SECOND DIVISION

COMMISSIONER OF INTERNAL G.R. Nos. 167274-75

REVENUE,
Petitioner, Present:

QUISUMBING, J.,
Chairperson,
YNARES-SANTIAGO,
- versus - CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
FORTUNE TOBACCO
CORPORATION, Promulgated:
Respondent.
July 21, 2008

x---------------------------------------------------------------------------x

DECISION

TINGA, J.:

Simple and uncomplicated is the central issue involved, yet whopping is the
amount at stake in this case.

After much wrangling in the Court of Tax Appeals (CTA) and the Court of
Appeals, Fortune Tobacco Corporation (Fortune Tobacco) was granted a tax
refund or tax credit representing specific taxes erroneously collected from its
tobacco products. The tax refund is being re-claimed by the Commissioner of
Internal Revenue (Commissioner) in this petition.

The following undisputed facts, summarized by the Court of Appeals, are quoted
in the assailed Decision[1] dated 28 September 2004:
CAG.R. SP No. 80675

xxxx

Petitioner[2] is a domestic corporation duly organized and existing

under and by virtue of the laws of the Republic of the Philippines, with
principal address at Fortune Avenue, Parang, Marikina City.

Petitioner is the manufacturer/producer of, among others, the

following cigarette brands, with tax rate classification based on net retail
price prescribed by Annex D to R.A. No. 4280, to wit:

Brand Tax Rate

Champion M 100 P1.00
Salem M 100 P1.00
Salem M King P1.00
Camel F King P1.00
Camel Lights Box 20s P1.00
Camel Filters Box 20s P1.00
Winston F Kings P5.00
Winston Lights P5.00

Immediately prior to January 1, 1997, the above-mentioned

cigarette brands were subject to ad valorem tax pursuant to then Section
142 of the Tax Code of 1977, as amended. However, on January 1,
1997, R.A. No. 8240 took effect whereby a shift from the
ad valorem tax (AVT) system to the specific tax system was made and
subjecting the aforesaid cigarette brands to specific tax under [S]ection
142 thereof, now renumbered as Sec. 145 of the Tax Code of 1997,
pertinent provisions of which are quoted thus:

Section 145. Cigars and Cigarettes-

(A) Cigars. There shall be levied, assessed and collected

on cigars a tax of One peso (P1.00) per cigar.
 (B) Cigarettes packed by hand. There shall be levied,
assessesed and collected on cigarettes packed by hand a tax of
Forty centavos (P0.40) per pack.

(C) Cigarettes packed by machine. There shall be levied,

assessed and collected on cigarettes packed by machine a tax at
the rates prescribed below:

(1) If the net retail price (excluding the excise tax and the
value-added tax) is above Ten pesos (P10.00) per pack, the tax
shall be Twelve (P12.00) per pack;
(2) If the net retail price (excluding the excise tax and the
value added tax) exceeds Six pesos and Fifty centavos (P6.50) but
does not exceed Ten pesos (P10.00) per pack, the tax shall
be Eight Pesos (P8.00) per pack.

(3) If the net retail price (excluding the excise tax and the
value-added tax) is Five pesos (P5.00) but does not exceed Six
Pesos and fifty centavos (P6.50) per pack, the tax shall be Five
pesos (P5.00) per pack;

(4) If the net retail price (excluding the excise tax and the
value-added tax) is below Five pesos (P5.00) per pack, the tax
shall be One peso (P1.00) per pack;

Variants of existing brands of cigarettes which are

introduced in the domestic market after the effectivity of R.A. No.
8240 shall be taxed under the highest classification of any variant
of that brand.

The excise tax from any brand of cigarettes within the next
three (3) years from the effectivity of R.A. No. 8240 shall not be
lower than the tax, which is due from each brand on October 1,
1996. Provided, however, that in cases were (sic) the excise tax
rate imposed in paragraphs (1), (2), (3) and (4) hereinabove will
result in an increase in excise tax of more than seventy percent
(70%), for a brand of cigarette, the increase shall take effect in
two tranches: fifty percent (50%) of the increase shall be effective
in 1997 and one hundred percent (100%) of the increase shall be
effective in 1998.
 Duly registered or existing brands of cigarettes or new
brands thereof packed by machine shall only be packed in
twenties.

The rates of excise tax on cigars and cigarettes under

paragraphs (1), (2) (3) and (4) hereof, shall be increased by
twelve percent (12%) on January 1, 2000. (Emphasis supplied)

New brands shall be classified according to their current

net retail price.

For the above purpose, net retail price shall mean the price
at which the cigarette is sold on retail in twenty (20) major
supermarkets in Metro Manila (for brands of cigarettes marketed
nationally), excluding the amount intended to cover the applicable
excise tax and value-added tax. For brands which are marketed
only outside Metro [M]anila, the net retail price shall mean the
price at which the cigarette is sold in five (5) major supermarkets
in the region excluding the amount intended to cover the
applicable excise tax and the value-added tax.

The classification of each brand of cigarettes based on its

average retail price as of October 1, 1996, as set forth in Annex
D, shall remain in force until revised by Congress.

Variant of a brand shall refer to a brand on which a

modifier is prefixed and/or suffixed to the root name of the brand
and/or a different brand which carries the same logo or design of
the existing brand.

To implement the provisions for a twelve percent (12%) increase

of excise tax on, among others, cigars and cigarettes packed by
machines by January 1, 2000, the Secretary of Finance, upon
recommendation of the respondent Commissioner of Internal Revenue,
issued Revenue Regulations No. 17-99, dated December 16, 1999,
which provides the increase on the applicable tax rates on cigar and
cigarettes as follows:
 SECTION DESCRIPTION OF PRESENT NEW
SPECIFIC TAX SPECIFIC
ARTICLES RATE PRIOR TAX RATE
TO JAN. 1, 2000 EFFECTIVE
JAN. 1, 2000

145 (A) P1.00/cigar P1.12/cigar

(B)Cigarettes packed
by machine

(1) Net retail price

(excluding VAT and P12.00/pack P13.44/ pack
excise)
exceeds P10.00 per
pack
P8.00/pack P8.96/pack
(2) Exceeds P10.00
per pack

(3) Net retail price P5.00/pack P5.60/pack

(excluding VAT and
excise) is P5.00
to P6.50 per pack

(4) Net Retail Price P1.00/pack P1.12/pack

(excluding VAT and
excise) is
below P5.00 per pack

Revenue Regulations No. 17-99 likewise provides in the last

paragraph of Section 1 thereof, (t)hat the new specific tax rate for
any existing brand of cigars, cigarettes packed by machine,
distilled spirits, wines and fermented liquor shall not be lower than
the excise tax that is actually being paid prior to January 1, 2000.

