TARIFF AND CUSTOMS LAWS  
  1. Articles subject to duty
 
Substantive Aspect of Tariff and Customs Laws
 
Meaning and Scope - Section 3514 (TCC)
 
Provides that Tariff and Customs Laws include not
only the provisions of the code itself and regulations
pursuant thereto but all other laws and regulation  
which are subject to enforcement by the Bureau of
Customs or otherwise within its jurisdiction. It
extend not only to the provisions of the Tariff
Customs Code but to all other laws as well; like
Central Bank Circulars, the enforcement of which is
entrusted to the Bureau of Customs.
 
 
Nature of Customs Duties and Tariff
 
1.   Custom duties:Are duties which are one
charged upon commodities on their being
imported into or exported out of a country.  
 
2.   Tariff:Means a book of rates, a table or  
catalogue drawn usually in alphabetical
order containing the names of several kinds
of merchandise with the duties to be paid for
the same as settled or agreed upon between     
several states that holds commerce together.
Concept of Goods for Customs duty purposes:
               
As to Imported Articles:
 
All articles when imported from any foreign country
into the Philippines shall be subject to duty upon
each importation even thought previously exported
from the Philippines.  Except as otherwise
specifically provided for in the code or other laws:
 
As to Exported Articles
Certain articles like specific types of wood, mineral
plant, vegetable and animal products are subject to
tariff and premium duties.  
Note: Articles: When used with reference to
importation or exportation includes goods, wares
and merchandise and, in general anything that
maybe made the subject of exportation and
importation.
 
Pertinent Case:
 
4 US dollars, having ceased to be legal tender in the
Philippines, fall within the meaning of the term     
“merchandise” (Bastida vs. Acting Commissioner     
of Customs, et al, L-24011, Oct. 24, 1970)
 
Articles / Goods Covered under the Tariff and
Customs Code:
General Rule: All articles when imported
from a foreign country including those
previously exported from the Philippines
one subject to duty unless otherwise
specifically provided for in the Tariff and
Customs Code or other laws. (Sec. 100,
TCS)
2. Prohibited Importations
 
Classifications:
 
A.       Articles which are absolutely
prohibited:
 weapons of war
 gambling devices
 narcotics or prohibited drugs
 immoral, obscene or insidious
articles
 those prohibited under special laws
B.       Articles Qualifiedly Prohibited:
Refers to those which maybe imported
but subject to, and after compliance
with, certain conditions.
                           
Pertinent Cases:
1.    Where such conditions as to warrant
lawful importation neither do nor
exist, the legal effects of the
importation of qualifiedly prohibited
articles are the same as those of
absolutely prohibited articles. 
(AuyongHian vs CTA, 59 SCRA
110)
 
2.   Prohibited importations one subject
to forfeiture whether the shipper and
the consignee are one and the same
person.  (UTE PATEROR vs.
Bureau of Customs, 193 S 132)
3.   Conditionally-free importations:
 
These are articles which are exempt
from import duties upon compliance
with the formalities prescribed with
regulations promulgated by the
Commission of Customs with the
approval of the Secretary of Finance.
(Sec. 105, TCC)
                                           
                            This article includes:
 
1.        Those prohibited for in Sec.
105 of the Tariff and Customs
Code;
 
 2.        Those granted to government
agencies, government-owned or
controlled corporations with
agreement with foreign countries;
 
3.        Those given to international
institutions, entitled to exemption
by agreement or special laws;
and
 
4.        Those that maybe granted by
the President upon NEDA’s
recommendation.
 
Liability for Custom Duties
 
General Rule: All importations / exportation of
articles / goods are subject to customs duties.
 
Exceptions:
 
1. Exempt under the TCC.
 
2. Exemption granted to government agencies,
instrumentalities with existing contracts,
commitment, agreements or obligations with
foreign countries.
3. Exempt international organizations pursuant
to agreements or special laws; and
 
4. Exempt by the President upon
recommendation of NEDA.
 
Liability of Importer for Custom Duties:
 
1. A personal debt which can be discharged
only by payment in full thereof;
 
2. A lien upon the imported article while they
are in custody or subject to the control of the
government.
Valuation of the Goods:
Invoice value of the goods plus:
 
1.        freight
 
2.        insurance
3.        cost
 
4.        expenses, and
 
5.        other necessary expenses.
 
Note: Imported goods must be entered into a custom
house at their port of entry otherwise they shall be
considered as contraband and the importer is liable
for smuggling.
 
Import entry
 
                It is a declaration in the Bureau of
Customs showing particulars of the imported article
that will enable the customs authorities to determine
the correct duties.
 
1. When importation does begin?
 
Importation begins when the carrying vessel
or aircraft enters the jurisdiction of the
Philippines with the intention to unlade
therein.
 
2. When is it terminated / ended?
 
Importation is deemed terminated upon
payment of duties, taxes and other charges
due upon the articles pr secured to be paid at
a port of entry and the legal permit for
withdrawal shall gave been granted or in
case said articles are free of duties, taxes and
other charges, until they have legally left the
jurisdiction of the customs (Sec. 1202, TCC)
 
Note: All imported articles into the Philippines,
whether subject to duty or not, shall be entered
through a customs house at a port of entry.
1.        Port of Entry
 
Means a domestic open to both foreign and
continuous trade including airport of entry.
 
2.        Exportation
It is the bringing out of goods from the
Philippines territorial jurisdiction.
 
3.        Under Executive Order # 26, Series of
1986, Export taxes, except on logs, have
been suspended
 
Kinds of Custom Duties
A. Regular / Ordinary Duties
These are duties imposed on imported
articles that enter the country of the
Philippines in avoidance with the schedules
and classifications provided under the Tariff
and Customs Code.
Classification:
 
1.        Advalorem Duty
 
Duty based on the value of the imported
article.
 
2.        Specific Duty
 
Duty based on the dutiable weight of
goods number or measurement.

B. Special Duties
 
Imposed in addition to regular or ordinary
duties principally in order to protect local
industries against unfair competition from
foreign manufacturers or procedures;
consumer against possible deceptions; and
national interest.
 
Classifications:
1.        Dumping Duty
Imposed by the secretary of Finance
upon the recommendation of the Tariff
Commission when:
 
a.        The price of the imported article
is deliberately or continually fixed at
less than the fair market value or cost
of production; and
b.        Importation would cause or likely
cause and injury to local industries
engaged in the manufacture or
production of the same or similar
articles or prevent their
establishment.
 
Amount of special duty: extent of the
under pricing.
 
2.        Countervailing duty
 
Special duty imposed on imported
articles which are granted any kind or
form of subsidy by the government in
the country or origin or exportation, the
importation of which has caused or
threatens to cause material injury to a
domestic industry or has materially
relaided the growth or, prevents the
establishment of a domestic industry.
(RA #8751)
 
Requisites:
 
1.        The levy of an excise tax or
inland tax or local goods of the same
or similar class as the article
imported or the grant of subsidy to
the foreign exporter by his
government; and
 
2.        The importation is likely to insure
materially established local
industries or prevent their
establishments.
Amount of special duty:  Equal to the
bounty or subsidy or subvention.
3.        Marking Duty
Special duty of five percent (5%)
advalorem imposed or articles properly
marked, collected by the commissioner,
except when such article is exported or
destroyed under the customs supervision
and prior to final liquidation of the
corresponding entry.
               
