated July 18, 2008, the CTA En Banc denied the CIRs motion for reconsideration.
Undaunted by the adverse ruling of the CTA, the CIR now seeks recourse to this Court on the following ground:
THE COURT OF TAX APPEALS EN BANC ERRED IN RULING THAT THE GOVERNMENT IS LIABLE TO
REFUND PETITIONER FOR ALLEGED OVERPAYMENT OF VAT. 6
In essence, two issues must be addressed to determine whether TPI is indeed entitled to its claim for refund or
issuance of tax credit certificate: (1) whether TPI complied with the 120+30 day rule under Section 112 (C) of the
Tax Code, and (2) whether TPI sufficiently complied with the invoicing requirements under the Tax Code.
Let us discuss the issues in seriatim.
First, it must be emphasized that to validly claim a refund or tax credit of input tax, compliance with the 120+30 day
rule under Section 112 of the Tax Code is mandatory.

13
Pertinent portions of Section 112 of the Tax Code, as amended by Republic Act No. 9337, 7 state:
SEC. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-Rated Sales. Any VAT-registered person, whose sales are zero-rated or effectively
zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the
issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except
transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however,
That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(B)(1) and (2), the
acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-
rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the
amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions,
it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making
sales that are zero-rated under Section 108(B)(6), the input taxes shall be allocated ratably between his zero-rated
and non-zero-rated sales.
xxxx
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. In proper cases, the Commissioner
shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120)
days from the date of submission of complete documents in support of the application filed in accordance with
Subsection (A) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer may, within thirty (30) days
from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period,
appeal the decision or the unacted claim with the Court of Tax Appeals.
Section 112 decrees that a VAT-registered person, whose sales are zero-rated or effectively zero-rated, may apply for
the issuance of a tax credit or refund creditable input tax due or paid attributable to such sales within two years
after the close of the taxable quarter when the sales were made. From the date of submission of complete documents
in support of its application, the CIR has 120 days to decide whether or not to grant the claim for refund or issuance
of tax credit certificate. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the
part of the CIR to act on the application within the given period, the taxpayer may, within 30 days from receipt of
the decision denying the claim or after the expiration of the 120-day period, appeal with the CTA the decision or
inaction of the CIR.
Recently, in the consolidated cases of Commissioner of Internal Revenue v. San Roque Power Corporation, 8 (San
Roque), the Court confirmed the mandatory and jurisdictional nature of the 120+30 day rule. It ratiocinated as
follows:
At the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory periods were already in
the law. Section 112 (C) expressly grants the Commissioner 120 days within which to decide the taxpayers claim.
The law is clear, plain and unequivocal: "x x x the Commissioner shall grant a refund or issue the tax credit
certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete
documents." Following the verba legis doctrine, this law must be applied exactly as worded since it is clear, plain and
unequivocal. The taxpayer cannot simply file a petition with the CTA without waiting for the Commissioners
decision within the 120-day mandatory and jurisdictional period. The CTA will have no jurisdiction because there
will be no "decision" or "deemed a denial" decision of the Commissioner for the CTA to review. In San Roques case, it
filed its petition with the CTA a mere 13 days after it filed its administrative claim with the Commissioner.
Indisputably, San Roque knowingly violated the mandatory 120-day period, and it cannot blame anyone but itself.
Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the
Commissioner, thus:

14
x x x the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the
expiration of the one-hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax
Appeals. (Emphasis supplied.)
This law is clear, plain, and unequivocal.1avvphi1 Following the well-settled verba legis doctrine, this law should be
applied exactly as worded since it is clear, plain and unequivocal. As this law states, the taxpayer may, if he wishes,
appeal the decision of the Commissioner to the CTA within 30 days from receipt of the Commissioners decision, or if
the Commissioner does not act on the taxpayers claim within the 120-day period, the taxpayer may appeal to the
CTA within 30 days from the expiration of the 120-day period.
xxxx
When Section 112 (C) states that "the taxpayer affected may, within thirty (30) days from receipt of the decision
denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted
claim with the Court of Tax Appeals," the law does not make the 120+30 day periods optional just because the law
uses the word "may." The word "may" simply means that the taxpayer may or may not appeal the decision of the
Commissioner within 30 days from receipt of the decision, or within 30 days from the expiration of the 120-day
period. Certainly by no stretch of the imagination can the word "may" be construed as making the 120+30 day
periods optional, allowing the taxpayer to file a judicial claim one day after filing the administrative claim with the
Commissioner.
The old rule that the taxpayer may file the judicial claim, without waiting for the Commissioners decision if the two-
year prescriptive period is about to expire, cannot apply because that rule was adopted before the enactment of the
30-day period. The 30-day period was adopted precisely to do away with the old rule, so that under the VAT System
the taxpayer will always have 30 days to file the judicial claim even if the Commissioner acts only on the 120th day,
or does not act at all during the 120-day period. With the 30-day period always available to the taxpayer, the
taxpayer can no longer file a judicial claim for refund or credit of input VAT without waiting for the Commissioner to
decide until the expiration of the 120-day period.
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the taxpayer.
One of the conditions for a judicial claim of refund or credit under the VAT System is compliance with the 120+30
day mandatory and jurisdictional periods. Thus, strict compliance with the 120+30 day periods is necessary for such
a claim to prosper, whether before, during, or after the effectivity of the Atlas doctrine, except for the period from the
issuance of BIR Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted,
which again reinstated the 120+30 day periods as mandatory and jurisdictional. 9
In a nutshell, the rules on the determination of the prescriptive period for filing a tax refund or credit of unutilized
input VAT, as provided in Section 112 of the Tax Code, are as follows:
(1) An administrative claim must be filed with the CIR within two years after the close of the taxable quarter when
the zero-rated or effectively zero-rated sales were made.
(2) The CIR has 120 days from the date of submission of complete documents in support of the administrative claim
within which to decide whether to grant a refund or issue a tax credit certificate. The 120-day period may extend
beyond the two-year period from the filing of the administrative claim if the claim is filed in the later part of the two-
year period. If the 120-day period expires without any decision from the CIR, then the administrative claim may be
considered to be denied by inaction.
(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIRs decision denying the
administrative claim or from the expiration of the 120-day period without any action from the CIR.
(4) All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003
up to its reversal by this Court in Aichi on 6 October 2010, as an exception to the mandatory and jurisdictional
120+30 day periods.10
Here, TPI filed its third and fourth quarterly VAT returns for 2001 on October 25, 2001 and January 25, 2002,
respectively. It then filed an administrative claim for refund of its unutilized input VAT for the third and fourth
quarters of 2001 on September 30, 2003. Thus, the CIR had 120 days or until January 28, 2004, after the submission
of TPIs administrative claim and complete documents in support of its application, within which to decide on its

15
claim. Then, it is only after the expiration of the 120-day period, if there is inaction on the part of the CIR, where
TPI may elevate its claim with the CTA within 30 days.
In the present case, however, it appears that TPIs judicial claims for refund of its unutilized input VAT covering the
third and fourth quarters of 2001 were prematurely filed on October 24, 2003 and January 22, 2004, respectively.
However, although TPIs judicial claim for the fourth quarter of 2001 has been filed prematurely, the most recent
pronouncements of the Court provide for a window wherein the same may be entertained.
As held in the San Roque ponencia, strict compliance with the 120+30 day mandatory and jurisdictional periods is
not necessary when the judicial claims are filed between December 10, 2003 (issuance of BIR Ruling No. DA-489-03
which states that the taxpayer need not wait for the 120-day period to expire before it could seek judicial relief) to
October 6, 2010 (promulgation of the Aichi doctrine).
Clearly, therefore, TPIs refund claim of unutilized input VAT for the third quarter of 2001 was denied for being
prematurely filed with the CTA, while its refund claim of unutilized input VAT for the fourth quarter of 2001 may be
entertained since it falls within the exception provided in the Courts most recent rulings.
With that settled, we now resolve the issue of whether TPI sufficiently complied with the invoicing requirements
under the Tax Code with respect to the fourth quarter of 2001.
Section 113 (A), in relation to Section 237 of the Tax Code, provides:
SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.
(A) Invoicing Requirements. A VAT-registered person shall, for every sale, issue an invoice or receipt.1wphi1 In
addition to the information shall be indicated in the invoice or receipt:
(1) A statement that the seller is a VAT-registered person, followed by his taxpayers identification number (TIN);
and
(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such
amount includes value-added tax.
xxxx
SEC. 237. Issuance of Receipts or Sales of Commercial Invoices. All persons subject to an internal revenue tax
shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more,
issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of
transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That in the
case of sales, receipts or transfers in the amount of One hundred pesos (P100.00) or more, or regardless of the
amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to
value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or
fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the
purchaser, customer or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to
the information herein required, the invoice or receipts shall further show the Taxpayer Identification Number (TIN)
of the purchaser.
Section 4.108-1 of Revenue Regulations No. 7-95 states:
Section 4.108-1. Invoicing Requirements All VAT-registered persons shall, for every sale or lease of goods or
properties or services, issue duly registered receipts or sales or commercial invoices which must show:
1. the name, TIN and address of seller;
2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of service;
4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client;
5. the word "zero-rated" imprinted on the invoice covering zero-rated sales; and
6. the invoice value or consideration.11
In the present case, we agree with the CTAs findings that the words "zero-rated" appeared on the VAT
invoices/official receipts presented by the TPI in support of its refund claim. Although the same was merely stamped
and not pre-printed, the same is sufficient compliance with the law, since the imprinting of the word "zero-rated" was
required merely to distinguish sales subject to 10% VAT, those that are subject to 0% VAT (zero-rated) and exempt

