G.R. No.

175097               As correctly pointed out by respondent, a disputed assessment is one

wherein the taxpayer or his duly authorized representative filed an
administrative protest against the formal letter of demand and
ALLIED BANKING CORPORATION, Petitioner,
assessment notice within thirty (30) days from date [of] receipt
vs.
thereof. In this case, petitioner failed to file an administrative protest
COMMISSIONER OF INTERNAL REVENUE, Respondent.
on the formal letter of demand with the corresponding assessment
notices. Hence, the assessments did not become disputed assessments
DECISION as subject to the Court’s review under Republic Act No. 9282. (See
also Republic v. Liam Tian Teng Sons & Co., Inc., 16 SCRA 584.)
DEL CASTILLO, J.:
WHEREFORE, the Motion to Dismiss is GRANTED. The Petition for
The key to effective communication is clarity. Review is hereby DISMISSED for lack of jurisdiction.

The Commissioner of Internal Revenue (CIR) as well as his duly SO ORDERED.16

authorized representative must indicate clearly and unequivocally to
the taxpayer whether an action constitutes a final determination on a Aggrieved, petitioner moved for reconsideration but the motion was
disputed assessment.1 Words must be carefully chosen in order to denied by the First Division in its Resolution dated February 1, 2006.17
avoid any confusion that could adversely affect the rights and interest
of the taxpayer.
Proceedings before the CTA En Banc

Assailed in this Petition for Review on Certiorari2 under Section 12 of

Republic Act (RA) No. 9282,3 in relation to Rule 45 of the Rules of
Court, are the August 23, 2006 Decision4 of the Court of Tax Appeals
(CTA) and its October 17, 2006 Resolution 5 denying petitioner’s Motion
for Reconsideration.
Factual Antecedents
On February 22, 2006, petitioner appealed the dismissal to the CTA En
Banc.18 The case was docketed as CTA EB No. 167.
Finding no reversible error in the Resolutions dated October 12, 2005
and February 1, 2006 of the CTA First Division, the CTA En
Banc  denied the Petition for Review19as well as petitioner’s Motion for
Reconsideration.20

On April 30, 2004, the Bureau of Internal Revenue (BIR) issued a

The CTA En Banc declared that it is absolutely necessary for the
Preliminary Assessment Notice (PAN) to petitioner Allied Banking
taxpayer to file an administrative protest in order for the CTA to
Corporation for deficiency Documentary Stamp Tax (DST) in the
acquire jurisdiction. It emphasized that an administrative protest is an
amount of ₱12,050,595.60 and Gross Receipts Tax (GRT) in the
integral part of the remedies given to a taxpayer in challenging the
amount of ₱38,995,296.76 on industry issue for the taxable year
legality or validity of an assessment. According to the CTA En
2001.6 Petitioner received the PAN on May 18, 2004 and filed a protest
Banc, although there are exceptions to the doctrine of exhaustion of
against it on May 27, 2004.7
administrative remedies, the instant case does not fall in any of the
exceptions.
On July 16, 2004, the BIR wrote a Formal Letter of Demand with
Assessment Notices to petitioner, which partly reads as follows:8
Issue

It is requested that the above deficiency tax be paid immediately upon

Hence, the present recourse, where petitioner raises the lone issue of
receipt hereof, inclusive of penalties incident to delinquency. This is
whether the Formal Letter of Demand dated July 16, 2004 can be
our final decision based on investigation. If you disagree, you may
construed as a final decision of the CIR appealable to the CTA under
appeal the final decision within thirty (30) days from receipt hereof,
RA 9282.
otherwise said deficiency tax assessment shall become final, executory
and demandable.
Our Ruling
Petitioner received the Formal Letter of Demand with Assessment
Notices on August 30, 2004.9 The petition is meritorious.

