753 Phil.

58 On 8 May 1989, petitioner CBC, through its vice-president, sent a letter of protest to the
BIR. CBC raised the following defenses: (1) double taxation, as the bank had previously paid
the DST on all its transactions involving sales of foreign bills of exchange to the Central
Bank; (2) absence of liability, as the liability for the DST in a sale of foreign exchange through
FIRST DIVISION telegraphic transfers to the Central Bank falls on the buyer ? in this case, the Central Bank;
(3) due process violation, as the bank’s records were never formally examined by the BIR
[ G.R. No. 172509, February 04, 2015 ] examiners; (4) validity of the assessment, as it did not include the factual basis therefore;
(5) exemption, as neither the tax-exempt entity nor the other party was liable for the
payment of DST before the effectivity of Presidential Decree Nos. (PD) 1177 and 1931 for
CHINA BANKING CORPORATION, PETITIONER, VS. COMMISSIONER OF INTERNAL
the years 1982 to 1986.[7] In the protest, the taxpayer requested a reinvestigation so as to
REVENUE, RESPONDENT.
substantiate its assertions.[8]
DECISION
On 6 December 2001, more than 12 years after the filing of the protest, the Commissioner
of Internal Revenue (CIR) rendered a decision reiterating the deficiency DST assessment and
SERENO, C.J.: ordered the payment thereof plus increments within 30 days from receipt of the Decision. [9]

This Rule 45 Petition[1] requires this Court to address the question of prescription of the On 18 January 2002, CBC filed a Petition for Review with the CTA. On 11 March 2002, the
government’s right to collect taxes. Petitioner China Banking Corporation (CBC) assails the CIR filed an Answer with a demand for CBC to pay the assessed DST. [10]
Decision[2] and Resolution[3] of the Court of Tax Appeals (CTA) En Banc  in CTA En Banc Case
No. 109. The CTA En Banc affirmed the Decision[4] in CTA Case No. 6379 of the CTA Second On 23 February 2005, and after trial on the merits, the CTA Second Division denied the
Division, which had also affirmed the validity of Assessment No. FAS-5-82/85-89-000586 Petition of CBC. The CTA ruled that a SWAP arrangement should be treated as a telegraphic
and FAS-5-86-89-00587. The Assessment required petitioner CBC to pay the amount of transfer subject to documentary stamp tax. [11]
P11,383,165.50, plus increments accruing thereto, as deficiency documentary stamp tax
(DST) for the taxable years 1982 to 1986. On 30 March 2005, petitioner CBC filed a Motion for Reconsideration, but it was denied in a
Resolution dated 14 July 2005.
FACTS
On 5 August 2005, petitioner appealed to the CTA En Banc. The appellate tax court,
Petitioner CBC is a universal bank duly organized and existing under the laws of the however, dismissed the Petition for Review in a Decision dated 1 December 2005. CBC filed
Philippines. For the taxable years 1982 to 1986, CBC was engaged in transactions involving a Motion for Reconsideration on 21 December 2005, but it was denied in a 20 March 2006
sales of foreign exchange to the Central Bank of the Philippines (now Bangko Sentral ng Resolution.
Pilipinas), commonly known as SWAP transactions.[5] Petitioner did not file tax returns or
pay tax on the SWAP transactions for those taxable years. The taxpayer now comes to this Court with a Rule 45 Petition, reiterating the arguments it
raised at the CTA level and invoking for the first time the argument of prescription.
On 19 April 1989, petitioner CBC received an assessment from the Bureau of Internal Petitioner CBC states that the government has three years from 19 April 1989, the date the
Revenue (BIR) finding CBC liable for deficiency DST on the sales of foreign bills of exchange former received the assessment of the CIR, to collect the tax. Within that time frame,
to the Central Bank. The deficiency DST was computed as follows: however, neither a warrant of distraint or levy was issued, nor a collection case filed in
court.
Deficiency Documentary Stamp Tax                                                                              
Amount On 17 October 2006, respondent CIR submitted its Comment in compliance with the Court’s
Resolution dated 26 June 2006.[12] The Comment did not have any discussion on the
For the years 1982 to 1985  P 8,280,696.00 question of prescription.
For calendar year 1986 P 2,481 ,975.60
Add : Surcharge  P 620,493.90 P 3,102.469.50 On 21 February 2007, the Court issued a Resolution directing the parties to file their
    P11 ,383,165.50[6] respective Memoranda. Petitioner CBC filed its Memorandum [13] on 26 April 2007. The CIR,
1
on the other hand, filed on 17 April 2007 a Manifestation stating that it was adopting the collection of internal revenue taxes. It was only on 23 April 2004, when Republic Act
allegations and authorities in its Comment in lieu of the required Memorandum. [14] Number 9282 took effect,[17] that the jurisdiction of the CTA was expanded to include,
among others, original jurisdiction over collection cases in which the principal amount
ISSUE involved is one million pesos or more.

Given the facts and the arguments raised in this case, the resolution of this case hinges on Consequently, the claim of the CIR for deficiency DST from petitioner is forever lost, as it is
this issue: whether the right of the BIR to collect the assessed DST from CBC is barred by now barred by time. This Court has no other option but to dismiss the present case.
prescription.[15]
The running of the statute of
RULING OF THE COURT limitations was not suspended
by the request for reinvestigation.
We grant the Petition on the ground that the right of the BIR to collect the assessed DST is
barred by the statute of limitations. The fact that the taxpayer in this case may have requested a reinvestigation did not toll the
running of the three-year prescriptive period. Section 320 of the 1977 Tax Code states:
Prescription Has Set In.
Sec. 320. Suspension of running of statute.—The running of the statute of limitations
To recall, the Bureau of Internal Revenue (BIR) issued the assessment for deficiency DST on provided in Sections 318 or 319 on the making of assessment and the beginning of distraint
19 April 1989, when the applicable rule was Section 319(c) of the National Internal Revenue or levy or a proceeding in court for collection, in respect of any deficiency, shall be
Code of 1977, as amended.[16]  In that provision, the time limit for the government to collect suspended for the period during which the Commissioner is prohibited from making the
the assessed tax is set at three years, to be reckoned from the date when the BIR assessment or beginning distraint or levy or a proceeding in court and for sixty days
mails/releases/sends the assessment notice to the taxpayer. Further, Section 319(c) states thereafter; when the taxpayer requests for a re-investigation which is granted by the
that the assessed tax must be collected by distraint or levy and/or court proceeding within Commissioner; when the taxpayer cannot be located in the address given by him in the
the three-year period. return filed upon which a tax is being assessed or collected: Provided, That if the taxpayer
informs the Commissioner of any change in address, the running of the statute of
With these rules in mind, we shall now determine whether the claim of the BIR is barred by limitations will not be suspended; when the warrant of distraint and levy is duly served
time. upon the taxpayer, his authorized representative, or a member of his household with
sufficient discretion, and no property could be located; and when the taxpayer is out of the
In this case, the records do not show when the assessment notice was mailed, released or Philippines. (Emphasis supplied)
sent to CBC. Nevertheless, the latest possible date that the BIR could have released, mailed
or sent the assessment notice was on the same date that CBC received it, 19 April 1989.
The provision is clear.  A request for reinvestigation alone will not suspend the statute of
Assuming therefore that 19 April 1989 is the reckoning date, the BIR had three years to
limitations. Two things must concur: there must be a request for reinvestigation and the CIR
collect the assessed DST. However, the records of this case show that there was neither a
must have granted it. BPI v. Commissioner of Internal Revenue[18] emphasized this rule by
warrant of distraint or levy served on CBC's properties nor a collection case filed in court by
stating:
the BIR within the three-year period.
In the case of Republic of the Philippines v. Gancayco, taxpayer Gancayco requested for a
The attempt of the BIR to collect the tax through its Answer with a demand for CBC to pay thorough reinvestigation of the assessment against him and placed at the disposal of the
the assessed DST in the CTA on 11 March 2002 did not comply with Section 319(c) of the Collector of Internal Revenue all the [evidence] he had for such purpose; yet, the Collector
1977 Tax Code, as amended. The demand was made almost thirteen years from the date ignored the request, and the records and documents were not at all examined. Considering
from which the prescriptive period is to be reckoned. Thus, the attempt to collect the tax the given facts, this Court pronounced that—
was made way beyond the three-year prescriptive period. x x x. The act of requesting a reinvestigation alone does not suspend the period. The
request should first be granted, in order to effect suspension. (Collector v. Suyoc
The BIR’s Answer in the case filed before the CTA could not, by any means, have qualified as Consolidated, supra; also Republic v. Ablaza, supra). Moreover, the Collector gave appellee
a collection case as required by law. Under the rule prevailing at the time the BIR filed its until April 1, 1949, within which to submit his evidence, which the latter did one day before.
Answer, the regular courts, and not the CTA, had jurisdiction over judicial actions for
2
There were no impediments on the part of the Collector to file the collection case from April received an assessment notice from the BIR for deficiency DST based on petitioner’s SWAP
1, 1949 x x x. transactions for the year 1985 on 16 June 1989. On 23 June 1989, BPI, through its counsel,
filed a protest requesting the reinvestigation and/or reconsideration of the assessment for
In Republic of the Philippines v. Acebedo, this Court similarly found that —
lack of legal or factual bases. Almost ten years later,  the CIR, in a letter dated 4 August
. . . [T]he defendant, after receiving the assessment notice of September 24, 1949, asked for
1998, denied the protest. On 4 January 1999, BPI filed a Petition for Review with the
a reinvestigation thereof on October 11, 1949 (Exh. “A”). There is no evidence that this
CTA. On 23 February 1999, the CIR filed an Answer with a demand for BPI to pay the
request was considered or acted upon. In fact, on October 23, 1950 the then Collector of
assessed DST. It was only when the case ultimately reached this Court that the issue of
Internal Revenue issued a warrant of distraint and levy for the full amount of the
prescription was brought up. Nevertheless, the Court ruled that the CIR could no longer
assessment (Exh. “D”), but there was follow-up of this warrant. Consequently, the request
collect the assessed tax due to prescription. Basing its ruling on Section 1, Rule 9 of the
for reinvestigation did not suspend the running of the period for filing an action for
Rules of Court and on jurisprudence, the Court held as follows:
collection. (Emphasis in the original)
The Court went on to declare that the burden of proof that the request for reinvestigation In a Resolution dated 5 August 2013, the Court, through the Third Division, found that the
had been actually granted shall be on the CIR. Such grant may be expressed in its assailed tax assessment may be invalidated because the statute of limitations on the
communications with the taxpayer or implied from the action of the CIR or his authorized collection of the alleged deficiency DST had already expired, conformably with Section 1,
representative in response to the request for reinvestigation. Rule 9 of the Rules of Court and the Bank of the Philippine Islands v. Commissioner of
Internal Revenue decision. However, to afford due process, the Court required both BPI and
There is nothing in the records of this case which indicates, expressly or impliedly, that the CIR to submit their respective comments on the issue of prescription.
CIR had granted the request for reinvestigation filed by BPI. What is reflected in the records
is the piercing silence and inaction of the CIR on the request for reinvestigation, as he Only the CIR filed his comment on 9 December 2013. In his Comment, the CIR argues that
considered BPI's letters of protest to be. the issue of prescription cannot be raised for the first time on appeal. The CIR further
alleges that even assuming that the issue of prescription can be raised, the protest letter
In the present case, there is no showing from the records that the CIR ever granted the interrupted the prescriptive period to collect the assessed DST, unlike in the Bank of the
request for reinvestigation filed by CBC. That being the case, it cannot be said that the Philippine Islands case.
running of the three-year prescriptive period was effectively suspended.
xxxx
Failure to raise prescription at the
administrative level/lower court as a We deny the right of the BIR to collect the assessed DST on the ground of prescription.
defense is of no moment.
When the pleadings or the evidence on record Section 1, Rule 9 of the Rules of Court expressly provides that:
show that the claim is barred by prescription, Section 1. Defenses and objections not pleaded. - Defenses and objections not pleaded
the court must dismiss the claim even if prescription either in a motion to dismiss or in the answer are deemed waived. However, when it
is not raised as a defense. appears from the pleadings or the evidence on record that the court has no jurisdiction
over the subject matter, that there is another action pending between the same parties for
the same cause, or that the action is barred by prior judgment or by the statute of
We note that petitioner has raised the issue of prescription for the first time only before limitations, the court shall dismiss the claim.
this Court. While we are mindful of the established rule of remedial law that the defense of
prescription must be raised at the trial court that has also been applied for tax cases. [19]  If the pleadings or the evidence on record show that the claim is barred by prescription,
Thus, as a rule, the failure to raise the defense of prescription at the administrative level the court is mandated to dismiss the claim even if prescription is not raised as a
prevents the taxpayer from raising it at the appeal stage. defense. In Heirs of Valientes v. Ramas, we ruled that the CA may motu proprio  dismiss the
case on the ground of prescription despite failure to raise this ground on appeal. The court
This rule, however, is not absolute. is imbued with sufficient discretion to review matters, not otherwise assigned as errors on
appeal, if it finds that their consideration is necessary in arriving at a complete and just
The facts of the present case are substantially identical to those in the 2014 case, Bank of resolution of the case. More so, when the provisions on prescription were enacted to
the Philippine Islands (BPI) v. Commissioner of Internal Revenue. [20] In that case, petitioner benefit and protect taxpayers from investigation after a reasonable period of time.

3
 Estoppel or waiver prevents the government
Thus, we proceed to determine whether the period to collect the assessed DST for the year from invoking the rule against raising the
1985 has prescribed. issue of prescription for the first time on appeal.