Purpose:  To prevent possible deception
of the consumers.
4.        Discriminatory/Retaliatory duty
Imposed on imported goods whenever it
is found as a fact that the country of
origin discriminates against the
commerce of the Philippines in such a
manner as to place the commerce of the
Philippines at a disadvantage compared
with the commerce of any foreign
country.
5.        Duties imposed under the Flexible
Tariff Clause (Sec. 401, TCC)
 
Import duties which are modified by the
President upon investigation of the Tariff
Commissions and recommendation of
the National Economic Development
Authority in the interest of national
economy, general welfare and national
security.
The President is given by the Tariff and
Customs Code ample powers to adjust
tariff rates Sec. 401 of TCC; empowers
the president to:
 
1.        Increase, reduce, or remove
existing protective rates of import duty;
  2.        Establish import quota or to
ban imports of any commodity;
3.        Impose and additional duty on
all imports not exceeding 10%
advaloremwhenever necessary.
 
Limitations imposed regarding the Flexible
Tariff Clause:
 
1. Conduct by the Tariff Commission of an
investigation in which a public hearing shall
be hold wherein interested parties shall be
afforded reasonable opportunity to be
present, produce evidence and to be heard;
 
2. The commission shall also hear the views
and recommendations of any government
office, agency or instrumentality concerned;
3. The commission shall submit their findings
and recommendations to the NEDA within
 30 days after the termination of the public  
hearings.  The NEDA thereafter, submits its 9.        Nature and composition and the
recommendation to the President. classification and heading number for
  customs revenue and other related
  purposes.
   
  B. Administrative Assistance to the
Administrative Aspect of President and Congress
Tariff and Customs Laws  
  1.        Ascertain conversion costs and costs
Agencies directly concerned with Tariff and of production:
Customs Administration:  
  a.        In the principal growing,
TARIFF COMMISSION producing or manufacturing:
   
Officials of the Tariff Commission are the 1.        Centers in the Philippines
chairman and 2 member Commissioners, all whenever possible;
appointed by the President.  
  2.        Centers in foreign countries;
Functions: whenever necessary;
   
A. Investigative Powers: b.        Including effects of tariff
  modifications or import restriction or
1.        Administration and the fiscal and prices.
industrial effect of the Tariff and  
Customs laws of this country now in 2.        Select and describe representative
force or when hereafter be enacted; articles imported to the Philippines
  similar to or comparable with those
2.        Relations between the rates of duty locally produced
on raw materials and the finished or  
partly finished products; 3.        Ascertain imposts costs of such
  representative articles so selected.
3.        Effects of ad valorem and specific  
duties and of compound, specific and ad 4.        Ascertain the grower’s producers or
valorem duties; manufacturer’s selling prices.
   
4.        All questions relative to the 5.        Submit annual reports of these to the
arrangement of schedules and President of the Philippines, copies of
classification of articles in several which shall be furnished to the NEDA,
sections of the tariff law; BSP, Dept. of Finance and the Bureau of
  Investments.
5.        Tariff relations between the  
Philippines and the Foreign countries,
commercial treaties, preferential
provisions, economic alliances, the
effect of export bounties and preferential
transportation rate;
 
6.        Volume of importations compared
with domestic production and
consumption;
 
7.        Conditions, causes and effects
relating to completion of foreign
industries with those of the Philippines,
including dumping and cost of
production;
 
8.        In general, to investigate the
operation of customs and tariff laws,
including their relations to the national
revenues, their effect upon the industries
or labor of the country and to submit
reports of  its investigation;

BUREAU OF CUSTOMS
Composed of one chief and 2 assistant chiefs known
as commissioner of customs, appointed by the
President respectively.
Functions of the Bureau of Customs (CASE)
 
1. Control smuggling and related frauds.
 
2. Assessment and collection of Revenues from
imported articles and all other impositions
under the tariff and customs laws.
 
3. Supervision and control over due entrance
and clearance of vessels and aircraft
engaged in foreign commerce.
 
4. Enforcement of Tariff and Custom Code and
related laws.
 
5. Supervision on control over the handling of
foreign mails arriving in the Philippines.
 
6. Supervise and control all import and export
cargos for the protection of the government
revenue.
7. Exclusive original jurisdiction over seizure
and forfeiture cases under the tariff and
customs laws.
 
Other Powers:
 
1. Supervision of collection districts and ports
of entry, coast ruse trade, vessels an aircrafts
used in foreign trade;
 
2. Ascertainment, collection and recovery of
import duty;
3. Warehousing of imported articles; and
 
4.  Administrative proceedings like search ,
seizure and arrest, including forfeitures.
 
 
Commissioner of Customs is vested with
authority to:
A.       Assess
 
B.       Collect
 
1.        All lawful revenues from imported
articles;
 
2.        All other dues, fees, charges, fines
and penalties.
 
 
 Procedural Aspect of the Tariff and Customs
Laws
 
Nature of Customs Protest;  Seizures and
Forfeiture cases
There are two kinds of proceedings in the
Bureau of Customs, these are:
 
a. Customs protest cases- deal safely with
liability for customs, duties, fees and other
charges.
 
b. Seizure and forfeiture cases- refer to
matters involving smuggling or the act of
any person who fraudulently imports or
brings into the Philippines, or assists in so
doing, any article contrary to law, or shall
receive, conceal, buy, sell or in any manner
facilitate the importation, concealment, or
sale of such auricles after importation,
knowing the same to have been imported
contrary to law smuggling includes the
exportation act of articles in a manner
contrary to law. (Sec. 3154, TCC).
 
Procedure in Custom Protest Cases
These are the steps:
 
1.        The collector of customs shall cause all
the articles entering the jurisdiction of his
district and destined for importation through
his port to be entered at the customs house.
He shall appraise and classify such articles,
and shall assess and collect the duties, taxes
and other charges thereon. He shall also hold
possession of all imported articles upon
which duties, taxes, and other charges have
not been paid of secured to be paid.
2.        The importer / owner makes the payment
after the final liquidation.
 
3.        The importer / owner adversely affected
by the collector’s ruling may file a written
protest with the Collector of custom at the
time of payment or within 15 days
thereafter.
4.        The Collector of Customs issues an order
for hearing within 15 days from receipt of
the protest and renders his decision within
30 days from the termination of hearing.
5.        In case an adverse decision is rendered
within the 30-day period from the
termination, the importer/owner may appeal
to the Commissioner of Customs within 15
days after notification of decision or lapse 
of the 30-day period to decide. The
importer/ owner may give written notice to
 the collector and one copy furnished to the
Commissioner of his desire to have the
matter reviewed by the Commissioner. The
Collector shall forthwith transmit all the
seconds of the proceedings to the
Commissioner.
 
6.        In case an adverse decision is rendered,
the importer/ owner may appeal to the Court
of Tax Appeals within 30 days from receipt
of the decision; and
 
7.        In case an adverse decision is still
rendered, the importer/ owner may appeal to
the Court of Appeals and the Supreme
Court.
 
Automatic Review in Customs Proceedings  
        
        Whenever the decision of the Collector is       
adverse to the Government, said decision is
automatically elevated to the Commissioner for  forfeiture as valid despite the fact that the
review, and  if such decision is affirmed by the
commissioner, the same shall be automatically
elevated to and finally received by the Secretary
of Finance.
 