16
sales, to enable the Bureau of Internal Revenue to properly implement and enforce the other VAT provisions of the
Tax Code.
Moreover, it is doctrinal that the Court will not lightly set aside the conclusions reached by the CTA which, by the
very nature of its function of being dedicated exclusively to the resolution of tax problems, has accordingly developed
an expertise on the subject, unless there has been an abuse or improvident exercise of authority. 12
In Barcelon, Roxas Securities, Inc. v. Commissioner of Internal Revenue, 13 the Court held that it accords the findings
of fact by the CTA with the highest respect. It ruled that factual findings made by the CTA can only be disturbed on
appeal if they are supported by substantial evidence or there is a showing of gross error or abuse on the part of the
Tax Court. In the absence of any clear and convincing proof to the contrary, this Court must presume that the CTA
rendered a decision which is valid in every respect. 14
WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The Commissioner of Internal
Revenue is hereby ORDERED to refund or issue tax credit certificate in favor of Toledo Power, Inc. only for the
fourth quarter of 2001. This case is hereby REMANDED to the Court of Tax Appeals for the proper computation of
the refundable amount representing unutilized input VAT for the fourth quarter of 2001.
SO ORDERED.

G.R. No. 173815 November 24, 2010 MILWAUKEE INDUSTRIES CORP. vs CTA and CIR

This resolves the petition for certiorari[1] under Rule 65 of the 1997 Rules of Civil Procedure filed by petitioner
Milwaukee Industries Corporation (Milwaukee) assailing the February 27, 2006 Verbal Order and the June 1, 2006
Resolution[2] of the Court of Tax Appeals (CTA), in CTA Case No. 6202 entitled Milwaukee Industries Corporation v.
Commissioner of Internal Revenue.

The Facts
In a Letter of Authority,[3] dated July 17, 1998, public respondent Commissioner of Internal Revenue (CIR)
notified Milwaukee of its intent to examine their books of account and other accounting records for all internal
revenue taxes for 1997 and other unverified prior years.

Milwaukee complied with the directive and submitted its documents to CIR.

Thereafter, CIR issued three undated assessment notices[4] together with a demand letter and explanation of the
deficiency tax assessments. Milwaukee allegedly owed a total of P173,063,711.58 corresponding to the deficiencies on
income tax, expanded withholding and value-added taxes for the 1997 taxable year. The table shows the supposed
deficiency taxes due against Milwaukee:[5]

Basic Tax Interest Compromise Total


Penalty
Deficiency P43,114,980.66 P20,264,040.91 P25,000.00 P63,404,021.57
Income Tax ST-
Income-97-0093-
2000
Deficiency 19,438.95 9,284.23 1,000.00 29,723.18
expanded
withholding tax
ST-EWT-97-
0092-2000
Deficiency 72,108,530.81 37,496,436.02 25,000.00 109,629,966.83

17
value-added tax
ST-VAT-97-0091-
2000
TOTALS P15,242,950.42 P57,796,761.16 P51,000.00 P173,063,711.58
[6]
In a letter dated February 21, 2000, Milwaukee protested the assessments.