Proceedings before the CTA First Division
On September 29, 2004, petitioner filed a Petition for Review10 with
the CTA which was raffled to its First Division and docketed as CTA
Case No. 7062.11
On December 7, 2004, respondent CIR filed his Answer.12 On July 28,
2005, he filed a Motion to Dismiss 13 on the ground that petitioner failed
to file an administrative protest on the Formal Letter of Demand with
Assessment Notices. Petitioner opposed the Motion to Dismiss on
August 18, 2005.14
On October 12, 2005, the First Division of the CTA rendered a
Resolution15 granting respondent’s Motion to Dismiss. It ruled:
Clearly, it is neither the assessment nor the formal demand letter itself
that is appealable to this Court. It is the decision of the Commissioner
of Internal Revenue on the disputed assessment that can be appealed
to this Court (Commissioner of Internal Revenue vs. Villa,  22 SCRA 3).
Section 7 of RA 9282 expressly provides that the CTA exercises
exclusive appellate jurisdiction to review by appeal decisions of the
CIR in cases involving disputed assessments
The CTA, being a court of special jurisdiction, can take cognizance only
of matters that are clearly within its jurisdiction.21 Section 7 of RA 9282
provides:
Sec. 7. Jurisdiction. — The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein
provided:
(1) Decisions of the Commissioner of Internal Revenue in
cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal
Revenue Code or other laws administered by the Bureau of
Internal Revenue;
 (2) Inaction by the Commissioner of Internal Revenue in
cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal
Revenue Code or other laws administered by the Bureau of
Internal Revenue, where the National Internal Revenue Code
provides a specific period of action, in which case the
inaction shall be deemed a denial; (Emphasis supplied)
xxxx
The word "decisions" in the above quoted provision of RA 9282 has
been interpreted to mean the decisions of the CIR on the protest of
the taxpayer against the assessments.22 Corollary thereto, Section 228
of the National Internal Revenue Code (NIRC) provides for the
procedure for protesting an assessment. It states:
SECTION 228. Protesting of Assessment. – When the Commissioner or
his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings: Provided,
however, That a preassessment notice shall not be required in the
following cases:
(a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax as
appearing on the face of the return; or
(b) When a discrepancy has been determined between the
tax withheld and the amount actually remitted by the
withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax
credit of excess creditable withholding tax for a taxable
period was determined to have carried over and
automatically applied the same amount claimed against the
estimated tax liabilities for the taxable quarter or quarters of
the succeeding taxable year; or
(d) When the excise tax due on excisable articles has not
been paid; or
(e) When an article locally purchased or imported by an
exempt person, such as, but not limited to, vehicles, capital
equipment, machineries and spare parts, has been sold,
traded or transferred to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on
which the assessment is made; otherwise, the assessment shall be
void.
Within a period to be prescribed by implementing rules and
regulations, the taxpayer shall be required to respond to said notice. If
the taxpayer fails to respond, the Commissioner or his duly authorized
representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request
for reconsideration or reinvestigation within thirty (30) days from
receipt of the assessment in such form and manner as may be
prescribed by implementing rules and regulations. Within sixty (60)
days from filing of the protest, all relevant supporting documents shall
have been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within
one hundred eighty (180) days from submission of documents, the
taxpayer adversely affected by the decision or inaction may appeal to
the Court of Tax Appeals within thirty (30) days from receipt of the
said decision, or from the lapse of the one hundred eighty (180)-day
period; otherwise, the decision shall become final, executory and
demandable.
In the instant case, petitioner timely filed a protest after receiving the
PAN. In response thereto, the BIR issued a Formal Letter of Demand
with Assessment Notices. Pursuant to Section 228 of the NIRC, the
proper recourse of petitioner was to dispute the assessments by filing
an administrative protest within 30 days from receipt thereof.
Petitioner, however, did not protest the final assessment notices.
Instead, it filed a Petition for Review with the CTA. Thus, if we strictly
apply the rules, the dismissal of the Petition for Review by the CTA
was proper.
The case is an exception to the
rule on exhaustion of administrative remedies
However, a careful reading of the Formal Letter of Demand with
Assessment Notices leads us to agree with petitioner that the instant
case is an exception to the rule on exhaustion of administrative
remedies, i.e., estoppel on the part of the administrative agency
concerned.
In the case of Vda. De Tan v. Veterans Backpay Commission, 23 the
respondent contended that before filing a petition with the court,
petitioner should have first exhausted all administrative remedies by
appealing to the Office of the President. However, we ruled that
respondent was estopped from invoking the rule on exhaustion of
administrative remedies considering that in its Resolution, it said, "The
opinions promulgated by the Secretary of Justice are advisory in
nature, which may either be accepted or ignored by the office seeking
the opinion, and any aggrieved party has the court for recourse". The
statement of the respondent in said case led the petitioner to conclude
that only a final judicial ruling in her favor would be accepted by the
Commission.
Similarly, in this case, we find the CIR estopped from claiming that the
filing of the Petition for Review was premature because petitioner
failed to exhaust all administrative remedies.
The Formal Letter of Demand with Assessment Notices reads:
Based on your letter-protest dated May 26, 2004, you alleged the
following:
1. That the said assessment has already prescribed in
accordance with the provisions of Section 203 of the Tax
Code.
2. That since the exemption of FCDUs from all taxes found in
the Old Tax Code has been deleted, the wording of Section
28(A)(7)(b) discloses that there are no other taxes
imposable upon FCDUs aside from the 10% Final Income
Tax.
Contrary to your allegation, the assessments covering GRT and DST
for taxable year 2001 has not prescribed for [sic] simply because no
returns were filed, thus, the three year prescriptive period has not
lapsed.
With the implementation of the CTRP, the phrase "exempt from all
taxes" was deleted. Please refer to Section 27(D)(3) and 28(A)(7) of
the new Tax Code. Accordingly, you were assessed for deficiency gross
receipts tax on onshore income from foreign currency transactions in
accordance with the rates provided under Section 121 of the said Tax
Code. Likewise, deficiency documentary stamp taxes was [sic] also
assessed on Loan Agreements, Bills Purchased, Certificate of Deposits
and related transactions pursuant to Sections 180 and 181 of NIRC, as
amended.
The 25% surcharge and 20% interest have been imposed pursuant to
the provision of Section 248(A) and 249(b), respectively, of the
National Internal Revenue Code, as amended.
It is requested that the above deficiency tax be paid immediately upon
receipt hereof, inclusive of penalties incident to delinquency. This is
our final decision based on investigation. If you disagree, you may
appeal this final decision within thirty (30) days from receipt hereof,
otherwise said deficiency tax assessment shall become final, executory
and demandable.24 (Emphasis supplied)
It appears from the foregoing demand letter that the CIR has already
made a final decision on the matter and that the remedy of petitioner
is to appeal the final decision within 30 days.
In Oceanic Wireless Network, Inc. v. Commissioner of Internal
Revenue,25 we considered the language used and the tenor of the
letter sent to the taxpayer as the final decision of the CIR.
In this case, records show that petitioner disputed the PAN but not the
Formal Letter of Demand with Assessment Notices. Nevertheless, we
cannot blame petitioner for not filing a protest against the Formal
Letter of Demand with Assessment Notices since the language used
and the tenor of the demand letter indicate that it is the final decision
of the respondent on the matter. We have time and again reminded
the CIR to indicate, in a clear and unequivocal language, whether his
action on a disputed assessment constitutes his final determination
thereon in order for the taxpayer concerned to determine when his or
her right to appeal to the tax court accrues. 26 Viewed in the light of the
foregoing, respondent is now estopped from claiming that he did not
intend the Formal Letter of Demand with Assessment Notices to be a
final decision.
Moreover, we cannot ignore the fact that in the Formal Letter of
Demand with Assessment Notices, respondent used the word "appeal"
instead of "protest", "reinvestigation", or "reconsideration". Although
there was no direct reference for petitioner to bring the matter directly