        Rationale: It is intended to protect the  secure itself from injury may certainly be
interest of the Government in the collection of
taxes and custom duties in seizures and protest
cases. Moreover, a favorable decision will no be
appealed by the taxpayer and certainly a
collector will not appeal his own decision (See
Yaokasin vs. Commissioner of Customs, et al.
G.R. No. 84111; Dec. 22, 1989.)
                Automatic Review Applies to:
 
1)       Custom Protest Cases
 
2)       Seizures and Forfeiture Cases
 
 
Custom Seizures and Forfeiture Cases
 
Basic Concepts:
 
a)       Jurisdiction of Customs in Seizures and
Forfeiture
 
Related Provisions:
 
The territorial jurisdiction of the Bureau of
Customs embraces “all seas within the
jurisdiction of the Philippines, and over all
coasts, ports, harbors, bays, rivers and inland
waters whether navigable or not from the
sea.” (Sec. 603, TCC)
 
Extra-Territorial jurisdiction
                (Right of Hot Pursuit):
 
“Whether a vessel becomes a subject to a
seizure by reason of an act done in the
Philippine waters, in violation of the Tariff
and Customs Laws, a pursuit of such vessel,
begins with the jurisdictional waters may
contain beyond the maritime zone, and the
vessel may be seized in the high seas. (Sec.
603, TCC).
 
“Imported articles which Maybe the subject
to seizures for violation of the Tariff and
Customs laws maybe pursued in their
transportation in the Philippines by land,
water or air, and such jurisdiction exerted
over them at any place therein as may be
necessary for the due enforcement of the
law. (Sec. 603, TCC)
          Pertinent Case:
         
The Supreme Court upheld the seizure and
importation had not yet begun and that the
seizure was affected outside the Philippine
waters. The Supreme Court held that the
authority of a nation within its own territory
is absolute and exclusive. The power to
exercised beyond the limits of its territory.
(QiluhAsaali, et al. vs. Commissioner of
Customs, L- 24170, Feb. 28, 1969).
 
b)       Place where Searchers and Seizures
may be conducted
 
1)       Right of the Police \ officers to
Enter Enclosure
 
        Any person exercising police power
conferred under such code may at any
time enter, pass through, or search any
land or enclosure, or any warehouse,
store or other building, not being a
dwelling house.
                A warehouse, store or other
building or enclosure used for the
keeping or storage of article does not
become a dwelling house within the
meaning hereof merely by reason of the
fact that a person employed as a
watchman lives in the place, nor will the
fact that his family stays there with him
alter the case.
 
2)     Search of Dwelling House
 
        A Dwelling house may be entered and
searched only upon warrant issued by a
judged.
        Note:  Except in the case of the search
of a dwelling house, persons exercising
police authority under the customs may
 effect search and seizure without a
search warrant in the enforcement of
custom laws.
 
3)     Right to search vessels or Aircraft
and Persons or Articles Conveyed
therein
 
        It is lawful for any person exercising
police authority under the TCC to go
aboard any vessel or aircraft within the
limits of any Collection district and to
inspect, search and examine said vessel
or aircraft and any other trunk, package,
box as envelope on board, and to search
any person on board the said vessel or
aircraft if underway, to use all necessary
force to compel compliance; and if it
shall appear that any breach or violation
of the customs and tariff laws of the
Philippines has been committed,
whereby or in consequence of which
such vessel or aircraft, or the article, or
any part thereof on, on  board of or
imported by such vessel or aircraft is
liable to forfeiture, to make seizure of
the same.
       
        Note: 1) Such power shall extend to the
removal of any false bottom, partition,
bulkhead or other obstruction. 2) No
proceeding herein shall give rise to any
claim fro the damage caused to the
article or vessel or aircraft.              3)       The proceedings upon search warrants
                 
1)       Right to Search Vehicles, Beast and
Persons
 
It shall also be lawful for a person
exercising authority to open and examine
any box, trunk, envelope or other
container, wherever found when he has
reasonable cause to suspect the presence
of dutiable or prohibited article or article
introduced into the Philippines contrary
to law and likewise to stop, search ad
examine any vehicle, beast or person
reasonably suspected of holding or
conveying such article.
2)       Search of Persons Arriving from
Foreign Countries
All persons coming in the Philippines
from the foreign countries shall be liable
to detention and search by the Customs
Authorities under such regulations as
may be prescribed relative thereto. (Sec.
603, TCC)
 
Non-necessity  of Search Warrant
 
General Rule: Persons exercising police authority
under the customs laws may effect search and
seizures without a search warrant in the
enforcement of customs laws. (See Sec. 2208, TCC)
 
Exception:  In the case of a dwelling house (Pacis
etc. vs. Pamaran, March 15, 1974).
Reason: On grounds of practicality.
 
Pertinent Cases on Searches and Seizures
 
1)       The legality of a search can be contested
only by the party whose rights have been
impaired thereby and that the objection to an
unlawful search and seizure is purely
personal and cannot be availed of by third
parties. (Nasiad, et al. vs. CTA, Nov. 29,
1994)
 
2)       Warrants of seizure and detention issued
by the Collector of C covering the seizure 
of imported goods are not general
warrants issued in violation of Section 3 
(now section 4), rule 126 of the Rules of
Court. Upon effecting the seizure of the
goods, the Bureau of Customs acquired
exclusive jurisdiction not only over the case
but also over the goods seized for the
purpose of enforcing the tariff and Customs
laws. (Chia vs. Acting Collector of Customs,
Sept. 26, 1989)
 
 
must be absolutely legal, “for there is not a
description of process known to the law, the
execution of which is more distressing to the
citizen. Perhaps there is none which excites
such intense feeling in the consequence of
its humiliating and degrading effect.” The
warrants will always be constured strictly
without however, going the full length of
requiring technical accuracy. No
presumptions of regularity are to be invoked
in aid of process when an officer undertakes
to justify under it. (Uy vs. BIR, Oct. 20,
2000)
 
 
Customs Forfeiture Actions
 
1. What kind of Actions are Customs
Forfeiture?
 
An action for the forfeiture of seized goods
in the Bureau of Customs is an action in rem,
or action taken against the Imported goods
themselves independently arising from any
 criminal action or action in personam that
may result as a consequence of a violation of
an existing law. Lack of knowledge by the
owner does not generally render the vessel
immune from forfeiture. However, the
forfeiture of a private carrier used in the
conveyance of illegally imported or exported
articles requires knowledge on the part of the
carrier-owner or his agent of the unlawful
act. A prima facie presumption shall exist
against the vessel, vehicle or aircraft under
any of the following circumstances:
 
1.        If the conveyance has been used for
smuggling at least twice before;
 
2.        If the owner is not in the business for
which the conveyance is generally used;
and,  
 
3.        If the owner is not financially in a
position to own such conveyance.
 
             Pertinent Cases:
 
        Acting Commissioner of Customs vs. CTA
 
The dismissal of the criminal charge in
the Fiscal’s office against respondent
Andrulis does not constitute re judicata in the
forfeiture proceedings. Forfeiture is in rem,
whereas a criminal action is in personam.
Conviction in the criminal action is not a bar
to forfeiture. Results of a criminal proceeding
being dependent on the evidence therein will
not necessarily influence judgment in the  
forfeiture proceedings.
 
Llamado vs. Commissioner of Customs
123 SCRA 118
 
A Cessna plane carrying persons engaged in
the smuggling of untaxed “blue seal”
cigarettes, landed at an airstrip in Alabat,
Quezon Province. The plane was also used to
bring in “de gaza” kerosene lanterns and
kerosene used to light the airstrip to facilitate
the loading of the cigarettes. The plane  was
subject to forfeiture pursuant to Sec. 2530 (a)
of the Tariff and Customs Code. It is not
necessary that the vessel or aircraft must carry
the contraband. It is not likewise essential that
the vessel or aircraft must come
from a foreign country.             
 
 
Commissioner of Customs vs.
CTA and Jose Pascual
138 SCRA 581
 
The Supreme Court ruled that the forfeiture
of Pascual’s vessel used in the illegal
importation of untaxed cigarettes is justified.
 