To determine prescription, what is essential only is that the facts demonstrating the lapse of In this case, petitioner may have raised the question of prescription only on appeal to this
the prescriptive period were sufficiently and satisfactorily apparent on the record either in Court. The BIR could have crushed the defense by the mere invocation of the rule against
the allegations of the plaintiff’s complaint, or otherwise established by the evidence. Under setting up the defense of prescription only at the appeal stage. The government, however,
the then applicable Section 319(c) [now, 222(c)] of the National Internal Revenue Code failed to do so.
(NIRC) of 1977, as amended, any internal revenue tax which has been assessed within the
period of limitation may be collected by distraint or levy, and/or court proceeding within On the contrary, the BIR was silent despite having the opportunity to invoke the bar against
three years following the assessment of the tax. The assessment of the tax is deemed made the issue of prescription. It is worthy of note that the Court ordered the BIR to file a
and the three-year period for collection of the assessed tax begins to run on the date the Comment. The government, however, did not offer any argument in its Comment about the
assessment notice had been released, mailed or sent by the BIR to the taxpayer. issue of prescription, even if petitioner raised it in the latter’s Petition. It merely fell silent
on the issue. It was given another opportunity to meet the challenge when this Court
In the present case, although there was no allegation as to when the assessment notice had ordered both parties to file their respective memoranda. The CIR, however, merely filed a
been released, mailed or sent to BPI, still, the latest date that the BIR could have released, Manifestation that it would no longer be filing a Memorandum and, in lieu thereof, it would
mailed or sent the assessment notice was on the date BPI received the same on 16 June be merely adopting the arguments raised in its Comment. Its silence spoke loudly of its
1989. Counting the three-year prescriptive period from 16 June 1989, the BIR had until 15 intent to waive its right to object to the argument of prescription.
June 1992 to collect the assessed DST. But despite the lapse of 15 June 1992, the evidence
established that there was no warrant of distraint or levy served on BPI’s properties, or any We are mindful of the rule in taxation that estoppel does not prevent the government from
judicial proceedings initiated by the BIR. collecting taxes; it is not bound by the mistake or negligence of its agents. The rule is based
on the political law concept “the king can do no wrong,” [21] which likens a state to a king: it
The earliest attempt of the BIR to collect the tax was when it filed its answer in the CTA on does not commit mistakes, and it does not sleep on its rights. The analogy fosters inequality
23 February 1999, which was several years beyond the three-year prescriptive period. between the taxpayer and the government, with the balance tilting in favor of the latter.
However, the BIR’s answer in the CTA was not the collection case contemplated by the law. This concept finds justification in the theory and reality that government is necessary, and it
Before 2004 or the year Republic Act No. 9282 took effect, the judicial action to collect must therefore collect taxes if it is to survive. Thus, the mistake or negligence of
internal revenue taxes fell under the jurisdiction of the regular trial courts, and not the CTA. government officials should not bind the state, lest it bring harm to the government and
Evidently, prescription has set in to bar the collection of the assessed DST. (Emphasis ultimately the people, in whom sovereignty resides.[22]
supplied)
Republic v. Ker & Co. Ltd.[23] involved a collection case for a final and executory assessment.
BPI  thus provides an exception to the rule against raising the defense of prescription for the The taxpayer nevertheless raised the prescription of the right to assess the tax as a defense
first time on appeal: the exception arises when the pleadings or the evidence on record before the Court of First Instance. The Republic, instead of objecting to the invocation of
show that the claim is barred by prescription. prescription as a defense by the taxpayer, litigated on the issue and thereafter submitted it
for resolution. The Supreme Court ruled for the taxpayer, treating the actuations of the
In this case, the fact that the claim of the government is time-barred is a matter of record. government as a waiver of the right to invoke the defense of prescription. Ker effectively
As can be seen from the previous discussion on the determination of the prescription of the applied to the government the rule of estoppel. Indeed, the no-estoppel rule is not
right of the government to claim deficiency DST, the conclusion that prescription has set in absolute.
was arrived at using the evidence on record. The date of receipt of the assessment notice
was not disputed, and the date of the attempt to collect was determined by merely The same ingredients in Ker - procedural matter and injustice - obtain in this case. The
checking the records as to when the Answer of the CIR containing the demand to pay the procedural matter consists in the failure to raise the issue of prescription at the trial
tax was filed. court/administrative level, and injustice in the fact that the BIR has unduly delayed the
assessment and collection of the DST in this case.  The fact is that it took more than 12
years for it to take steps to collect the assessed tax.  The BIR definitely caused untold

4
prejudice to petitioner, keeping the latter in the dark for so long, as to whether it is liable
for DST and, if so, for how much.

CONCLUSION

Inasmuch as the government’s claim for deficiency DST is barred by prescription, it is no

longer necessary to dwell on the validity of the assessment.

WHEREFORE, the Petition is GRANTED. The Court of Tax Appeals En Banc Decision dated 1
December 2005 and its Resolution dated 20 March 2006 in CTA EB Case No. 109 are
hereby REVERSED and SET ASIDE. A new ruling is entered DENYING respondent’s claim for
deficiency DST in the amount of P11,383,165.50.

SO ORDERED.

5
636 Phil. 43 each calendar quarter or month as may be provided in the respective franchise or pertinent
municipal regulation and shall, any provision of the Local Tax Code or any other law to the
contrary notwithstanding, be in lieu of all taxes and assessments of whatever nature
imposed by any national or local authority on earnings, receipts, income and privilege of
FIRST DIVISION generation, distribution and sale of electric current.

[ G.R. No. 166134, June 29, 2010 ] On January 1, 1992, RA 7160 or the Local Government Code (LGC) of 1991 was passed into
law, conferring upon provinces and cities the power, among others, to impose tax on
ANGELES CITY, PETITIONER, VS. ANGELES CITY ELECTRIC CORPORATION AND REGIONAL businesses enjoying franchise.[4] In accordance with the LGC, the Sangguniang
TRIAL COURT BRANCH 57, ANGELES CITY, RESPONDENTS. Panlungsod of Angeles City enacted on December 23, 1993 Tax Ordinance No. 33, S-93,
otherwise known as the Revised Revenue Code of Angeles City (RRCAC).
DECISION
On February 7, 1994, a petition seeking the reduction of the tax rates and a review of the
DEL CASTILLO, J.: provisions of the RRCAC was filed with the Sangguniang Panlungsod by Metro Angeles
Chamber of Commerce and Industry Inc. (MACCI) of which AEC is a member. There being no
action taken by the Sangguniang Panlungsod on the matter, MACCI elevated the
The prohibition on the issuance of a writ of injunction to enjoin the collection of taxes
petition[5] to the Department of Finance, which referred the same to the Bureau of Local
applies only to national internal revenue taxes, and not to local taxes.
Government Finance (BLGF). In the petition, MACCI alleged that the RRCAC is oppressive,
excessive, unjust and confiscatory; that it was published only once, simultaneously on
This Petition[1] for Certiorari under Rule 65 of the Rules of Court seeks to set aside the Writ
January 22, 1994; and that no public hearings were conducted prior to its enactment. Acting
of Preliminary Injunction issued by the Regional Trial Court (RTC) of Angeles City, Branch 57,
on the petition, the BLGF issued a First Indorsement [6] to the City Treasurer of Angeles City,
in Civil Case No. 11401, enjoining Angeles City and its City Treasurer from levying, seizing,
instructing the latter to make representations with the Sangguniang Panlungsod for the
disposing and selling at public auction the properties owned by Angeles Electric Corporation
appropriate amendment of the RRCAC in order to ensure compliance with the provisions of
(AEC).
the LGC, and to make a report on the action taken within five days.
Factual Antecedents
Thereafter, starting July 1995, AEC has been paying the local franchise tax to the Office of
the City Treasurer on a quarterly basis, in addition to the national franchise tax it pays every
On June 18, 1964, AEC was granted a legislative franchise under Republic Act No. (RA)
quarter to the Bureau of Internal Revenue (BIR).
4079[2] to construct, maintain and operate an electric light, heat, and power system for the
purpose of generating and distributing electric light, heat and power for sale in Angeles City,
Proceedings before the City Treasurer
Pampanga. Pursuant to Section 3-A thereof,[3] AEC's payment of franchise tax for gross
earnings from electric current sold was in lieu of all taxes, fees and assessments.
On January 22, 2004, the City Treasurer issued a Notice of Assessment [7] to AEC for payment
of business tax, license fee and other charges for the period 1993 to 2004 in the total
On September 11, 1974, Presidential Decree No. (PD) 551 reduced the franchise tax of
amount of P94,861,194.10. Within the period prescribed by law, AEC protested the
electric franchise holders. Section 1 of PD 551 provided that:
assessment claiming that:
SECTION 1. Any provision of law or local ordinance to the contrary notwithstanding, the
(a) pursuant to RA 4079, it is exempt from paying local business tax;
franchise tax payable by all grantees of franchises to generate, distribute and sell electric
current for light, heat and power shall be two percent (2%) of their gross receipts received
(b) since it is already paying franchise tax on business, the payment of business tax would
from the sale of electric current and from transactions incident to the generation,
result in double taxation;
distribution and sale of electric current.
(c) the period to assess had prescribed because under the LGC, taxes and fees can only be
Such franchise tax shall be payable to the Commissioner of Internal Revenue or his duly
assessed and collected within five (5) years from the date they become due; and
authorized representative on or before the twentieth day of the month following the end of
6
 disposing the properties of AEC. All other matters pertaining to the validity of the tax
(d) the assessment and collection of taxes under the RRCAC cannot be made retroactive to assessment and AEC's tax exemption must therefore be left for the determination of the
1993 or prior to its effectivity.[8] RTC where the main case is pending decision.

On February 17, 2004, the City Treasurer denied the protest for lack of merit and requested Petitioner's Arguments
AEC to settle its tax liabilities.[9]
Petitioner's main argument is that the collection of taxes cannot be enjoined by the RTC,
Proceedings before the RTC citing Valley Trading Co., Inc. v. Court of First Instance of Isabela, Branch II, [23]  wherein the
lower court's denial of a motion for the issuance of a writ of preliminary injunction to enjoin
Aggrieved, AEC appealed the denial of its protest to the RTC of Angeles City via a Petition for the collection of a local tax was upheld. Petitioner further reasons that since the levy and
Declaratory Relief,[10] docketed as Civil Case No. 11401. auction of the properties of a delinquent taxpayer are proper and lawful acts specifically
allowed by the LGC, these cannot be the subject of an injunctive writ. Petitioner likewise
On April 5, 2004, the City Treasurer levied on the real properties of AEC. [11] A Notice of insists that AEC must first pay the tax before it can protest the assessment. Finally,
Auction Sale[12] was published and posted announcing that a public auction of the levied petitioner contends that the tax exemption claimed by AEC has no legal basis because RA
properties of AEC would be held on May 7, 2004. 4079 has been expressly repealed by the LGC.

This prompted AEC to file with the RTC, where the petition for declaratory relief was Private respondent's Arguments
pending, an Urgent Motion for Issuance of Temporary Restraining Order and/or Writ of
Preliminary Injunction[13] to enjoin Angeles City and its City Treasurer from levying, Private respondent AEC on the other hand asserts that there was no grave abuse of
annotating the levy, seizing, confiscating, garnishing, selling and disposing at public auction discretion on the part of the RTC in issuing the writ of preliminary injunction because it was
the properties of AEC. issued after due notice and hearing, and was necessary to prevent the petition from
becoming moot. In addition, AEC claims that the issuance of the writ of injunction was
Meanwhile, in response to the petition for declaratory relief filed by AEC, Angeles City and proper since the tax assessment issued by the City Treasurer is not yet final, having been
its City Treasurer filed an Answer with Counterclaim [14] to which AEC filed a Reply.[15] seasonably appealed pursuant to Section 195[24] of the LGC. AEC likewise points out that
following the case of Pantoja v. David,[25] proceedings to invalidate a warrant of distraint
After due notice and hearing, the RTC issued a Temporary Restraining Order (TRO) [16] on and levy to restrain the collection of taxes do not violate the prohibition against injunction
May 4, 2004, followed by an Order[17] dated May 24, 2004 granting the issuance of a Writ of to restrain the collection of taxes because the proceedings are directed at the right of the
Preliminary Injunction, conditioned upon the filing of a bond in the amount of City Treasurer to collect the tax by distraint or levy. As to its tax liability, AEC maintains that
P10,000,000.00. Upon AEC's posting of the required bond, the RTC issued a Writ of it is exempt from paying local business tax. In any case, AEC counters that the issue of
Preliminary Injunction on May 28, 2004,[18] which was amended on May 31, 2004 due to whether it is liable to pay the assessed local business tax is a factual issue that should be
some clerical errors.[19] determined by the RTC and not by the Supreme Court via a petition for certiorari under Rule
65 of the Rules of Court.
On August 5, 2004, Angeles City and its City Treasurer filed a "Motion for Dissolution of
Preliminary Injunction and Motion for Reconsideration of the Order dated May 24, Our Ruling
2004,"[20] which was opposed by AEC.[21]
We find the petition bereft of merit.
Finding no compelling reason to disturb and reconsider its previous findings, the RTC denied
the joint motion on October 14, 2004.[22] The LGC does not specifically prohibit an injunction enjoining the collection of taxes

Issue A principle deeply embedded in our jurisprudence is that taxes being the lifeblood of the
government should be collected promptly, [26] without unnecessary hindrance[27] or delay.
[28]
Being a special civil action for certiorari, the issue in the instant case is limited to the  In line with this principle, the National Internal Revenue Code of 1997 (NIRC) expressly
determination of whether the RTC gravely abused its discretion in issuing the writ of provides that no court shall have the authority to grant an injunction to restrain the
preliminary injunction enjoining Angeles City and its City Treasurer from levying, selling, and collection of any national internal revenue tax, fee or charge imposed by the code. [29] An
7
exception to this rule obtains only when in the opinion of the Court of Tax Appeals (CTA) the namely: (1) the existence of a clear and unmistakable right that must be protected; and (2)
collection thereof may jeopardize the interest of the government and/or the taxpayer. [30] an urgent and paramount necessity for the writ to prevent serious damage. [33]