to the CTA, it cannot be denied that the word "appeal" under
prevailing tax laws refers to the filing of a Petition for Review with the
CTA. As aptly pointed out by petitioner, under Section 228 of the
NIRC, the terms "protest", "reinvestigation" and "reconsideration" refer
to the administrative remedies a taxpayer may take before the CIR,
while the term "appeal" refers to the remedy available to the taxpayer
before the CTA. Section 9 of RA 9282, amending Section 11 of RA
1125,27 likewise uses the term "appeal" when referring to the action a
taxpayer must take when adversely affected by a decision, ruling, or
inaction of the CIR. As we see it then, petitioner in appealing the
Formal Letter of Demand with Assessment Notices to the CTA merely
took the cue from respondent. Besides, any doubt in the interpretation
or use of the word "appeal" in the Formal Letter of Demand with
Assessment Notices should be resolved in favor of petitioner, and not
the respondent who caused the confusion.
To be clear, we are not disregarding the rules of procedure under
Section 228 of the NIRC, as implemented by Section 3 of BIR Revenue
Regulations No. 12-99.28 It is the Formal Letter of Demand and
Assessment Notice that must be administratively protested or disputed
within 30 days, and not the PAN. Neither are we deviating from our
pronouncement in St. Stephen’s Chinese Girl’s School v. Collector of
Internal Revenue,29 that the counting of the 30 days within which to
institute an appeal in the CTA commences from the date of receipt of
the decision of the CIR on the disputed assessment, not from the date
the assessment was issued.1avvphi1
What we are saying in this particular case is that, the Formal Letter of
Demand with Assessment Notices which was not administratively
protested by the petitioner can be considered a final decision of the
CIR appealable to the CTA because the words used, specifically the
words "final decision" and "appeal", taken together led petitioner to
believe that the Formal Letter of Demand with Assessment Notices was
in fact the final decision of the CIR on the letter-protest it filed and
that the available remedy was to appeal the same to the CTA.
We note, however, that during the pendency of the instant case,
petitioner availed of the provisions of Revenue Regulations No. 30-
2002 and its implementing Revenue Memorandum Order by submitting
an offer of compromise for the settlement of the GRT, DST and VAT
for the period 1998-2003, as evidenced by a Certificate of Availment
dated November 21, 2007.30 Accordingly, there is no reason to
reinstate the Petition for Review in CTA Case No. 7062.
WHEREFORE, the petition is hereby GRANTED. The assailed August
23, 2006 Decision and the October 17, 2006 Resolution of the Court of
Tax Appeals are REVERSED and SET ASIDE. The Petition for Review
in CTA Case No. 7062 is hereby DISMISSED based solely on the
Bureau of Internal Revenue’s acceptance of petitioner’s offer of
compromise for the settlement of the gross receipts tax, documentary
stamp tax and value added tax, for the years 1998-2003.
SO ORDERED.
January 27, 2016
G.R. No. 208731
PHILIPPINE AMUSEMENT AND GAMING
CORPORATION, Petitioner,
vs.
BUREAU OF INTERNAL REVENUE, COMMISSIONER OF
INTERNAL REVENUE, and REGIONAL DIRECTOR, REVENUE
REGION No. 6, Respondents.
DECISION
CARPIO, J.:
The Case
G.R. No. 208731 is a petition for review 1 assailing the
Decision2 promulgated on 18 February 2013 as well as the
Resolution3 promulgated on 23 July 2013 by the Court of Tax Appeals
En Banc (CTA En Banc) in CTA EB No. 844. The CTA EB affirmed the
Decision dated 6 July 20114 and Resolution5 dated 13 October 2011 of
the Court of Tax Appeals' First Division (CTA 1st Division) in CTA Case
No. 7880.
In its 6 July 2011 Decision, the CTA 1st Division ruled in favor of the
Bureau of Internal Revenue (BIR), Commissioner of Internal Revenue
(CIR), and the Regional Director of Revenue Region No. 6 (collectively,
respondents) and against petitioner Philippine Amusement and Gaming
Corporation (PAGCOR). The CTA 1st Division dismissed PAGCOR's
petition for review seeking the cancellation of the Final Assessment
Notice (FAN) dated 14 January 2008 which respondents issued for
alleged deficiency fringe benefits tax in 2004. The CTA 1st Division
ruled that PAGCOR's petition was filed out of time.
The Facts
The CTA 1st Division recited the facts as follows:
[PAGCOR] claims that it is a duly organized government-owned and
controlled corporation existing under and by virtue of Presidential
Decree No. 1869, as amended, with business address at the 6th Floor,
Hyatt Hotel and Casino, Pedro Gil comer M.H. Del Pilar Streets, Malate,
Manila. It was created to regulate, establish and operate clubs and
casinos for amusement and recreation, including sports gaming pools,
and such other forms of amusement and recreation.
Respondent [CIR], on the other hand, is the Head of the [BIR] with
authority, among others, to resolve protests on assessments issued by
her office or her authorized representatives. She holds office at the
BIR National Office Building, Agham Road, Diliman, Quezon City.
[PAGCOR] provides a car plan program to its qualified officers under
which sixty percent (60%) of the car plan availment is shouldered by
PAGCOR and the remaining forty percent (40%) for the account of the
officer, payable in five (5) years.
On October 10, 2007, [PAGCOR] received a Post Reporting Notice
dated September 28, 2007 from BIR Regional Director Alfredo Misajon
[RD Misajon] of Revenue Region 6, Revenue District No. 33, for an
informal conference to discuss the result of its investigation on
[PAGCOR's] internal revenue taxes in 2004. The Post Reporting Notice
shows that [PAGCOR] has deficiencies on Value Added Tax (VAT),
Withholding Tax on VAT (WTV), Expanded Withholding Tax (EWT),
and Fringe Benefits Tax (FBI).
Subsequently, the BIR abandoned the claim for deficiency assessments
on VAT, WTV and EWT in the Letter to [PAGCOR] dated November 23,
2007 in view of the principles laid down in Commissioner of Internal
Revenue vs. Acesite Hotel Corporation  [G.R. No. 147295] exempting
[PAGCOR] and its contractors from VAT. However, the assessment on
deficiency FBT subsists and remains due to date.
On January 17, 2008, [PAGCOR] received a Final Assessment Notice
[FAN] dated January 14, 2008, with demand for payment of deficiency
FBT for taxable year 2004 in the amount of P48,589,507.65.
On January 24, 2008, [PAGCOR] filed a protest to the FAN addressed
to [RD Misajon] of Revenue Region No. 6 of the BIR.
On August 14, 2008, [PAGCOR] elevated its protest to respondent CIR
in a Letter dated August 13, 2008, there being no action taken thereon
as of that date.
In a Letter dated September 23, 2008 received on September 25,
2008, [PAGCOR] was informed that the Legal Division of Revenue
Region No. 6 sustained Revenue Officer Ma. Elena Llantada on the
imposition of FBT against it based on the provisions of Revenue
Regulations (RR) No. 3-98 and that its protest was forwarded to the
Assessment Division for further action.
On November 19, 2008, [PAGCOR] received a letter from the OIC-
Regional Director, Revenue Region No. 6 (Manila), stating that its
letter protest was referred to Revenue District Office No. 33 for
appropriate action.
On March 11, 2009, [PAGCOR] filed the instant Petition for Review
alleging respondents' inaction in its protest on the disputed deficiency
FBT.6
The CTA 1st Division's Ruling
The CTA 1st Division issued the assailed decision dated 6 July 2011
and ruled in favor of respondents. The CTA 1st Division ruled that RD
Misajon's issuance of the FAN was a valid delegation of authority, and
PAGCOR's administrative protest was validly and seasonably filed on 24
January 2008. The petition for review filed with the CTA 1st Division,
however, was filed out of time. The CTA 1st Division stated:
As earlier stated, [PAGCOR] timely filed its administrative protest on
January 24, 2008. In accordance with Section 228 of the Tax Code,
respondent CIR or her duly authorized representative had 180 days or
until July 22, 2008 to act on the protest. After the expiration of the
180-day period without action on the protest, as in the instant case,
the taxpayer, specifically [PAGCOR], had 30 days or until August 21,
2008 to assail the non-determination of its protest.
Clearly, the conclusion that the instant Petition for Review was filed
beyond the reglementary period for appeal on March 11, 2009,
effectively depriving the Court of jurisdiction over the petition, is
inescapable.
And as provided in Section 228 of the NIRC, the failure of [PAGCOR] to
appeal from an assessment on time rendered the same final, executory
and demandable. Consequently, [PAGCOR] is already precluded from
disputing the correctness of the assessment. The failure to comply
with the 30-day statutory period would bar the appeal and deprive the
Court of Tax Appeals of its jurisdiction to entertain and determine the
correctness of the assessment.
Even assuming in gratia argumenti  that the [CTA] has jurisdiction over
the case as claimed by [PAGCOR], the petition must still fail on the
ground that [PAGCOR] is not exempt from payment of the assessed
FBT under its charter.
xxxx
Since the car plan provided by [PAGCOR] partakes of the nature of a
personal expense attributable to its employees, it shall be treated as
taxable fringe benefit of its employees, whether or not the same is
duly receipted in the name of the employer. Therefore, [PAGCOR's]