For the period covering January 1-31, 2000, petitioner allegedly

paid specific taxes on all brands manufactured and removed in the total
amounts of P585,705,250.00.
 On February 7, 2000, petitioner filed with respondents Appellate
Division a claim for refund or tax credit of its purportedly overpaid
excise tax for the month of January 2000 in the amount
of P35,651,410.00

On June 21, 2001, petitioner filed with respondents Legal

Service a letter dated June 20, 2001 reiterating all the claims for
refund/tax credit of its overpaid excise taxes filed on various dates,
including the present claim for the month of January 2000 in the
amount of P35,651,410.00.

As there was no action on the part of the respondent, petitioner

filed the instant petition for review with this Court on December 11,
2001, in order to comply with the two-year period for filing a claim for
refund.

In his answer filed on January 16, 2002, respondent raised the

following Special and Affirmative Defenses;

4. Petitioners alleged claim for refund is subject to

administrative routinary investigation/examination by the
Bureau;

5. The amount of P35,651,410 being claimed by petitioner

as alleged overpaid excise tax for the month of January
2000 was not properly documented.

6. In an action for tax refund, the burden of proof is on the

taxpayer to establish its right to refund, and failure to
sustain the burden is fatal to its claim for refund/credit.

7. Petitioner must show that it has complied with the

provisions of Section 204(C) in relation [to] Section 229
of the Tax Code on the prescriptive period for claiming
tax refund/credit;

8. Claims for refund are construed strictly against the

claimant for the same partake of tax exemption from
taxation; and
 9. The last paragraph of Section 1 of Revenue Regulation[s]
[No.]17-99 is a valid implementing regulation which has
the force and effect of law.

CA G.R. SP No. 83165

The petition contains essentially similar facts, except that the said
case questions the CTAs December 4, 2003 decision in CTA Case No.
6612 granting respondents[3] claim for refund of the amount
of P355,385,920.00 representing erroneously or illegally collected
specific taxes covering the period January 1, 2002 to December 31,
2002, as well as its March 17, 2004 Resolution denying a
reconsideration thereof.

xxxx

In both CTA Case Nos. 6365 & 6383 and CTA No. 6612, the Court of Tax
Appeals reduced the issues to be resolved into two as stipulated by
the parties, to wit: (1) Whether or not the last paragraph of Section 1 of
Revenue Regulation[s] [No.] 17-99 is in accordance with the pertinent
provisions of Republic Act [No.] 8240, now incorporated in Section 145 of
the Tax Code of 1997; and (2) Whether or not petitioner is entitled to a
refund of P35,651,410.00 as alleged overpaid excise tax for the month of
January 2000.

xxxx

Hence, the respondent CTA in its assailed October 21, 2002 [twin]
Decisions[s] disposed in CTA Case Nos. 6365 & 6383:

WHEREFORE, in view of the foregoing, the court finds the

instant petition meritorious and in accordance with law.
Accordingly, respondent is hereby ORDERED to REFUND
to petitioner the amount ofP35,651.410.00 representing
erroneously paid excise taxes for the period January 1
to January 31, 2000.

SO ORDERED.
Herein petitioner sought reconsideration of the above-quoted decision. In
[twin] resolution[s] [both] dated July 15, 2003, the Tax Court, in an
apparent change of heart, granted the petitioners consolidated motions for
reconsideration, thereby denying the respondents claim for refund.

However, on consolidated motions for reconsideration filed by the

respondent in CTA Case Nos. 6363 and 6383, the July 15, 2002 resolution
was set aside, and the Tax Court ruled, this time with a semblance of
finality, that the respondent is entitled to the refund claimed. Hence, in a
resolution dated November 4, 2003, the tax court reinstated its December
21, 2002 Decision and disposed as follows:

WHEREFORE, our Decisions in CTA Case Nos. 6365 and 6383

are hereby REINSTATED. Accordingly, respondent is
hereby ORDERED to REFUND petitioner the total amount
of P680,387,025.00 representing erroneously paid excise
taxes for the period January 1, 2000 to January 31,
2000 and February 1, 2000 to December 31, 2001.

SO ORDERED.

Meanwhile, on December 4, 2003, the Court of Tax Appeals rendered

decision in CTA Case No. 6612 granting the prayer for the refund of the
amount of P355,385,920.00 representing overpaid excise tax for the period
covering January 1, 2002 to December 31, 2002. The tax court disposed of
the case as follows:

IN VIEW OF THE FOREGOING, the Petition for Review is

GRANTED. Accordingly, respondent is hereby ORDERED
to REFUND to petitioner the amount of P355,385,920.00
representing overpaid excise tax for the period
covering January 1, 2002 to December 31, 2002.

SO ORDERED.

Petitioner sought reconsideration of the decision, but the same was denied
in a Resolution dated March 17, 2004.[4] (Emphasis supplied) (Citations
omitted)
The Commissioner appealed the aforesaid decisions of the CTA. The petition
questioning the grant of refund in the amount of P680,387,025.00 was docketed as
CA-G.R. SP No. 80675, whereas that assailing the grant of refund in the amount
of P355,385,920.00 was docketed as CA-G.R. SP No. 83165. The petitions were
consolidated and eventually denied by the Court of Appeals. The appellate court
also denied reconsideration in its Resolution[5] dated 1 March 2005.

In its Memorandum[6] 22 dated November 2006, filed on behalf of the

Commissioner, the Office of the Solicitor General (OSG) seeks to convince the
Court that the literal interpretation given by the CTA and the Court of Appeals of
Section 145 of the Tax Code of 1997 (Tax Code) would lead to a lower tax
imposable on 1 January 2000 than that imposable during the transition
period. Instead of an increase of 12% in the tax rate effective on 1 January 2000 as
allegedly mandated by the Tax Code, the appellate courts ruling would result in a
significant decrease in the tax rate by as much as 66%.