The situation, however, is different in the case of the collection of local taxes as there is no In issuing the injunction, the RTC ratiocinated that:
express provision in the LGC prohibiting courts from issuing an injunction to restrain local
governments from collecting taxes. Thus, in the case of Valley Trading Co., Inc. v. Court of It is very evident on record that petitioner[34] resorted and filed an urgent motion for
First Instance of Isabela, Branch II, cited by the petitioner, we ruled that: issuance of a temporary restraining order and preliminary injunction to stop the scheduled
auction sale only when a warrant of levy was issued and published in the newspaper setting
Unlike the National Internal Revenue Code, the Local Tax Code [31] does not contain any the auction sale of petitioner's property by the City Treasurer, merely few weeks after the
specific provision prohibiting courts from enjoining the collection of local taxes. Such petition for declaratory relief has been filed, because if the respondent will not be
statutory lapse or intent, however it may be viewed, may have allowed preliminary restrained, it will render this petition moot and academic. To the mind of the Court, since
injunction where local taxes are involved but cannot negate the procedural rules and there is no other plain, speedy and adequate remedy available to the petitioner in the
requirements under Rule 58.[32] ordinary course of law except this application for a temporary restraining order and/or writ
of preliminary injunction to stop the auction sale and/or to enjoin and/or restrain
respondents from levying, annotating the levy, seizing, confiscating, garnishing, selling and
In light of the foregoing, petitioner's reliance on the above-cited case to support its view
disposing at public auction the properties of petitioner, or otherwise exercising other
that the collection of taxes cannot be enjoined is misplaced. The lower court's denial of the
administrative remedies against the petitioner and its properties, this alone justifies the
motion for the issuance of a writ of preliminary injunction to enjoin the collection of the
move of the petitioner in seeking the injunctive reliefs sought for.
local tax was upheld in that case, not because courts are prohibited from granting such
injunction, but because the circumstances required for the issuance of writ of injunction
Petitioner in its petition is questioning the assessment or the ruling of the City Treasurer on
were not present.
the business tax and fees, and not the local ordinance concerned. This being the case, the
Court opines that notice is not required to the Solicitor General since what is involved is just
Nevertheless, it must be emphasized that although there is no express prohibition in the
a violation of a private right involving the right of ownership and possession of petitioner's
LGC, injunctions enjoining the collection of local taxes are frowned upon. Courts therefore
properties. Petitioner, therefore, need not comply with Section 4, Rule 63 requiring such
should exercise extreme caution in issuing such injunctions.
notice to the Office of the Solicitor General.
No grave abuse of discretion was committed by the RTC
The Court is fully aware of the Supreme Court pronouncement that injunction is not proper
to restrain the collection of taxes. The issue here as of the moment is the restraining of the
Section 3, Rule 58, of the Rules of Court lays down the requirements for the issuance of a
respondent from pursuing its auction sale of the petitioner's properties. The right of
writ of preliminary injunction, viz:
ownership and possession of the petitioner over the properties subject of the auction sale is
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief at stake.
consists in restraining the commission or continuance of the acts complained of, or in the
performance of an act or acts, either for a limited period or perpetually; Respondents assert that not one of the witnesses presented by the petitioner have proven
what kind of right has been violated by the respondent, but merely mentioned of an injury
(b) That the commission, continuance or non-performance of the act or acts complained of which is only a scenario based on speculation because of petitioner's claim that electric
during the litigation would probably work injustice to the applicant; or power may be disrupted.

(c) That a party, court, or agency or a person is doing, threatening, or attempting to do, or is Engr. Abordo's testimony reveals and even his Affidavit Exhibit "S" showed that if the
procuring or suffering to be done, some act or acts probably in violation of the rights of the auction sale will push thru, petitioner will not only lose control and operation of its facility,
applicant respecting the subject of the action or proceeding, and tending to render the but its employees will also be denied access to equipments vital to petitioner's operations,
judgment ineffectual. and since only the petitioner has the capability to operate Petersville sub station, there will
be a massive power failure or blackout which will adversely affect business and economy, if
not lives and properties in Angeles City and surrounding communities.
Two requisites must exist to warrant the issuance of a writ of preliminary injunction,
8
Petitioner, thru its witnesses, in the hearing of the temporary restraining order, presented that it would sustain serious damage if these properties, which are vital to its operations,
sufficient and convincing evidence proving irreparable damages and injury which were would be sold at public auction. As we see it then, the writ of injunction was properly
already elaborated in the temporary restraining order although the same may be realized issued.
only if the auction sale will proceed. And unless prevented, restrained, and enjoined, grave
and irreparable damage will be suffered not only by the petitioner but all its electric A final note. While we are mindful that the damage to a taxpayer's property rights generally
consumers in Angeles, Clark, Dau and Bacolor, Pampanga. takes a back seat to the paramount need of the State for funds to sustain governmental
functions,[40] this rule finds no application in the instant case where the disputed tax
The purpose of injunction is to prevent injury and damage from being incurred, otherwise, it assessment is not yet due and demandable. Considering that AEC was able to appeal the
will render any judgment in this case ineffectual. denial of its protest within the period prescribed under Section 195 of the LGC, the
collection of business taxes[41] through levy at this time is, to our mind, hasty, if not
"As an extraordinary remedy, injunction is calculated to preserve or maintain the status quo premature.[42] The issues of tax exemption, double taxation, prescription and the alleged
of things and is generally availed of to prevent actual or threatened acts, until the merits of retroactive application of the RRCAC, raised in the protest of AEC now pending with the
the case can be heard" (Cagayan de Oro City Landless Res. Assn. Inc. vs. CA, 254 SCRA 220) RTC, must first be resolved before the properties of AEC can be levied. In the meantime,
AEC's rights of ownership and possession must be respected.
It appearing that the two essential requisites of an injunction have been satisfied, as there
exists a right on the part of the petitioner to be protected, its right[s] of ownership and WHEREFORE, the petition is hereby DISMISSED.
possession of the properties subject of the auction sale, and that the acts (conducting an
auction sale) against which the injunction is to be directed, are violative of the said rights of SO ORDERED.
the petitioner, the Court has no other recourse but to grant the prayer for the issuance of a
writ of preliminary injunction considering that if the respondent will not be restrained from
doing the acts complained of, it will preempt the Court from properly adjudicating on the
merits the various issues between the parties, and will render moot and academic the
proceedings before this court.[35]

As a rule, the issuance of a preliminary injunction rests entirely within the discretion of the
court taking cognizance of the case and will not be interfered with, except where there is
grave abuse of discretion committed by the court. [36] For grave abuse of discretion to
prosper as a ground for certiorari, it must be demonstrated that the lower court or tribunal
has exercised its power in an arbitrary and despotic manner, by reason of passion or
personal hostility, and it must be patent and gross as would amount to an evasion or to a
unilateral refusal to perform the duty enjoined or to act in contemplation of law. [37] In other
words, mere abuse of discretion is not enough.[38]

Guided by the foregoing, we find no grave abuse of discretion on the part of the RTC in
issuing the writ of injunction. Petitioner, who has the burden to prove grave abuse of
discretion,[39] failed to show that the RTC acted arbitrarily and capriciously in granting the
injunction. Neither was petitioner able to prove that the injunction was issued without any
factual or legal justification. In assailing the injunction, petitioner primarily relied on the
prohibition on the issuance of a writ of injunction to restrain the collection of taxes. But as
we have already said, there is no such prohibition in the case of local taxes. Records also
show that before issuing the injunction, the RTC conducted a hearing where both parties
were given the opportunity to present their arguments. During the hearing, AEC was able to
show that it had a clear and unmistakable legal right over the properties to be levied and

9
 FIRST DIVISION Drawback Center (DOF Center), approved the Deeds of Assignment. [7]

[ G.R. No. 197945, July 09, 2018 ] Thereafter, respondents sought the DOF Center's permission to use the assigned TCCs in
settling respondents' own excise tax liabilities. The DOF Center issued Tax Debit
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, vs. PILIPINAS SHELL PETROLEUM Memoranda (DOF TDMs) addressed to the Collection Program Division of the Bureau of
CORPORATION, RESPONDENT. Internal Revenue (BIR),[8] allowing respondents to do so.

[G.R. Nos. 204119-20] Thus, to pay for their excise tax liabilities from 1992 to 1997 (Covered Years), [9] respondents
presented the DOF TDMs to the BIR. The BIR accepted the TDMs and issued the following:
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. PILIPINAS SHELL PETROLEUM (a) TDMs signed by the BIR Assistant Commissioner for Collection Service [10] (BIR TDMs); (b)
CORPORATION AND PETRON CORPORATION, RESPONDENTS.
Authorities to Accept Payment for Excise Taxes (ATAPETs) signed by the BIR Regional District
Officer; and (c) corresponding instructions to BIR's authorized agent banks to accept
DECISION
respondents' payments in the form of BIR TDMs. [11]
LEONARDO-DE CASTRO,* J.:
Three significant incidents arising from the foregoing antecedents resulted in the filing of
several petitions before this Court, viz.:
Before the Court are consolidated petitions for review on certiorari under Rule 45 of the
Rules of Court, as amended, filed by petitioner Commissioner of Internal Revenue (CIR): Significant Incidents Resultant Petition/s before the Court

(a) 1998 Collection Letters issued by the BIR G.R. Nos. 204119-20 (one of the pr sent
1. G.R. No. 197945 assailing the Decision[1] dated February 22, 2011 and against respondents petitions)
Resolution[2] dated July 27, 2011 of the Court of Tax Appeals (CTA) in CTA En
Banc Case No. 535; and (b) 1999 Assessments issued by the BIR Pilipinas Shell Petroleum Corporation v.
against respondents Commissioner of Internal Revenue, G.R. No.
2. G.R. Nos. 204119-20 assailing the Decision[3] dated March 21, 2012 and 172598, December 21, 2007 (2007 Shell
Resolution[4] dated October 10, 2012 of the Court of Appeals in CA-G.R. SP Nos. Case)
55329-30.
Petron Corporation v. Commissioner of
Respondents Pilipinas Shell Petroleum Corporation (Shell) and Petron Corporation (Petron)
Internal Revenue, G.R. No. 180385, July 28,
are domestic corporations engaged in the production of petroleum products and are duly
2010 (2010 Petron Case)
registered with the Board of Investments (BOI) under the Omnibus Investments Code of
1987.[5] (c) 2002 Collection Letter issued by the BIR G.R. No. 197945 (one of the present
against respondent Shell petitions)
On different occasions during 1988 to 1996, respondents separately sold bunker oil and
other fuel products to other BOT-registered entities engaged in the export of their own Said incidents and petitions are discussed in detail below.
manufactured goods (BOI export entities).[6] These BOT-registered export entities used Tax
Credit Certificates (TCCs) originally issued in their name to pay for these purchases. A. 1998 Collection Letters
    (G.R. Nos. 204119-20)
To proceed with this mode of payment, the BOT-registered export entities executed Deeds
of Assignment in favor of respondents, transferring the TCCs to the latter. Subsequently, the In its collection letters[12] dated April 22, 1998 (1998 Collection Letters) addressed to
Department of Finance (DOF), through its One Stop Shop Inter-Agency Tax Credit and Duty respondents' respective presidents, the BIR[13] pointed out that respondents partly paid for
their excise tax liabilities during the Covered Years using TCCs issued in the names of other
10
companies; invalidated respondents' tax payments using said TCCs; and requested
respondent Shell and respondent Petron to pay their delinquent tax liabilities amounting to WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby GRANTED.
P1,705,028,008.06 and P1,107,542,547.08, respectively. The 1998 Collection Letters The collection of the alleged delinquent excise taxes in the amount of P1,107,542,547.08 is
similarly read: hereby CANCELLED AND SET ASIDE for being contrary to law. Accordingly, [herein petitioner
and BIR Regional Director of Makati, Region No. 8] are ENJOINED from collecting the said
Our records show that for the years x x x, you have been paying part of your excise tax
amount of taxes against [herein respondent Petron]. [20]
liabilities in the form of Tax Credit Certificate (TCC) which bear the name of a company
other than yours in violation of Rule IX of the Rules and Regulations issued by the Board of CTA Case No. 5728
Investments to implement P.D. No. 1789 and B.P. 391. Accordingly, your payment through
the aforesaid TCC's are considered invalid and therefore, you are hereby requested to IN LIGHT OF ALL THE FOREGOING, the instant petition for review is GRANTED. The collection
pay the amount of x x x inclusive of delinquency for late payments as of even date, covering letter issued by [herein petitioner] dated April 22, 1998 is considered withdrawn and he is
the years heretofore mentioned within thirty days (30) from receipt hereof, lest we will be ENJOINED from any attempts to collect from [herein respondent Shell] the specific tax,
constrained to resort to administrative and legal remedies available in accordance with surcharge and interest subject of this petition.[21]
law. (Emphasis supplied.)
In both Decisions, the CTA upheld the validity of the TCC transfers from the BOI-registered
Respondents separately filed their administrative protests [14] against the 1998 Collection export entities to respondents, the latter having complied with the requirements of
Letters, but the BIR denied[15] said protests. The BIR maintained that the transfers of the transferability. The CTA further ruled that the BIR's attempt to collect taxes without an
TCCs from the BOI-registered export entities to respondents and the use of the same TCCs assessment was a denial of due process and a violation of Section 228 [22] of the National
by respondents to pay for their self-assessed specific tax liabilities were invalid, and Internal Revenue Code of the Philippines of 1997 (Tax Code). The CTA also noted that the
reiterated its demand that respondents pay their delinquent taxes. BIR might have purposely avoided the issuance of a for;mal assessment because its right to
assess majority of respondents' alleged delinquent taxes had already prescribed.
This prompted respondent Petron to file a Petition for Review [16] before the CTA docketed as
CTA Case No. 5657. Petitioner's motions for reconsideration of the above-mentioned decisions were denied by
the CTA.[23] Thus, petitioner CIR sought recourse before the Court of Appeals [24] through the
As for respondent Shell, it first requested for reconsideration of the denial of its protest by consolidated petitions docketed as CA-G.R. SP Nos. 55329-30.
the BIR.[17] However, while said request for reconsideration was pending, the BIR issued a
Warrant of Garnishment[18] against respondent Shell. Taking this as a denial of its request for However, the Court of Appeals dismissed the petitions and found the transfer and
reconsideration, respondent Shell likewise filed a Petition for Review [19] before the CTA utilization of the subject TCCs were valid, in accordance with the 2007 Shell Case.[25] The
docketed as CTA Case No. 5728. appellate court eventually denied petitioner's motion for reconsideration.