obligation as an agent of the government to withhold and remit the
final tax on the fringe benefit received by its employees is personal
and direct. The government's cause of action against [PAGCOR] is not
for the collection of income tax, for which [PAGCOR] is exempted, but
for the enforcement of the withholding provision of the 1997 NIRC,
compliance of which is imposed on [PAGCOR] as, the withholding
agent, and not upon its employees. Consequently, [PAGCOR's] non-
compliance with said obligation to withhold makes it personally liable
for the tax arising from the breach of its legal duty.7
PAGCOR filed a motion for reconsideration, dated 26 July 2011, of the
6 July 2011 Decision of the CTA 1st Division. The CIR filed a
comment,8 and asked that PAGCOR be ordered to pay P48,589,507.65
representing deficiency fringe benefits tax for taxable year 2004 plus
25% surcharge and 20% delinquency interest from late payment
beyond 15 February 2008 until fully paid, pursuant to Sections 248 and
249 of the National Internal Revenue Code (NIRC) of 1997.
In the meantime, the CIR sent PAGCOR a letter dated 18 July
2011.9 The letter stated that PAGCOR should be subjected to the
issuance of a Warrant of Distraint and/or Levy and a Warrant of
Garnishment because of its failure to pay its outstanding delinquent
account in the amount of P46,589,507.65, which included surcharge
and interest. Settlement of the tax liability is necessary to obviate the
issuance of a Warrant of Distraint and/or Levy and a Warrant of
Garnishment.
Subsequently, PAGCOR filed a reply dated 28 September 2011 to ask
that an order be issued directing respondents to hold in abeyance the
execution of the Warrant of Distraint and/or Levy and the Warrant of
Garnishment, as well as to suspend the collection of tax insofar as the
2004 assessment is concerned. PAGCOR also asked for exemption
from filing a bond or depositing the amount claimed by respondents.10
PAGCOR filed a petition for review with urgent motion to suspend tax
collection11 with the CTA En Banc on 23 November 2011.
The CTA En Banc's Ruling
The CTA En Banc dismissed PAGCOR's petition for review and affirmed
the CTA 1st Division's Decision and Resolution. The CTA En Banc ruled
that the protest filed before the RD is a valid protest; hence, it was
superfluous for PAGCOR to raise the protest before the CIR. When
PAGCOR filed its administrative protest on 24 January 2008, the CIR or
her duly authorized representative had 180 days or until 22 July 2008
to act on the protest. After the expiration of the 180 days, PAGCOR
had 30 days or until 21 August 2008 to assail before the CTA the non-
determination of its protest.
Moreover, Section 223 of the NIRC merely suspends the period within
which the BIR can make assessments on a certain taxpayer. A
taxpayer's request for reinvestigation only happens upon the BIR's
issuance of an assessment within the three-year prescriptive period.
The reinvestigation of the assessment suspends the prescriptive period
for either a revised assessment or a retained assessment.
PAGCOR filed its Motion for Reconsideration on 22 March 2013, while
respondents filed their Comment/Opposition on 3 June 2013.
12
The CTA En Banc denied PAGCOR's motion in a Resolution  dated 23
July 2013.
PAGCOR filed the present petition for review on 14 October 2013.
Respondents filed their comment through the Office of the Solicitor
General on 20 March 2014. On 23 April 2014, this Court required
PAGCOR to file a reply to the comment within 10 days from notice.
This period expired on 26 June 2014. On 15 September 2014, this
Court issued another resolution denying PAGCOR's petition for failure
to comply with its lawful order without any valid cause. On 31 October
2014, PAGCOR filed a motion for reconsideration of the Court's 15
September 2014 Resolution. We granted PAGCOR's motion in a
Resolution dated 10 December 2014.
The Issues
PAGCOR presented the following issues in its petition:
1. Whether or not the CTA En Banc gravely erred in
affirming the CTA 1st Division's Decision dismissing the
Petition for Review for having been filed out of time.
2. Whether or not the CTA En Banc seriously erred when it
affirmed the CTA 1st Division's failure to decide the case on
substantive matters, i.e., the full import of PAGCOR's tax
exemption under its charter which necessarily includes its
exemption from the fringe benefits tax (FBT).
2.1 Assuming that PAGCOR is not exempt from the
FBT, whether or not the car plan extended to its
officers inured to its benefit and it is required or
necessary in the conduct of its business.
2.2 Assuming that PAGCOR is subject to the
alleged deficiency FBT, whether or not it is only
liable for the basic tax, i.e., excluding surcharge
and interest.13
In their Comment,14 respondents argue that the CTA properly
dismissed PAGCOR's petition because it was filed beyond the periods
provided by law.
The Court's Ruling
The petition has no merit. The CTA En Banc and 1st Division were
correct in dismissing PAGCOR's petition. However, as we shall explain
below, the dismissal should be on the ground of premature, rather
than late, filing.
Timeliness of PAGCOR's Petition before the CTA
The CTA 1st Division and CTA En Banc both established that PAGCOR
received a FAN on 17 January 2008, filed its protest to the FAN
addressed to RD Misajon on 24 January 2008, filed yet another protest
addressed to the CIR on 14 August 2008, and then filed a petition
before the CTA on 11 March 2009. There was no action on PAGCOR's
protests filed on 24 January 2008 and 14 August 2008. PAGCOR would
like this Court to rule that its protest before the CIR starts a new
period from which to determine the last day to file its petition before
the CTA.
The CIR, on the other hand, denied PAGCOR's claims of exemption
with the issuance of its 18 July 2011 letter. The letter asked PAGCOR
to settle its obligation of P46,589,507.65, which consisted of tax,
surcharge and interest. PAGCOR's failure to settle its obligation would
result in the issuance of a Warrant of Distraint and/or Levy and a
Warrant of Garnishment.
The relevant portions of Section 228 of the NIRC of 1997 provide:
SEC. 228. Protesting of Assessment.  - When the Commissioner or his
duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings: x x x.
xxxx
Within a period to be prescribed by implementing rules and
regulations, the taxpayer shall be required to respond to said notice. If
the taxpayer fails to respond, the Commissioner or his duly authorized
representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request
for reconsideration or reinvestigation within thirty (30) days from
receipt of the assessment in such form and manner as may be
prescribed by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant supporting
documents shall have been submitted; otherwise, the assessment shall
become final.
If the protest is denied in whole or in part, or is not acted upon within
one hundred eighty (180) days from submission of documents, the
taxpayer adversely affected by the decision or inaction may appeal to
the Court of Tax Appeals within thirty (30) days from receipt of the
said decision, or from the lapse of one hundred eighty (180)-day
period; otherwise, the decision shall become final, executory and
demandable.
Section 3.1.5 of Revenue Regulations No. 12-99, implementing Section
228 above, provides:
3.1.5. Disputed Assessment. - The taxpayer or his duly authorized
representative may protest administratively against the aforesaid
formal letter of demand and assessment notice within thirty (30) days
from date of receipt thereof.xx x.
xxxx
If the taxpayer fails to file a valid protest against the formal letter of
demand and assessment notice within thirty (30) days from date of
receipt thereof, the assessment shall become final, executory and
demandable.
If the protest is denied, in whole or in part, by the Commissioner, the
taxpayer may appeal to the Court of Tax Appeals within thirty (30)
days from the date of receipt of the said decision, otherwise, the
assessment shall become final, executory and demandable.
In general, if the protest is denied, in whole or in part, by the
Commissioner or his duly authorized representative, the taxpayer may
appeal to the Court of Tax Appeals within thirty (30) days from date of
receipt of the said decision, otherwise, the assessment shall become
final executory and demandable: Provided, however, that if the
taxpayer elevates his protest to the Commissioner within thirty (30)
days from date of receipt of the final decision of the Commissioner's
duly authorized representative, the latter's decision shall not be
considered final, executory and demandable, in which case, the protest
shall be decided by the Commissioner.
If the Commissioner or his duly authorized representative fails to act
on the taxpayer's protest within one hundred eighty (180) days from
date of submission, by the taxpayer, of the required documents in
support of his protest, the taxpayer may appeal to the Court of Tax
Appeals within thirty (30) days from the lapse of the said 180-day
period, otherwise the assessment shall become final, executory and
demandable.
Following the verba legis  doctrine, the law must be applied exactly as
worded since it is clear, plain, and unequivocal. 15 A textual reading of
Section 3.1.5 gives a protesting taxpayer like PAGCOR only three
options:
1. If the protest is wholly or partially denied by the
CIR or  his authorized representative, then the taxpayer may