The OSG argues that Section 145 of the Tax Code admits of several
interpretations, such as:
1. That by January 1, 2000, the excise tax on cigarettes should be the
higher tax imposed under the specific tax system and the tax
imposed under the ad valorem tax system plus the 12% increase
imposed by par. 5, Sec. 145 of the Tax Code;

2. The increase of 12% starting on January 1, 2000 does not apply to

the brands of cigarettes listed under Annex D referred to in par. 8,
Sec. 145 of the Tax Code;

3. The 12% increment shall be computed based on the net retail price
as indicated in par. C, sub-par. (1)-(4), Sec. 145 of the Tax Code
even if the resulting figure will be lower than the amount already
being paid at the end of the transition period. This is the
interpretation followed by both the CTA and the Court of Appeals.[7]
This being so, the interpretation which will give life to the legislative intent to raise
revenue should govern, the OSG stresses.

Finally, the OSG asserts that a tax refund is in the nature of a tax exemption and
must, therefore, be construed strictly against the taxpayer, such as Fortune
Tobacco.

In its Memorandum[8] dated 10 November 2006, Fortune Tobacco argues that the
CTA and the Court of Appeals merely followed the letter of the law when they
ruled that the basis for the 12% increase in the tax rate should be the net retail price
of the cigarettes in the market as outlined in paragraph C, sub paragraphs (1)-(4),
Section 145 of the Tax Code. The Commissioner allegedly has gone beyond his
delegated rule-making power when he promulgated, enforced and implemented
Revenue Regulation No. 17-99, which effectively created a separate classification
for cigarettes based on the excise tax actually being paid prior to January 1, 2000.[9]

It should be mentioned at the outset that there is no dispute between the fact of
payment of the taxes sought to be refunded and the receipt thereof by the Bureau of
Internal Revenue (BIR). There is also no question about the mathematical accuracy
of Fortune Tobaccos claim since the documentary evidence in support of the
refund has not been controverted by the revenue agency. Likewise, the claims have
been made and the actions have been filed within the two (2)-year prescriptive
period provided under Section 229 of the Tax Code.

The power to tax is inherent in the State, such power being inherently
legislative, based on the principle that taxes are a grant of the people who are
taxed, and the grant must be made by the immediate representatives of the people;
and where the people have laid the power, there it must remain and be exercised.[10]

This entire controversy revolves around the interplay between Section 145 of the
Tax Code and Revenue Regulation 17-99. The main issue is an inquiry into
whether the revenue regulation has exceeded the allowable limits of legislative
delegation.

For ease of reference, Section 145 of the Tax Code is again reproduced in full as
follows:
 Section 145. Cigars and Cigarettes-

(A) Cigars.There shall be levied, assessed and collected on cigars

a tax of One peso (P1.00) per cigar.

(B). Cigarettes packed by hand.There shall be levied, assessed

and collected on cigarettes packed by hand a tax of Forty centavos
(P0.40) per pack.

(C) Cigarettes packed by machine.There shall be levied,

assessed and collected on cigarettes packed by machine a tax at the rates
prescribed below:

(1) If the net retail price (excluding the excise tax and the value-
added tax) is above Ten pesos (P10.00) per pack, the tax shall be Twelve
pesos (P12.00) per pack;
(2) If the net retail price (excluding the excise tax and the value
added tax) exceeds Six pesos and Fifty centavos (P6.50) but does not
exceed Ten pesos (P10.00) per pack, the tax shall be Eight Pesos (P8.00)
per pack.

(3) If the net retail price (excluding the excise tax and the value-
added tax) is Five pesos (P5.00) but does not exceed Six Pesos and fifty
centavos (P6.50) per pack, the tax shall be Five pesos (P5.00) per pack;

(4) If the net retail price (excluding the excise tax and the value-
added tax) is below Five pesos (P5.00) per pack, the tax shall be One
peso (P1.00) per pack;

Variants of existing brands of cigarettes which are introduced in

the domestic market after the effectivity of R.A. No. 8240 shall be taxed
under the highest classification of any variant of that brand.

The excise tax from any brand of cigarettes within the next three
(3) years from the effectivity of R.A. No. 8240 shall not be lower than
the tax, which is due from each brand on October 1, 1996. Provided,
however, That in cases where the excise tax rates imposed in paragraphs
(1), (2), (3) and (4) hereinabove will result in an increase in excise tax of
 more than seventy percent (70%), for a brand of cigarette, the increase
shall take effect in two tranches: fifty percent (50%) of the increase shall
be effective in 1997 and one hundred percent (100%) of the increase
shall be effective in 1998.

Duly registered or existing brands of cigarettes or new brands

thereof packed by machine shall only be packed in twenties.

The rates of excise tax on cigars and cigarettes under

paragraphs (1), (2) (3) and (4) hereof, shall be increased by twelve
percent (12%) on January 1, 2000.

New brands shall be classified according to their current net retail

price.

For the above purpose, net retail price shall mean the price at
which the cigarette is sold on retail in twenty (20) major supermarkets in
Metro Manila (for brands of cigarettes marketed nationally), excluding
the amount intended to cover the applicable excise tax and value-added
tax. For brands which are marketed only outside Metro Manila, the net
retail price shall mean the price at which the cigarette is sold in five (5)
major intended to cover the applicable excise tax and the value-added
tax.

The classification of each brand of cigarettes based on its average

retail price as of October 1, 1996, as set forth in Annex D, shall remain
in force until revised by Congress.

Variant of a brand shall refer to a brand on which a modifier is

prefixed and/or suffixed to the root name of the brand and/or a different
brand which carries the same logo or design of the existing
brand.[11](Emphasis supplied)

Revenue Regulation 17-99, which was issued pursuant to the unquestioned

authority of the Secretary of Finance to promulgate rules and regulations for the
effective implementation of the Tax Code,[12] interprets the above-quoted provision
and reflects the 12% increase in excise taxes in the following manner:
 SECTION DESCRIPTION OF PRESENT NEW
SPECIFIC TAX SPECIFIC
ARTICLES RATES PRIOR TAX RATE
TO JAN. 1, 2000 Effective Jan..
1, 2000

145 (A) Cigars P1.00/cigar P1.12/cigar

(B)Cigarettes packed
by Machine

(1) Net Retail Price

(excluding VAT and P12.00/pack P13.44/pack
Excise)
exceeds P10.00 per
pack

(2) Net Retail Price

(excluding VAT and P8.00/pack P8.96/pack
Excise) is P6.51 up
to P10.00 per pack
P5.00/pack P5.60/pack
(3) Net Retail Price
(excluding VAT and
excise) is P5.00
to P6.50 per pack

(4) Net Retail Price P1.00/pack P1.12/pack

(excluding VAT and
excise) is
below P5.00 per
pack)

This table reflects Section 145 of the Tax Code insofar as it mandates a 12%
increase effective on 1 January 2000 based on the taxes indicated under paragraph
C, sub-paragraph (1)-(4).However, Revenue Regulation No. 17-99 went further
and added that [T]he new specific tax rate for any existing brand of cigars,
cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not
be lower than the excise tax that is actually being paid prior to January 1, 2000.[13]

Parenthetically, Section 145 states that during the transition period, i.e., within the
next three (3) years from the effectivity of the Tax Code, the excise tax from any
brand of cigarettes shall not be lower than the tax due from each brand on 1
October 1996. This qualification, however, is conspicuously absent as regards the
12% increase which is to be applied on cigars and cigarettes packed by machine,
among others, effective on 1 January 2000. Clearly and unmistakably, Section 145
mandates a new rate of excise tax for cigarettes packed by machine due to the 12%
increase effective on 1 January 2000 without regard to whether the revenue
collection starting from this period may turn out to be lower than that collected
prior to this date.