In their respective petitions before the CTA, respondents raised similar arguments against Undaunted, petitioner CIR filed the present petition docketed as G.R. Nos. 204119-20.
petitioner, to wit: (a) The collection of tax without prior assessment was a denial of the
taxpayer's right to due process; (b) The use of TCCs as payment of excise tax liabilities was B. 1999 Assessments (The 2007 Shell Case and 2010 Petron Case)
valid; (c) Since the BIR approved the transfers and subsequent use of the TCCs, it was
estopped from questioning the validity thereof; and (d) The BIR's right to collect the alleged During the pendency of the consolidated petitions in CA-G.R. SP Nos. 55329-30 before the
delinquent taxes had already prescribed. Court of Appeals, the DOF Center conducted separate post-audit procedures [26] on all of the
TCCs acquired and used by respondents during the Covered Years, requiring them to submit
The CTA granted respondents' petitions in separate Decisions both dated July 23, 1999, documents to support their acquisition of the TCCs from the BOI-registered export entities.
decreeing as follows: As a result of its post-audit procedures, the DOF Center cancelled the first batch of the
CTA Case No. 5657 transferred TCCs[27] used by respondent Shell and Petron, with aggregate amount of
P830,560,791.00 and P284,390,845.00, respectively.

11
 2007. This prompted respondent Petron to seek relief from this Court through a petition for
Following the cancellation of the TCCs, petitioner issued separate assessment letters to review, docketed as G.R. No. 180385, the 2010 Petron Case.[30]
respondents in November 1999 (1999 Assessments) for the payment of deficiency excise
taxes, surcharges, and interest for the Covered Years, which were also covered by the 1998 Citing the 2007 Shell Case, the Court similarly cancelled the 1999 assessment against
Collection Letters. Respondents filed their respective administrative protests against said respondent Petron and decided the 2010 Petron Case as follows:
assessments. While petitioner denied respondent Shell's protest, he did not act upon that of
WHEREFORE, premises considered, the petition is GRANTED and the October 30, 2007
respondent Petron.
CTA En Banc Decision in CTA EB No. 238 is, accordingly, REVERSED and SET ASIDE. In lieu
thereof, another is entered invalidating respondent's Assessment of petitioner's deficiency
B.1 The 2007 Shell Case
excise taxes for the years 1995 to 1997 for lack of legal bases. No pronouncement as to
costs.[31]
Respondent Shell raised petitioner's denial of its protest through a petition for review
before the CTA, docketed as CTA Case No. 6003. The CTA Division rendered a Decision Entry of Judgment[32] was made in the 2010 Petron Case on November 2, 2010.
dated August 2, 2004 granting said petition and cancelled and set aside the assessment
against respondent Shell; but then the CTA en banc, in its Decision dated April 28, 2006, set C. 2002 Collection Letter
aside the CTA Division's judgment and ordered respondent Shell to pay petitioner deficiency     (G.R. No. 197945)
excise tax, surcharges, and interest. Hence, respondent Shell filed a petition for review
before this Court docketed as G.R. No. 172598, the 2007 Shell Case. Meanwhile, during the pendency of respondent Shell's CTA Case No. 6003 (which was
eventually elevated to this Court in the 2007 Shell Case), the BIR requested respondent Shell
In its Decision in the 2007 Shell Case, the Court cancelled the 1999 assessment against to pay its purported excise tax liabilities amounting to P234,555,275.48, in a collection
respondent Shell and disposed thus: letter[33] dated June 17, 2002 (2002 Collection Letter), which read:
WHEREFORE, the petition is GRANTED. The April 28, 2006 CTA En Banc Decision in CTA EB Collection Letter
No. 64 is hereby REVERSED and SET ASIDE, and the August 2, 2004 CTA Decision in CTA Case
No. 6003 disallowing the assessment is hereby REINSTATED. The assessment of respondent
for deficiency excise taxes against petitioner for 1992 and 1994 to 1997 inclusive contained xxxx
in the April 22, 1998 letter of respondent is cancelled and declared without force and effect
for lack of legal basis. No pronouncement as to costs. [28] Our records show that a letter dated January 30, 2002 was served to you by our Collection
Service, for the collection of cancelled Tax Credit Certificates and Tax Debit Memos which
In nullifying petitioner's assessments, the Court upheld the TCCs' validity, respondent Shell's were used to pay your 1995 to 1998 excise tax liabilities. Said cancellation was embodied in
qualifications as transferees of said TCCs, respondent Shell's status as a transferee in good EXCOM Resolution No. 03-05-99 of the Tax & Duty Drawback Center of the Department of
faith and for value, and respondent Shell's right to due process. Finance. Upon verification by this Office, however, some of these TCCs/TDMs were already
included in the tax case previously filed in [the] Court of Tax Appeals. Accordingly, the
The 2007 Shell Case became final and executory on March 17, 2008.[29] collectible amount has been reduced from P691,508,005.82 to P234,555,275.48, the
summary of which is hereto attached for your ready reference.
B.2 The 2010 Petron Case
P
Basic  
Considering petitioner's inaction on its protest, respondent Petron likewise filed a petition 87,893,876.00
for review with the CTA, docketed as CTA Case No. 6136, to challenge the assessment. In a Surcharg
Decision dated August 23, 2006, the CTA Division denied the petition and ordered 21,973,469.00 
e
respondent Petron to pay petitioner deficiency excise taxes, surcharges, and interest. Said
judgment was subsequently affirmed by the CTA En Banc in. its Decision dated October 30, Interest 124,687,930.48 

12
 P 03-05-99 violated its right to due process; (b) The DOF Center did not have authority to
TOTAL  
234,555,275.48 cancel the TCCs; (c) The TCCs' transfers and utilizations were valid and legal; (d) It was an
innocent purchaser for value; (e) The HIR was estopped from invalidating the transfer and
In view thereof, you are hereby requested to pay the aforesaid tax liability/ties within ten
utilization of the TCCs; and (f) The HIR's right to collect had already prescribed.
(10) days from receipt hereof thru any authorized agent bank x x x Should you fail to do so,
this Office, much to our regret, will be constrained to enforce the collection of the said
The CTA Second Division ruled in favor of respondent Shell in its Decision [38] dated April 30,
amount thru the summary administrative remedies provided by law, without any further
2009:
notice. (Emphasis supplied.)
WHEREFORE, premises considered, the instant Petition for Review is hereby GRANTED. The
DOF Executive Committee Resolution No. 03-05-99 referred to in the aforequoted
Collection Letters and Warrant of Distraint and/or Levy are CANCELLED and declared
Collection Letter prescribed the guidelines and procedures for the cancellation, recall, and
without force and effect for lack of legal basis.[39]
recovery of fraudulently-issued TCCs.
After the CTA Division denied[40] his motion for reconsideration, petitioner elevated the case
[34]
Respondent Shell filed on July 11, 2002 its administrative protest  to the 2002 Collection to the CTA En Banc via a petition for review[41] docketed as CTA EB No. 535.
Letter. However, without resolving said protest, petitioner [35] issued a Warrant of Distraint
and/or Levy dated September 12, 2002 for the satisfaction of the following alleged tax In its Decision dated February 22, 2011, the CTA En Banc denied the petition and affirmed
delinquency of respondent Shell: the judgment of the CTA Division.

WHEREAS, THERE IS DUE FROM:

The CTA En Banc resolved the issues relying on the 2007 Shell Case. Pursuant to this ruling,
the real issue is not whether the BOI-registered export entities validly procured the TCCs
PILIPINAS SHELL PETROLEUM CORP. x x x x
from the DOF Center, but whether respondent Shell fraudulently obtained the TCCs from
said BOI-registered export entities.
The sum of TWO HUNDRED THIRTY[-]FOUR MILLION FIVE HUNDRED FIFTY[-]FIVE
THOUSAND TWO HUNDRED TWENTY[-]FIVE PESOS AND 48 CENTAVOS as Internal Revenue
The CTA En Banc brushed aside petitioner's argument that respondent Shell was aware that
Taxes shown hereunder, plus all increments incident to delinquency.
the transferred TCCs were subject to post-audit procedures. It explained that the TCCs were
Assessment valid and effective upon issuance and were not subject to post-audit procedures as a
: Unnumbered suspensive condition. Further, the TCCs could no longer be cancelled once these had been
Notice No.
fully utilized or duly applied against any outstanding tax liability of an innocent transferee
Date Issued : January 30, 2002 for value.

Tax Type : Excise Tax

In this regard, the CTA En Banc found that respondent Shell did not participate in any fraud
Period attending the issuance of the TCCs, as well as its subsequent transfers. Thus, respondent
: Various Dates (December 18, 1995 to July 03, 1997) Shell is an innocent transferee in good faith and for value and could not be prejudiced by
Covered
fraud attending the TCCs' procurement.
Amount : P234,555,275.48
In the absence of fraud, petitioner could only reassess Shell for deficiency tax within the
WHEREAS, the said taxpayer failed and refused and still fails and refuses to pay the same
three-year prescriptive period under Section 203 of the Tax Code, not the 10-year period
notwithstanding demands made by this Office.[36]
under Section 222(a) of the same Code. Further, petitioner violated respondent Shell's right
Aggrieved, respondent Shell filed a petition for review [37] before the CTA docketed as CTA to due process when he issued the 2002 Collection Letter without a Notice of Informal
Case No. 6547, arguing that: (a) the issuance of the 2002 Collection Letter and Warrant of Conference (NIC) or a Preliminary Assessment Notice as required by Revenue Regulations
Distraint and/or Levy and enforcement of DOF Center's Executive Committee Resolution No. No. (RR) 12-99.

13
 III. THE CTA EN BANC COMMITTED GRIEVOUS ERROR IN RULING THAT RESPONDENT IS NOT
The CIR moved for reconsideration but was denied. LIABLE TO PAY EXCISE TAXES.

Hence, petitioner now comes before this Court citing in the petitions at bar the following IV. THE CTA EN BANC COMMITTED GRIEVOUS ERROR IN HOLDING THAT THE GOVERNMENT
errors allegedly committed by the courts a quo in G.R. Nos. 204119-20 and G.R. No. 197945: IS ESTOPPED FROM NULLIFYING THE TCCs, AND DECLARING THEIR USE, TRANSFER AND
UTILIZATION AS FRAUDULENT.
G.R. Nos. 204119-20
V. THE CTA EN BANC COMMITTED GRIEVOUS ERROR IN RULING THAT RESPONDENT WAS
The Court of Appeals erred: DENIED DUE PROCESS.

I.
VI. THE CTA EN BANC COMMITTED A GRIEVOUS ERROR IN DECLARING THAT THE PERIOD TO
COLLECT RESPONDENT'S UNPAID EXCISE TAXES HAS ALREADY PRESCRIBED.
IN NOT HOLDING THAT RESPONDENTS SHELL AND PETRON WERE NOT QUALIFIED
TRANSFEREES OF THE TAX CREDIT CERTIFICATES (TCCs) SINCE THEY WERE NOT SUPPLIERS VII. THE CTA EN BANC COMMITTED A GRIEVOUS ERROR IN RULING THAT,RESPONDENT IS
OF DOMESTIC CAPITAL EQUIPMENT OR OF RAW MATERIAL AND/OR COMPONENTS TO NOT LIABLE TO PAY SURCHARGES AND INTERESTS. [43]
THEIR TRANSFERORS.
The Ruling of the Court
II.
The petitions are without merit.
IN NOT HOLDING THAT SINCE RESPONDENTS WERE NOT QUALIFIED TRANSFEREES OF THE
TCCs, THE SAME COULD NOT BE VALIDLY USED IN PAYING THEIR EXCISE TAX LIABILITIES. The issues concerning the transferred TCCs' validity, respondents' qualifications as
transferees of said TCCs, and the respondents' valid use of the TCCs to pay for their excise
III. tax liabilities for the Covered Years had been finally settled in the 2007 Shell Case and
2010 Petron Case and are already barred from being re-litigated herein by the doctrine
IN NOT HOLDING THAT GOVERNMENT IS NOT ESTOPPED FROM COLLECTING TAXES DUE TO of  res judicata in the concept of conclusiveness of judgment.
THE MISTAKES OF ITS AGENTS.
While the present petitions, on one hand, and the 2007 Shell Case and 2010 Petron Case, on
IV. the other hand, involve identical parties and originate from the same factual antecedents,
there are also substantial distinctions between these cases, for which reason, the Court
IN NOT HOLDING THAT SHELL WAS ACCORDED DUE PROCESS IN PETITIONER'S ATTEMPT TO cannot simply dismiss the former on account of the latter based on the doctrine of res
COLLECT ITS EXCISE TAX LIABILITIES.[42] judicata in the concept of "barby prior judgment."