appeal to the CTA within 30 days from receipt of the whole
or partial denial of the protest.
2. If the protest is wholly or partially denied by the CIR's
authorized representative, then the taxpayer may appeal to
the CIR within 30 days from receipt of the whole or partial
denial of the protest.
3. If the CIR or his authorized representative failed to act
upon the protest within 180 days from submission of the
required supporting documents, then the taxpayer may
appeal to the CTA within 30 days from the lapse of the 180-
day period.
To further clarify the three options: A whole or partial denial by the
CIR's authorized representative may be appealed to the CIR or the
CTA. A whole or partial denial by the CIR may be appealed to the CTA.
The CIR or the CIR's authorized representative's failure to act may be
appealed to the CTA. There is no mention of an appeal to the CIR from
the failure to act by the CIR's authorized representative.
PAGCOR did not wait for the RD or the CIR's decision on its protest.
PAGCOR made separate and  successive filings before the RD and the
CIR before it filed its petition with the CTA. We shall illustrate below
how PAGCOR failed to follow the clear directive of Section 228 and
Section 3.1.5.
PAGCOR's protest to the RD on 24 January 2008 was filed within the
30-day period prescribed in Section 228 and Section 3.1.5. The RD did
not release any decision on PAGCOR's protest; thus, PAGCOR was
unable to make use of the first option as described above to justify an
appeal to the CTA. The effect of the lack of decision from the RD is the
same, whether we consider PAGCOR's April 2008 submission of
documents16 or not.
Under the third option described above, even if we grant leeway to
PAGCOR and consider its unspecified April 2008 submission, PAGCOR
still should have waited for the RD's decision until 27 October 2008, or
180 days from 30 April 2008. PAGCOR then had 30 days from 27
October 2008, or until 26 November 2008, to file its petition before the
CTA. PAGCOR, however, did not make use of the third option. PAGCOR
did not file a petition before the CTA on or before 26 November 2008.
Under the second option, PAGCOR ought to have waited for the RD's
whole or partial denial of its protest before it filed an appeal before the
CIR. PAGCOR rendered the second option moot when it formulated its
own rule and chose to ignore the clear text of Section 3.1.5. PAGCOR
"elevated an appeal" to the CIR on 13 August 2008 without  any
decision from the RD, then filed a petition before the CTA on 11 March
2009. A textual reading of Section 228 and Section 3 .1.5 will readily
show that neither Section 228 nor Section 3 .1.5 provides for the
remedy of an appeal to the CIR in case of the RD's failure to act. The
third option states that the remedy for failure to act by the CIR or his
authorized representative is to file an appeal to the CTA within 30 days
after the lapse of 180 days from the submission of the required
supporting documents. PAGCOR clearly failed to do this.1âwphi1
If we consider, for the sake of argument, PAGCOR's submission before
the CIR as a separate protest and not as an appeal, then such protest
should be denied for having been filed out of time. PAGCOR only had
30 days from 17 January 2008 within which to file its protest. This
period ended on 16 February 2008. PAGCOR filed its submission before
the CIR on 13 August 2008.
When PAGCOR filed its petition before the CTA, it is clear that PAGCOR
failed to make use of any of the three options described above. A
petition before the CTA may only be made after a whole or
partial denial of the protest by the CIR or the CIR's authorized
representative. When PAGCOR filed its petition before the CTA on 11
March 2009, there was still no denial of PAGCOR's protest by either the
RD or the CIR. Therefore, under the first option, PAGCOR's petition
before the CTA had no cause of action because it was prematurely
filed. The CIR made an unequivocal denial of PAGCOR's protest only
on 18 July 2011, when the CIR sought to collect from PAGCOR the
amount of P46,589,507.65. The CIR's denial further puts PAGCOR in a
bind, because it can no longer amend its petition before the CTA.17
It thus follows that a complaint whose cause of action has not yet
accrued cannot be cured or remedied by an amended or supplemental
pleading alleging the existence or accrual of a cause of action while
the case is pending. Such an action is prematurely brought and is,
therefore, a groundless suit, which should be dismissed by the court
upon proper motion seasonably filed by the defendant. The underlying
reason for this rule is that a person should not be summoned before
the public tribunals to answer for complaints which are [premature].
As this Court eloquently said in Surigao Mine Exploration Co., Inc. v.
Harris:
It is a rule of law to which there is, perhaps, no exception, either at
law or in equity, that to recover at all there must be some cause of
action at the commencement of the suit.  As observed by counsel for
appellees, there are reasons of public policy why there should be no
needless haste in bringing up litigation, and why people who are in no
default and against whom there is yet no cause of action should not be
summoned before the public tribunals to answer complaints which are
groundless. We say groundless because if the action is [premature], it
should not be entertained, and an action prematurely brought is a
groundless suit.
It is true that an amended complaint and the answer thereto take the
place of the originals which are thereby regarded as
abandoned (Reynes vs. Compañia General de Tabacos  [1912], 21 Phil.
416; Ruyman and Farris vs. Director of Lands  [1916], 34 Phil. 428)
and that "the complaint and answer having been superseded by the
amended complaint and answer thereto, and the answer to the original
complaint not having been presented in evidence as an exhibit, the
trial court was not authorized to take it into account." (Bastida vs.
Menzi & Co.  [1933], 58 Phil. 188.) But in none of these cases or in any
other case have we held that if a right of action did not exist when the
original complaint was filed, one could be created by filing an amended
complaint. In some jurisdictions in the United States what was termed
an "imperfect cause of action" could be perfected by suitable
amendment (Brown vs. Galena Mining & Smelting Co.,  32 Kan.,
528; Hooper vs. City of Atlanta,  26 Ga. App., 221) and this is virtually
permitted in Banzon and Rosaura vs. Sellner  ([1933], 58 Phil.
453); Asiatic Potroleum [sic] Co. vs. Veloso  ([1935], 62 Phil. 683); and
recently in Ramos vs. Gibbon  (38 Off. Gaz. 241). That, however,
which is no cause of action whatsoever cannot by amendment or
supplemental pleading  be converted into a cause of action: Nihil de re
accrescit ei qui nihil in re quando jus accresceret habet.
We are therefore of the opinion, and so hold, that unless the plaintiff
has a valid and subsisting cause of action at the time his action is
commenced, the defect cannot be cured or remedied by the
acquisition or accrual of one while the action is pending, and a
supplemental complaint or an amendment setting up such after-
accrued cause of action is not permissible.  (Italics ours)18
PAGCOR has clearly failed to comply with the requisites in disputing an
assessment as provided by Section 228 and Section 3.1.5. Indeed,
PAGCOR's lapses in procedure have made the BIR's assessment final,
executory and demandable, thus obviating the need to further discuss
the issue of the propriety of imposition of fringe benefits tax.
WHEREFORE, we DENY the petition. The Decision promulgated on
18 February 2013 and the Resolution promulgated on 23 July 2013 by
the Court of Tax Appeals - En Banc in CTA EB No. 844
are AFFIRMED with the MODIFICATION that the denial of
Philippine Amusement and Gaming Corporation's petition is due to lack
of jurisdiction because of premature filing. We REMAND the case to
the Court of Tax Appeals for the determination of the final amount to
be paid by PAGCOR after the imposition of surcharge and delinquency
interest.
SO ORDERED.
G. R. No. 207843
CIR vs Court of Tax Appeals and Petron Corp
G. R. No. 207843
Facts:
Petron is engaged in the manufacture and marketing of petroleum
products, imports alkalyte as a raw material or blending component for
the manufacture of ethanol-blended motor gasoline. The CIR has ruled
that alkalyte is exempt from the payment of the excise tax because it
was not among those articles enumerated as subject to excise tax
under the Title VI of the Republic Act No. 8424 or the 1997 NIRC.
Issue:
Whether or not it is under the jurisdiction of the CIR to interpret tax
laws.
Held:
Yes, it is under the jurisdiction of CIR to interpret tax laws. According
to Section 4 of the Tax Code, on the Power of the Commissioner to
Interpret Tax Laws and to Decide Tax Cases. The power to interpret
the provisions of this Code and other tax laws shall be under the
exclusive and original jurisdiction of the Commissioner, subject to
review by the Secretary of Finance.
The power to decide disputed assessments, refunds or internal
revenue taxes, fees and other charges, penalties imposed in relation
thereto, or other matters arising under this Code or other laws or
portions thereof administered by the Bureau of Internal Revenue is
vested in the commissioner, subject to the exclusive appellate
jurisdiction of the Court of Tax Appeals.