By adding the qualification that the tax due after the 12% increase becomes
effective shall not be lower than the tax actually paid prior to 1 January 2000,
Revenue Regulation No. 17-99 effectively imposes a tax which is the higher
amount between the ad valorem tax being paid at the end of the three (3)-year
transition period and the specific tax under paragraph C, sub-paragraph (1)-(4), as
increased by 12%a situation not supported by the plain wording of Section 145 of
the Tax Code.

This is not the first time that national revenue officials had ventured in the area of
unauthorized administrative legislation.

In Commissioner of Internal Revenue v. Reyes,[14] respondent was not

informed in writing of the law and the facts on which the assessment of estate taxes
was made pursuant to Section 228 of the 1997 Tax Code, as amended by Republic
Act (R.A.) No. 8424. She was merely notified of the findings by the
Commissioner, who had simply relied upon the old provisions of the law and
Revenue Regulation No. 12-85 which was based on the old provision of the law.
The Court held that in case of discrepancy between the law as amended and the
implementing regulation based on the old law, the former necessarily prevails. The
law must still be followed, even though the existing tax regulation at that time
provided for a different procedure.[15]

In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,[16] the

tax authorities gave the term tax credit in Sections 2(i) and 4 of Revenue
Regulation 2-94 a meaning utterly disparate from what R.A. No. 7432 provides.
Their interpretation muddled up the intent of Congress to grant a mere discount
privilege and not a sales discount. The Court, striking down the revenue
regulation, held that an administrative agency issuing regulations may not enlarge,
alter or restrict the provisions of the law it administers, and it cannot engraft
additional requirements not contemplated by the legislature. The Court emphasized
that tax administrators are not allowed to expand or contract the legislative
mandate and that the plain meaning rule or verba legis in statutory construction
should be applied such that where the words of a statute are clear, plain and free
from ambiguity, it must be given its literal meaning and applied without attempted
interpretation.

As we have previously declared, rule-making power must be confined to details for

regulating the mode or proceedings in order to carry into effect the law as it has
been enacted, and it cannot be extended to amend or expand the statutory
requirements or to embrace matters not covered by the statute. Administrative
regulations must always be in harmony with the provisions of the law because any
resulting discrepancy between the two will always be resolved in favor of the basic
law.[17]

In Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop,

[18]
Inc., Commissioner Jose Ong issued Revenue Memorandum Order (RMO) No.
15-91, as well as the clarificatory Revenue Memorandum Circular (RMC) 43-91,
imposing a 5% lending investors tax under the 1977 Tax Code, as amended by
Executive Order (E.O.) No. 273, on pawnshops. The Commissioner anchored the
imposition on the definition of lending investors provided in the 1977 Tax Code
which, according to him, was broad enough to include pawnshop
operators. However, the Court noted that pawnshops and lending investors were
subjected to different tax treatments under the Tax Code prior to its amendment by
the executive order; that Congress never intended to treat pawnshops in the same
way as lending investors; and that the particularly involved section of the Tax
Code explicitly subjected lending investors and dealers in securities only to
percentage tax. And so the Court affirmed the invalidity of the challenged
circulars, stressing that administrative issuances must not override, supplant or
modify the law, but must remain consistent with the law they intend to carry out.[19]
 In Philippine Bank of Communications v. Commissioner of Internal
Revenue,[20] the then acting Commissioner issued RMC 7-85, changing the
prescriptive period of two years to ten years for claims of excess quarterly income
tax payments, thereby creating a clear inconsistency with the provision of Section
230 of the 1977 Tax Code. The Court nullified the circular, ruling that the BIR did
not simply interpret the law; rather it legislated guidelines contrary to the statute
passed by Congress. The Court held:
It bears repeating that Revenue memorandum-circulars are considered
administrative rulings (in the sense of more specific and less general
interpretations of tax laws) which are issued from time to time by the
Commissioner of Internal Revenue. It is widely accepted that the
interpretation placed upon a statute by the executive officers, whose
duty is to enforce it, is entitled to great respect by the
courts. Nevertheless, such interpretation is not conclusive and will be
ignored if judicially found to be erroneous. Thus, courts will not
countenance administrative issuances that override, instead of remaining
consistent and in harmony with, the law they seek to apply and
implement.[21]
In Commissioner of Internal Revenue v. CA, et al.,[22] the central issue was the
validity of RMO 4-87 which had construed the amnesty coverage under E.O. No.
41 (1986) to include only assessments issued by the BIR after the promulgation of
the executive order on 22 August 1986 and not assessments made to that
date. Resolving the issue in the negative, the Court held:

x x x all such issuances must not override, but must remain

consistent and in harmony with, the law they seek to apply and
implement. Administrative rules and regulations are intended to carry
out, neither to supplant nor to modify, the law.[23]

xxx

If, as the Commissioner argues, Executive Order No. 41 had not

been intended to include 1981-1985 tax liabilities already assessed
(administratively) prior to 22 August 1986, the law could have simply so
provided in its exclusionary clauses. It did not. The conclusion is
unavoidable, and it is that the executive order has been designed to be in
the nature of a general grant of tax amnesty subject only to the cases
specifically excepted by it.[24]
In the case at bar, the OSGs argument that by 1 January 2000, the excise tax on
cigarettes should be the higher tax imposed under the specific tax system and the
tax imposed under the ad valorem tax system plus the 12% increase imposed by
paragraph 5, Section 145 of the Tax Code, is an unsuccessful attempt to justify
what is clearly an impermissible incursion into the limits of administrative
legislation. Such an interpretation is not supported by the clear language of the law
and is obviously only meant to validate the OSGs thesis that Section 145 of the
Tax Code is ambiguous and admits of several interpretations.