Due to CIRs inaction regarding its protest, on November 20, 2000, Milwaukee filed a petition for review before the
CTA.[7] This was docketed as CTA Case No. 6202.

After Milwaukee had presented its evidence-in-chief, CIR offered the testimony of Ms. Edralin Silario (Silario), the
group supervisor of the BIR examiners, who conducted the examination of Milwaukees books. She testified on the
Final Report she prepared for the BIR and explained the grounds for the disallowance of the deductions being
claimed by Milwaukee on the following: (1) foreign exchange losses classified as miscellaneous expenses; and (2)
interest and bank charges paid in 1997.

Subsequently, Milwaukee manifested its intention to present documentary rebuttal evidence. [8] By its Order of July
11, 2005, the CTA permitted Milwaukee to present rebuttal evidence starting September 5, 2005.[9] Milwaukee,
however, moved for resetting on the scheduled hearings, particularly on September 5, 2005 and October 26, 2005.[10]

On January 16, 2006, Milwaukee was able to partially present its rebuttal evidence in a commissioners hearing.
[11]
The CTA scheduled another hearing on February 27, 2006.

On February 27, 2006, during the scheduled hearing, the CIR waived its right to cross-examine Milwaukees witness.
[12]
The CTA then asked Milwaukee to continue its presentation of rebuttal evidence. Not
prepared, Milwaukee moved for the postponement of the pre-marking and presentation of its rebuttal evidence
relative to the deductibility of some interests and bank charges from its corporate income tax for the year 1997
amounting to P18,128,498.26.

Immediately, the CTA issued a verbal order denying Milwaukees motion to be allowed additional commissioners
hearing for further presentation of its rebuttal evidence.The CTA likewise gave Milwaukee ten (10) days within
which to submit its Formal Offer of Rebuttal Evidence. [13]

Consequently, Milwaukee moved for reconsideration of the CTAs verbal order. Milwaukee likewise moved to toll the
running of the period for filing its formal offer of rebuttal evidence. [14]

In its June 1, 2006 Resolution, the CTA denied Milwaukees motion for reconsideration but allowed its motion to
suspend the period for filing of formal offer of rebuttal evidence. [15] Specifically, the CTA stated:

This Court agrees with the respondent. The Court, upon motion, allowed petitioner to present rebuttal
evidence. However, it was petitioner who asked for several postponements of trial and commissioners hearing, which
lead the Court to issue final warnings on October 26, 2005, January 16, 2006 and January 31, 2006.

It is worth stressing that the objective of the procedural rules is to secure a just, speedy and inexpensive disposition
of every action to the benefit of all litigants. The Court will not countenance further delay of the proceedings. Thus,
the Court hereby RESOLVES to DENY Petitioners Motion for Reconsideration for lack of merit.

However, finding petitioners Motion to Toll Running of the Period for Filing Formal Offer of Rebuttal Evidence to be
in order, the Court hereby RESOLVES to GRANT the same.
18
WHEREFORE, petitioner is ordered to submit its Formal Offer of Rebuttal Evidence within the remaining period
prescribed by this Court upon receipt of this Resolution.Respondent is given a period of 10 days to file his Comment
thereto. Thereafter, petitioners Formal Offer of Rebuttal Evidence shall be deemed submitted for resolution.

SO ORDERED.[16]

On June 21, 2006, Milwaukee filed its Formal Offer of Rebuttal Evidence (ex Abundanti ad Cautelam) before the
CTA.[17]

Aggrieved by the denial of its motion for reconsideration of the verbal order, Milwaukee filed this petition.