Applying the principle of ejusdem generis, the phrase 'other matters
arising under this Code' should be interpreted as of the same nature as
those that have preceded them. As such, the CIR was correct in its
interpretation of Section 148 (e) of the NIRC to include alkalyte among
the articles subject to customs duties, as it is provided in the first
paragraph of Section 4 that the interpretation of the same is under the
original jurisdiction of the CIR.
G.R. No. 207843               July 15, 2015
COMMISSION OF INTERNAL REVENUE, Petitioner,
vs.
COURT OF TAX APPEALS (SECOND DIVISION) and PETRON
CORPORATION,* Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for certiorari1 are the Resolutions dated
February 13, 20132 and May 8, 20133 of the Court of Tax Appeals,
Second Division (CTA) in CTA Case No. 8544 reversing and setting
aside the earlier dismissal of the petition for review filed by private
respondent Petron Corporation (Petron) in the said case on the bases
of prematurity and lack of jurisdiction.
The Facts
Petron, which is engaged in the manufacture and marketing of
petroleum products, imports alkylate as a raw material or blending
component for the manufacture of ethanol-blended motor
gasoline.4 For the period January 2009 to August 2011, as well as for
the month of April 2012, Petron transacted an aggregate of 22
separate importations for which petitioner the Commissioner of
Internal Revenue (CIR) issued Authorities to Release Imported Goods
(ATRIGs), categorically stating that Petron's importation of alkylate is
exempt from the payment of the excise tax because it was not among
those articles enumerated as subject to excise tax under Title VI of
Republic Act No. (RA) 8424,5 as amended, or the 1997 National
Internal Revenue Code (NIRC). With respect, however, to Petron's
alkylate importations covering the period September 2011 to June
2012 (excluding April 2012), the CIR inserted, without prior notice, a
reservation for all ATRIGs issued,6 stating that:
This is without prejudice to the collection of the corresponding excise
taxes, penalties and interest depending on the final resolution of the
Office of the Commissioner on the issue of whether this item is subject
to the excise taxes under the National Internal Revenue Code of 1997,
as amended.7
In June 2012, Petron imported 12,802,660 liters of alkylate and paid
value-added tax (VAT) in the total amount of ?41,657,533.00 as
evidenced by Import Entry and Internal Revenue Declaration (IEIRD)
No. SN 122406532. Based on the Final Computation, said importation
was subjected by the Collector of Customs of Port Limay, Bataan, upon
instructions of the Commissioner of Customs (COC), to excise taxes of
₱4.35 per liter, or in the aggregate amount of ₱55,691,571.00, and
consequently, to an additional VAT of 12% on the imposed excise tax
in the amount of ₱6,682,989.00.8 The imposition of the excise tax was
supposedly premised on Customs Memorandum Circular (CMC) No.
164-2012 dated July 18, 2012, implementing the Letter dated June 29,
2012 issued by the CIR, which states that:
[A]lkylate which is a product of distillation similar to that of naphta, is
subject to excise tax under Section 148(e) of the National Internal
Revenue Code (NIRC) of 1997. 9
In view of the CIR's assessment, Petron filed before the CTA a petition
for review,10 docketed as CTA Case No. 8544, raising the issue of
whether its importation of alkylate as a blending component is subject
to excise tax as contemplated under Section 148 (e) of the NIRC.
On October 5, 2012, the CIR filed a motion to dismiss on the grounds
of lack of jurisdiction and prematurity.11
Initially, in a Resolution12 dated November 15, 2012, the CTA granted
the CIR's motion and dismissed the case. However, on Petron's motion
for reconsideration,13 it reversed its earlier disposition in a
Resolution14 dated February 13, 2013, and eventually denied the CIR's
motion for reconsideration15 therefrom in a Resolution16 dated May 8,
2013. In effect, the CTA gave due course to Petron's petition, finding
that: (a) the controversy was not essentially for the determination of
the constitutionality, legality or validity of a law, rule or regulation but
a question on the propriety or soundness of the CIR's interpretation of
Section 148 (e) of the NIRC which falls within the exclusive jurisdiction
of the CTA under Section 4 thereof, particularly under the phrase
"other matters arising under [the NIRC]";17 and (b) there are attending
circumstances that exempt the case from the rule on non-exhaustion
of administrative remedies, such as the great irreparable damage that
may be suffered by Petron from the CIR's final assessment of excise
tax on its importation.18
Aggrieved, the CIR sought immediate recourse to the Court, through
the instant petition, alleging that the CTA committed grave abuse of
discretion when it assumed authority to take cognizance of the case
despite its lack of jurisdiction to do so.19
The Issue Before the Court
The core issue to be resolved is whether or not the CTA properly
assumed jurisdiction over the petition assailing the imposition of excise
tax on Petron's importation of alkylate based on Section 148 (e) of the
NIRC.
The Court's Ruling
The petition is meritorious.
The CIR asserts that the interpretation of the subject tax provision,
i.e., Section 148 (e) of the NIRC, embodied in CMC No. 164-2012, is
an exercise of her quasi-legislative function which is reviewable by the
Secretary of Finance, whose decision, in turn, is appealable to the
Office of the President and, ultimately, to the regular courts, and that
only her quasi-judicial functions or the authority to decide disputed
assessments, refunds, penalties and the like are subject to the
exclusive appellate jurisdiction of the CTA.20 She likewise contends that
the petition suffers from prematurity due to Petron 's failure to exhaust
all available remedies within the administrative level in accordance
with the Tariff and Customs Code (TCC).21
The CIR's position is well-grounded.
Section 4 of the NIRC confers upon the CIR both: (a) the power to
interpret tax laws in the exercise of her quasi-legislative function; and
(b) the power to decide tax cases in the exercise of her quasi-judicial
function. It also delineates the jurisdictional authority to review the
validity of the CIR's exercise of the said powers, thus:
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to
Decide Tax Cases. - The power to interpret the provisions of this Code
and other tax laws shall be under the exclusive and original jurisdiction
of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation
thereto, or other matters arising under this Code or other laws or
portions thereof administered by the Bureau of Internal Revenue is
vested in the Commissioner, subject to the exclusive appellate
jurisdiction of the Court of Tax Appeals. (Emphases and underscoring
supplied)
The CTA is a court of special jurisdiction, with power to review by
appeal decisions involving tax disputes rendered by either the CIR or
the COC.1âwphi1 Conversely, it has no jurisdiction to determine the
validity of a ruling issued by the CIR or the COC in the exercise of their
quasi-legislative powers to interpret tax laws. These observations may
be deduced from a reading of Section 7 of RA 1125,22 as amended by
RA 9282,23 entitled "An Act Creating the Court of Tax Appeals,"
enumerating the cases over which the CT A may exercise its
jurisdiction:
Sec. 7. Jurisdiction. -The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as
herein provided:
1. Decisions of the Commissioner of Internal
Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other
matters arising under the National Internal
Revenue or other laws administered by the Bureau
of Internal Revenue;
2. Inaction by the Commissioner of Internal
Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other
charges, penalties in relations thereto, or other
matters arising under the National Internal
Revenue Code or other laws administered by the
Bureau of Internal Revenue, where the National
Internal Revenue Code provides a specific period
of action, in which case the inaction shall be
deemed a denial;
3. Decisions, orders or resolutions of the Regional
Trial Comis in local tax cases originally decided or
resolved by them in the exercise of their original
or appellate jurisdiction;
4. Decisions of the Commissioner of Customs in
cases involving liability for customs duties, fees or
other money charges, seizure, detention or release
of property affected, fines, forfeitures or other
penalties in relation thereto, or other matters
arising under the Customs Law or other laws
administered by the Bureau of Customs;
5. Decisions of the Central Board of Assessment
Appeals in the exercise of its appellate jurisdiction
over cases involving the assessment and taxation
of real property originally decided by the provincial
or city board of assessment appeals;
6. Decisions of the Secretary of Finance on
customs cases elevated to him automatically for
review from decisions of the Commissioner of
Customs which are adverse to the Government
under Section 2315 of the Tariff and Customs
Code;
7. Decisions of the Secretary of Trade and
Industry, in the case of nonagricultural product,
commodity or article, and the Secretary of
Agriculture in the case of agricultural product,
commodity or article, involving dumping and
countervailing duties under Section 301 and 302,
respectively, of the Tariff and Customs Code, and