G.R. No. 197945

The 2007 Shell Case and 2010 Petron Case were assessment cases. These initiated from
respondents' protests of the 1999 Assessments issued by petitioner CIR against them for
I. The CTA EN BANC COMMITTED GRIEVOUS ERROR IN NOT RULING ON THE VALIDITY OF
deficiency excise taxes, surcharges, and interest, following cancellation of the transferred
THE TCCs AND ITS CONSEQUENT EFFECTS ON THE RIGHTS AND OBLIGATIONS ASSUMED BY
TCCs and the corresponding TDMs which respondents used to pay for said excise taxes. Said
RESPONDENT.
cases were primarily concerned with the legality and propriety of petitioner's issuance of
the 1999 Assessments against respondents.
II. THE CTA EN BANC COMMITTED GRIEVOUS ERROR IN HOLDING THAT RESPONDENT IS AN
INNOCENT TRANSFEREE OF THE DISPUTED TCCs IN GOOD FAITH.
In contrast, the consolidated petitions now before the Court arose from respondents'

14
protests of petitioner's 1998 and 2002 Collection Letters for essentially the same excise tax actually embraces two (2) concepts: the first is "bar by prior judgment" under paragraph (b)
deficiencies covered by the 1999 of Rule 39, Section 47, and the second is "conclusiveness of judgment" under paragraph
(c) thereof. In the present case, the second concept - conclusiveness of judgment- applies.
Assessments, but apparently issued and pursued by the petitioner and BIR separately from The said concept is explained in this manner:
and concurrently with the assessment cases. At the crux of these cases is petitioner's right
[A] fact or question which was in issue in a former suit and was there judicially passed
to collect the deficiency excise taxes from respondents.
upon and determined by a court of competent jurisdiction, is conclusively settled by the
judgment therein as far as the parties to that action and persons in privity with them are
In the instant petitions, petitioner asserts his right to collect as excise tax deficiencies the
concerned and cannot be again litigated in any future action between such parties or their
excise tax liabilities which respondents had previously settled using the transferred TCCs,
privies, in the same court or any other court of concurrent jurisdiction on either the same
impugning the TCCs' validity on account of fraud as well as respondents' qualifications as
or different cause of action, while the judgment remains unreversed by proper
transferees of said TCCs. However, respondents already raised the same arguments and the
authority. It has been held that in order. that a judgment in one action can be conclusive as
Court definitively ruled thereon in its final and executory decisions in the 2007 Shell
to a particular matter in another action between the same parties or their privies, it is
Case and 2010 Petron Case.
essential that the issue be identical. If a particular point or question is in issue in the second
action, and the judgment will depend on the determination of that particular point or
The re-litigation of these issues in the present petitions, when said issues had already been
question, a former judgment between the same parties or their privies will be final and
settled with finality in the 2007 Shell Case and 2010 Petron Case, is precluded by res
conclusive in the second if that same point or question was in issue and adjudicated in the
judicata in the concept of "conclusiveness of judgment."
first suit. x x x.
In Ocho v. Calos,[44] the Court extensively explained the doctrine of res judicata in the Although the action instituted by the Caloses in Adm. Case No. 006-90
concept of "conclusiveness of judgment," thus: (Anomalies/Irregularities in OLT Transfer Action and Other Related Activities) is different
from the action in Adm. Case No. (X)-014 (Annulment of Deeds of Assignment,
The doctrine of res judicata as embodied in Section 47, Rule 39 of the Rules of Court states:
Emancipation Patents and Transfer Certificate of Titles, Retention and Recovery of
SECTION 47. Effect of judgments or final orders. - The effect of a judgment or final order Possession and Ownership), the concept of conclusiveness of judgment still applies because
rendered by a court of the Philippines, having jurisdiction to pronom:tce the judgment or under this principle "the identity of causes of action is not required but merely identity of
final order, may be as follows: issues."

xxxx [Simply] put, conclusiveness of judgment bars the relitigation of particular facts or issues
in another litigation between the same parties on a different claim or cause of action.
(b) In other cases, the judgment or final order is, with respect to the matter directly In Lopez vs. Reyes, we expounded on the concept of conclusiveness of judgment as follows:
adjudged or as to any other matter that could have been raised in relation thereto,
The general rule precluding the relitigation of material facts or questions which were in
conclusive between the parties and their successors-in interest by title subsequent to the
issue and adjudicated in former action are commonly applied to all matters essentially
commencement of the action or special proceeding, litigating for the same thing and under
connected with the subject matter of litigation. Thus it extends to questions necessarily
the same title and in the same capacity; and
involved in an issue, and necessarily adjudicated, or necessarily implied in the final
judgment, although no specific finding may have been made in reference thereto, and
(c) In any other litigation between the same parties or their successors-in-interest, that only
although such matters were directly referred to in the pleadings and were not actually or
is deemed. to have been adjudged in a former judgment or final order which appears upon
formally presented. Under this rule, if the record of the former trial shows that the
its face to have been so adjudged, or which was actually and necessarily included therein or
judgment could not have been rendered without deciding the particular matter, it will be
necessary thereto.
considered as having settled that matter as to all future actions between the parties, and if
It must be pointed out at this point that, contrary to the insistence of the Caloses, the a judgment necessarily presupposes certain premises, they are as conclusive as the
doctrine of res judicata applies to both judicial and quasi-judiCial proceedings. The doctrine judgment itself. Reasons for the rule are that a judgment is an adjudication on all the
15
matters which are essential to support it, and that every proposition assumed or decided by such authority after the subject TCCs have already been utilized and accepted as payment
the court leading up to the final conclusion upon which such conclusion is based is as for respondent Shell's excise tax liabilities. What had been used up, debited, and cancelled
effectually passed upon as the ultimate question which is solved. could no longer be voided and cancelled anew. While the State was not estopped by the
neglect or omission of its agents, this principle could not be applied to the prejudice of an
xxxx innocent transferee in good faith and for value.

As held in Legarda vs. Savellano:

And finally, the Court found in the 2007 Shell Case that respondent Shell's right to due
x x x It is a general rule common to all civilized system of jurisprudence, that the solemn and process was violated. Petitioner did not issue a Notice of Informal Conference (NIC) and
deliberate sentence of the law, pronounced by its appointed organs, upon a disputed fact or Preliminary Assessment Notice (PAN) to respondent Shell, in violation of the formal
a state of facts, should be regarded as a final and conclusive determination of the question assessment procedure required by Revenue Regulations No. (RR) 12-99. [46] Petitioner merely
litigated, and should forever set the controversy at rest. Indeed, it has been well said that relied on the DOF Center's findings supporting the cancellation of respondent Shell's TCCs.
this maxim is more than a mere rule of law; more even than an important principle of public Thus, the Court voided the assessment dated November 15, 1999 issued by the CIR against
policy; and that it is not too much to say that it is a fundamental concept in the organization herein respondent Shell.
of every jural system. Public policy and sound practice demand that, at the risk of occasional
errors, judgments of courts should become final at some definite date fixed by law. The very On the other hand, the Court resolved the 2010 Petron Case in accordance with its ruling in
object for which courts were constituted was to put an end to controversies. the 2007 Shell Case, reiterating that: First, the subject TCCs' validity and effectivity should
be immediate and should not be dependent on the outcome of a post-audit as a suspensive
The findings of the Hearing Officer in Adm. Case No. 006-90, which had long attained condition. Second, respondent Petron could not be prejudiced by fraud alleged to have
finality, that petitioner is not the owner of other agricultural lands foreclosed any inquiry on attended such issuance as it was not privy to the issuance of the subject TCCs and it had
the same issue involving the same parties and property. The CA thus erred in still making a already used said TCCs in settling its tax liabilities. Third, respondent Petron was also an
finding that petitioner is not qualified to be a farmer-beneficiary because he owns other innocent transferee in good faith and for value because it was a qualified transferee of the
agricultural lands. (Emphases supplied, citations omitted.) TCCs based on existing rules and regulations and the TCCs' transfers were approved by the
appropriate government agencies. And fourth, while the government cannot be estopped
In the 2007 Shell Case, the Court affirmed the validity of the TCCs, the transfer of the TCCs
from collecting taxes by the mistake, negligence, or omission of its agents, the rights of a
to respondent Shell, and the use of the transfe ed TCCs by respondent Shell to partly pay for
transferee in good faith and for value should be protected.
its excise tax liabilities for the Covered Years. The Court ratiocinated as follows: First, the
results of postaudit procedures conducted in connection with the TCCs should not operate
The Court's aforementioned findings in the 2007 Shell Case and 2010 Petron Case are
as a suspensive condition to the TCCs' validity. Second, while it was one of the conditions
conclusive and binding upon this Court in the petitions at bar. Res judicata by
appearing on the face of the TCCs, the post-audit contemplated therein did not pertain to
conclusiveness of judgment bars the Court from relitigating the issues on the TCCs' validity
the TCCs' genuineness or validity, but to computational discrepancies that might have
and respondents' qualifications as transferees in these cases. As a result of such findings in
resulted from their utilization and transfer. Third, the DOF Center or DOF could not compel
the 2007 Shell Case and 2010 Petron Case, then respondents could not have had excise tax
respondent Shell to submit sales documents for the purported post-audit. As a BOI-
deficiencies for the Covered Years as they had validly paid for and settled their excise tax
registered enterprise, respondent Shell was a qualified transferee of the subject TCCs,
liabilities using the transferred TCCs.
pursuant to existing rules and regulations.[45] Fourth, respondent Shell was a transferee in
good faith and for value as it secured the necessary approvals from various government
In any case, the present petitions are dismissed as petitioner violated respondents' right
agencies before it used and applied the transferred TCCs against its tax liabilities and it did
to due process for failing to observe the prescribed procedure for collection of unpaid
not participate in the perpetuation of fraudulent acts in the procurement of the said TCCs.
taxes through summary administrative remedies.
As a transferee in good faith, respondent Shell could not be prejudiced with a re-
assessment of excise tax liabilities it had already settled when due using the subject TCCs
The Court dismisses the present petitions for it cannot allow petitioner to collect any excise
nor by any fraud attending the procurement of the subject TCCs. Fifth, while the DOF Center
tax deficiency from respondents by mere issuance of the 1998 and 2002 Collection Letters.
was authorized to cancel TCCs it might have erroneously issued, it could no longer exercise
Petitioner had failed to comply with the prescribed procedure for collection of unpaid taxes
16
through summary administrative remedies and, thus, violated respondents' right to due estate of petitioner's findings, without stating the factual and legal bases for said
process. assessment. The Court, absent a valid assessment, refused to accord validity and effect to
petitioner's collection efforts - which involved, among other things, the successive issuances
That taxation is an essential attribute of sovereignty and the lifeblood of every nation are of a collection letter, a final notice before seizure, and a warrant of distraint and/or levy
doctrines well-entrenched in our jurisdiction. Taxes are the government's primary means to against the taxpayer estate - and declared that:
generate funds needed to fulfill its mandate of promoting the general welfare and well-
x x x [P]etitioner violated the cardinal rule in administrative law that the taxpayer be
being of the people[47] and so should be collected without unnecessary hindrance. [48]
accorded due process. Not only was the law here disregarded, but no valid notice was sent,
either. A void assessment bears no valid fruit.
While taxation per se is generally legislative in nature, collection of tax is administrative in
character.[49] Thus, Congress delegated the assessment and collection of all national internal
The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly
revenue taxes, fees, and charges to the BIR. [50] And as the BIR's chief, the CIR has the power
with tax collection without first establishing a valid assessment is evidently violative of
to make assessments and prescribe additional requirements for tax administration and
the cardinal principle in administrative investigations: that taxpayers should be able to
enforcement.[51]
present their case and adduce supporting evidence. In the instant case, respondent has not
been informed of the basis of the estate tax liability. Without complying with the
The Tax Code provides two types of remedies to enforce the collection of unpaid taxes, to
unequivocal mandate of first informing the taxpayer of the government's claim, there can
wit: (a) summary administrative remedies, such as the distraint and/or levy of taxpayer's
be no deprivation of property, because no effective protest can be made. The haphazard
property;[52] and/or (b) judicial remedies, such as the filing of a criminal or civil action
shot at slapping an assessment, supposedly based on estate taxation's general provisions
against the erring taxpayer.[53]
that are expected to be known by the taxpayer, is utter chicanery.
Verily, pursuant to the lifeblood doctrine, the Court has allowed tax authorities ample
Even a cursory review of the preliminary assessment notice, as well as the demand letter
discretion to avail themselves of the most expeditious way to collect the taxes, [54] including
sent, reveals the lack of basis for - not to mention the insufficiency of - the gross figures and
summary processes, with as little interference as possible. [55] However, the Court, at the
details of the itemized deductions indicated in the notice and the letter. This Court cannot
same time, has not hesitated to strike down these processes in cases wherein tax
countenance an assessment based on estimates that appear to have been arbitrarily or
authorities disregarded due process.[56] The BIR's power to collect taxes must yield to the
capriciously arrived at. Although taxes are the lifeblood of the government, their
fundamental rule that no person shall be deprived of his/her property without due process
assessment and collection "should be made in accordance with law as any arbitrariness will
of law.[57] The rule is that taxes must be collected reasonably and in accordance with the
negate the very reason for government itself."[62] (Emphasis supplied.)
prescribed procedure.[58]
The Court similarly found that there was no valid assessment in Commissioner of Internal
In the normal course of tax administration and enforcement, the BIR must first make Revenue v. BASF Coating + Inks Phils., Inc.[63] (BASF Coating Case) as the assessment notice
an assessment then enforce the collection of the amounts so assessed. "An assessment is therein was sent to the taxpayer company's former address. Without a valid assessment,
not an action or proceeding for the collection of taxes. x x x It is a step preliminary, but the Court pronounced that petitioner's issuance of a First Notice Before Issuance of Warrant
essential to warrant distraint, if still feasible, and, also, to establish a cause for judicial of Distraint and Levy to be in violation of the taxpayer company's right to due process and
action."[59] The BIR may summarily enforce collection only when it has accorded the effectively blocked any further efforts by petitioner to collect by virtue thereof. The Court
taxpayer administrative due process, which vitally includes the issuance of a valid ratiocinated that:
assessment.[60] A valid assessment sufficiently informs the taxpayer in writing of the legal
and factual bases of the said assessment, thereby allowing the taxpayer to effectively It might not also be amiss to point out that petitioner's issuance of the First Notice Before
protest the assessment and adduce supporting evidence in its behalf. Issuance of Warrant of Distraint and Levy violated respondent's right to due process
because no valid notice of assessment was sent to it. An invalid assessment bears no valid
In Commissioner of Internal Revenue v. Reyes[61] (Reyes Case), the petitioner issued an fruit. The law imposes a substantive, not merely a formal, requirement. To proceed
assessment notice and a demand letter for alleged deficiency estate tax against the heedlessly with tax collection without first establishing a valid assessment is evidently
taxpayer estate. The assessment notice and demand letter. simply notified the taxpayer violative of the cardinal principle in administrative investigations: that taxpayers should be
17
able to present their case and adduce supporting evidence. In the instant case, respondent Assessments were already nullified in the 2007 Shell Case and 2010 Petron Case.
has not properly been informed of the basis of its tax liabilities. Without complying with the
unequivocal mandate of first informing the taxpayer of the government's claim, there can Absent a previously issued assessment supporting the 1998 and 2002 Collection Letters, it is
be no deprivation of property, because no effective protest can be made. clear that petitioner's attempts to collect through said collection letters as well as the
subsequent Warrants of Garnishment and Distraint and/or Levy are void and ineffectual. If
xxxx an invalid assessment bears no valid fruit, with more reason will no such fruit arise if there
was no assessment in the first place.
It is an elementary rule enshrined in the 1987 Constitution that no person shall be deprived
of property without due process of law. In balancing the scales between the power of the The period for petitioner to collect the alleged deficiency excise taxes from respondents
State to tax and its inherent right to prosecute perceived transgressors of the law on one through judicial remedies had already prescribed.
side, and the constitutional rights of a citizen to due process of law and the equal protection
of the laws on the other, the scales must tilt in favor of the individual, for a citizen's right is After establishing that petitioner could not collect respondents' alleged deficiency excise
amply protected by the Bill of Rights under the Constitution. [64] taxes for the covered years through summary administrative remedies without a valid
assessment, the Court next determines whether petitioner could still resort to judicial
It is worthy to note that in the Reyes Case and BASF Coating Case, there were assessments
remedies to enforce collection.
actually issued against the taxpayers therein, except that said assessments were adjudged
invalid for different reasons (i.e., for failing to state the factual and legal bases for the
The Court answers in the negative as the period for collection o£ the respondents' alleged
assessment in the Reyes Case and for sending the assessment to the wrong address in
deficiency excise taxes for the Covered Years through judicial remedies had already
the BASF Coating Case). In the instant cases, petitioner did not issue at all an assessment
prescribed.
against respondents prior to his issuance of the 1998 and 2002 Collection Letters. Thus,
there is even more reason for the Court to bar petitioner's attempts to collect the alleged
The alleged deficiency excise taxes petitioner seeks to collect from respondents in the cases
deficiency excise taxes through any summary administrative remedy.
at bar pertain to the Covered Years, i.e., 1992 to 1997, during which, the National Internal
Revenue Code of the Philippines of 1977[66] (1977 NIRC) was the governing law. Pertinent
In the present case, it is clear from the wording of the 1998 and 2002 Collection Letters that
provisions of the 1977 NIRC read:
petitioner intended to pursue, through said collection letters, summary administrative
remedies for the collection of respondents' alleged excise tax deficiencies for the Covered Sec. 318. Period of Limitation Upon Assessment and Collection. - Except as provided in the
Years. In fact, in the respondent Shell's case, the collection letters were already followed by succeeding section, internal-revenue taxes shall be assessed within five years after the
the BIR's issuance of Warrants of Garnishment and Distraint and/or Levy against it. return was filed, and no proceeding in court without assessment for the collection of such
taxes shall be begun after the expiration of such period. For the purposes of this section, a
That the BIR proceeded with the collection of respondents' alleged unpaid taxes without a return filed before the last day prescribed by law for the filing thereof shall be considered as
previous valid assessment is evident from the following: First, petitioner admitted in CTA filed on such last day: Provided, That this limitation shall not apply to cases already
Case Nos. 5728[65] and 6547 that: (a) the collections letters were not tax assessment notices; investigated prior to the approval of this Code. (Emphasis Supplied)
(b) the letters were issued solely based on the DOF Center's findings; and (c) the BIR never
issued any preliminary assessment notice prior to the issuance of the collection Sec. 319. Exceptions as to period of limitation of assessment and collection of taxes. - (a) In
letters. Second, although the 1998 and 2002 Collection Letters and the 1999 Assessments the case of a false or fraudulent return with intent to evade tax or of a failure to file a
against respondents were for the same excise taxes for the Covered Years, the former were return, the tax may be assessed, or a proceeding in court for the collection of such tax may
evidently not based on the latter. The 1998 Collection Letters against respondents were be begun without assessment, at any time within ten years after the discovery of the
issued prior to the 1999 Assessments; while the 2002 Collection Letter against respondent falsity, fraud, or omission: Provided, That in a fraud assessment which has become final and
Shell was issued even while respondent Shell's protest of the 1999 Assessment was still executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal
pending before the CTA. And third, assuming arguendo that the 1998 and 2002 Collection action for the collection thereof.
Letters were intended to implement the 1999 Assessments against respondents, the 1999