In its Memorandum,[18] Milwaukee submits the following

ISSUES

WHETHER OR NOT RESPONDENT CTA COMMITTED GRAVE ABUSE OF DISCRETION (AMOUNTING


TO LACK OR EXCESS OF JURISDICTION) IN DENYING PETITIONERS MOTION TO BE ALLOWED TO
PRESENT REBUTTAL EVIDENCE, AND ITS SUBSEQUENT MOTION FOR RECONSIDERATION
THEREON:

A. Whether or not petitioner unduly delayed the case;

B. Whether or not petitioner was denied due process by not being allowed to present its rebuttal
evidence in relation to its disallowed interest and bank charges for the year 1997; and

C. Whether or not petitioners proffered evidence, if allowed and admitted, would have sufficiently
substantiated its claims for deductibility of the disallowed interest and bank charges.[19]
Milwaukee explained that it sought postponement of the 27 February 2006 hearing, but only because the same was
originally scheduled for respondent CIRs cross-examination of Milwaukees witness. Unexpectedly, on that very same
hearing date, counsel for respondent CIR suddenly manifested that he was waiving cross-
examination. Understandably, Milwaukee was constrained to request for postponement of said hearing, not because
it intended to delay the proceedings, but because the evidence it intended to present, while already available, was
yet to be collated and sorted out for a more orderly presentation. [20]

Milwaukee claimed that the denial of its motions deprived it of its right to have the case be decided on the merits. It
wrote: Without said countervailing evidence, the adjudication of the issue of deductibility of certain interest and
bank charges will [be] seriously impaired, because it will not be based on substantial evidence or on the entire facts.
[21]

The Court finds no merit in the petition.

In order for a petition for certiorari to succeed, the following requisites must concur, namely: (a) that the writ is
directed against a tribunal, a board, or any officer exercising judicial or quasi-judicial functions; (b) such tribunal,
board, or officer has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction; and (c) there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of
law.[22] Without jurisdiction denotes that the tribunal, board, or officer acted with absolute lack of authority. There

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is excess of jurisdiction when the public respondent exceeds its power or acts without any statutory authority. Grave
abuse of discretion connotes such capricious and whimsical exercise of judgment as to be equivalent to lack or excess
of jurisdiction; otherwise stated, power is exercised in an arbitrary or despotic manner by reason of passion,
prejudice, or personal hostility; and such exercise is so patent or so gross as to amount to an evasion of a positive
duty or to a virtual refusal either to perform the duty enjoined or to act at all in contemplation of law. [23]

As a rule, the grant or denial of a motion for postponement is addressed to the sound discretion of the court which
should always be predicated on the consideration that more than the mere convenience of the courts or of the
parties, the ends of justice and fairness should be served thereby. [24] Furthermore, this discretion must be exercised
intelligently.[25]

In this case, the Court is of the view that the CTA gave enough opportunity for Milwaukee to present its rebuttal
evidence. Records reveal that when Milwaukee requested for resetting on September 5, 2005 and October 26, 2005,
its motions were granted by the CTA. As a matter of fact, by January 16, 2006, Milwaukee was already able to
partially present its rebuttal evidence. Thus, when the CTA called on Milwaukee to continue its presentation of
rebuttal evidence on February 27, 2006, it should have been prepared to do so. It cannot be said that the CTA
arbitrarily denied Milwaukees supposed simple request of resetting because it had already given the latter several
months to prepare and gather its rebuttal evidence.

Milwaukee tried to reason out that if only the CIR gave an advance notice that it would be waiving its right to cross-
examine its witness, then it could have rushed the collation and sorting of its rebuttal documentary exhibits. [26]

The Court, however, is not persuaded.

As stated earlier, Milwaukee was given more than ample time to collate and gather its evidence. It should have been
prepared for the continuance of the trial. True, the incident on said date was for the cross-examination
of Milwaukees witness but it could be short; it could be lengthy. Milwaukee should have prepared for any eventuality.
It is discretionary on the part of the court to allow a piece-meal presentation of evidence. If it decides not to allow it,
it cannot be considered an abuse of discretion. As defined, discretion is a faculty of a court or an official by which he
may decide a question either way, and still be right.[27]

Accordingly, Milwaukees right to due process was not transgressed. The Court has consistently reminded litigants
that due process is simply an opportunity to be heard. [28] The requirement of due process is satisfactorily met as long
as the parties are given the opportunity to present their side. In the case at bar, Milwaukee was precisely given the
right and the opportunity to present its side. It was able to present its evidence-in-chief and had its opportunity to
present rebuttal evidence.

WHEREFORE, the petition is DENIED.

SO ORDERED.

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