Forfeiture, according to the Citing the case
of Vierneya vs. Commissioner of Customs
(July 30, 1968), is in the nature of
proceedings in rem and is directed against
the res. The fact that the owner of the vessel
had no actual knowledge that the vessel was
illegally used does not render the vessel
immune from forfeiture. This is so because
the forfeiture action is against the vessel
itself.
 
Note: The said vessel was duly authorized to
engage in coasturse trade but has no
certificate of public convenience.
Transglobe International  Inc.
vs. Court of Appeals
G.R. No. 126634,
January 25, 1999.
Forfeiture of seized goods in the Bureau of 
Customs is a proceeding against the goods
and not against the owner. It is the nature of
a proceeding in rem, i.e. directed against the
res or imported article and entails a
determination of the legality of their
importation. In this proceeding, it is in legal
contemplation the property itself which
commits the violation and is treated as the
offender, without reference whatsoever to
the character or conduct of the owner.
 
2. Forfeiture Cases and the Doctrine
Primary Jurisdiction
The Doctrine of primary jurisdiction
provides that the Bureau of Customs
acquired exclusive jurisdiction over
imported goods for the purpose of the
enforcement of the Customs laws from the
moment the goods are actually in its
possession or control even if no warrant of
seizure or detention had previously been
issued by the collector of the Customs.
Primary jurisdiction is vested in seizures and
forfeiture proceedings in the collector and
the Commissioner or the Customs to the
exclusion of the regular courts.
(Commissioner of Customs vs. Navarro, L-
33146, May 31, 1977)
   
Rationale of the doctrine: It is anchored on
the policy of placing no necessary hindrance
on the Government’s drive not only to
prevent smuggling and other frauds upon
Customs but also to render effective the
collection of  import and export duties duet
to the State. (Jao, et, al. vs. Court of
 Appeals, et al. G.R. Nos. 104604 and
111223, Oct. 6, 1995).
 
                Pertinent Cases:
 
1.        Proceedings for the forfeiture of
goods illegally imported are civil and
administrative not criminal in nature
since they do not result in the conviction
of the wrongdoer nor in the imposition
upon him of a penalty (Collector vs.
Villaluz, L-34038, June 18, 1976;
Commissioner vs. Navarro, supra;
Republic vs. Bocar, supra).
 
2.        “Proof beyond reasonable doubt” is
not required to warrant forfeiture (Feeder
International vs. CA, 197 SCRA 842)
3.        The Collector of Customs, when
sitting in forfeiture proceedings,
constitutes a tribunal upon which the law
expressly confess jurisdiction to hear and
determine all questions touching on the
forfeiture and further disposition of the
illegal imported mechanics (Government
of the P.I. vs. Gale, 24 Phil 95;
AuyongHian vs. CTA, 19 SCRA 10).
4.        Jurisprudence is replete with cases
which have held that regional trial courts
are devoid of any competence to pass
upon the validity of seizure and
forfeiture proceedings conducted in the
Bureau of Customs and to enjoin, or
otherwise interfere with these
proceedings. The Collector of Customs
sitting in the seizure and forfeiture
proceedings has exclusive jurisdiction to
hear and determine all questions
touching on the seizure and forfeiture
proceedings of dutiable goods. The
regional trial courts are preclude from
assuming cognizance over such even
though petition for certiorari,
prohibition, or mandamus.
5.        Even if a Customs seizure is illegal,
exclusive jurisdiction still belongs to the
Bureau of Customs (Jao, et. al  vs. CA,
supra).
6.        To seize or not to seize is
discretionary on Customs, so mandamus
does not lie. However, in case of grave
abuse by customs, petitioner can file
certiorari proceedings (Provident Tree
Farms, Inc. vs. Batario, Jr. etc et. al G.R.
No. 92285, March 28, 1994).
Procedure Governing Seizure and Forfeiture
Cases
The steps are the following:
1.        The imported articles are seized and a
warrant for the detention of  the property is issued
by the collector of Customs;
2.        If the owner or importer desires to secure the
release of the property for legitimate, the Collector
may surrender it upon the filing of a sufficient
bond;  provided that the articles the importation of
which is prohibited by law shall not be released
under bond.
 
3.        The Collector of Customs makes a report  of
the seizure to the seizure to the Commissioner on
Audits.
4.        The Collector shall give the owner or
importer of property or his agent a written notice of
the seizure and shall give him an opportunity to be
heard;
5.        Notice to an unknown owner shall be
effected by posting for fifteen days (15) days in the
public  corridor of the custom-house of the district
in which the seizures was made, and, in the
discretion of the Commissioner by publication in a
newspaper or by other means a he shall consider
desirable;
6.        The Collector of Customs schedules the
hearing and renders his decision after the hearing is
conducted;
7.        In case the decision of the Collector of
Customs is adverse to the importer/ owner, within
fifteen (15) days after notification in writing by the
collector of his action or decision the importer/
owner may give written notice to the Collector and
one copy furnished to the Commissioner of his
desire to have the matter reviewed by the
Commissioner. Thereupon, the collector shall
forthwith transmit all the records of the proceeding
to the Commissioner;
8.        In case the decision of the collector of
Customs is affirmed by the Commissioner of
Customs, or  in case of inaction on the part of the
Commissioner of Customs, the importer/ owner
may appeal to the court of Appeals within 30 days
from notice of the decision; and
9.        In case an adverse decision is still rendered,
the importer/ owner may appeal to the Court of
Appeals and the Supreme Court.
Note: If the Collector renders a decision adverse to
the Government, such decision shall automatically,
be elevated to and reviewed  by the Commissioner;
and if the Collector’s decision is affirmed by the
Commissioner, such decision shall be automatically
elevated to, and be finally be reviewed by the
secretary of Finance.
 
If within 30 days from receipt of the record of the
case by the Commissioner or by the Secretary of
Finance, as the case may be, no decision is rendered
by either of them, the decision under review shall
become final and executory.
 
Settlement of Seizures
Subject to the approval of the commissioner of the
district collector may while the case is still pending
except when there is fraud:
 
a)       Accept the settlement of any seizure case-  a.        Surcharges
provided that the owner, importer, exporter or
consignee or  his agent shall offer to pay a fine; or
b)       In case of forfeiture- the owner, importer,
exporter, consignee or his shall offer to pay for the
domestic market value of the seized article.
 
Note: The commissioner may accept the settlement
of any seizure case on appeal in the same manner.
 
Effect of Settlement: The property shall be
forthwith released and all the liabilities which may
or might attack to the property by virtue of the
offense which was the occasion of the seizure and
all the liability which might have been incurred
under any cash deposit or bond given by the owner
or agent in respect to such property shall be deemed
to be discharged.
 
Settlement of any seizure case shall not be allowed:
a.       where the importation is absolutely prohibited
or,
b.       Where the release of the property could be
contrary to the law.
 
Pertinent Cases:
1)       Redemption of forfeited property is
unavailing of three (3) instances:
a)       when there is fraud,
b)       where the importation is absolutely
prohibited,
c)        Where the release of the property would be
contrary to law. (Transglobe International, Inc. vs.
C.A, supra)
2)       The fraud contemplated by law must be
actual and not constructive. It must be intentional
fraud, consisting of deception willfully and
deliberately done or resorted to in order to induce
another to give up some right. (Farolan vs. CTA and
Bagong Buhay Trading, 217 SCRA 298)
 
Remission of Customs, Duties and Compromise
 
The Collector of customs has the discretion
 a)       Remit the assessment and collection of
customs duties, taxes and other  charges where the
aggregate amount is less than ten (10) pesos; and
b)       He may dispense with the seizure of article of
the less than ten ( 10) pesos in value except:
 1)       in cases of prohibited importation; or,
 2)       habitual or intentional violation of tariff and
customs laws.
Subject to the approval of the Secretary of Finance,
the Commissioner  of  Customs may compromise
cases involving the imposition of fines, surcharges
and forfeitures unless otherwise specified by law.
 