18
(b) Where before the expiration of the time prescribed in the preceding section for the From respondents' filing of their excise tax returns in the years 1992 to 1997 until the lapse
assessment of the tax, both the Commissioner and the taxpayer have consented in writing of the five-year prescriptive period under Section 318 of the 1977 NIRC in the years 1997 to
to its assessment after such time, the tax may be assessed at any time prior to the 2002, petitioner did not institute any judicial action for collection of tax as aforedescribed.
expiration of the period agreed upon. The period so agreed upon may be extended by Instead, petitioner relied solely on summary administrative remedies by issuing the
subsequent agreements in writing made before the expiration of the period previously collection letters and warrants of garnishment and distraint and/or levy without prior
agreed upon. assessment against respondents. Sifting through records, it can be said that petitioner's
earliest attempts to judicially enforce collection of respondents' alleged deficiency excise
(c) Where the assessment of any internal revenue tax has been made within the period of taxes were his Answers to respondents' Petitions for Review filed before the CTA in Case
limitation above-prescribed, such tax may be collected by distraint or levy or by a Nos. 5657, 5728, and 6547 on August 6, 1998,[70] March 2, 1999,[71] and November 29, 2002,
[72]
proceeding in court, but only if began (1) within five years after assessment of the tax, or (2)  respectively.
prior to the expiration of any period for collection agreed upon in writing by the
Commissioner and the taxpayer before the expiration of such five-year period. The period Verily, in a long line of jurisprudence, the Court deemed the filing of such pleadings as
so agreed upon may be extended by subsequent agreements in writing made before the effective tax collection suits so as to stop the running of the prescriptive period in cases
expiration of the period previously agreed upon. where: (a) the CIR issued an assessment and the taxpayer appealed the same to the CTA;
[73]
 (b) the CIR filed the answer praying for the payment of tax within five years after the
Under Section 318 of the 1977 NIRC, petitioner had five years [67] from the time respondents
issuance of the assessment;[74] and (c) at the time of its filing, jurisdiction over judicial
filed their excise tax returns in question to: (a) issue an assessment; and/or (b) file a court
actions for collection of internal revenue taxes was vested in the CTA, not in the regular
action for collection without an assessment. In the petitions at bar, respondents filed their
courts.[75]
returns for the Covered Years from 1992 to 1997, and the five-year prescriptive period
under Section 319 of the 1977 NIRC would have prescribed accordingly from 1997 to 2002.
However, judging by the foregoing conditions, even petitioner's Answers in CTA Case Nos.
5657, 5728, and 6547 cannot be deemed judicial actions for collection of tax. First, CTA Case
As the Court has explicitly found herein as well as in the 2007 Shell Case and 2010 Petron
Nos. 5657, 5728, and 6547 were not appeals of assessments. Respondents went before the
Case, petitioner failed to issue any valid assessment against respondents for the latter's
CTA to challenge the 1998 and 2002 Collection Letters, which, by petitioner's own
alleged deficiency excise taxes for the Covered Years. Without a valid assessment, the five-
admission, are not assessments. Second, by the time petitioner filed. his Answers before the
year prescriptive period to assess continued to run and had, in fact, expired in these cases.
CTA on August 6, 1998, March 2, 1999, and November 29, 2002, his power to collect alleged
Irrefragably, petitioner is already barred by prescription from issuing an assessment against
deficiency excise taxes, the returns for which were filed from 1992 to 1997, had already
respondents for deficiency excise taxes for the Covered Years. Resultantly, this also bars
partially prescribed, particularly those pertaining to the earlier portion of the Covered
petitioner from undertaking any summary administrative remedies, i.e., distraint and/or
Years. Third, at the time petitioner filed his Answers before the CTA, the jurisdiction over
levy, against respondents for collection of the same taxes.
judicial actions for collection of internal revenue taxes was vested in the regular courts, not
the CTA.[76] Original jurisdiction over collection cases[77] was transferred to the CTA only on
Unlike summary administrative remedies, the government's power to enforce the
April 23, 2004, upon the effectivity of Republic Act No. 9282. [78]
collection through judicial action is not conditioned upon a previous valid assessment.
Sections 318 and 319(a) of the 1977 NIRC expressly allowed the institution of court
Without either a formal tax collection suit filed before the court of competent jurisdiction
proceedings for collection of taxes without assessment within five years from the filing of
or an answer deemed as a judicial action for collection of tax within the prescribed five-year
the tax return and 10 years from the discovery of falsity, fraud, or omission, respectively. [68]
period under Section 318 of the 1977 NIRC, petitioner's power to institute a court
proceeding for the collection of respondents' alleged deficiency excise taxes without an
A judicial action for the collection of a tax is begun: (a) by the filing of a complaint with the
assessment had already prescribed in 1997 to 2002.
court of competent jurisdiction, or (b) where the assessment is appealed to the Court of Tax
Appeals, by filing an answer to the taxpayer's petition for review wherein payment of the
The Court's ruling remains the same even if the 10-year prescriptive period under Section
tax is prayed for.[69]
319(a) of the 1977 NIRC, in case of falsity, fraud, or omission in the taxpayer's return, is
applied to the present cases.
19
 October 10, 2012 of the Court of Appeals in CA-G.R. SP Nos. 55329-30.
Even if the Court concedes, for the sake of argument, that respondents' returns for the
Covered Years were false or fraudulent, Section 319(a) of the 1977 NIRC similarly required SO ORDERED.
petitioner to (a) issue an assessment; and/or (b) file a court action for collection without an
assessment, but within 10 years after the discovery of the falsity, fraud, or omission in the
taxpayer's return. As early as the 1998 Collection Letters, petitioner could already be
charged with knowledge of the alleged falsity or fraud in respondents' excise tax returns,
which precisely led petitioner to invalidate respondents' payments using the transferred
TCCs and to demand payment of deficiency excise taxes through said letters. The 10-year
prescriptive period under Section 319(a) of the 1977 NIRC wholly expired in 2008 without
petitioner issuing a valid assessment or instituting judicial action for collection.

The Court cannot countenance the tax authorities' non-performance of their duties in the
present cases. The law provides for a statute of limitations on the assessment and collection
of internal revenue taxes in order to safeguard the interest of the taxpayer against
unreasonable investigation.[79]

While taxes are the lifeblood of the nation, the Court cannot allow tax authorities indefinite
periods to assess and/or collect alleged unpaid taxes. Certainly, it is an injustice to leave any
taxpayer in perpetual uncertainty whether he will be made liable for deficiency or
delinquent taxes.

In sum, petitioner's attempts to collect the alleged deficiency excise taxes from respondents
are void and ineffectual because (a) the Issues regarding the transferred TCCs' validity,
respondents' qualifications as transferees of said TCCs, and respondents' use of the TCCs to
pay for their excise tax liabilities for the Covered Years, had already been settled with
finality in the 2007 Shell Case and 2010 Petron Case, and could no longer be re-litigated on
the ground of res judicata in the concept of conclusiveness of judgment; (b) petitioner's
resort to summary administrative remedies without a valid assessment was not in
accordance with the prescribed procedure and was in violation of respondents' right to
substantive due process; and (c) none of petitioner's collection efforts constitute a valid
institution of a judicial remedy for collection of taxes without an assessment, and any such
judicial remedy is now barred by prescription.

WHEREFORE, premises considered, the Court DENIES the petition of the Commissioner of

Internal Revenue in G.R. No. 197945 and AFFIRMS the Decision dated February 22, 2011
and Resolution dated July 27, 2011 of the Court of Tax Appeals en banc in CTA En Banc Case
No. 535.

The Court likewise DENIES the petition of the Commissioner of Internal Revenue in G.R.

Nos. 204119-20 and AFFIRMS the Decision dated March 21, 2012 and Resolution dated
20
 SECOND DIVISION Revenue Memorandum Order (RMO) No. 45-93, in the amount of P1,721,503.40, or twenty
percent (20%) of the subject assessment, which was received on March 30, 1994. On May 2,
[ G.R. No. 224327, June 11, 2018 ] 1994, the counsel for CBC issued a Letter addressed to petitioner, reiterating its Letter of
offer of compromise settlement dated March 29, 1994 and Application for Compromise
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, V. BANK OF THE PHILIPPINE Settlement/Abatement under RMO No. 45-93.
ISLANDS, RESPONDENT.
Petitioner, on October 12, 1994, approved the earlier mentioned Application for
DECISION Compromise Settlement of CBC, provided that one hundred percent (100%) of its deficiency
Income Tax assessment for the year 1986, or in the amount of P8,607,517.00, be paid
PERALTA, J.: within fifteen (15) days from receipt thereof.

