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Philippine American Life and General Insurance the administrative agency, the regular courts have

(PHILAMLIFE) vs Secretary of Finance jurisdiction to pass upon the same.


G.R. No. 198756
January 13, 2015 2. APPLICABILITY OF SECTION 100 OF THE NIRC AND
RR 06-2008 AND RMC 25-2011.
Facts:
PHILAMLIFE intended to divest its shares from PHILAMCARE Petitioner argued that the transaction cannot be
and was then able to sold it to STI INVESTMENTS, INC. for subjected to donor’s tax because it has no donative intent
an amount based on the prevailing market rate of the nor actual donation. The fact that the shares are sold in an
shares via public bidding. However, the book value of the arm’s length transaction is enough to prove that there was
shares sold is more than the selling price. When the subject no donation. Moreover, they alleged that sale thru public
taxpayer applied for the issuance of tax clearance bidding (as in this case) is not among those included
certificate and Certificate Authorizing Registration, they transactions subject to donor’s tax.
were advised to secure a ruling due to the potential donor’s
tax implication.
Respondent’s contention:
In the BIR Ruling, the CIR denied the tax
exemption and held that the subject transaction is subject Even assuming that CTA has no jurisdiction over
to donor’s tax. (Dili nalng nato e detail ngano subject sa the case, petitioner should have appealed the case to the
donor’s tax ky tax remedies man ang topic). Office of the President as DOF is not among the agencies
enumerated under Rules of Court whose decisions are
Petitioner then appealed the ruling of the CIR to subject to petitioner for review in regular courts. They also
the Finance Secretary who also confirmed the ruling of the use the constitutional provision that the president exercises
CIR in its entirety. Petitioner ELEVATED THE CASE TO THE control over executive departments, bureaus and offices.
COURT OF APPEALS.

CA dismissed the case for lack of jurisdiction. It


held that CIR’s ruling was in the exercise of his power under Issue:
NIRC to interpret tax laws. Hence, a petition for review for
that matter comes within the jurisdiction of COURT OF TAX
APPEALS and not in CA. 1. WON CA has jurisdiction in petitions for review on the
decisions/rulings issued by the finance secretary in relation
to the exercise by the CIR of its POWER TO DECIDE TAX
Petitioner’s contention: CASES.

1. POWER TO INTERPRET TAX LAWS & DECIDE TAX 2. WON CTA has jurisdiction in deciding the validity of the
CASES (note duha ni ka power under Section 4) Revenue Regulations and Revenue Memorandum Circulars
issued by the Finance Secretary.
Power to Interpret tax laws – any adverse decisions of the
CIR is appealable to the Finance Secretary
Power to Decide Tax Cases – CTA has the exclusive and Rule:
appellate jurisdiction on reviewing matters in the exercise
of this power by CIR.
1. No.
Petitioner argued that their case does not fall in
the first paragraph of Section 4 of NIRC (power to interpret Admittedly, there is no provision in law that
tax laws). Their case does not also fall under the second expressly provides where exactly the ruling of the Secretary
paragraph (power to decide tax cases) because according to of Finance under the adverted NIRC provision is appealable
RA 1125, this relates only to customs cases. Hence, there is to. However,We find that Sec. 7(a)(1) of RA 1125, as
a gap in the law because it was not indicated clearly where amended, addresses the seeming gap in the law as it vests
to elevate the case on the adverse decision of the Finance the CTA, albeit impliedly, with jurisdiction over the CA
Secretary under the Second paragraph. petition as “other matters”arising under the NIRC or other
laws administered by the BIR. As stated:
This gap, petitioner submits, was remedied by
Bristish American Tabacco v. Camacho wherein the Court Sec. 7. Jurisdiction. - The CTA shall exercise:
ruled that where what is assailed is the validity or Exclusive appellate jurisdiction to review by appeal, as
constitutionality of a law, or a rule or regulation issued by herein provided:
1. Decisions of the Commissioner of Internal Revenue in importation of akylate is exempt from excise tax. A Customs
cases involving disputed assessments, refunds of internal Memorandum Circular (CMC) was issued stating that
revenue taxes, fees or other charges, penalties in relation Alkylate is subject to excise tax under Section 148( e) of the
thereto, or other matters arising under the National NIRC. CIR then issued assessment to Petron for deficiency
Internal Revenue or other laws administered by the Bureau tax. filed before the CTA a petition for review raising the
of Internal Revenue. (emphasis supplied). issue of whether its importation of alkylate is subject to
excise tax as contemplated under Section 148 (e) of the
NIRC. CIR filed a motion to dismiss on the grounds of lack of
Even though the provision suggests that it only jurisdiction and prematurity. CTA ruled in favor of Petron,
covers rulings of the Commissioner, We hold that it is, stating that (a) the controversy was not essentially for the
nonetheless, sufficient enough to include appeals from the determination of the constitutionality, legality or validity of
Secretary’s review under Sec. 4 of the NIRC. a law, rule or regulation but a question on the propriety or
soundness of the CIR's interpretation of Section 148 (e) of
the NIRC which falls within the exclusive jurisdiction of the
CTA under Section 4 thereof, particularly under the phrase
2. Yes. "other matters arising under [the NIRC]";17 and (b) there
are attending circumstances that exempt the case from the
The recent case of City of Manila vs Grecia- rule on non-exhaustion of administrative remedies, such as
Cuerdo over-rules the British American case depicted by the the great irreparable damage that may be suffered by
petitioner. Petron from the CIR's final assessment of excise tax on its
importation. CIR is now alleging that the CTA committed
City of Manila diametrically opposes British grave abuse of discretion because it does not have
American Tobacco to the effect that it is now within the jurisdiction to take cognizance of the case.
power of the CTA, through its power of certiorari, to rule on (Long Version)
the validity of a particular administrative rule or regulation Petron, which is engaged in the manufacture and marketing
so long as it is within its appellate jurisdiction. Hence, it can of petroleum products, imports alkylate as a raw material
now rule not only on the propriety of an assessment or tax or blending component for the manufacture of ethanol-
treatment of a certain transaction, but also on the validity blended motor gasoline.For the period January 2009 to
of the revenue regulation or revenue memorandum circular August 2011, as well as for the month of April 2012, Petron
on which the said assessment is based. transacted an aggregate of 22 separate importations for
which petitioner the Commissioner of Internal Revenue
Guided by the doctrinal teaching in resolving the (CIR) issued Authorities to Release Imported Goods
case at bar, the fact that the CA petition not only contested (ATRIGs), categorically stating that Petron's importation of
the applicability of Sec. 100 of the NIRC over the sales alkylate is exempt from the payment of the excise tax. In
transaction but likewise questioned the validity of Sec. June 2012, Petron imported 12,802,660 liters of alkylate
7(c.2.2) of RR 06-08 and RMC 25-11 does not divest the CTA and paid value-added tax (VAT) in the total amount of
of its jurisdiction over the controversy, contrary to 41,657,533.00 as evidenced by Import Entry and Internal
petitioner’s arguments. Revenue Declaration (IEIRD) No. SN 122406532. Based on
the Final Computation, said importation was subjected by
the Collector of Customs of Port Limay, Bataan, upon
instructions of the Commissioner of Customs (COC), to
Commissioner of Internal Revenue v. Court of Tax excise taxes of P4.35 per liter, or in the aggregate amount
Appeals and Petron Corporation, G.R. No. of P55,691,571.00, and consequently, to an additional VAT
207843, July 15, 2015 of 12% on the imposed excise tax in the amount of
DOCTRINE: The CTA has no jurisdiction to determine the P6,682,989.00.
validity of a ruling issued by the CIR or the COC in The imposition of the excise tax was supposedly premised
the exercise of their quasi-legislative powers to interpret on Customs Memorandum Circular (CMC) No. 164-2012
tax laws. The phrase "other matters arising under this dated July 18, 2012, implementing the Letter dated June 29,
Code," as stated in the second paragraph of Section 4 of the 2012 issued by the CIR, which states that: [A]lkylate which
NIRC, should be understood as pertaining to those matters is a product of distillation similar to that of naphta, is
directly related to the preceding phrase "disputed subject to excise tax under Section 148( e) of the National
assessments, refunds of internal revenue taxes, fees or Internal Revenue Code (NIRC) of 1997.
other charges, penalties imposed in relation thereto". It In view of the CIR's assessment, Petron filed before the CTA
cannot extend to evaluating the soundness of the a petition for review, docketed as CTA Case No. 8544,
interpretation of tax laws by the CIR. raising the issue of whether its importation of alkylate as a
FACTS: (Short Version) blending component is subject to excise tax as
Petron imports alkylate as a raw material for the contemplated under Section 148 (e) of the NIRC.
manufacture of motor gasoline. It claims that its
CIR filed a motion to dismiss on the grounds of lack of customs duties, hence, Petron's petition before the CTA
jurisdiction and prematurity. ultimately challenging the legality and constitutionality of
CTA gave due course to Petron's petition, finding that: (a) the CIR's aforesaid interpretation of a tax provision.
the controversy was not essentially for the determination In line with the foregoing discussion, however, the CIR
of the constitutionality, legality or validity of a law, rule or correctly argues that the CTA had no jurisdiction to take
regulation but a question on the propriety or soundness of cognizance of the petition as its resolution would
the CIR's interpretation of Section 148 (e) of the NIRC which necessarily involve a declaration of the validity or
falls within the exclusive jurisdiction of the CTA under constitutionality of the CIR's interpretation of Section 148
Section 4 thereof, particularly under the phrase "other (e) of the NIRC, which is subject to the exclusive review by
matters arising under [the NIRC]";17 and (b) there are the Secretary of Finance and ultimately by the regular
attending circumstances that exempt the case from the rule courts.
on non-exhaustion of administrative remedies, such as the Hence, as the CIR's interpretation of a tax provision involves
great irreparable damage that may be suffered by Petron an exercise of her quasi-legislative functions, the proper
from the CIR's final assessment of excise tax on its recourse against the subject tax ruling expressed in CMC
importation. CIR sought immediate recourse to the Court, No. 164-2012 is a review by the Secretary of Finance and
through the instant petition, alleging that the CTA ultimately the regular courts.
committed grave abuse of discretion when it assumed There being no protest ruling by the customs collector that
authority to take cognizance of the case despite its lack of was appealed to the COC, the filing of the petition before
jurisdiction to do so the CTA was premature as there was nothing yet to review.
ISSUE/S: WON CTA had jurisdiction - NO Verily, the fact that there is no decision by the COC to
HELD: NO. The case does not fall within the jurisdiction of appeal from highlights Petron's failure to exhaust
the CTA because the phrase "other matters arising under administrative remedies prescribed by law. Before a party
this Code," as stated in the second paragraph of Section 4 is allowed to seek the intervention of the courts, it is a pre-
of the NIRC, should be understood as pertaining to those condition that he avail of all administrative processes
matters directly related to the preceding phrase "disputed afforded him, such that if a remedy within the
assessments, refunds of internal revenue taxes, fees or administrative machinery can be resorted to by giving the
other charges, penalties imposed in relation thereto". It administrative officer every opportunity to decide on a
cannot extend to evaluating the soundness of the matter that comes within his jurisdiction, then such remedy
interpretation of tax laws by must be exhausted first before the court's power of judicial
the CIR. Moreover, Section 4 of the NIRC confers upon the review can be sought, otherwise, the premature resort to
CIR both: (a) the power to interpret tax laws in the exercise the court is fatal to one's cause of action.
of her quasi-legislative function; and (b) the power to DISPOSITIVE: WHEREFORE, the petition is GRANTED. The
decide tax cases in the exercise of her quasi-judicial Resolutions dated February 13, 2013 and May 8, 2013 of the
function. It also delineates the jurisdictional authority to Court of Tax Appeals (CTA), Second Division in CTA Case No.
review the validity of the CIR's exercise of the said powers, 8544 are hereby REVERSED and SET ASIDE. The petition for
thus: review filed by private respondent Petron Corporation
SEC. 4. Power of the Commissioner to Interpret Tax Laws before the CTA is DISMISSED for lack of jurisdiction and
and to Decide Tax Cases. - The power to interpret the prematurity.
provisions of this Code and other tax laws shall be under the SECRETARY OF FINANCE v ORO MAURA SHIPPING LINES
exclusive and original jurisdiction of the Commissioner, Brion; June 15, 2009
subject to review by the Secretary of Finance. The power to Topic: Tariff and Customs
decide disputed assessments, refunds of internal revenue Quick Facts
taxes, fees or other charges, penalties imposed in relation Glory Shipping Lines owed the Collector of the Port of
thereto, or other matters arising under this Code or other Mactan P1,296,710.00 for the importation of M/V
laws or portions thereof administered by the Bureau of “HARUNA.” Without
Internal Revenue is vested in the Commissioner, subject to notifying the Collector of the Port of Mactan, Glory sold the
the exclusive appellate jurisdiction of the Court of Tax M/V “HARUNA” to Oro Maura Shipping Lines. Oro Maura
Appeals. through
The CTA is a court of special jurisdiction, with power to Kariton inquired with the DOF if it could pay the duties and
review by appeal decisions involving tax disputes rendered taxes due on the vessel. The DOF referred Kariton’s letter
by either the CIR or the COC. Conversely, [the CTA] has no which
jurisdiction to determine the validity of a ruling issued by ended up with the Collector of Customs of the Port of
the CIR or the COC in the exercise of their quasilegislative Manila which accepted the declared value of the vessel at
powers to interpret tax laws. P1,100,000.00
In this case, Petron's tax liability was premised on the COC's and assessed duties and taxes amounting to P149,989.00,
issuance of CMC No. 164-2012, which gave effect to the which Oro Maura duly paid in 1995. Upon learning of the
CIR's June 29, 2012 Letter interpreting Section 148 (e) of the sale, the Collector of the Port of Mactan ordered the
NIRC as to include alkylate among the articles subject to forfeiture of the vessel in favor of the Government.
DOF ordered a reassessment of the dutiable value of the vessel (P1,952,000.00) despite repeated demands made by
vessel based on the original entered value, without the Collector of the Port of Mactan.
allowance for Without informing or notifying the Collector of the Port of
depreciation.The CA ruled that the earlier assessment made Mactan, Haruna Maritime S.A. and Glory Shipping Lines sold
by the Collector of the Port of Manila had already become the M/V “HARUNA” to Oro Maura Shipping Lines. Kariton
final and and Company (Kariton), representing Oro Maura, inquired
conclusive on all parties, pursuant to Sections 1407 and with the DOF if it could pay the duties and taxes due on the
1603 of the TCCP. vessel. The DOF referred Kariton’s letter which ended up
Doctrine/tax: Section 1603. Finality of Liquidation. – When with the Collector of Customs of the Port of Manila which
articles have been entered and passed free of duty or final accepted the declared value of the vessel at P1,100,000.00
adjustments of duties made, with subsequent delivery, and assessed duties and taxes amounting to P149,989.00,
such entry and passage free of duty or settlements of duties which Oro Maura duly paid in 1995.
will, after In 1997, after discovery of the sale, the Collector of the Port
the expiration of one (1) year, from the date of the final of Mactan sent Oro Maura a demand letter for the unpaid
payment of duties, in the absence of fraud or protest or customs duties and charges of Glory Shipping Lines. It later
compliance ordered the forfeiture of the vessel in favor of the
audit pursuant to the provisions of this Code, be final and Government, after finding that both Glory Shipping Lines
conclusive upon all parties, unless the liquidation of the and the respondent acted fraudulently in the transaction.
import entry The Collector of the Port of Mactan found that the
was merely tentative. Section 2503. Undervaluation, respondent defrauded the BOC of the proper customs duty,
Misclassification and Misdeclaration of Entry. – but the District Collector of Cebu held otherwise on appeal
Xxx That an undervaluation, misdeclaration in weight, and absolved the respondent from any participation in the
measurement or quantity of more than thirty percent (30%) fraud committed by Glory Shipping Lines. These factual
between the findings and conclusion were affirmed by the Commissioner
value, weight, measurement, or quantity declared in the of Customs, by the CTA and, ultimately, by the CA. Although
entry, and the actual value, weight, quantity, or in agreement with the conclusion, DOF, however, ordered
measurement shall a reassessment of the dutiable value of the vessel based on
constitute a prima facie evidence of fraud penalized under the original entered value, without allowance for
Section 2530 of this Code. depreciation.
The CA ruled that the earlier assessment made by the
Facts: Collector of the Port of Manila had already become final
In 1992, the Maritime Industry Authority (MARINA) and conclusive on all parties, pursuant to Sections 1407 and
authorized the importation of M/V “HARUNA”; under a 1603 of the TCCP.
Bareboat Charter, for a period of 5 years from its actual Hence to SC:
delivery to the charterer. The original parties to the DOF arguments:
bareboat charter agreement were Haruna Maritime S.A and 1. The Commissioner and the Secretary may at any time
Glory Shipping Lines (Glory), the charterer. The Department direct the re assessment of dutiable articles and order the
of Finance (DOF), allowed the temporary registration of the collection of deficiency duties. Even assuming that Sections
M/V “HARUNA” and its tax and duty-free release to Glory. 1407 and 1603 of the TCCP apply to the present case, the
The Bureau of Customs (BOC) also required Glory to post a one-year limitation does not run where the article was
bond in the amount equal to 150% of the duties, taxes and misdeclared or undervalued, until a deficiency assessment
other charges due on the importation, conditioned on the has been issued and settled in full.
re-exportation of the vessel upon termination of the 2. Oro Maura being a direct and actual party to the
charter period, but in no case to extend beyond the year importation, should have ensured that the imported article
1999. Glory posted Ordinary Re-Export Bond for was properly declared and assessed the correct duties.
P1,952,000.00, conditioned on the re-export of the vessel Oro Maura’s arguments:
within a period of one 1 year or, in case of default, to pay 1. The appraisal of the Collector can only be altered or
customs duty, tax and other charges on the importation of modified within a year from payment of duties, per Sections
the vessel in the amount of P1,296,710.00. M/V “HARUNA” 1407 and 1603 of the TCCP; it is only when there is fraud or
arrived at the Port of Mactan with a dutiable value of protest or when the import entry was merely tentative that
P6,171,092.00 and estimated customs duty of settlement of duties will not attain finality.
P1,296,710.00. 2. Allegation that there was misdeclaration or
When Glory’s re-export bond expired, Glory sent a Letter of undervaluation of the vessel is not supported by the
Guarantee to the Collector guaranteeing to renew the Re- evidence.
Export Bond on vessel M/V “HARUNA” otherwise, it would
pay the duties and taxes on said vessel. Glory Shipping Lines ISSUE:
never complied with its Letter of Guarantee; neither did it WON the Secretary of Finance can order a re-assessment of
pay the duties and taxes and other charges due on the the vessel M/V “HARUNA.”
HELD: Yes The 80% drop in valuation existing in this case renders the
Ratio: consideration and application of Section 2503 unavoidable.
A closer scrutiny of the surrounding circumstances of the Significantly, Oro Maura never explained the considerable
case and the respondent’s actions reveal the existence of disparity between the dutiable value declared by Glory
fraud. Our finding of fraud leads us to conclude that the Shipping Lines and the dutiable value it declared –
assessment of the Collector of the Port of Manila cannot difference of P5,000,000.00 – so as to overturn or
become final and conclusive pursuant to Section 1603 of contradict this prima facie finding of fraud.
the TCCP, which states: The respondent, being in the shipping business, should
Section 1603. Finality of Liquidation. – When articles have have known the standard prices of vessels and that the
been entered and passed free of duty or final adjustments value it proposed to MARINA, is extraordinarily low
of duties compared to the vessel’s originally declared valuation. Oro
made, with subsequent delivery, such entry and passage Maura’s Complicity Oro Maura fully participated in moves
free of duty or settlements of duties will, after the to defraud the BOC. With the knowledge that the vessel was
expiration of one released under a reexport bond, the respondent should
(1) year, from the date of the final payment of duties, in the have known that this original entry was subject to specific
absence of fraud or protest or compliance audit pursuant to conditions, among them, the obligation to guarantee the
the re-export of the vessel within a given period, or otherwise
provisions of this Code, be final and conclusive upon all to pay the customs duties on the vessel.
parties, unless the liquidation of the import entry was It should have known, too, of the conditions of the vessel’s
merely tentative. release under the re-export bond and of the state of Glory
Shipping Lines’ status of compliance. There was an original
An undisputed given in the facts of the case is the valuation but incomplete importation by Glory Shipping Lines that the
of P6,171,092.00 that Glory Shipping Lines gave when the respondent could not have simply disregarded proceeds
vessel first entered the country. When Oro Maura made its from knowledge of the vessel’s history and the application
request with the MARINA for authorization to import the of the relevant law. In this respect, Section 1202 of the TCCP
same vessel after a span of only 19 months, the respondent provides:
proposed an acquisition cost of only P1,100,000.00. Importation begins when the carrying vessel or aircraft
Consistent with this proposal, the respondent, through enters the jurisdiction of the Philippines with intention to
Kariton, gave the vessel the same declared value in its own unlade therein. Importation is deemed terminated upon
Import Entry filed with the Collector of the Port of Manila. payment of the duties, taxes and other charges due upon
Thus, in a little over a year and a half, the declared value of the articles, or secured to be paid, at a port of entry and the
the vessel decreased by P5,000,000.00, or an astonishing legal permit for withdrawal shall have been granted, or in
80% of its original price. We find this drop in value within a case said articles are free of duties, taxes and other charges,
short period of 19 months to be too fantastic to be accepted until they have legally left the jurisdiction of the customs.
without question, even allowing for depreciation. Equally Nature of a tax lien
fantastic is the change in the customs duties, taxes and Section 1204. Liability of Importer for Duties. – Unless
other charges due which fell from P1,296,710.00 in March relieved by laws or regulations, the liability for duties, taxes,
1993 to P149,989.00 in January 1995, all because of the fees and other charges attaching on importation
sale, the new application by the vendee, and the change in constitutes a personal debt due from the importer to the
the Port where the assessment and collection were made. government which can be discharged only by payment in
The drop alone from the undisputed original entry valuation full of all duties, taxes, fees and other charges legally
of P6,171,092.00 to the respondent’s new valuation of accruing. It also constitutes a lien upon the articles
P1,100,000.00 (or a decrease of 80% from the original imported which may be enforced while such articles are in
valuation) is already a prima facie evidence of fraud that the custody or subject to the control of the government.
rulings below did not properly appreciate simply because Consequently, when the respondent bought the vessel
they disregarded the records of the original entry of the from Glory Shipping Lines on December 2, 1994, the
vessel through the Port of Mactan. Section 2503 of the TCCP obligation to pay the BOC P1,296,710.00 as customs duties
provides in this regard that: Section 2503. Undervaluation, had already attached to the vessel and the non-renewal of
Misclassification and Misdeclaration of Entry. – the re-export bond made this liability due and demandable.
Xxx That an undervaluation, misdeclaration in weight, The subsequent transfer of ownership of the vessel from
measurement or quantity of more than thirty percent (30%) Glory Shipping Lines to the respondent did not extinguish
between the this liability. We find in favor of DOF and uphold his order
value, weight, measurement, or quantity declared in the for the re-assessment of the value of the vessel based on
entry, and the actual value, weight, quantity, or the entered value, which in this case should follow the
measurement shall unpaid assessment made by the Collector of Customs of the
constitute a prima facie evidence of fraud penalized under Port of Mactan.
Section 2530 of this Code.