Administrative Penalties under the Tariff and
Customs Code
 
 These include:
b.        Fines
c.        Forfeitures
a.        The code imposes surcharges for:
1.        failure to pay liquidated charges;
 2.        unauthorized withdrawal of imported
articles from bonded warehouses;
3.        failure to supply the consular or invoice
when acquired;
 4.        undervaluation, misclassification or
misdeclaration; and,
 5.        failure or refusal to give evidence or submit
documents for examination
 
b.       A fine may be imposed in the following
case:
 1.        Any dutiable article is found in the baggage
of an arriving passenger which is not included in the
baggage declaration;
2.        breach of bond;
 3.        unlawful boarding as leaving of vessel or
aircraft;
 
4.        unloading of cargo before arrival at
ports of destination, or at improper time
or place after arrival; and
 
5.        failure to supply the requisite
manifest.
 
 
c. The penalty of forfeiture is imposed in the
cases enumerated in Section 2530 of the
Tariff and Customs Code.
       The requisite for forfeiture are:
 
1. The wrongful making by the owner,
importer, ex-porter or consignee of    
any declaration or affidavit or the
wrongful making as delivery by the 
same persons of any invoice, letter or
paper touching on the importation or
exportation of merchandise; and
 
2. That such declaration, affidavit,
invoice, letter or paper I false.
 
Remedies under theTariff and Customs Code
 
A.       Government  Remedies:
 
a.        Extrajudicial
 
1.        Enforcement or tax lien
 
 A tax lien attaches on the goods,
regardless of the ownership while
still in the custody or control of the
government
 
Proceeds of sale are applied to the
tax due. Any deficiency or excess is
for the account or credit, respectively      
of the taxpayer
This is availed of when the
importation is neither nor improperly
made
               
2.        Seizures
Generally applied when the penalty
is fine or forfeiture which is imposed
when the importation is unlawful  
and  it may be exercised even where         
the articles are not or no longer in  
Customs Custody, unless the
importation is merely attempted.
                In the case of attempted  
importation, administrative fine or
forfeiture may be affected only;
 
a.        while the goods are still
within  the customs jurisdiction,
or
 
b.        in the hands or under the  
control of the importer or person
who is aware thereof.
3.        Sale of Property
Property in the customs custody shall be
subject to sale under the following  
conditions;                   f.          for manifest classical errors; (see
 
a.        abandoned articles;         
 
b.        articles entered under  
warehousing entry not      In drawback cases where the goods are
withdrawn nor the duties and
taxes paid thereon within the  
period provided under Section
1908, TCC;
 
c.        seized property, other than
contraband, after liability to sale
shall have been established by
proper administrative or judicial  
proceedings in conformity with         
the provision of this code: and  
 
d.        Any articles subject to a valid
lien for customs duties, taxes or
other charges collectible by the  
Bureau of Customs, after the
expiration of the period allowed
for the satisfaction of the same.
 
Note: Goods in the collector’s
possession or of Customs authorities
pending payment of customs duties are
beyond the reach of attachment.
b.       Judicial Action
The tax liability of the importer constitutes a
personal debt to the government,
enforceable by action (Sec. 1204, TCC)
This is availed of when the tax lien is lost by
the release of the goods.
 
B.       Taxpayer’s Remedies
        Administrative Recourse
Claim for refund—a written claim for refund
may be  submitted by the importer:
1.        In abatement  uses such as:
 
a.        on missing packages;
 
b.        deficiencies in the contents of
packages or shortage before arrival
of the goods in the Philippines;
c.        articles lost or destroyed after
such arrival,
d.        articles lost or destroyed
e.        dead or injured animals; and
section 1701-1708, TCC)
                  
2.        Judicial relief
re-exported
a.        Protest
 
see the earlier discussions on
“Customs Protest Cases”
 
b.        In seizure cases
                  see earlier discussion on the subject
a. Settlement of case by the payment of
fine or redemption of forfeited 
property
see earlier discussions on the subject
 Note: The owner or importer may  
abandon either expressly or By b.        Constructive – The owner is merely
importation in favor of the Government prohibited from disposing of his
thus relieving himself of the tax liability personal                  property.
but not from the possible criminal  
liability. Actual Distraint. Constructive Distraint
  May be made on the
The taxpayer may appeal to the Court of Made on the property
property of any
Appeals which has exclusive jurisdiction only of a delinquent
taxpayer whether
to review decisions of the Commissioner taxpayer.
delinquent or not
of Custom in cases involving: Taxpayer is merely
        There is actual taking or
prohibited from
a)       liability for customs duties, fees or possession of the
disposing of his
other money charges; property.
property.
b)       seizures, detention or release of Effected by having a list Effected by requiring
property affected; of the distraint property the taxpayer to sign a
  or by service or warrant receipt of the property
c)        fines forfeitures or other penalties of distraint or or by leaving a list of
imposed in relation thereto; and garnishment. same
  Such immediate step is
d)       other matters arising under the An immediate step for
not necessary; tax due
customs Law or other laws collection of taxes where
may not be definite or it
administered by the Revenue  of amount due is definite.
is being questioned.
Customs.  
 
Requisites:
 
1. Taxpayer is delinquent in the payment of
Remedies of the Government tax.
 
 
Enumeration of the Remedies 2. Subsequent demand for its payment.
   
Administrative 3. Taxpayer must fail to pay delinquent tax at
  time required.
1.        Distraint of Personal Property  
  4. Period with in to assess or collect has not yet
2.        Levy of Real Property prescribed. In case of constructive distraint,
  requisite no. 1 is not essential (see Sec. 206
3.        Tax Lien TC)
   
4.        Compromise When remedy not available:
   
5.        Forfeiture                 Where amount involved does not exceed
  P100 (Sec. 205 TC). In keeping with the provision
6.        Other Administrative Remedies on the abatement of the collection of tax as the cost
  of same might even be more than P100.
Judicial  
  Procedure:
7.        Civil Action  
  1. Service of warrant of distraint upon taxpayer
8.        Criminal Action or upon person in possession of taxpayer’s
  personal property.
Distraint of Personal Property  
  2. Posting of notice is not less than two places
Distraint- Seizure by the government of in the municipality or city and notice to the
personal property, tangible or intangible, to enforce taxpayer specifying time and place of sale
the payment of faces, to be followed by its public and the articles distrained.
sale, if the taxes are not voluntarily paid.  
  3. Sale at public auction to highest bidder
a.        Actual – There is taking of possession of  
personal property out of the taxpayer into 4. Disposition of proceeds of the sale.
that of the government. In case of intangible  
property. Taxpayer is also diverted of the  
power of control over the property;
Who may effect distraint Amount
 Involved
1. commissioner or his due In excess of
authorized representative P1,000,000.00
  P1,000,000.00 or
2. RDO less
 
 
How Actual Distraint Effected
 
1. In case of Tangible Property:
 
a. Copy of an account of the property
distrained, signed by the officer, left
either with the owner or person from
whom property was taken, at the
dwelling or place of business and
with someone of suitable age and
discretion
 
b. Statement of the sum demanded.
 
c. Time and place of sale.
2. In case of intangible property:
 
a. Stocks and other securities
 
Serving a copy of the warrant upon
taxpayer and upon president,
manager, treasurer or other
responsible officer of the issuing
corporation, company or association.
b. Debts and credits
1.        Leaving a copy of the warrant
with the person owing the debts
or having in his possession such
credits or his agent.
 