The contention that the increase of 12% starting on 1 January 2000 does not apply
to the brands of cigarettes listed under Annex
D is likewise unmeritorious, absurd even. Paragraph 8, Section 145 of the Tax
Code simply states that, [T]he classification of each brand of cigarettes based on its
average net retail price as of October 1, 1996, as set forth in Annex D, shall remain
in force until revised by Congress. This declaration certainly does not lend itself to
the interpretation given to it by the OSG. As plainly worded, the average net retail
prices of the listed brands under Annex D, which classify cigarettes according to
their net retail price into low, medium or high, obviously remain the bases for the
application of the increase in excise tax rates effective on 1 January 2000.

The foregoing leads us to conclude that Revenue Regulation No. 17-99 is indeed
indefensibly flawed. The Commissioner cannot seek refuge in his claim that the
purpose behind the passage of the Tax Code is to generate additional revenues for
the government. Revenue generation has undoubtedly been a major consideration
in the passage of the Tax Code. However, as borne by the legislative record,[25] the
shift from the ad valorem system to the specific tax system
is likewise meant to promote fair competition among the players in the industries
concerned, to ensure an equitable distribution of the tax burden and to simplify tax
administration by classifying cigarettes, among others, into high, medium and low-
priced based on their net retail price and accordingly graduating tax rates.

At any rate, this advertence to the legislative record is merely gratuitous because,
as we have held, the meaning of the law is clear on its face and free from the
ambiguities that the Commissioner imputes. We simply cannot disregard the letter
of the law on the pretext of pursuing its spirit.[26]
 Finally, the Commissioners contention that a tax refund partakes the nature
of a tax exemption does not apply to the tax refund to which Fortune Tobacco is
entitled. There is parity between tax refund and tax exemption only when the
former is based either on a tax exemption statute or a tax refund statute. Obviously,
that is not the situation here. Quite the contrary, Fortune Tobaccos claim for refund
is premised on its erroneous payment of the tax, or better still the governments
exaction in the absence of a law.

Tax exemption is a result of legislative grace. And he who claims an

exemption from the burden of taxation must justify his claim by showing that the
legislature intended to exempt him by words too plain to be mistaken. [27] The rule
is that tax exemptions must be strictly construed such that the exemption will not
be held to be conferred unless the terms under which it is granted clearly and
distinctly show that such was the intention.[28]

A claim for tax refund may be based on statutes granting tax exemption or
tax refund. In such case, the rule of strict interpretation against the taxpayer is
applicable as the claim for refund partakes of the nature of an exemption, a
legislative grace, which cannot be allowed unless granted in the most explicit and
categorical language. The taxpayer must show that the legislature intended to
exempt him from the tax by words too plain to be mistaken.[29]
Tax refunds (or tax credits), on the other hand, are not founded principally on
legislative grace but on the legal principle which underlies all quasi-contracts
abhorring a persons unjust enrichment at the expense of another. [30] The dynamic
of erroneous payment of tax fits to a tee the prototypic quasi-contract, solutio
indebiti, which covers not only mistake in fact but also mistake in law. [31]

The Government is not exempt from the application of solutio

indebiti.[32] Indeed, the taxpayer expects fair dealing from the Government, and the
latter has the duty to refund without any unreasonable delay what it has
erroneously collected.[33] If the State expects its taxpayers to observe fairness and
honesty in paying their taxes, it must hold itself against the same standard in
refunding excess (or erroneous) payments of such taxes. It should not unjustly
enrich itself at the expense of taxpayers.[34] And so, given its essence, a claim for
tax refund necessitates only preponderance of evidence for its approbation like in
any other ordinary civil case.

Under the Tax Code itself, apparently in recognition of the pervasive quasi-
contract principle, a claim for tax refund may be based on the following: (a)
erroneously or illegally assessed or collected internal revenue taxes; (b) penalties
imposed without authority; and (c) any sum alleged to have been excessive or in
any manner wrongfully collected.[35]

What is controlling in this case is the well-settled doctrine of strict interpretation in

the imposition of taxes, not the similar doctrine as applied to tax exemptions. The
rule in the interpretation of tax laws is that a statute will not be construed as
imposing a tax unless it does so clearly, expressly, and unambiguously. A tax
cannot be imposed without clear and express words for that purpose. Accordingly,
the general rule of requiring adherence to the letter in construing statutes applies
with peculiar strictness to tax laws and the provisions of a taxing act are not to be
extended by implication. In answering the question of who is subject to tax
statutes, it is basic that in case of doubt, such statutes are to be construed most
strongly against the government and in favor of the subjects or citizens because
burdens are not to be imposed nor presumed to be imposed beyond what statutes
expressly and clearly import.[36] As burdens, taxes should not be unduly exacted
nor assumed beyond the plain meaning of the tax laws.[37]

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in

CA G.R. SP No. 80675, dated 28 September 2004, and its Resolution, dated 1
March 2005, are AFFIRMED. No pronouncement as to costs.

SO ORDERED.

DANTE O. TINGA
Associate Justice
WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CONSUELO YNARES-SANTIAGO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson, Second Division
 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice
G.R. No. 192024, July 01, 2015 - FORTUNE TOBACCO ORPORATION, Petitioner, v. COMMISSIONER OF
INTERNAL REVENUE, Respondent.

SECOND DIVISION

G.R. No. 192024, July 01, 2015

FORTUNE TOBACCO ORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL

REVENUE, Respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Fortune Tobacco
Corporation (petitioner), assailing the March 12, 2010 Decision1 of the Court of Tax Appeals En Banc(CTA En
Banc) and its April 26, 2010 Resolution2 in CTA EB Case No. 533, which affirmed in toto the April 30, 2009
Decision3 and the August 18, 2009 Resolution4 of the Former First Division of the Court of Tax Appeals (CTA
Division) in CTA Case No. 7367.

The facts of this case are akin to those obtaining in G.R. Nos. 167274-75 and GR. No. 180006. In G.R. No.
167274-275, the Court eventually sustained petitioner's claim for refund of overpaid excise taxes for the
period covering January 1, 2002 to December 31, 2002. In G.R. No. 180006, the Court likewise sustained
petitioner's claim for refund of overpaid excise tax paid in 2003 and the period covering January 1 to May
31, 2004. The subject claim for refund involves the amount of excise taxes allegedly overpaid during the
period beginning June 1, 2004 up to December 31, 2004.