For this Court’s resolution is the Petition for Review on Certiorari[1] under Rule 45 of the The counsel for CBC, on November 28, 1994, issued a Letter addressed to petitioner,
Revised Rules of Civil Procedure assailing the Decision [2] dated September 16, 2015 and requesting for a reconsideration of the approved amount as compromise settlement, and
Resolution[3] dated April 21, 2016 of the Court of Tax Appeals (CTA) En Banc in CTA EB No. offering to pay the amount of P1,600,000.00 as full and final settlement of the subject
1173 (CTA CASE No. 8350) on petitioner Commissioner of Internal Revenue's (CIR) tax assessment. The same counsel for CBC issued a Letter on March 8, 1995 reiterating its
assessment against respondent Bank of the Philippine Islands (BPI). request for reconsideration and offering to increase its full and final settlement in the
amount P3,200,000.00.
The facts follow.
On March 28, 1995, petitioner approved the Application for Compromise Settlement of CBC
dated March 30, 1994, provided that CBC pay the amount of P8,607,517.00 within fifteen
Citytrust Banking Corporation (CBC) filed its Annual Income Tax Returns for its Regular
(15) days from receipt thereof.
Banking Unit, and Foreign Currency Deposit Unit for taxable year 1986 on April 15, 1987.

Later, on May 4, 1995, the counsel for CBC issued another Letter addressed to petitioner,
Thereafter, on August 11, 1989, July 12, 1990 and November 8, 1990, CBC executed Waivers
requesting for a final reconsideration, and reiterating its offer of compromise in the amount
of the Statute of Limitations under the National Internal Revenue Code (NIRC).
of P3,200,000.00.
On March 7, 1991, petitioner CIR issued a Pre-Assessment Notice (PAN) against CBC for
Petitioner, however, disapproved the Application for Compromise Settlement of CBC dated
deficiency taxes, among which is for deficiency Income Tax for taxable year 1986 in the total
March 30, 1994. The counsel of CBC, on July 27, 1995, issued a Letter addressed to
amount of P19,202,589.97. The counsel for CBC filed its protest against the PAN on April 22,
petitioner requesting for reconsideration and offering to pay the increased amount of
1991.
P4,303,758.50.
Petitioner, on May 6, 1991, issued a Letter, with attached Assessment Notices, demanding
Meanwhile, on October 4, 1996, the Securities and Exchange Commission approved the
for the payment of the deficiency taxes within thirty (30) days from receipt thereof. The
Articles of Merger between respondent BPI and CBC, with BPI as the surviving corporation.
counsel for CBC filed its Protest against the assessments on May 27, 1991 and another
Protest on February 17, 1992.
Afterwards, on May 26, 2011, petitioner issued a Notice of Denial addressed to respondent,
requesting for the payment of CBC's deficiency Income Tax for taxable year 1986, within
A Letter was again issued by petitioner on February 5, 1992 requesting for the payment of
fifteen (15) days from receipt thereof, and on July 28, 2011, petitioner issued another Letter
CBC's tax liabilities, within ten (10) days from receipt thereof.
addressed to respondent, denying the offer of compromise penalty, and requesting for the
payment of the amount of P19,202,589.97, plus all increments incident to delinquency,
The counsel for CBC, on March 29, 1994, issued a Letter addressed to petitioner offering a pursuant to Sections 248 (A) (3) and 249 (C) (3) of the 1997 NIRC, as amended.
compromise settlement on its deficiency Income Tax assessment for Taxable year 1986,
with an attached Application for Compromise Settlement/Abatement of Penalties under
21
Consequently, on September 21, 2011, petitioner issued a Warrant of Distraint and/or Levy Petitioner argues that the CTA did not acquire jurisdiction over the case for respondent's
against respondent BPI which prompted the latter to file a Petition for Review with the CTA failure to contest the assessments made against it by the Bureau of Internal Revenue (BIR)
on October 7, 2011. within the period prescribed by law. Petitioner also contends that by the principle of
estoppel, respondent is not allowed to raise the defense of prescription against the efforts
In a Decision[4] dated February 12, 2014, the CTA Special Third Division granted the petition of the government to collect the tax assessed against it.
for review, thus:
In its Comment[8] dated August 22, 2016, respondent claims that the assessment notice
WHEREFORE, the Petition for Review is hereby GRANTED. Accordingly, the Warrant of issued against it, is not yet final and executory and that the CTA has jurisdiction over the
Distraint and/or Levy dated September 21, 2011 is hereby CANCELLED and SET ASIDE. case. It further asserts that the right of petitioner to assess deficiency income tax for the
taxable year 1986 had already prescribed pursuant to the Tax Code of 1977 and that the
SO ORDERED.[5] right of petitioner to collect the alleged deficiency income tax for the taxable year 1986 had
already prescribed. Respondent also insists that it is not liable for the alleged deficiency
income tax and increments for the taxable year 1986.
According to the CTA Special Third Division, BPI can validly assail the Warrant of Distraint
and/or Levy, as its appellate jurisdiction is not limited to cases which involve decisions of
the Commissioner of Internal Revenue on matters relating to assessments or refunds. The The petition lacks merit.
Court further ruled that the Assessment Notices, being issued only on May 6, 1991, were
already issued beyond the three-year period to assess, counting from April 15, 1987, when First of all, the CTA did not err in its ruling that it has jurisdiction over cases asking for the
CBC filed its Annual Income Tax Returns for the taxable year 1986. The same Court also held cancellation and withdrawal of a warrant of distraint and/or levy as provided under Section
that the Waivers of Statute of Limitations executed on July 12, 1990 and November 8, 1990 7 of Republic Act (R.A.) No. 9282, thus:
were not in accordance with the proper form of a valid waiver pursuant to RMO No. 20-90,
thus, the waivers failed to extend the period given to petitioner to assess. Sec. 7 Jurisdiction. – The CTA shall exercise:

After the denial of petitioner's motion for reconsideration, a petition for review was filed a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
with the CTA En Banc, in which the latter Court denied the said petition, thus:
1. xxx
WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED.
Accordingly, the Decision and the Resolution, dated February 12, 2014 and April 25, 2014, 2. Inaction by the Commissioner of the Internal Revenue in cases involving
respectively, are hereby AFFIRMED. disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matter arising under the
SO ORDERED.[6] National Internal Revenue Code or other laws administered by the
Bureau of Internal Revenue, where the National Internal Revenue Code
Hence, the present petition after the CTA En Banc denied petitioner's motion for provides a specific period of action, in which case the inaction shall be
reconsideration. deemed a denial;

Petitioner raises the following grounds for the allowance of the present petition: xxxx

THE CTA EN BANC ERRED IN AFFIRMING THE CTA SPECIAL THIRD DIVISION'S EXERCISE OF Anent the other grounds relied upon by petitioner, such are factual in nature. It is doctrinal
JURISDICTION OVER THE INSTANT CONTROVERSY. that the Court will not lightly set aside the conclusions reached by the CTA which, by the
very nature of its function of being dedicated exclusively to the resolution of tax problems,
has developed an expertise on the subject, unless there has been an abuse or improvident
THE CTA EN BANC ERRED IN AFFIRMING THE ANNULMENT OF THE WARRANT OF DISTRAINT
exercise of authority.[9] We thus accord the findings of fact by the CTA with the highest
AND/OR LEVY AGAINST RESPONDENT GIVEN PETITIONER'S CLEAR RIGHT TO THE SAME. [7]
respect. These findings of facts can only be disturbed on appeal if they are not supported by

22
substantial evidence or there is a showing of gross error or abuse on the part of the CTA. In indeed, mailed or sent before the BIR's right to assess had prescribed and that said notice
the absence of any clear and convincing proof to the contrary, this Court must presume that was received by BPI. As a matter of fact, there was an express admission on the part of the
the CTA rendered a decision which is valid in every respect. [10] Nevertheless, the factual CIR that there was no proof that indeed the alleged Final Assessment Notice was ever sent
findings of the CTA are supported by substantial evidence. to or received by BPI. As stated in the Transcript of stenographic Notes on the court hearing
dated October 29, 2012:
An assessment becomes final and unappealable if within thirty (30) days from receipt of the
assessment, the taxpayer fails to file his or her protest requesting for reconsideration or Q: And you anchor your argument based on this document (Letter dated February 5, 1992)
reinvestigation as provided in Section 229 of the NIRC, thus: that this is the final decision of the BIR, is that correct?
A: Yes.
SECTION 229. Protesting of assessment. – When the Commissioner of Internal Revenue or
his duly authorized representative finds that proper taxes should be assessed, he shall first Q: When was this received by the petitioner City Trust Banking Corporation?
notify the taxpayer of his findings within a period to be prescribed by implementing A: I think it was only mailed.
regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to
respond, the Commissioner shall issue an assessment based on his findings. Q: What is your proof that it was mailed?
A: Because the BIR...(interrupted by Atty. Nidea)
Such assessment may be protested administratively by filing a request for reconsideration
or reinvestigation in such form and manner as may be prescribed by implementing Q: Do you have any proof that it was mailed?
regulations within thirty (30) days from receipt of the assessment; otherwise, the A: No, I don't have any proof.
assessment shall become final and unappealable.
Q: So, you don't have any proof. So you don't have any proof that it was received by the
If the protest is denied in whole and in part, the individual, association or corporation petitioner?
adversely affected by the decision on the protest may appeal to the Court of Tax Appeals A: I don't have any idea.
within thirty (30) days from receipt of the said decision; otherwise, the decision shall
become final, executory and demandable.[11] Q: You don't have any proof.

Petitioner insists that respondent failed to elevate the tax assessment against it to the CTA Moreover, as correctly pointed out in the assailed Resolution, whether or not the Letter
within the required period. Respondent, on the other hand, claims that it never received dated February 5, 1992 constitutes as the Final Decision on the Disputed Assessment
any final decision on the disputed assessment from petitioner granting or denying the same, appealable under Section 229 of the 1977 Tax Code, or whether the same was validly served
whether in whole or in part. and duly received by BPI, are immaterial matters which will not cure the nullity of the said
Preliminary Assessment Notice and Assessment Notices, as they were clearly made beyond
The CTA was correct in ruling that petitioner failed to prove that it sent a notice of the prescriptive period.[12]
assessment and that it was received by respondent, thus:
In the case of Nava v. Commissioner of Internal Revenue,[13] this Court stressed on the
The February 5, 1992 Decision of the CIR which she insists to be the reckoning point to importance of proving the release, mailing or sending of the notice.
protest, was not proven to have been received by BPI when the latter denied its receipt.
Thus, the assessment notice dated May 6, 1991 should be deemed as the final decision of While we have held that an assessment is made when sent within the prescribed period,
the CIR on the matter, in which BPI timely protested on May 27, 1991. While a mailed letter even if received by the taxpayer after its expiration (Coll. Of Int. Rev. vs. Bautista, L-12250
is deemed received by the addressee in the ordinary course of mail, this is still merely a and L-12259, May 27, 1959), this ruling makes it the more imperative that the release,
disputable presumption subject to controversion, and a direct denial of the receipt thereof mailing, or sending of the notice be clearly and satisfactorily proved. Mere notations made
shifts the burden upon the party favored by the presumption to prove that the mailed letter without the taxpayer's intervention, notice, or control, without adequate supporting
was indeed received by the addressee. (Republic v. Court of Appeals, G.R. No. L-38540, April evidence, cannot suffice; otherwise, the taxpayer would be at the mercy of the revenue
30, 1987, 149 SCRA 351, 355.) In the instant case, BPI denies receiving the assessment offices, without adequate protection or defense.
notice, and the CIR was unable to present substantial evidence that such notice was,
23
Thus, the failure of petitioner to prove the receipt of the assessment by respondent would collection through the issuance of Warrant of Distraint and/or Levy on October 05, 2011
necessarily lead to the conclusion that no assessment was issued. was made beyond the prescriptive period.[15]

As to the contention of petitioner that through the principle of estoppel, respondent is not It must be remembered that [T]he law imposes a substantive, not merely a formal,
allowed to raise the defense of prescription against the efforts of the government to collect requirement. To proceed heedlessly with tax collection without first establishing a valid
the tax assessed against it, such is misplaced. Its argument that respondent's belated assessment is evidently violative of the cardinal principle in administrative investigations:
assertions relative to the alleged defects and flaws in the waivers it signed in favor of the that taxpayers should be able to present their case and adduce supporting evidence.
[16]
government should not be given merit, is also amiss.  Although taxes are the lifeblood of the government, their assessment and collection
"should be made in accordance with law as any arbitrariness will negate the very reason for
Petitioner cannot implore the doctrine of estoppel just to compensate its failure to follow government itself."[17]
the proper procedure. As aptly ruled by the CTA:
WHEREFORE, the Petition for Review on Certiorari  dated June 16, 2016 of petitioner
It is well established that issues raised for the first time on appeal are barred by estoppel. Commissioner of Internal Revenue is DENIED for lack of merit. Consequently, the Decision
However, in the leading case of Commissioner of Internal Revenue v. Kudos Metal dated September 16, 2015 and the Resolution dated April 21, 2016 of the Court of Tax
Corporation, the Supreme Court held that: Appeals En Banc in CTA EB No. 1173 (CTA CASE No. 8350), are AFFIRMED.

The doctrine of estoppel cannot be applied in this case as an exception to the statute of SO ORDERED.
limitations on the assessment of taxes considering that there is a detailed procedure for the
proper execution of the waiver, which the BIR must strictly follow. xxx As such, the doctrine
of estoppel cannot give validity to an act that is prohibited by law or one that is against
public policy. xxx

Moreover, the BIR cannot hide behind the doctrine of estoppel to cover its failure to comply
with RMO 20-90 and RDAO 05-01, which the BIR itself issued. xxx Having caused the defects
in the waivers, the BIR must bear the consequence. It cannot shift the blame to the
taxpayer. To stress, a waiver of the statute of limitations, being a derogation of the
taxpayer's right to security against prolonged and unscrupulous investigations, must be
carefully and strictly construed.