safeguard measures under Republic Act No. 8800,
where either party may appeal the decision to
impose or not to impose said duties.
b. Jurisdiction over cases involving criminal offenses as
herein provided:
 1. Exclusive original jurisdiction over all criminal
offenses arising from violations of the National
Internal Revenue Code or Tariff and Customs
Code and other laws administered by the Bureau
of Internal Revenue or the Bureau of Customs:
Provided, however, That offenses or felonies
mentioned in this paragraph where the principal
amount of taxes and fees, exclusive of charges
and penalties, claimed is less than One million
pesos (₱1,000,000.00) or where there is no
specified amount claimed shall be tried by the
regular Courts and the jurisdiction of the CTA shall
be appellate. Any provision of law or the Rules of
Court to the contrary notwithstanding, the criminal
action and the corresponding civil action for the
recovery of civil liability for taxes and penalties
shall at all times be simultaneously instituted with,
and jointly determined in the same proceeding by
the CT A, the filing of the criminal action being
deemed to necessarily carry with it the filing of the
civil action, and no right to reserve the filling of
such civil action separately from the criminal
action will be recognized.
2. Exclusive appellate jurisdiction in criminal
offenses:
a. Over appeals from the judgments,
resolutions or orders of the Regional
Trial Courts in tax cases originally
decided by them, in their respective
territorial jurisdiction.
b. Over petitions for review of the
judgments, resolutions or orders of the
Regional Trial Courts in the exercise of
their appellate jurisdiction over tax
cases originally decided by the
Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts
in their respective jurisdiction.
c. Jurisdiction over tax collection cases
as herein provided:
1. Exclusive original jurisdiction in tax collection cases
involving final and executory assessments for taxes, fees,
charges and penalties: Provided, however, That collection
cases where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is less than One
million pesos (₱1,000,000.00) shall be tried by the proper
Municipal Trial Court, Metropolitan Trial Court and Regional
Trial Court.
2. Exclusive appellate jurisdiction in tax collection cases:
a. Over appeals from the judgments, resolutions
or orders of the Regional Trial Courts in tax
collection cases originally decided by them, in their
respective territorial jurisdiction.
b. Over petitions for review of the judgments,
resolutions or orders of the Regional Trial Courts
in the exercise of their appellate jurisdiction over
tax collection cases originally decided by the
Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts, in their
respective jurisdiction. (Emphasis supplied)
In this case, Petron's tax liability was premised on the COC's issuance
of CMC No. 164-2012, which gave effect to the CIR's June 29, 2012
Letter interpreting Section 148 (e) of the NIRC as to include alkyl ate
among the articles subject to customs duties, hence, Petron's petition
before the CTA ultimately challenging the legality and constitutionality
of the CIR's aforesaid interpretation of a tax provision. In line with the
foregoing discussion, however, the CIR correctly argues that the CT A
had no jurisdiction to take cognizance of the petition as its resolution
would necessarily involve a declaration of the validity or
constitutionality of the CIR's interpretation of Section 148 (e) of the
NIRC, which is subject to the exclusive review by the Secretary of
Finance and ultimately by the regular courts. In British American
Tobacco v. Camacho,24 the Court ruled that the CTA's jurisdiction to
resolve tax disputes excludes the power to rule on the constitutionality
or validity of a law, rule or regulation, to wit:
While the above statute confers on the CTA jurisdiction to resolve tax
disputes in general, this does not include cases where the
constitutionality of a law or rule is challenged. Where what is assailed
is the validity or constitutionality of a law, or a rule or regulation issued
by the administrative agency in the performance of its quasi-legislative
function, the regular courts have jurisdiction to pass upon the same. x
x x.25
In asserting its jurisdiction over the present case, the CTA explained
that Petron's petition filed before it "simply puts in question" the
propriety or soundness of the CIR's interpretation and application of
Section 148 (e) of the NIRC (as embodied in CMC No. 164-2012) "in
relation to" the imposition of excise tax on Petron's importation of
alkylate; thus, the CTA posits that the case should be regarded as
"other matters arising under [the NIRC]" under the second paragraph
of Section 4 of the NIRC, therefore falling within the CTA's
jurisdiction:26
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to
Decide Tax Cases. - The power to interpret the provisions of this Code
and other tax laws shall be under the exclusive and original jurisdiction
of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation
thereto, or other matters arising under this Code or other laws or
portions thereof administered by the Bureau of Internal Revenue is
vested in the commissioner, subject to the exclusive appellate
jurisdiction of the Court of Tax Appeals. (Emphases and underscoring
supplied)
The Court disagrees.
As the CIR aptly pointed out, the phrase "other matters arising under
this Code," as stated in the second paragraph of Section 4 of the
NIRC, should be understood as pertaining to those matters directly
related to the preceding phrase "disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in
relation thereto" and must therefore not be taken in isolation to invoke
the jurisdiction of the CTA.27 In other words, the subject phrase should
be used only in reference to cases that are, to begin with, subject to
the exclusive appellate jurisdiction of the CTA, i.e., those controversies
over which the CIR had exercised her quasi-judicial functions or her
power to decide disputed assessments, refunds or internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, not
to those that involved the CIR's exercise of quasi-legislative powers.
In Enrile v. Court of Appeals,28 the Court, applying the statutory
construction principle of ejusdem generis,29 explained the import of
using the general clause "other matters arising under the Customs Law
or other law or part of law administered by the Bureau of Customs" in
the enumeration of cases subject to the exclusive appellate jurisdiction
of the CTA, saying that: [T]he 'other matters' that may come under
the general clause should be of the same nature as those that have
preceded them applying the rule of construction known as ejusdem
generis.30 (Emphasis and underscoring supplied)
Hence, as the CIR's interpretation of a tax provision involves an
exercise of her quasi-legislative functions, the proper recourse against
the subject tax ruling expressed in CMC No. 164-2012 is a review by
the Secretary of Finance and ultimately the regular courts. In
Commissioner of Customs v. Hypermix Feeds Corporation, 31 the Court
has held that:
The determination of whether a specific rule or set of rules issued by
an administrative agency contravenes the law or the constitution is
within the jurisdiction of the regular courts. Indeed, the Constitution
vests the power of judicial review or the power to declare a law,
treaty, international or executive agreement, presidential decree,
order, instruction, ordinance, or regulation in the courts, including the
regional trial courts. This is within the scope of judicial power, which
includes the authority of the courts to determine in an appropriate
action the validity of the acts of the political departments. x x x.32
Besides, Petron prematurely invoked the jurisdiction of the CT A.
Under Section 7 of RA 1125, as amended by RA 9282, what is
appealable to the CT A is the decision of the COC over a customs
collector's adverse ruling on a taxpayer's protest:
collector's final assessment that could be the proper subject of review.
And even if it were, the same should have been brought first for
review before the COC and not directly to the CTA. It should be
stressed that the CTA has no jurisdiction to review by appeal, decisions
of the customs collector.34 The TCC prescribes that a party adversely
affected by a ruling or decision of the customs collector may protest
such ruling or decision upon payment of the amount due35 and, if
aggrieved by the action of the customs collector on the matter under
protest, may have the same reviewed by the COC. 36 It is only after the
COC shall have made an adverse ruling on the matter may the
aggrieved party file an
appeal to the CT A.37
Notably, Petron admitted to not having filed a protest of the
assessment before the customs collector and elevating a possible
adverse ruling therein to the COC, reasoning that such a procedure
would be costly and impractical, and would unjustly delay the
resolution of the issues which, being purely legal in nature anyway,
were also beyond the authority of the customs collector to resolve with
finality.38 This admission is at once decisive of the issue of the CTA's
jurisdiction over the petition. There being no protest ruling by the
customs collector that was appealed to the COC, the filing of the
petition before the CTA was premature as there was nothing yet to
review.39

SEC. 7. Jurisdiction. -The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein
provided:
1. Decisions of the Commissioner of Internal Revenue in cases
involving disputed assessments, refunds of internal revenue taxes, fees
or other charges, penalties in relation thereto, or other matters arising
under the National Internal Revenue or other laws administered by the
Bureau of Internal Revenue;
xxxx
Verily, the fact that there is no decision by the COC to appeal from
highlights Petron's failure to exhaust administrative remedies
prescribed by law. Before a party is allowed to seek the intervention of
the courts, it is a pre-condition that he avail of all administrative
processes afforded him, such that if a remedy within the administrative
machinery can be resorted to by giving the administrative officer every
opportunity to decide on a matter that comes within his jurisdiction,
then such remedy must be exhausted first before the court's power of
judicial review can be sought, otherwise, the premature resort to the
court is fatal to one's cause of action. 40 While there are exceptions to
the principle of exhaustion of administrative remedies, it has not been
sufficiently shown that the present case falls under any of the
exceptions.

4. Decisions of the Commissioner of Customs in cases involving liability
for customs duties, fees or other money charges, seizure, detention or
release of property affected, fines, forfeitures or other penalties in
relation thereto, or other matters arising under the Customs Law or
other laws administered by the Bureau of Customs;
xxxx
Section 11 of the same law is no less categorical in stating that what
may be the subject of an appeal to the CT A is a decision, ruling or
inaction of the CIR or the COC, among others:
WHEREFORE, the petition is GRANTED. The Resolutions dated
February 13, 2013 and May 8, 2013 of the Court of Tax Appeals (CTA),
Second Division in CTA Case No. 8544 are hereby REVERSED and SET
ASIDE. The petition for review filed by private respondent Petron
Corporation before the CTA is DISMISSED for lack of jurisdiction and
prematurity.
SO ORDERED.

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. – Any
party adversely affected by a decision, ruling or inaction of the
Commissioner of Internal Revenue, the Commissioner of Customs, the
Secretary of Finance, the Secretary of Trade and Industry or the
Secretary of Agriculture or the Central Board of Assessment Appeals or
the Regional Trial Courts may file an appeal with the CTA within thirty
(30) days after the receipt of such decision or ruling or after the
expiration of the period fixed by law for action as referred to in Section
7(a)(2) herein.

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In this case, there was even no tax assessment to speak of. While
customs collector Federico Bulanhagui himself admitted during the
CTA's November 8, 2012 hearing that the computation he had written
at the back page of the IEIRD served as the final assessment imposing
excise tax on Petron's importation of alkylate,33 the Court concurs with
the CIR's stance that the subject IEIRD was not yet the customs