For a better understanding of the controversy, a recapitulation of the factual and procedural antecedents is
in order. Thus, as stated in the following portions of the CTA En Banc decision:
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Petitioner is the manufacturer/producer of, among others, the following cigarette brands, with tax rate
classification based on net retail price prescribed by Annex "D" to Republic Act (R.A.) No. 4280, to wit:
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Brand Tax Rate

Champion M 100 P1.00

Camel F King P1.00
Camel Lights Box 20's P1.00
Camel Filters Box 20'sP1.00
Winston F King P5.00
Winston Lights P5.00
Immediately prior to January 1, 1997, the above-mentioned cigarette brands were subject to ad valorem tax
pursuant to then Section 142 of the Tax Code of 1977, as amended. However, on January 1, 1997, R.A. No.
8240 took effect causing a shift from the ad valorem tax (AVT) system to the specific tax system. As a result
of such shift, the aforesaid cigarette brands were subjected to specific tax under Section 142 thereof, now
renumbered as Section 145 of the Tax Code of 1997. Section 145 is quoted thus:
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'Section 145. Cigars and Cigarettes - (A) Cigars. - There shall be levied, assessed and collected on cigars a
tax of One peso (P1.00) per cigar.

(B) Cigarettes Packed by Hand. - There shall be levied, assessed and collected on cigarettes packed by hand
a tax of Forty centavos (P0.40) per pack.

(C) Cigarettes Packed by Machine. - There shall be levied, assessed and collected on cigarettes packed by
machine a tax at the rates prescribed below:
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[1] If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos (P10.00)
per pack, the tax shall be Twelve (P12.00) per pack: Lawl ibra ryofCRAlaw

[2] If the net retail price (excluding the excise tax and the value added tax) exceeds Six pesos and Fifty
centavos (P6.50) but does not exceed Ten pesos (P10.00) per pack, the tax shall be Eight Pesos (P8.00) per
pack.

[3] If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but does
not exceed Six Pesos and fifty centavos (P6.50) per pack, the tax shall be Five pesos (P5.00) per pack;

[4] If the net retail price (excluding the excise tax and the value-added tax] is below Five pesos (P5.00) per
pack, the tax shall be One peso (P1.00) per pack;
Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity of
R.A. No. 8240 shall be taxed under the highest classification of any variant of that brand.

The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No.
8240 shall not be lower than the tax, which is due from each brand on October 1, 1996. Provided, however,
that in cases where the excise tax rate imposed in paragraphs (1), (2), (3) and (4) hereinabove will result in
an increase in excise tax of more than seventy percent (70%), for a brand of cigarette, the increase shall
take effect in two tranches: fifty percent (50%) of the increase shall be effective in 1997 and one hundred
percent (100%) of the increase shall be effective in 1998.

Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only be
packed in twenties.

The rates of excise tax on cigars and cigarettes under paragraphs (1), (2), (3) and (4) hereof, shall be
increased by twelve percent (12%) on January 1, 2000.

New brands shall be classified according to their current net retail price.

For the above purpose, 'net retail price' shall mean the price at which the cigarette is sold on retail in twenty
(20) major supermarkets in Metro Manila (for brands of cigarettes marketed nationally), excluding the
amount intended to cover the applicable excise tax and value-added tax. For brands which are marketed
only outside Metro Manila, the 'net retail price' shall mean the price at which the cigarette is sold in five (5)
major supermarkets in the region excluding the amount intended to cover the applicable excise tax and the
value-added tax.

The classification of each brand of cigarettes based on its average net retail price as of October 1, 1996, as
set forth in Annex "D," shall remain in force until revised by Congress.

'Variant of a brand' shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of
the brand and/or a different brand which carries the same logo or design of the existing brand.
To implement the provisions for a twelve percent (12%) increase of excise tax on cigars and cigarettes
packed by machines by January 1, 2000, the Secretary of Finance, upon recommendation of the respondent
Commissioner of Internal Revenue, issued Revenue Regulations No. 17-99, dated December 16, 1999, xxx

RR No. 17-99 likewise provides in the last paragraph of Section 1 thereof, "that the new specific tax rate for
any existing brand of cigars, cigarettes packed by machine, distilled spirits, wines and fermented liquor shall
not be lower than the excise tax that is actually being paid prior to January 1, 2000."

On 31 March 2005, petitioner filed a claim for tax credit or refund under Section 229 of the National Internal
Revenue Code of 1997 (1997 NIRC) for erroneously or illegally collected specific taxes covering the period
June to December 31, 2004 in the total amount of Php219,566,450.00.

On November 14, 2005, petitioner filed a Petition for Review which was raffled to the Former First Division
of this Court.

Respondent in his Answer raised among others, as a Special and Affirmative Defense, that the amount of
TWO HUNDRED NINETEEN MILLION FIVE HUNDRED SIXTY SIX THOUSAND FOUR HUNDRED FIFTY PESOS
(Php219,566,450.00) being claimed by petitioner as alleged overpaid excise tax for the period covering 1
June to 31 December 2004, is not properly documented.

After trial on the merits, the Former First Division of this Court rendered the assailed Decision, dated April
30, 2009, which consistently ruled that RR 17-99 is contrary to law and that there is insufficiency of
evidence on the claim for refund.

Petitioner filed its motion for reconsideration therefrom, and which was denied by the Former First Division
on August 18, 2009.
Petitioner elevated its claim to the CTA En Banc, but was rebuffed after the tax tribunal found no cause to
reverse the findings and conclusions of the CTA Division.

Hence, this petition.

Essentially, petitioner claims that it paid a total amount of P219,566,450.00 in overpaid excise taxes. For
petitioner, considering that the CTA found Revenue Regulation No. 17-99 (RR 17-99) to be contrary to law,
there should be no obstacle to the refund of the total amount excess excise taxes it had paid.5 redarclaw

In a nutshell, the sole issue for the resolution of the Court is: whether or not there is sufficient evidence to
warrant the grant of petitioner's claim for tax refund.

The petition lacks merit.

The question of sufficiency of petitioner's evidence to support its claim for tax refund is a question of fact

Unlike in the proceeding had in G.R. Nos. 167274-75 and G.R. No. 180006, the denial of petitioner's claim
for tax refund in this case is based on the ground that petitioner failed to provide sufficient evidence to
prove its claim and the amount thereof. As a result, petitioner seeks that the Court re-examine the
probative value of its evidence and determine whether it should be refunded the amount of excise taxes it
allegedly overpaid.