Applying the said ruling in the case at bench, BPI is not estopped from raising the invalidity
of the subject Waivers as the BIR in this case caused the defects thereof. As such, the invalid
Waivers did not operate to toll or extend the period of prescription. [14]

From the above disquisitions, it is clear that the right of petitioner to assess respondent has
already prescribed and respondent is not liable to pay the deficiency tax assessment. The
period of collection has also prescribed. As held by the CTA:

As to the period of collection, We uphold the ruling of the Division that such has already
prescribed. Regardless if We will reckon the period to collect from May 6, 1991, or the
alleged Final Demand Letter on February 5, 1992, counting the three-year period therein to
collect in accordance with Section 223 (c) of the 1977 Tax Code, obviously, the mode of

24
738 Phil. 577
P839,723,000.00 x P0.30 (Sec. 182 NIRC).. P 1,259,584.50
        P200.00
Add: Suggested compromise penalty…………........... 300.00
SECOND DIVISION
TOTAL AMOUNT DUE........................................... P 1,259,884.50
[ G.R. No. 181836, July 09, 2014 ]

On 16 June 1989, BPI received the assessment notice and demand letter from the BIR.
BANK OF THE PHILIPPINE ISLANDS, PETITIONER, VS. COMMISSIONER OF INTERNAL
REVENUE, RESPONDENT.
On 23 June 1989, BPI, through its counsel, filed a protest letter [6] requesting for the
DECISION reinvestigation and/or reconsideration of the assessment for lack of legal and factual bases.
The BPI alleged that it should not be liable for the assessed DST because: (1) based on
CARPIO, J.: recognized business practice incorporated in the Bankers Association of the Philippines
(BAP) Foreign Exchange Trading Center Rule 2(e), DST was for the account of the buyer; (2)
The Case BIR Ruling No. 135-87 stated that neither the tax-exempt entity nor the other party shall be
liable for the payment of DST before the effectivity of Presidential Decree No. (PD) 1994 on
1 January 1986; (3) since the then law left the tax to be paid indifferently by either party and
This petition for review[1] assails the Decision[2] promulgated on 29 May 2007 as well as the the party liable was exempt, the document was exempt from DST; and (4) the assessed DST
Resolution[3] promulgated on 12 February 2008 by the Court of Appeals (CA) in CA-G.R. SP was the same assessment made by the BIR for DST swap transaction covering taxable years
No. 63640. The CA reversed the Decision[4] of the Court of Tax Appeals (CTA), dated 12 1982-1986.
February 2001, and reinstated Assessment No. FAS-5-85-89-000988 requiring petitioner
Bank of the Philippine Islands (BPI) to pay the amount of P1,259,884.50 as deficiency In a letter dated 4 August 1998,[7] then Commissioner of Internal Revenue (CIR) Beethoven L.
documentary stamp tax (DST) for the taxable year 1985, inclusive of the compromise Rualo denied the “request for reconsideration.” The CIR held that BPI’s arguments were
penalty. legally untenable. The CIR cited BIR Unnumbered Ruling dated 30 May 1977 and BIR Ruling
No. 144-84 dated 3 September 1984, where the liability to pay DST was shifted to the other
The Facts party, who was not exempt from the tax. As for being taxed twice, the CIR found that such
allegation was unsubstantiated by BPI.
BPI, successor-in-interest of Citytrust Banking Corporation, is a commercial banking
corporation organized and existing under the laws of the Philippines. On 4 January 1999, BPI filed a petition for review before the CTA. On 23 February 1999, the
CIR filed his answer with a demand for BPI to pay the assessed DST.
On 19 May 1989, the Bureau of Internal Revenue (BIR) issued Assessment No. FAS-5-85-89-
000988[5] finding BPI liable for deficiency DST on its sales of foreign bills of exchange to the The CTA Ruling
Central Bank, computed as follows:
In a Decision dated 12 February 2001,[8] the CTA ordered the cancellation of the assessed
1985 Deficiency Documentary Stamp Tax DST on BPI. The CTA ruled that neither BPI nor Central Bank, which was tax-exempt, could
Foreign Bills of P 839,723,000.00 be liable for the payment of the assessed DST. The CTA reasoned out that before PD 1994
Exchange.......................................... took effect in 1986, there was no law that shifted the liability to the other party, in case the
party liable to pay the DST was tax exempt.
Tax Due Thereon:            
The dispositive portion of the CTA decision reads:
25
WHEREFORE, in view of the foregoing, the Court finds the instant Petition for Review Only the CIR filed his comment on 9 December 2013. In his Comment, [14] the CIR argues that
MERITORIOUS. Respondent is hereby ORDERED to CANCEL the 1985 deficiency the issue of prescription can not be raised for the first time on appeal. The CIR further
documentary stamp tax assessment issued to Bank of the Philippine Islands (as successor- alleges that even assuming that the issue of prescription can be raised, the protest letter
in-interest of Citytrust [B]anking Corporation) in the amount of P1,259,884.50 covered by interrupted the prescriptive period to collect the assessed DST, unlike in the Bank of the
Assessment No. FAS-5-85-89-000988. Philippine Islands case.[15]

SO ORDERED.[9] The Issue

Hence, the CIR appealed to the CA. The issue boils down to whether or not BIR has a right to collect the assessed DST from BPI.

The CA Ruling The Ruling of the Court

In a Decision dated 29 May 2007,[10] the CA reversed the CTA decision, and adopted the We deny the right of the BIR to collect the assessed DST on the ground of prescription.
arguments of the CIR and CTA Associate Justice Ramon O. De Veyra, in his dissent. The CA
held that BIR Unnumbered Ruling dated 30 May 1977 was more in accord with the general Section 1, Rule 9 of the Rules of Court expressly provides that:
principles of law and the intent for the enactment of the provisions on DST. According to
the CA, BPI further failed to justify its claim for exemption from tax. Section 1. Defenses and objections not pleaded. - Defenses and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived. However, when it
Thus, the dispositive portion of the CA decision states: appears from the pleadings or the evidence on record that the court has no jurisdiction
over the subject matter, that there is another action pending between the same parties for
WHEREFORE, based on the foregoing, the instant Petition is GRANTED. The Decision of the the same cause, or that the action is barred by prior judgment or by the statute of
Court of Tax Appeals in C. T. A. Case No. 5711, dated February 12, 2001, which [cancelled] limitations, the court shall dismiss the claim. (Emphasis and underscoring supplied)
the 1985 deficiency documentary stamp tax issued to the Bank of the Philippine Islands (as
successor-in-interest of Citytrust Banking Corporation) in the amount of P1,259,884.50 If the pleadings or the evidence on record show that the claim is barred by prescription, the
covered by Assessment No. FAS-5-85-89-000988 is REVERSED and SET ASIDE. Assessment court is mandated to dismiss the claim even if prescription is not raised as a defense.
No. FAS-5-85-89-000988 is hereby ordered reinstated. Bank of the Philippine Islands is In  Heirs of Valientes v. Ramas,[16] we ruled that the CA may motu proprio dismiss the case on
ordered to pay the amount of P1,259,884.50 plus 20% annual interest from the date the ground of prescription despite failure to raise this ground on appeal. The court is
prescribed for its payment until fully paid pursuant to Section 249 (cc) (3) of the Tax Code. imbued with sufficient discretion to review matters, not otherwise assigned as errors on
appeal, if it finds that their consideration is necessary in arriving at a complete and just
SO ORDERED.[11] resolution of the case.[17] More so, when the provisions on prescription were enacted to
benefit and protect taxpayers from investigation after a reasonable period of time. [18]
On 12 February 2008, the CA denied the motion for reconsideration filed by BPI. Hence, BPI
filed a petition for review before the Court. Thus, we proceed to determine whether the period to collect the assessed DST for the year
1985 has prescribed.
In a Resolution dated 5 August 2013,[12] the Court, through the Third Division, found that the
assailed tax assessment may be invalidated because the statute of limitations on the To determine prescription, what is essential only is that the facts demonstrating the lapse of
collection of the alleged deficiency DST had already expired, conformably with Section 1, the prescriptive period were sufficiently and satisfactorily apparent on the record either in
Rule 9 of the Rules of Court and the Bank of the Philippine Islands v. Commissioner of the allegations of the plaintiff’s complaint, or otherwise established by the evidence.
[19]
Internal Revenue[13] decision. However, to afford due process, the Court required both BPI  Under the then applicable Section 319(c) [now, 222(c)] [20] of the National Internal
and CIR to submit their respective comments on the issue of prescription. Revenue Code (NIRC) of 1977, as amended, any internal revenue tax which has been
assessed within the period of limitation may be collected by distraint or levy, and/or court
26
proceeding within three years[21] following the assessment of the tax. The assessment of the
tax is deemed made and the three-year period for collection of the assessed tax begins to (b) Request for reinvestigation. – refers to a plea for re-evaluation of an assessment on the
run on the date the assessment notice had been released, mailed or sent by the BIR to the basis of newly-discovered or additional evidence that a taxpayer intends to present in the
taxpayer.[22] reinvestigation. It may also involve a question of fact or law or both.

In the present case, although there was no allegation as to when the assessment notice had x x x Undoubtedly, a reinvestigation, which entails the reception and evaluation of
been released, mailed or sent to BPI, still, the latest date that the BIR could have released, additional evidence, will take more time than a reconsideration of a tax assessment, which
mailed or sent the assessment notice was on the date BPI received the same on 16 June will be limited to the evidence already at hand; this justifies why the former can suspend
1989. Counting the three-year prescriptive period from 16 June 1989, the BIR had until 15 the running of the statute of limitations on collection of the assessed tax, while the latter
June 1992 to collect the assessed DST. But despite the lapse of 15 June 1992, the evidence can not.
established that there was no warrant of distraint or levy served on BPI’s properties, or any
judicial proceedings initiated by the BIR. x x x A close review of the contents thereof would reveal, however, that it protested
Assessment No. FAS-5-85-89-002054 based on a question of law, in particular, whether or
The earliest attempt of the BIR to collect the tax was when it filed its answer in the CTA on not petitioner BPI was liable for DST on its sales of foreign currency to the Central Bank in
23 February 1999, which was several years beyond the three-year prescriptive period. taxable year 1985. The same protest letter did not raise any question of fact; neither did it
However, the BIR’s answer in the CTA was not the collection case contemplated by the law. offer to present any new evidence. In its own letter to petitioner BPI, dated 10 September
Before 2004 or the year Republic Act No. 9282 took effect, the judicial action to collect 1992, the BIR itself referred to the protest of petitioner BPI as a request for
internal revenue taxes fell under the jurisdiction of the regular trial courts, and not the CTA. reconsideration. These considerations would lead this Court to deduce that the protest
Evidently, prescription has set in to bar the collection of the assessed DST. letter of petitioner BPI was in the nature of a request for reconsideration, rather than a
request for reinvestigation and, consequently, Section 224 of the Tax Code of 1977, as
The BIR nevertheless insists that the running of the prescriptive period to collect the tax was amended, on the suspension of the running of the statute of limitations should not apply.
suspended by BPI’s filing of a request for the reinvestigation and/or reconsideration on 23
June 1989. In the similar case of Bank of the Philippine Islands,[23] we already ruled on the Even if, for the sake of argument, this Court glosses over the distinction between a request
matter as follows: for reconsideration and a request for reinvestigation, and considers the protest of petitioner
BPI as a request for reinvestigation, the filing thereof could not have suspended at once the
Of particular importance to the present case is one of the circumstances enumerated in running of the statute of limitations. Article 224 of the Tax Code of 1977, as amended, very
Section [320 (now, 223)] of the Tax Code of 1977, as amended, wherein the running of the plainly requires that the request for reinvestigation had been granted by the BIR
statute of limitations on assessment and collection of taxes is considered suspended “when Commissioner to suspend the running of the prescriptive periods for assessment and
the taxpayer requests for a reinvestigation which is granted by the Commissioner.” collection. (Emphasis supplied)

This Court gives credence to the argument of petitioner BPI that there is a distinction In the present case, the protest letter of BPI essentially raises the same question of law, that
between a request for reconsideration and a request for reinvestigation. Revenue is whether BPI was liable for DST on its sales of foreign bills of exchange to the Central Bank
Regulations (RR) No. 12-85, issued on 27 November 1985 by the Secretary of Finance, upon in the taxable year 1985. Although it raised the issue of being taxed twice, the BIR admitted
the recommendation of the BIR Commissioner, governs the procedure for protesting an that BPI did not present any new or additional evidence to substantiate its allegations. [24] In
assessment and distinguishes between the two types of protest, as follows– its letter dated 4 August 1998,[25] the BIR itself referred to the protest of BPI as a request for
reconsideration, found the arguments in it legally untenable, and denied the request.
xxxx Hence, we find that the protest letter of BPI was a request for reconsideration, which did
not suspend the running of the prescriptive period to collect.
(a) Request for reconsideration. – refers to a plea for a re-evaluation of an assessment on
the basis of existing records without need of additional evidence. It may involve both a Even considering that BPI’s protest was a request for reinvestigation, there was nothing in
question of fact or of law or both. the records which showed that the BIR granted such request. On the other hand, the BIR
27
only responded to BPI on 4 August 1998 or after nine years from the protest letter of BPI. In
the Bank of the Philippine Islands case,[26] we clarified and qualified our ruling
in Commissioner of Internal Revenue v. Wyeth Suaco Laboratories, Inc.,[27] such that the
request for reinvestigation in that case was granted by the BIR. Thus, unlike in the present
case, there was a proper ground for suspension of the prescriptive period in Wyeth Suaco.
[28]

Considering that the dismissal of the present case due to prescription is imperative, there is
no more need to determine the validity of the assessment.

WHEREFORE, we GRANT the petition. The Decision of the Court of Appeals in CA-G.R. SP

No. 63640, dated 29 May 2007, which reinstated Assessment No. FAS-5-85-89-000988
requiring petitioner BPI to pay the amount of P1,259,884.50 as deficiency documentary
stamp tax for the taxable year 1985, inclusive of the compromise penalty,
is REVERSED and SET ASIDE. Assessment No. FAS-5-85-89-000988 is hereby
ordered CANCELLED.

SO ORDERED.

28