2.        Warrant shall be sufficient
authority for such person to pay
CIR his credits or debts.
 
c. Bank Accounts – garnishment
 
1.        Serve warrant upon taxpayer
and president, manager, treasurer
or responsible officer of the
bank.
 
2.        Bank shall turn over to CIR so
much of the bank accounts as
may be sufficient.
How constructive Distraint Effected
1. Require taxpayer or person in possession to
 
a.        Sign a receipt covering property
distrained
 
b.        Obligate him to preserve the same
properties.
 
c.        Prohibit him from disposing the
property from disposing the property in
any manner, with out the authority of the
CIR.
2. Where Taxpayer or person in possession
refuses to sign:
 
a.        Officer shall prepare list of the
property distrained.
 
b.        In the presence of two witnesses of
sufficient age and discretion, leave a
copy in the premises where property is
located.
 
Grounds of Constructive Distraint
 
1. Taxpayer is retiring from any business
subject to tax.
2. Taxpayer is intending to leave the
Philippines; or
 
3. To remove his property there from.
 
4. Taxpayer hides or conceals his property.
 
5. Taxpayer acts tending to obstruct collection
proceedings.
Note:
1. Bank accounts may be distrained with out
violating the confidential nature of bank
accounts for no inquiry is made.  BIR
simply seizes so much of the deposit with
out having to know how much the deposits
are or where the money or any part of it
came from.
 
2. If at any time prior to the consummation of
the sale, all proper charges are paid to the
officer conducting the same, the goods
distrained shall be restored to the owner.
 
3. When the amount of the bid for the property
under distraint is not equal to the amount of
the tax or is very much less than the actual
market value of articles, the CIR or his
deputy may purchase the distrained property
on behalf of the national government.
Levy of Real Property
Levy – Act of seizure of real property in
order to enforce the payment of taxes.  The property
may be sold at public sale, if after seizure; the taxes
are not voluntarily paid. The requisites are the same
as that of distraint.
Procedure:
 
1. International Revenue officer shall prepare a
duly authenticated certificate showing
 
a. Name of taxpayer
 
b. Amount of tax and
 
c. Penalty due.
 
-          enforceable through out the
Philippines
 
2. Officer shall write upon the certificate a
description of the property upon which levy
is made.
 
3. Service of written notice to:
 
a.        The taxpayer, and
 
b.        RD where property is located.
 
4. Advertisement of the time and place of sale.
 
5. Sale at public auction to highest bidder.
6. Disposition of proceeds of sale.
The excess shall be turned over to owner.
 
Redemption of property sold or forfeited
a. Person entitled: Taxpayer or anyone for him
b. Time to redeem: one year from date of sale
or forfeiture
 
-          Begins from registration of the deed
of sale or declaration of forfeiture.
-          Cannot be extended by the courts.
 
c. Possession pending redemption – owner not
deprived of possession
 
d. Price: Amount of taxes, penalties and
interest thereon from date of delinquency to
the date of sale together with interest on said
purchase price at 15% per annum from date
of purchase to date of redemption.
 
Distraint and Levy compared
1. Both are summary remedies for collection of
taxes.
 
2. Both cannot be availed of where amount
involved is not more than P100.
 
3. Distraint – personal property
 
Levy – real property
 
4. Distraint – forfeiture by government, not
provided
 
Levy – forfeiture by government authorized
where there is no bidder or the highest bid is
not sufficient to pay the taxes, penalties and
costs.
5. Distraint – Taxpayer no given the right of
redemption
 
Levy – Taxpayer can redeem properties
levied upon and sold/forfeited to the
government.
 
Note:
 
1. It is the duty of the Register of Deeds
concerned upon registration of the
declaration of forfeiture, to transfer the title
to the property with out of an order from a
competent court
2. The remedy of distraint or levy may be
repeated if necessary until the full amount,
including all expenses, is collected.
Enforcement of Tax Lien
Tax Lien—a legal claim or charge on property,
either real or personal, established by law as a
security in default of the payment of taxes.
1. Nature:
A lien in favor of the government of the
Philippines when a person liable to pay a tax
neglects or fails to do so upon demand.\
 
2. Duration:
Exists from time assessment is made by the
CIR until paid, with interests, penalties and
costs.
 
3. Extent:
 
Upon all property and rights to property
belonging to the taxpayer.
 
4. Effectivity against third persons:
Only when notice of such lien is filed by the
CIR in the Register of Deeds concerned.
Extinguishment of Tax Lien
 
1. Payment or remission of the tax
 
2. Prescription of the right of the government
to assess or collect.
 3. Failure to file notice of such lien in the
office of register of Deeds, purchases or
judgment creditor.
4. Destruction of the property subject to the
lien.
In case Nos. 1 and 2, there is no more tax
liability.  Under nos. 3 and 4, the taxpayer is
still liable.
 
Enforcement of Tax Lien vs. Distraint
 
                A tax lien is distinguished from disttraint
in that, in distraint the property seized must be that
of the taxpayer, although it need not be the property
in respect to the tax is assessed.  Tax lien is directed
to the property subject to the tax, regardless of its
owner.
Note:
 
1. This is superior to judgment claim of private
individuals or parties
2. Attaches not only from time the warrant was
served but from the time the tax was due and
demandable.
Compromise
Compromise—a contract whereby the
parties, by reciprocal concessions, avoid litigation
or put an end to one already commenced.
 
Requisites:
 
1. Taxpayer must have a tax liability.
2. There must be an offer by taxpayer or CIR,
of an amount to be paid by taxpayer.
 
3. There must be acceptance of the offer in
settlement of the original claim.
When taxes may be compromised:
1. A reasonable doubt as to the validity if the
claim against the taxpayer exists;
 
2. The financial position of the taxpayer
demonstrates a clear inability to pay the
assessed tax.
 
3. Criminal violations, except:
a.        Those already filed in court
 
b.        Those involving fraud.
 
Limitations:
 
1. Minimum compromise rate:
 
a. 10% of the basic tax assessed – in
case of financial incapacity.
b. 40% of basic tax assessed – other
cases.
2. Subject to approval of Evaluation Board
 
a.        When basic tax involved exceeds
P1,000,000.00 or
 
b.        Where settlement offered is less
than the prescribed minimum rates.
 
Delegation of Power to Compromise
 
General Rule:  The power to compromise or
abate shall not be delegated by the commissioner.
Exception:  The Regional Evaluation Board
may compromise the assessment issued by the
regional offices involving basic taxes of P 500 K or
less.
Remedy in case of failure to comply:
 
                The CIR may either:
1. enforce the compromise, or
2. Regard it as rescinded and insists upon the
original demand.
 
Compromise Penalty
 
1. It is a certain amount of money which the
taxpayer pays to compromise a tax violation.
2. It is pain in lieu of a criminal prosecution.
 
3. Since it is voluntary in character, the same
may be collected only if the taxpayer is
willing to pay them.
Enforcement of forfeiture
Forfeiture—implies a divestiture of property
with out compensation, in consequence of a default
or offense. It includes the idea of not only losing but
also having the property transferred to another with
out the consent of the owner and wrongdoer.
 
1. Effect:  Transfer the title to the specific
thing from the owner to the government.
2. When available:
a. No bidder for the real property
exposed for sale.
b. If highest bid is for an amount
insufficient to pay the taxes,
penalties and costs.
 
 -          With in two days thereafter, a return
of the proceeding is duly made.
 
3. How enforced:
 
a.        In case of personal property – by
seizure and sale or destruction of the
specific forfeited property.
b.        In case of real property – by a
judgment of condemnation and sale
in a legal action or proceeding, civil
or criminal, as the case may require.
 