This cannot be done.

The settled rule is that only questions of law may be raised in a petition under Rule 45 of the Rules of Court.
It is not this Court's function to analyze or weigh all over again the evidence already considered in the
proceedings below, the Court's jurisdiction being limited to reviewing only errors of law that may have been
committed by the lower court. The resolution of factual issues is the function of the lower courts, whose
findings on these matters are received with respect. A question of law which the Court may pass upon must
not involve an examination of the probative value of the evidence presented by the litigants.6 This is in
accordance with Section 1, Rule 45 of the Rules of Court, as amended, which reads:
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Section 1. Filing of petition with Supreme Court. - A party desiring to appeal by certiorari from a
judgment, final order or resolution of the Court of Appeals, the Sandiganbayan, the Court of Tax Appeals,
the Regional Trial Court or other courts, whenever authorized by law, may file with the Supreme Court a
verified petition for review on certiorari. The petition may include an application for a writ of preliminary
injunction or other provisional remedies and shall raise only questions of law, which must be
distinctly set forth. The petitioner may seek the same provisional remedies by verified motion filed in the
same action or proceeding at any time during its pendency.

[Emphasis and Underlining Supplied]

In fact, the rule finds greater significance with respect to the findings of specialized courts such as the CTA,
the conclusions of which are not lightly set aside because of the very nature of its functions which is
dedicated exclusively to the resolution of tax problems and has accordingly developed an expertise on the
subject, unless there has been an abuse or improvident exercise of authority.7 reda rclaw

Moreover, it has been said that the proper interpretation of the provisions on tax refund that does notcall for
an examination of the probative value of the evidence presented by the parties-litigants is a question of
law.8 Conversely, it may be said that if the appeal essentially calls for the re-examination of the probative
value of the evidence presented by the appellant, the same raises a question of fact. Often repeated is the
distinction that there is a question of law in a given case when doubt or difference arises as to what the law
is on a certain state of facts; there is a question of fact when doubt or difference arises as to the truth or
falsehood of alleged facts.9 redarc law

Verily, the sufficiency of a claimant's evidence and the determination of the amount of refund, as called for
in this case, are questions of fact,10 which are for the judicious determination by the CTA of the evidence on
record.

Significantly, it bears noting that Section 5, Rule 45 of the Rules of Court provides that the failure of
petitioner to comply with the requirements on the contents of the petition shall be sufficient ground for its
dismissal. While jurisprudence provides exceptions to these rules, the subject petition does not fall under
any of those so excepted. Thus, for this reason alone, the petition must fail.

The CTA committed no reversible error in denying petitioner's claim for tax refund for insufficient evidence.

A. Petitioner relied heavily on photocopied documents to prove its claim.

Granting that the Court could take a second look and review petitioner's evidence, the result would be the
same.

The claim for refund hinges on the admissibility and the probative value of the following photocopied
documents that allegedly contain a recording of petitioner's excise payments for the period covering June 1,
2004 up to December 31, 2004: Lawli bra ryofCRAlaw

(1) Production, Removals and Payments for All FTC Brands;11 and

(2) Excise Tax Refund Computation Summary.12 redarclaw

Although both the CTA Division and the CTA En Banc provisionally admitted petitioner's Exhibit "C,"13the
above-mentioned documents, as well as the other documentary evidence submitted by petitioner were
refused admission for being merely photocopies.14 reda rclaw

Section 3 of Administrative Matter (A.M.) No. 05-11-07 CTA, the Revised Rules of the Court of Tax Appeals,
provides that the Rules of Court shall apply suppletorily in the proceeding before the tax tribunal.

In this connection, Section 3 of Rule 130 of the Rules of Court lays down the Best Evidence Rule with
respect to the presentation of documentary evidence. Thus:
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Section 3. Original document must be produced; exceptions. — When the subject of inquiry is the contents
of a document, no evidence shall be admissible other than the original document itself, except in the
following cases: Lawl ibra ryofCRAlaw
(a) When the original has been lost or destroyed, or cannot be produced in court, without bad faith on the
part of the offerer;

(b) When the original is in the custody or under the control of the party against whom the evidence is
offered, and the latter fails to produce it after reasonable notice;

(c) When the original consists of numerous accounts or other documents which cannot be examined in court
without great loss of time and the fact sought to be established from them is only the general result of the
whole; and

(d) When the original is a public record in the custody of a public officer or is recorded in a public office. (2a)
In this case, petitioner did not even attempt to provide a plausible reason as to why the original copies of
the documents presented could not be produced before the CTA or any reason that the application of any of
the foregoing exceptions could be justified. Although petitioner presented one (1) witness to prove its claim,
it appears that this witness was not even a signatory to any of the disputed documentary evidence.

As correctly pointed out by the CTA Division, petitioner knew all along that it had committed the foregoing
procedural lapses when it filed its Formal Offer of Evidence. Although petitioner orally manifested that it was
going to seek reconsideration of the CTA Division order excluding its evidence, in the end, petitioner did not
even bother to file any such motion for reconsideration at all.

B. Petitioner failed to offer any proof or tender of excluded evidence.

At any rate, even if the Court should find fault in the ruling of the CTA Division in denying the admission of
petitioner's evidence, the result would be the same because petitioner failed to offer any proof or tender of
excluded evidence. As aptly discussed by the CTA En Banc:
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Petitioner posits that if their exhibits, specifically Exhibits "G", "G-1" to "G-7" and Exhibit "H", are admitted
together with the testimony of their witness, the same would sufficiently prove their claim. A closer scrutiny
of the records shows that petitioner did not file any offer of proof or tender of excluded evidence.

Section 40, Rule 132 of the Rules of Court provides:

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Sec. 40. Tender of excluded evidence. - If documents or things offered in evidence are excluded by the
court, the offeror may have the same attached to or made part of the record. If the evidence excluded is
oral, the offeror may state for the record the name and other personal circumstances of the witness and the
substance of the proposed testimony.
The rule is that evidence formally offered by a party may be admitted or excluded by the court. If a party's
offered documentary or object evidence is excluded, he may move or request that it be attached to form
part of the records of the case. If the excluded evidence is oral, he may state for the record the name and
other personal circumstances of the witness and the substance of the proposed testimony. These procedures
are known as offer of proof or tender of excluded evidence and are made for purposes of appeal. If an
adverse judgment is eventually rendered against the offeror, he may in his appeal assign as error the
rejection of the excluded evidence.

