CITY OF MANILA AND OFFICE OF THE CITY TREASURER OF MANILA, v.

COSMOS BOTTLING
CORPORATION

Facts:

For the first quarter of 2007, the City of Manila assessed [Cosmos] local business taxes and regulatory
fees in the total amount of P1,226,781.05, as contained in the Statement of Account dated January 15,
2007. [Cosmos] protested the assessment through a letter dated January 18, 2007, arguing that Tax
Ordinance Nos. 7988 and 8011, amending the Revenue Code of Manila (RCM), have been declared null
and void. [Cosmos] also argued that the collection of local business tax under Section 21 of the RCM in
addition to Section 14 of the same code constitutes double taxation.

[Cosmos] also tendered payment of only P131,994.23 which they posit is the correct computation of
their local business tax for the first quarter of 2007. This payment was refused by the City Treasurer.
[Cosmos] also received a letter from the City Treasurer denying their protest.

The Ruling of the CTA En Banc

In its Resolution of 16 February 2011, the CTA En Banc ruled that the direct resort to it without a prior
motion for reconsideration or new trial before the CTA Division violated Section 18 of Republic Act (R.A.)
No. 1125,10 as amended by R.A. No. 9282 and R.A. No. 9503, and Section 1, Rule 8 of the Revised Rules
of the CTA (CTA Rules).11

The petitioners sought reconsideration, but their motion was denied by the CTA En Banc. Hence, the
appeal before this Court.

ISSUES

Whether the CTA En Banc correctly dismissed the petition for review before it for failure of the
petitioners to file a motion for reconsideration or new trial with the CTA Division?

Whether a taxpayer who had initially protested and paid the assessment may shift its remedy to one
of refund?

Ruling:

I. The filing of a motion for reconsideration or new trial before the CTA Division is an
indispensable requirement for filing an appeal before the CTA En Banc.

The CTA En Banc was correct in interpreting Section 18 of R.A. No. 1125, as amended by R.A. 9282 and
R.A. No. 9503, which states –

Section 18. Appeal to the Court of Tax Appeals En Banc. – No civil proceeding involving matter arising
under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code
shall be maintained, except as herein provided, until and unless an appeal has been previously filed with
the CTA and disposed of this Act.
 A party adversely affected by a resolution of a Division of the CTA on motion for reconsideration or
new trial, may file a petition for review with the CTA en banc. (underlining supplied)

as requiring a prior motion for reconsideration or new trial before the same division of the CTA that
rendered the assailed decision before filing a petition for review with the CTA En Banc. Failure to file
such motion for reconsideration or new trial is cause for dismissal of the appeal before the CTA En Banc.

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 noncompliance may have resulted in prejudicing a
party's substantive rights. 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

II. A taxpayer who had protested and paid an assessment may later on institute an action for
refund.

To stress, where an assessment is issued, the taxpayer cannot choose to pay the assessment and
thereafter seek a refund at any time within the full period of two years from the date of payment as
Section 196 may suggest. If refund is pursued, the taxpayer must administratively question the validity
or correctness of the assessment in the 'letter-claim for refund' within 60 days from receipt of the notice
of assessment, and thereafter bring suit in court within 30 days from either decision or inaction by the
local treasurer.

Simply put, there are two conditions that must be satisfied in order to successfully prosecute an action
for refund in case the taxpayer had received an assessment. One, pay the tax and administratively assail
within 60 days the assessment before the local treasurer, whether in a letter-protest or in a claim for
refund. Two, bring an action in court within thirty (30) days from decision or inaction by the local
treasurer, whether such action 1s denominated as an appeal from assessment and/or claim for refund
of erroneously or illegally collected tax.

In this case, after Cosmos received the assessment of Toledo on 15 January 2007, it forthwith protested
such assessment through a letter dated 18 January 2007.34 Constrained to pay the assessed taxes and
charges, Cosmos subsequently wrote the Office of the City Treasurer another letter asking for the refund
and reiterating the grounds raised in the previous submitted protest letter.35 In the meantime, Cosmos
received on 6 February 2007 the letter of Toledo denying its protest.36 Thus, on 8 March 2007, or
exactly thirty (30) days from its receipt of the denial, Cosmos brought the action before the RTC of
Manila.

Under the circumstances, it is evident that Cosmos was fully justified in asking for the refund of the
assailed taxes after protesting the same before the local treasurer. Consistent with the discussion in the
premises, Cosmos may resort to, as it actually did, the alternative procedure of seeking a refund after
timely protesting and paying the assessment. Considering that Cosmos initiated the judicial claim for
refund within 30 days from receipt of the denial of its protest, it stands to reason that the assessment
which was validly protested had not yet attained finality.

To reiterate, Cosmos, after it had protested and paid the assessed tax, is permitted by law to seek a
refund having fully satisfied the twin conditions for prosecuting an action for refund before the court.

Consequently, the CTA did not commit a reversible error when it allowed the refund in favor of Cosmos.

WHEREFORE, the petition is DENIED for lack of merit. The 16 February 2011 and 20 April 2011
Resolutions of the Court of Tax Appeals En Banc in C.T.A. E.B. No. 702 are hereby AFFIRMED.

MITSUBISHI MOTORS PHILIPPINES CORPORATION, vs. BUREAU OF CUSTOMS

Facts:

The instant case arose from a collection suit4 for unpaid taxes and customs duties in the aggregate
amount of ₱46,844,385.00 filed by respondent against petitioner Mitsubishi Motors Philippines
Corporation (petitioner) before the Regional Trial Court of Manila, Branch 17 (RTC), docketed as Civil
Case No. 02-103763 (collection case).

Respondent alleged that from 1997 to1998, petitioner was able to secure tax credit certificates (TCCs)
from various transportation companies; after which, it made several importations and utilized said TCCs
for the payment of various customs duties and taxes in the aggregate amount of ₱46,844,385.00.5
Believing the authenticity of the TCCs, respondent allowed petitioner to use the same for the settlement
of such customs duties and taxes. However, a post-audit investigation of the Department of Finance
revealed that the TCCs were fraudulently secured with the use of fake commercial and bank documents,
and thus, respondent deemed that petitioner never settled its taxes and customs duties pertaining to
the aforesaid importations.6 Thereafter, respondent demanded that petitioner pay its unsettled tax and
customs duties, but to no avail. Hence, it was constrained to file the instant complaint.7

In its defense,8 petitioner maintained, inter alia, that it acquired the TCCs from their original holders in
good faith and that they were authentic, and thus, their remittance to respondent should be considered
as proper settlement of the taxes and customs duties it incurred in connection with the aforementioned
importations.9

Initially, the RTC dismissed10 the collection case due to the continuous absences of respondent’s
counsel during trial.11 On appeal to the CA,12 and eventually the Court,13 the said case was reinstated
and trial on the merits continued before the RTC.14

After respondent’s presentation of evidence, petitioner filed a Demurrer to Plaintiff’s Evidence15 on

February 10, 2012, essentially contending that respondent failed to prove by clear and convincing
evidence that the TCCs were fraudulently procured,16 and thus, prayed for the dismissal of the
complaint.17 In turn, respondent filed an Opposition18 dated March 7, 2012 refuting petitioner’s
contentions.

Assailed in this petition for review on certiorari1 are the Resolutions dated June 7, 20132 and November
4, 20133 of the Court of Appeals (CA) in CA-G.R. CV No. 99594, which referred the records of the instant
case to the Court of Tax Appeals (CTA) for proper disposition of the appeal taken by respondent Bureau
of Customs (respondent).

Issue:

Whether or not the CA correctly referred the records of the collection case to the CTA for proper
disposition of the appeal taken by respondent?

Ruling:

The petition is meritorious.

Jurisdiction is defined as the power and authority of a court to hear, try, and decide a case.32 In order
for the court or an adjudicative body to have authority to dispose of the case on the merits, it must
acquire, among others, jurisdiction over the subject matter.33 It is axiomatic that jurisdiction over the
subject matter is the power to hear and determine the general class to which the proceedings in
question belong; it is conferred by law and not by the consent or acquiescence of any or all of the
parties or by erroneous belief of the court that it exists.34 Thus, when a court has no jurisdiction over
the subject matter, the only power it has is to dismiss the action.

In the instant case, the CA has no jurisdiction over respondent’s appeal; hence, it cannot perform any
action on the same except to order its dismissal pursuant to Section 2, Rule 5039 of the Rules of Court.
Therefore, the act of the CA in referring respondent’s wrongful appeal before it to the CTA under the
guise of furthering the interests of substantial justice is blatantly erroneous, and thus, stands to be
corrected. In Anderson v. Ho,40 the Court held that the invocation of substantial justice is not a magic
wand that would readily dispel the application of procedural rules.

PAGCOR vs CA and Angeline V. Paez

Facts:

Respondent was an employee of PAGCOR with a position of Dealer stationed at Casino Filipino-
Waterfront Hotel, Lahug, Cebu City. In a random drug testing conducted by PAGCOR to all its employees,
respondent allegedly tested positive for methamphetamine. Thus, in its March 30, 2006 Letter,4
respondent was informed that she was dismissed from the service for gross misconduct and violation of
company rules and regulations.

The CSC exonerated respondent from the administrative charges on account of PAGCOR's failure to
comply with the requirements of Section 38 of Republic Act (R.A.) No. 9165 or the Comprehensive
Dangerous Drugs Act of 2002. It found that respondent was not notified of the positive screening result,
which should have given her a window of opportunity to impugn the result through a confirmatory
testing. It held that notice of the screening test is part of her substantive rights and the absence thereof
is tantamount to denial of the due process granted to her by law. Thus, it exonerated her of the
administrative charges.

Thus, on August 17, 2012, PAGCOR filed a petition for review before the CA under Rule 43 of the ROC.

In a Resolution,10 dated October 22, 2015, the CA reinstated the petition in view of respondent's
voluntary submission to its jurisdiction. It ordered PAGCOR to furnish respondent a copy of the petition
for review, complete with annexes, within five (5) days from notice and to submit proof of compliance
therewith.

In a resolution, dated April 27, 2016, the CA deemed the petition abandoned and dismissed the same. It
noted that, as of March 3, 2016, PAGCOR had yet to comply with its October 22, 2015 resolution.
Accordingly, it dismissed the petition.

PAGCOR moved for reconsideration of this resolution, which the CA denied in its January 3, 2017
resolution.

Hence, this petition, anchored on the ground that the CA committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it rendered the April 27, 2016 and January 3, 2017
resolutions.

PAGCOR argues that its failure to comply with the CA's October 22, 2015 resolution was unintentional. It
was merely due to the heavy workload of its former counsel, as well as the effect of the recurring water
intrusion/leakage in its offices due to bursting of the PAGCOR FCU Chilled Water. This outpour of water
soaked and damaged the computers, case files, confidential documents and other materials belonging
to the lawyers.

Further, PAGCOR argues that the gross negligence of its former handling lawyer should not bind it as it
would be tantamount to a deprivation of its right to due process and to be rightfully heard on the merits
of the case.

Issue:

WHETHER THE CA COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF

JURISDICTION WHEN IT DISMISSED THE PETITION FOR REVIEW OF PAGCOR?

Ruling:

The petition is devoid of merit.

PAGCOR comes before this Court seeking exemption from the general rule that a client is bound by the
acts, even mistakes, of his counsel in the realm of procedural technique.13 However, PAGCOR's
disregard for technical procedure is made manifest by the fact that the instant petition is a substitute for
a lost appeal. Further, the CA did not commit any grave abuse of discretion when it dismissed the
petition for review before it. The instant petition is a substitute for a lost appeal.

Further, PAGCOR was not deprived of due process. On the contrary, it was given every opportunity to be
heard, which is the very essence of due process. The merits of its case were heard by the CSC. It
appealed the decision of the CSC to the CA. The CA initially dismissed the case for failure to acquire
jurisdiction over respondent due to PAGCOR's failure to comply with its orders regarding service of a
copy of the petition to respondent and/or her counsel. When the CA reinstated the case in view of
respondent's voluntary submission to its jurisdiction, PAGCOR squandered the second chance given to it
by failing to comply with the CA's directive to furnish respondent with a copy of the petition. This is
despite respondent volunteering the current address of her counsel through the manifestations she
filed. To add salt to injury, PAGCOR let the period to appeal the January 3, 2017 resolution of the CA
before this Court lapse. Instead, it filed the present petition for certiorari as a substitute for its lost
appeal.

International Container Terminal Services Inc City of Manila

Facts:

International Container, a corporation with its principal place of business in Manila, renewed its
business license for 1999.

When the City Treasurer failed to decide International Container's protest within 60 days from the
protest, International Container filed before the Regional Trial Court of Manila its Petition for Certiorari
and Prohibition with Prayer for the Issuance of a Temporary Restraining Order against the City Treasurer
and Resident Auditor of Manila.11 The City Treasurer and the Resident Auditor of Manila moved for the
dismissal12 of the Petition for Certiorari and Prohibition on the ground that International Container had
no cause of action, since it had failed to comply with the requirements of Section 187 of Republic Act
No. 7160, otherwise known as the Local Government Code of 1991.

CIR vs Negros Consolidated Farms Multipurpose Cooperative

Facts:

As its usual course, COFA's farmer-members deliver the sugarcane produce to be milled and processed
in COFA's name with the sugar mill/refinery.[5] Before the refined sugar is released by the sugar mill,
however, an Authorization Allowing the Release of Refined Sugar (AARRS) from the Bureau of Internal
Revenue (BIR) is required from COFA. For several instances, upon COFA's application, the BIR issued the
AARRS without requiring COFA to pay advance VAT pursuant to COFA's tax exemption under Section
61[6] of RA 6938 and Section 109(r) (now under Section 109[L])[7] of RA No. 8424[8], as amended by RA
No. 9337.[9] As such, COFA was issued Certificates of Tax Exemption dated May 24, 1999 and April 23,
2003 by the BIR.[10]

However, beginning February 3, 2009, the BIR, through the Regional Director of Region 12-Bacolod City,
required as a condition for the issuance of the AARRS the payment of "advance VAT" on the premise
that COFA, as an agricultural cooperative, does not fall under the term "producer." According to the BIR,
a "producer" is one who tills the land it owns or leases, or who incurs cost for agricultural production of
the sugarcane to be refined by the sugar refinery.

In its presently assailed Decision, the CTA En Banc affirmed COFA's status as an agricultural cooperative
entitled to VAT exemption. By evidence consisting of COFA's Certificate of Registration dated October
19, 2009 and Certificate of Good Standing dated May 19, 2010, as well as the CIR's admission in its
Answer, pre-trial brief and stipulation of facts, it was established that COFA is an agricultural
cooperative. According to the CTA En Banc, COFA, at the time of the subject transactions, was a
cooperative in good standing as indicated in the Certification of Good Standing issued and renewed by
the CDA on May 19, 2010.

As such, the CTA En Banc held that pursuant to Section 109(L) of RA 8424, as amended, transactions
such as sales by agricultural cooperatives duly registered with the CDA to their members, as well as sales
of their produce, whether in its original state or processed fom1, to non-members, are exempt from
VAT. Citing Article 61 of RA 6938, as amended by RA 9520, the CTA En Banc held that cooperatives were
exempt from VAT for sales or transactions with members. As well, the CTA En Banc held that COFA was
exempt from VAT for transactions with non-members, provided that the goods subject of the
transaction were produced by the members of the cooperative; that the processed goods were sold in
the name and for the account of the cooperative; and, that at least 25% of the net income of the
cooperatives was returned to the members in the form of interest and/or patronage refunds.

Issue:

Whether or not COFA, at the time of the subject transactions, i.e., from May 12, 2009 to July 22, 2009, is
VAT--exempt and therefore entitled to a tax refund for the advance VAT it paid?

Ruling:

COFA is a VAT-exempt agricultural cooperative. Exemption from the payment of VAT on sales made by
the agricultural cooperatives to members or to non-members necessarily includes exemption from the
payment of "advance VAT" upon the withdrawal of the refined sugar from the sugar mill.

VAT is a tax on transactions, imposed at every stage of the distribution process on the sale, barter,
exchange of goods or property, and on the performance of services, even in the absence of profit
attributable thereto, so much so that even a non-stock, non-profit organization or government entity, is
liable to pay VAT on the sale of goods or services.
Moreover, being the exclusive marketing arm of the harvested sugarcane from the various farms of its
members, the cooperative does not: engage in the purchase of sugarcane produced by non-members.
As such, the sugarcane produced by the cooperative members will be harvested, hauled, delivered and
milled to the sugarmill in the name of COFA. The sugarmill issues the quedan of the raw sugar in the
name of COFA pursuant to the membership agreement that the cooperative will be solely and
exclusively tasked to market the sugar, molasses and other derivative products. Thereafter, COFA turns
over to its members the net proceeds of the sale of the sugarcane produce. When COFA further decides
to process the produced raw sugar of its members into refined sugar, the sugarmill issues refined sugar
quedan in the name of COFA.