 
4. When forfeited property to be destroyed or
sold:
 
a.        To be destroyed – by order of the
CIR when the sale for consumption
or use of the following would be
injurious to the public health or
prejudicial to the enforcement of the
law:  (at least 20 days after seizure)
 
1.        distilled spirits
 
2.        liquors
 
3.        cigars
 
4.        cigarettes, and other
manufactured products of
tobacco
5.        playing cards
6.        All apparatus used in or about
the illicit production of such
articles.
 
b.        To be sold or destroyed – depends
upon the discretion of CIR
 
1.        All other articles subject to
exercise tax, (wine, automobile,
mineral products, manufactured
oils, miscellaneous products,
non-essential items a petroleum
products) manufactured or
removed in violation of the Tax
Code.
2.        Dies for printing or making IR
stamps, labels and tags, in
imitation of or purport to be
lawful stamps, labels or tags.
 
5. Where to be sold:
 
a.        Public sale:  provided, there is
notice of not less than 20 days.
b.        Private sale:  provided, it is with
the approval of the Secretary of
Finance.
 
6. Right of Redemption:
 
a.        Personal entitled – taxpayer or
anyone for him
b.        Time to redeem – with in one (1)
year from forfeiture
 
c.        Amount to be paid – full amount
of the taxes and penalties, plus
interest and cost of the sale
 
d.        To whom paid – Commissioner or
the Revenue Collection Officer
 
e.        Effect of failure to redeem –
forfeiture shall become absolute.
 
 
Note: The Register of Deeds is duty bound to
transfer the title of property forfeited to the
government with our necessity of an order from a
competent court.
 
Other Administrative Remedies
 
1.        Requiring filing of bonds – in the
following instances:
 
a.        Estate and donor’s tax
b.        Excise taxes
c.        Exporter’s bond
 
d.        Manufacturer’s and importer’s bond
2.        Requiring proof of filing income tax
returns
 
Before a license to engage in trade, business
or occupation or to practice a profession can
be issued.
 
3.        Giving reward to informers – Sum
equivalent to 10% of revenues, surcharges or
fees recovered and/or fine or penalty
imposed and collected or P1, 000,000.00 per
case, whichever is lower.
 
4.        Imposition of surcharge and interest.
 
5.        Making arrest, search and seizure
Limited to violations of any penal law or
regulation administered by the BIR,
committed with in the view of the Internal
Revenue Officer or EE.
 
 6.        Deportation in case of aliens – on the
following grounds
a.        Knowingly and fraudulently evades
payment of IR taxes.
 
b.        Willfully refuses to pay such tax and
its accessory penalties, after decision on
his tax liability shall have become final
and executory.
7.        Inspection of books  a.        Dispute same by filing protest with
 
Books of accounts and other accounting
records of taxpayer must be preserved,
generally within three years after date the
tax return was due or was filed whichever is
later.
8.        Use of National Tax Register
 
9.        Obtaining information on tax liability of
any person
 
 
10.     Inventory – Taking of stock-in-trade and
making surveillance.
11.     Prescribing presumptive gross sales or
receipt:
 
 
a.        Person failed to issue receipts and
invoices
 
b.        Reason to believe that records do not
correctly reflect declaration in return.\
12.     Prescribing real property values
 
13.     Inquiring into bank deposit accounts of
a.        A deceased person to determine gross
estate
 
b.        Any taxpayer who filed application
for compromise by reasons of financial
incapacity his tax liability.
 
14.     Registration of Taxpayers.
Judicial Remedies
 
Civil and Criminal Actions:
1.        Brought in the name of the Government
of the Philippines.
 
2.        Conducted by Legal Officer of BIR
 
3.        Must be with the approval of the CIR, in
case of action, for recovery of taxes, or
enforcement of a fine, penalty or forfeiture.
 
 
A. Civil Action
Actions instituted by the government to
collect internal revenue taxes in regular
courts (RTC or MTCs, depending on the
amount involved)
 
When assessment made has become final
and executory for failure or taxpayer to:
CIR
 
b.        Appeal adverse decision of CIR to
CTA
 
B. Criminal Action
A direct mode of collection of taxes, the
judgment of which shall not only impose
the penalty but also order payment of taxes.
 
An assessment of a tax deficiency is not
necessary to a criminal prosecution for tax
evasion, provided there is a prima facie
showing of willful attempt to evade.
Effect of Acquittal on Tax Liability:
 
                Does not exonerate taxpayer his civil
liability to pay the tax due.  Thus, the government
may still collect the tax in the same action.
Reason:  Tax is an obligation, does not arise from a
criminal act.
 
Effect of Satisfaction of Tax Liability on
Criminal Liability
                Will not operate to extinguish taxpayer’s
criminal liability since the duty to pay the tax is
imposed by statute, independent of any attempt on
past of taxpayers to evade payment.
               
This is true in case the criminal action is
based on the act to taxpayer of filing a false and
fraudulent tax return and failure to pay the tax.
Note: The satisfaction of civil liability is not one of
the grounds for the extinction of criminal action.
 
Prescriptive Periods /Statute Of Limitation
 
Purpose: 
 
For purposes of Taxation, statue of limitation
is primarily designed to protect the rights of the
taxpayer’s against unreasonable investigation of the
taxing authority with respect to assessment and
collection of Internal Revenue Taxes.
 
Prescription of Government’s Right to Assess
Taxes:
 
General Rule: Internal Revenue Taxes shall be
assessed within three (3) years after the last day
prescribed by law for the filing of the return or from
the day the return was filed, in case it is filed
beyond the period prescribed thereof.  (Section 203
of the Tax Code)
 
Note:
 
1.        A return filed before the last day
prescribed by law for the filing thereof shall
be considered as filed on such last day.
2.        In case a return is substantially amended,
the government right to assess the tax shall
commence from the filing of the amended
return (CIR vs. Phoenix, May 20, 1965; Kei
& Co. vs. Collector, 4 SCRA 872)
 
3.        In computing the prescriptive period for
assessment, the latter is deemed made when
notice to this effect is released, mailed or
sent by the Commissioner to the correct
address of the taxpayer.  However, the law
does not require that the demand/notice be
received within the prescriptive period.  c.        Recurrence
(Basilan Estates, Inc. vs. Commissioner 21,
SCRA 17; Republic vs. CA April 30, 1987)
 
4.        An affidavit executed by a revenue office
indicating the tax liabilities of a taxpayer
and attached to a criminal complaint for tax
evasion, cannot be deemed an assessment.  for payment.
( CIR vs.  Pascoi Realty Corp. June 29,
1999)
 
5.        A transcript sheets are not returns,
because they do not contain information
necessary and required to permit the
computation and assessment of taxes
(Sinforo Alca vs. Commissioner, Dec. 29,
1964)
 
 
Exceptions: (Sec. 222 ic)
 
1. Where no return was filed - within ten (10)  
years after the date of discovery of the
omission.
 
2. Where a return was filed but the same was
false or fraudulent – within ten (10) years
from the discovery of falsity or fraud.
 
Nature of Fraud:
 
a.        Fraud is never presumed and the
circumstances consisting it must be
alleged and proved to exist by clear &
convincing evidence (Republic vs. Keir,
Sept. 30, 1966)
 
b.        The fraud contemplated by law is
actual and not constructive.  It must
amount to intentional wrongdoing with
the sole object of avoiding the tax.  A
mere mistake is not a fraudulent intent. 
(Aznar case, Aug. 23, 1974)
 
c.        A fraud assessment which has
become final and executory, the fact of
fraud shall be judicially taken
cognizance of in the civil or criminal
action for the collection thereof.  (Sec.
222 paragraph (a))
 
Fraud may be established by the
following : (Badges of Fraud)
 
a.        Intentional and substantial
understatement of tax liability of the
taxpayer.
 
b.        Intentional and substantial
overstatement of deductions  of
exemption
 
of the foregoing
circumstances.
 