It is of record that the denial of the excluded evidence was never assigned as an error in this appeal. Thus,
this Court cannot pass upon nor consider the propriety of their denial. Moreover, this Court cannot and
should not consider the documentary and oral evidence presented which are not considered to be part of the
records in the first place. Thus, Exhibits "G", "G- 1" to "G-7" and Exhibit "H", together with the testimony of
petitioner's witness thereon, cannot be admitted and be given probative valuer.15
It has been repeatedly ruled that where documentary evidence was rejected by the lower court and the
offeror did not move that the same be attached to the record, the same cannot be considered by the
appellate court,16 as documents forming no part of proofs before the appellate court cannot be considered in
disposing the case.17 For the appellate court to consider as evidence, which was not offered by one party at
all during the proceedings below, would infringe the constitutional right of the adverse party - in this case,
the CIR, to due process of law.

It also bears pointing out that at no point during the proceedings before the CTA En Banc and before this
Court has petitioner offered any plausible explanation as to why it failed to properly make an offer of proof
or tender of excluded evidence. Instead, petitioner harps on the fact that respondent CIR simply refused its
claim for refund on the ground that RR 17-99 was a valid issuance. Thus, for its failure to seasonably avail
of the proper remedy provided under Section 40, Rule 132 of the Rules of Court, petitioner is precluded from
doing so at this late stage of the case. Clearly, estoppel has already stepped in.
Although it may be suggested that the CTA should have been more liberal in the application of technical
rules of evidence, it should be stressed that a liberal application, or suspension of the application of
procedural rules, must remain as the exception to the well-settled principle that rules must be complied with
for the orderly administration of justice. As pointed out in Marohomsalic v. Cole,18
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While procedural rules may be relaxed in the interest of justice, it is well-settled that these are tools
designed to facilitate the adjudication of cases. The relaxation of procedural rules in the interest of
justice was never intended to be a license for erring litigants to violate the rules with
impunity. Liberality in the interpretation and application of the rules can be invoked only in proper cases
and under justifiable causes and circumstances. While litigation is not a game of technicalities, every case
must be prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy
administration of justice.19 reda rclaw

[Emphases Supplied]
And, as stressed in the case of Daikoku Electronics Phils., Inc. v. Raza:20
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To be sure, the relaxation of procedural rules cannot be made without any valid reasons proffered
for or underpinning it. To merit liberality, petitioner must show reasonable cause justifying its non-
compliance with the rules and must convince the Court that the outright dismissal of the petition would
defeat the administration of substantive justice, x x x The desired leniency cannot be accorded absent valid
and compelling reasons for such a procedural lapse, xxx

We must stress that the bare invocation of "the interest of substantial justice" line is not some
magic wand that will automatically compel this Court to suspend procedural rules. Procedural rules
are not to be belittled, let alone dismissed simply because their non-observance may have resulted in
prejudice to a party's substantial rights. Utter disregard of the rules cannot be justly rationalized by harping
on the policy of liberal construction.21 redarclaw

[Emphases Supplied]
In this case, as explained above, petitioner utterly failed to not only comply with the basic procedural
requirement of presenting only the original copies of its documentary evidence, but also to adhere to the
requirement to properly make its offer of proof or tender of excluded evidence for the proper consideration
of the appellate tribunal.

Indeed, to apply technical rules strictly against the CIR because it simply relied on the validity of RR 17-99 -
but not be strict with respect to petitioner's shortcomings, would be unfair. For this would go against the
principle that taxation is the rule, exemption/refund, the exception.

C. Petitioner's evidence, even if considered, fails to prove that it is entitled to its claim for refund.

Finally, as correctly held by the CTA En Banc, even if the Court would consider petitioner's otherwise
excluded evidence, the same would still fail to sufficiently prove the petitioner's entitlement to its claim for
refund. The disquisition of the CTA Division, as quoted in the CTA En Banc decision, is hereby reiterated with
approval:
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xxx, the documentary exhibits are not sufficient to prove the amounts being claimed by petitioner as refund.
Looking at Exhibit 'G,' the same is a mere summary of excise taxes paid by petitioner for ALL of its
cigarette brands. This Court cannot verify the amounts of excise taxes paid for the brands in issue which
are Champion M-100s, Camel Filter Kings, Winston Filter Kings, and Winston Lights.

This Court cannot likewise rely solely on petitioner's Excise Tax Refund Computation Summary. The figures
therein must be verified through other documentary evidence which this Court must look into and which
petitioner failed to properly provide.22 redarclaw

[Emphases Supplied]
Clearly, it is petitioner's burden to prove the allegations made in its claim for refund. For a claim for refund
to be granted, the manner in proving it must be in accordance with the prescribed rules of evidence. It
would have been erroneous had the CTA En Banc relied on petitioner's own Excise Tax Refund Computation
Summary or the unsatisfactory explanation of its lone witness to justify its claim for tax refund.

Indeed, while it is true that litigation is not a game of technicalities is equally true, however, that every case
must be established in accordance with the prescribed procedure to ensure an orderly and speedy
administration of justice. In all, the Court finds that the failure of petitioner to prove its claim in accordance
with the settled evidentiary rules merits its dismissal.

Lest it be misunderstood, this Court is not reversing, directly or indirectly, its pronouncements in G.R. Nos.
167274-75 and G.R. No. 180006 that RR 17-99 is invalid. This Court is simply pointing to the rule that
claims for refunds are the exception, rather than the rule, and that each claim for refund, in order to be
granted, must be clearly set forth and established in accordance with the rules of evidence.

As it has been said, time and again, that claims for tax refunds are in the nature of tax exemptions which
result in loss of revenue for the government. Upon the person claiming an exemption from tax payments
rests the burden of justifying the exemption by words too plain to be mistaken and too categorical to be
misinterpreted; it is never presumed nor be allowed solely on the ground of equity.23 In addition, one who
claims that he is entitled to a tax refund must not only claim that the transaction subject of tax is clearly
and unequivocally not subject to tax - the amount of the claim must still be proven in the normal
course,24 in accordance with the prescribed rules on evidence.

After all, taxes are the lifeblood of the nation.25

redarclaw

WHEREFORE, the petition is DENIED.

SO ORDERED. cralawlawlibra ry

Bersamin,*Del Castillo, (Acting Chairperson), Villarama, Jr.,** and Leonen, JJ., concur.

Endnotes: