CASE DIGESTS OF RECENT CASES

CHANG L. MOHAMMAD, SHARALYN S. PEDRENA, JOHNNY S. YUSUP, FERDAUS

A. OMAR, AND ARMAND P. DAUD vs. COMMISSIONER OF CUSTOMS
CTA Case No. 10346 | SECOND DIVISION
Promulgated: November 4, 2022
Ponente: Bacorro-Villena, J.

FACTS: Omar went to Hong Kong, under the instructions of Yusup, to buy watches and pieces
of jewelry in a scheduled jewelry and gem fair in 2019. Omar was to be accompanied by Daud
and Mohammad. In the fair, Omar found that the pieces of jewelry were expensive, and hence,
only bought a few. Upon returning to the Manila, the three split the unspent money amongst
themselves -- $501,600 in Daud’s black cabin luggage, and $148,000 in Mohammad’s black
backpack.

During their flight, Daud filled out his Customs Baggage Declaration Form (CBDF). Mohammad
claims that it was inconvenient for him to do so while in the flight, and wanted to wait until they
landed.

Upon arrival at the airport, Daud request Mohammad to carry his backpack. However,
Mohammad encountered some issues with Immigration. When he was cleared, he could not find
Daud anymore. Mohammad went to the Customs area and filled out his CBDF, declaring that he
had, in his possession, $148,000. However, Mohammad already had two bags with him,
containing a total of $649,600.00.

Later on, after a preliminary hearing with AMLC and following the advice of BSP, the total
amount of $158,000.00 was released to Mohammad. Customs’ Law Division recommended the
issuance of a Warrant of Seizure and Detention (WSD) against the undeclared foreign currency
($491,600.00). Mohammad, et. al. filed a Motion for Compromise Settlement, wherein they
offered to pay a fine instead. The District Collector rejected the compromise and forfeited the
amount of $419,600.00 in favor of the government, for violation of Section 1113 (l)(2) of
CMTA.

ISSUE/S:

Procedural:
1. W/N the Petition for Review was filed on time
2. W/N the petitioners substantially complied with Section 2, Rule 42 of the Rules of Court

Substantive:
1. W/N the Respondent acted within the bounds of his discretion in affirming the denial of
the petitioners’ offer of settlement by payment of fine

RATIO:

Procedural:
1. Yes, the Petition for Review was filed on time. The Commission of Customs rendered a
decision on 29 July 2020, and the petitioners only received a copy of the decision on 11
August 2020. Hence, they had 30 days or until 10 September 2020 to file an appeal
before the CTA. The Petition for Review was filed on 10 September 2020.

2. Based on Section 4(a) of the RRCTA, in relation to Section 3 of the Rules of Court, the
Petition for Review should be accompanied with the pleadings and other material
portions of the record that would support the allegations of the petition. In this case, the
petitioners attached the Letter-Request dated 4 September 2020, the original copy of the
Notice of Decision signed by the NAIA Customhouse Law Division Chief Agaceta.
These sufficiently supported the allegations therein. Moreover, the parties already came
 up with a Joint Stipulation of Facts and Legal Issues (JSFLI), which contained a
discussion of the grounds of their appeal.

Substantive:

1. Section 1124 of the CMTA does not automatically grant a right upon any claimant to
demand the settlement of a pending seizure and forfeiture case. Such decision remains
solely within the discretion of the District Collector. The petitioners clearly violated
Section 1113 (l)(2) of the CMTA, which required any person bringing in foreign currency
to the Philippines to declare any amount in excess of US$10,000.00. Worse, the
petitioners failed to show proof that Daud, and not Mohammad, owned the backpack.

Forfeiture proceedings are in the nature of proceedings in rem. Hence, having

established Mohammad’s failure to comply with CMTA, the US$491,600.00 undeclared
foreign currency must be forfeited in favor of the government.

IBEX PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE

CTA EB No. 2533 (CTA Case No. 9802) | EN BANC
Promulgated: November 10, 2022
Ponente: Uy, J.

FACTS: IBEX Philippines filed a claim for tax refund under Section 112 (A), in relation to
Section 112 (C) of the Tax Code, covering the period from October 1, 2015 to June 30, 2016, in
the total amount of P9,138,100.67. Thereafter, BIR issued a Letter of Authority against IBEX
Philippines on February 6, 2018. However, in a letter dated February 23, 2018, the respondent
denied the petitioner’s administrative claim. The Petitioner received this letter on March 9, 2018,
and filed a Petition for Review before the CTA on April 10, 2018.

The case was raffled to the First Division of CTA. On November 18, 2020, the First Division
denied the Petition for Review for lack of merit. The petitioner filed a Motion for
Recommendation, and the same was denied. Thereafter, the petitioner elevated the Petition to the
Court En Banc.

ISSUE/S: W/N the First Division gravely erred in concluding that the petitioner is not entitled to
a refund of VAT

RATIO: IBEX does not qualify for VAT zero-rating because it failed to prove that the nature of
its services was other than processing, manufacturing, or repacking of goods; and that the same
were performed in the Philippines.

Based on Section 108 (B) (1) and (2) of the NIRC, the petitioner should satisfy the following
elements to qualify for VAT-zero rating: The recipient of the services is a foreign corporation,
and the said corporation is doing business outside the Philippines, or is a non-resident person not
engaged in business who is outside the Philippines when the services were performed:

1) The recipient of the services is a non-foreign corporation, and the said corporation is
doing business outside the Philippines, or is a nonresident person not engaged in business
who is outside the Philippines when the services were performed;
2) The services fall under any of the categories under Section 108 (B) (2), or simply, the
services rendered should be other than “processing, manufacturing, or repacking goods”;
3) The services must be performed in the Philippines by a VAT-registered person; and
4) The payment for such services should be in acceptable foreign currency accounted for in
accordance with BSP rules.

While the petitioner is compliant with the first and second elements, it is no longer compliant
with the third element. While it has an address, made purchases and incurred expenses in the
Philippines, there was no proof that the actual services it rendered were rendered in it. It had no
proof of any service agreement or contract to prove such fact.

COMMISSIONER OF INTERNAL REVENUE vs. GMA NETWORK FILMS, INC.

CTA EB No. 2441 (CTA Case No. 9381) | EN BANC
Promulgated: October 17, 2022
Ponente: Reyes-Fajardo, J.

FACTS: BIR issued a letter of authority (LOA) to GMA dated 23 August 2012. On 7 May 2014,
GMA executed a Waiver of the Defense of Prescription under the Statute of Limitations of the
NIRC, consenting to the assessment and/or collection of taxes or taxes for the subject calendar
year for the period not later than June 30, 2015. On May 29, 2015, BIR issued a PAN, with
attached details of discrepancies, assessing GMA for deficiency income tax, VAT, and EWT for
CY 2011, amounting to a total of P9,725,766.54. On 15 June 2015, BIR issued the FAN/FLD,
with an assessment of P9,879,245.42. GMA requested for a reinvestigation, and afterwards BIR
issued the FDDA with an assessment of deficiency income tax, VAT, and EWT for CY 2011 in
the amount of P11,054,565.66. Petitioner argued that the three-year prescriptive period to assess
taxes has been extended due to GMA’s execution of the waiver.

ISSUE/S: W/N GMA’s waiver of the prescriptive period is valid.

RATIO: No, GMA’s waiver of the prescriptive period is invalid. It failed to indicate the amount
of tax due and the type of tax assessed.

A waiver is a bilateral agreement, and there should be specific information on the kind and
amount of tax due for it to be considered valid. The Court cited the Supreme Court decision on
Commission of Internal Revenue vs. Standard Chartered Bank in saying, “Logically, there can be
no agreement if the kind and amount of the taxes to be assessed or collected were not indicated.
Hence, specific information in the waiver is necessary for its validity.”

Moreover, RMC No. 29-12 superseded RMO NO. 20-90, which does not require the amount and
type of tax assessed to be specified. In the circular, BIR itself stated that from August 2, 2001,
the form prescribed under RMC No. 29-12 shall apply. The form prescribed now requires that
the type and amount of tax be clearly indicated.

GMA is also not estopped. No partial payment has been made. Moreover, a waiver is a
derogation of the taxpayer’s right to security against prolonged and unscrupulous investigations.
Hence, it must be carefully and strictly construed.