Instances/Circumstances negating fraud:
 
a.        When the Commissioner fails impute
fraud in the assessment notice/demand
 
b.        When the Commissioner failed to
allege in his answer to the taxpayer’s
petition for review when the case is
appealed to the CTA.
 
c.        When the Commissioner raised the
question of fraud only for the first time
in his memorandum which was filed the
CTA after he had rested his case.
d.        Where the BIR itself appeared, “not
sure” as to the real amount of the
taxpayer’s net income.
e.        A mere understatement of income
does not prove fraud, unless there is a
sufficient evidence shaving fraudulent
intent.
 
3. Where the commissioner and the taxpayer,
before the expiration of the three (3) year
period of limitation have agreed in writing to
the extension of said period.
 
Note: Limitations:
 
 a.        The agreement extending the period
of prescription should be in writing and
duly signed by the taxpayer and the
commissioner.
b.        The agreement to extend the same
should be mode before the expiration of
the period previously agreed upon.
 
4. Where there is a written waiver or
renunciation of the original 3-year limitation
signed by the taxpayer.
 
        Note: Limitations:
 
a.        The waiver to be valid must be
executed by the parties before the lapse
of the prescriptive period.
b.        A waiver is inefficient I it is executed
beyond the original three year.
 
c.        The commissioner can notvalid agree
to reduce the prescriptive period to less
than that granted by law.
 
 
Imprescriptible Assessments:
 
1. Where the law does not provide for any
particular period of assessment, the tax
sought to be assessed becomes
imprescriptible.
 
2. Where no return is required by law, the tax
is imprescriptible.
 
 
3. Assessment of unpaid taxes, where the bases
of which is not required by law to be
reported in a return such as excise taxes. 
(Carmen vs. Ayala Securities Corp., Nov.
21, 1980)
 
4. Assessment of compensating and
documentary stamp tax.
 
 
Prescription of Government’sRight to Collect
Taxes
A. General Rule:
 
1.        Where an assessment was made –
Any internal revenue tax which has been
assessed within the period of limitation
may be collected by distraint or levy or  
by proceeding in court within 5 years
following the date of assessment.
2.        Where no assessment was made and a
return was filed and the same is not
fraudulent or false- the tax should be
collected within 3 years after the return
was due or was filed, whichever is later.
 
B. Exceptions:
1.        Where a fraudulent/false return with
intent to evade taxes was filed a
proceeding in court for the collection of
the tax may be filed without assessment,
at anytime within ten years after the
discovery of the falsity or fraud.
 
Note: The 10-year prescriptive period for
collector thru action does not apply if it
appears that there was an assessment.  In
such case, the ordinary 5-year period
(now 3 years) would apply (Rep. vs.
Ret., March 31, 1962)
2.        When the taxpayer omits to file a
return – a court proceeding for the
collection of such tax may be filed
without assessment, at anytime within 10
years after the discovery of the omission.
 
3.        Waiver of statute of limitations – any
internal revenue tax, which has been
assessed within the period agreed upon,
may be collected be distinct or levy of
by a proceeding in court within the
period agreed upon in writing before the
expiration of 5-year period.
 
4.        Where the government makes another
assessment on the basis of
reinvestigation requested by the taxpayer
– the prescriptive period for collection
should be counted from the last
assessment. (Rep. vs. Lopez, March 30,
1963)
 
5.        Where the assessment is revised
because of an amended return – the
period for collection is counted from the
last revised assessment.
 
6.        Where a tax obligation is secured by
a surety bond – the government may
proceed thru a court action to forfeit a
bond and enforce such contractual
obligation within a period of ten years.
7.        Where the action is brought to
enforce a compromise entered into
between the commission and the
taxpayer – the prescriptive period is ten
years.
C.  When tax is deemed collected for purposes
of the prescriptive period.
1.        Collection by summary remedies – It
is effected by summary methods when
 the government avail of distraint and
levy procedure.
 
2.        Collection by judicial action – The
collection begins by filing the complaint
with the proper court.  (RTC)
 
3.        Where assessment of the
commissioner is protected & appealed to
the CTA – the collection begin when the
government file its answer to taxpayer’s
petition for review.
 
 
Rules of Prescription in Criminal Cases
 
Rule:  All violations of any provision of the
tax code shall prescribe after five (5) years.
 
Note:
 
When it should commence?
The five (5) year prescriptive period shall
begin to run from the:
 
a.        Day of the commission of the violation, if
know.
b.        If not known, from the time of discovery
and the institution of judicial proceeding for
its investigation and punishment.
When it is interrupted:
 
a.        When a proceeding is instituted against
the guilty person
 
b.        When the offender is absent from the
Philippines.
 
When it should run again:
 
When the proceeding is dismissed for reason
not Constituting jeopardy.
 
When does the defense of prescription  
may be raised:
 
a.        In civil case – If not raised in the lower
court, it is bailed permanently; if can not be
raised for the first time on appeal.
b.        In criminal case – It can be raised even if
the case has been decided by the lower court  
but pending decision on appeal.
 
 
Interruption of the Prescriptive Period
1.        Where before the expiration of the time
prescribed for the assessment of the tax,
both the commissioner and the taxpayer
have consented in writing to its assessment
after such time, the tax may be assessed
prior to the expiration of the period agreed
upon.
 
2.        The running of statute of limitations on
making an assessment and the beginning of
distraint/levy or a proceeding in court for
collection shall be suspended for the period.
During which the Commissioner is
prohibited from making the assessment or
beginning distraint/levy or a proceeding in
court and for 60 days thereafter; e.g.
 
a.        Filing a petition for review in the
CTA from the decision of the
Commissioner.  The commissioner is
prevented from filing an ordinary action
to collect the tax.
b.        When CTA suspends the collection of
tax liability of the taxpayer pursuant to
Section 11 of RA 1125 upon proof that
its collection may jeopardizes the
government and /or the taxpayer.
c.        When the taxpayer requests for
reinvestigation which is granted by
commissioner.
Note: A mere request for
reinvestigation without any action or
the part of the Commissioner does
not interrupt the running of the
prescriptive period. The request must
not be a mere pro-former. 
Substantial issues must be raised.
d.        When the taxpayer cannot be
located in the address given by him
in the return.
 
Note: If the taxpayer informs the
Commissioner of any change in
address the statute will not be
suspended.
e.        When the warrant of distraint or
levy is duly served upon any of the
following person:
 
1.        taxpayer
2.        his authorized representative
3.        Member of his household
with sufficient discretion and no
property could be located.
 
 f.          When the taxpayer is out of the
Philippines.
 
g.        In criminal cases for violation of
tax code – the period shall not run
when the offender is absent from the
Philippines.
 
Note: A petition for reconsideration of a
tax assessment does not suspend the
criminal action. Reason:  No requirement
for assessment of the tax before the
criminal action may be instituted.
 
Nota Bene:
 
1. The law on prescription remedial measure
should be interpreted liberally in order to
protect the taxpayer.
 
2. The defense of prescription must be raised
by the taxpayer on time, otherwise it is
deemed waived.
3. The question of prescription is not
jurisdictional, and as defense it must be
raised reasonably otherwise it is deemed
waived.
 
4. The prescriptive provided in the tax code
over ride the statute of non-claims in the
settlement of the deceased’s estate.
 
5. In the event that the collection of the tax has
already prescribed, the government cannot
invoke the principle of Equitable recumbent
by setting- off the prescribed tax against a
tax refused to which the taxpayer is entitled.