1
the mail. But if one of the said facts fails to appear, the the assessment was made as required by Section 228 of
presumption does not lie. R.A. No. 8424, the assessment made by the CIR is void.
What is essential to prove the fact of mailing is the registry It is an elementary rule enshrined in the 1987 Constitution that
receipt issued by the Bureau of Posts or the Registry return card no person shall be deprived of property without due process of
which would have been signed by the Petitioner or its authorized law. In balancing the scales between the power of the State to
representative. And if said documents cannot be located, tax and its inherent right to prosecute perceived transgressors
Respondent at the very least, should have submitted to the of the law on one side, and the constitutional rights of a citizen
Court a certification issued by the Bureau of Posts and any other to due process of law and the equal protection of the laws on
pertinent document which is executed with the intervention of the other, the scales must tilt in favor of the individual, for a
the Bureau of Posts. This Court does not put much credence to citizens right is amply protected by the Bill of Rights under the
the self-serving documentations made by the BIR personnel Constitution. Thus, while taxes are the lifeblood of the
especially if they are unsupported by substantial evidence government, the power to tax has its limits, in spite of
establishing the fact of mailing. all its plenitude.
The Court agrees with the CTA that the CIR failed to
discharge its duty and present any evidence to show 2. Commissioner of Internal Revenue vs. ANRON Subic
that Metro Star indeed received the PAN dated January Power Corpoation
16, 2002. It could have simply presented the registry receipt G.R. no. 166387
or the certification from the postmaster that it mailed the PAN,
but failed. Neither did it offer any explanation on why it failed to Facts:
comply with the requirement of service of the PAN. It merely
accepted the letter of Metro Stars chairman dated April 29, Enron, a domestic corporation registered with the Subic Bay
2002, that stated that he had received the FAN dated April 3, Metropolitan Authority as a freeport enterprise, filed its
2002, but not the PAN; that he was willing to pay the tax as annual income tax return for the year 1996 on April 12,
computed by the CIR; and that he just wanted to clarify some 1997. It indicated a net loss of P7,684,948.
matters with the hope of lessening its tax liability. Subsequently, the Bureau of Internal Revenue, through a
preliminary five-day letter, informed it of a proposed
AS TO THE DENIAL OF DUE PROCESS assessment of an alleged P2,880,817.25 deficiency income
Section 228 of the Tax Code clearly requires that the tax.
taxpayer must first be informed that he is liable for Enron disputed the proposed deficiency assessment in its
deficiency taxes through the sending of a PAN. He must first protest letter.
be informed of the facts and the law upon which the Enron received from the CIR a formal assessment notice
assessment is made. The law imposes a substantive, not requiring it to pay the alleged deficiency income tax
merely a formal, requirement. To proceed heedlessly of P2,880,817.25 for the taxable year 1996. Enron
with tax collection without first establishing a valid protested this deficiency tax assessment.
assessment is evidently violative of the cardinal Due to the non-resolution of its protest within the 180-day
principle in administrative investigations - that period, Enron filed a petition for review in the Court of Tax
taxpayers should be able to present their case and Appeals (CTA). It argued that the deficiency tax assessment
adduce supporting evidence. disregarded the provisions of Section 228 of the National
Internal Revenue Code (NIRC), as amended, and Section
This is confirmed under the provisions R.R. No. 12-99 of 3.1.4 of Revenue Regulations (RR) No. 12-99 by not
the BIR. It is clear that the sending of a PAN to taxpayer providing the legal and factual bases of the assessment.
to inform him of the assessment made is but part of Enron likewise questioned the substantive validity of the
the due process requirement in the issuance of a assessment.
deficiency tax assessment, the absence of which renders CTA granted Enron’s petition and ordered the
nugatory any assessment made by the tax authorities. cancellation of its deficiency tax assessment for the
The use of the word shall in subsection 3.1.2 describes the year 1996. The CTA reasoned that the assessment notice
mandatory nature of the service of a PAN. The persuasiveness sent to Enron failed to comply with the requirements of a
of the right to due process reaches both substantial and valid written notice under Section 228 of the NIRC and RR
procedural rights and the failure of the CIR to strictly comply No. 12-99. The CIRs motion for reconsideration of the CTA
with the requirements laid down by law and its own rules is a decision was denied in a resolution dated November 12,
denial of Metro Stars right to due process Thus, for its failure 2001.
to send the PAN stating the facts and the law on which The CIR appealed the CTA decision to the CA but the
CA affirmed it. CIR filed a motion for reconsideration
2
but this was deemed abandoned when he filed a The CIR insists that an examination of the facts shows that
motion for extension to file a petition for review in Enron was properly apprised of its tax deficiency. During the
this Court. The CIR now argues that respondent was pre-assessment stage, the CIR advised Enrons representative of
informed of the legal and factual bases of the deficiency the tax deficiency, informed it of the proposed tax deficiency
assessment against it. assessment through a preliminary five-day letter and furnished
Enron a copy of the audit working paperallegedly showing in
Issue: Whether or not respondent was informed of the legal detail the legal and factual bases of the assessment. The CIR
and factual bases of the deficiency assessment against it argues that these steps sufficed to inform Enron of the laws and
facts on which the deficiency tax assessment was based.
Ruling: NO. PETITION DENIED.
The advice of tax deficiency, given by the CIR to an
A notice of assessment is declaration of deficiency taxes employee of Enron, as well as the preliminary five-day
issued to a taxpayer who fails to respond to a Pre- letter, were not valid substitutes for the mandatory
Assessment Notice (PAN) within the prescribed period notice in writing of the legal and factual bases of the
of time, or whose reply to the PAN was found to be assessment. These steps were mere perfunctory
without merit. The Notice of Assessment shall inform discharges of the CIRs duties in correctly assessing a
the taxpayer of this fact, and that the report of taxpayer. The requirement for issuing a preliminary or
investigation submitted by the Revenue Officer final notice, as the case may be, informing a taxpayer of
conducting the audit shall be given due course. the existence of a deficiency tax assessment is markedly
different from the requirement of what such notice must
The formal letter of demand calling for payment of the contain. Just because the CIR issued an advice, a
taxpayers deficiency tax or taxes shall state the fact, the preliminary letter during the pre-assessment stage and
law, rules and regulations or jurisprudence on which the a final notice, in the order required by law, does not
assessment is based, otherwise the formal letter of necessarily mean that Enron was informed of the law
demand and the notice of assessment shall be void. and facts on which the deficiency tax assessment was
made.
3
its international flight operations, petitioner purchased manufacturer/seller. Following the principle of stare
aviation fuel from Petron Corporation (Petron) from July 1, decisis, the present petition must therefore be denied.
1998 to December 31, 1998, paying the excise taxes
thereon in the sum of ₱5,007,043.39. The payment was Excise taxes, which apply to articles manufactured or
advanced by Singapore Airlines, Ltd. on behalf of petitioner. produced in the Philippines for domestic sale or
On October 20, 1999, petitioner filed an administrative consumption or for any other disposition and to things
claim for refund in the amount of ₱5,007,043.39 imported into the Philippines, is basically an indirect tax.
representing excise taxes on the purchase of jet fuel from While the tax is directly levied upon the
Petron, which it alleged to have been erroneously paid. The manufacturer/importer upon removal of the taxable
claim is based on Section 135 (a) and (b) of the 1997 Tax goods from its place of production or from the customs
Code, which provides: custody, the tax, in reality, is actually passed on to the
SEC. 135. Petroleum Products Sold to International Carriers and
end consumer as part of the transfer value or selling
Exempt Entities or Agencies. – Petroleum products sold to the
following are exempt from excise tax: price of the goods, sold, bartered or exchanged. In early
(a) International carriers of Philippine or foreign regis try on cases, we have ruled that for indirect taxes (such as
their use or consumption outside the Philippines: Provided, That the valued-added tax or VAT), the proper party to question
petroleum products sold to these international carriers shall be stored
or seek a refund of the tax is the statutory taxpayer, the
in a bonded storage tank and may be disposed of only in
accordance with the rules and regulations to be prescribed by the person on whom the tax is imposed by law and who paid
Secretary of Finance, upon recommendation of the Commissioner; the same even when he shifts the burden thereof to
(b) Exempt entities or agencies covered by tax treaties,
another. Thus, in Contex Corporation v. Commissioner of
conventions and other international agreementsfor their use or
consumption: Provided, however, That the country of said foreign Internal Revenue, we held that while it is true that petitioner
international carrier or exempt entities or agencies exempts from corporation should not have been liable for the VAT
similar taxes petroleum products sold to Philippine carriers, entities or inadvertently passed on to it by its supplier since their
agencies; and
transaction is a zero-rated sale on the part of the supplier, the
Petitioner also invoked Article 4(2) of the Air Transport
petitioner is not the proper party to claim such VAT refund.
Agreement between the Government of the Republic of the
Rather, it is the petitioner’s suppliers who are the proper parties
Philippines and the Government of the Republic of
to claim the tax credit and accordingly refund the petitioner of
Singapore.
the VAT erroneously passed on to the latter.13
Due to the inaction by respondent Commissioner of Internal
Revenue, petitioner filed a petition for review with the Court
In the first Silkair case decided on February 6, 2008, this Court
of Tax Appeals. CTA rendered its decision denying
categorically declared:
petitioner’s claim for refund. its motion for reconsideration
having been denied by the CTA, petitioner elevated the case
to the CA. The proper party to question, or seek a refund of, an indirect
The CA affirmed the denial of the claim for tax tax is the statutory taxpayer, the person on whom the tax is
refund and dismissed the petition. It ruled that imposed by law and who paid the same even if he shifts the
while petitioner is exempt from paying excise taxes burden thereof to another. Section 130 (A) (2) of the NIRC
on petroleum products purchased in the Philippines provides that "[u]nless otherwise specifically allowed, the return
by virtue of Section 135 (b), petitioner is not the shall be filed and the excise tax paid by the manufacturer or
proper party to seek for the refund of the excise producer before removal of domestic products from place of
taxes paid. Petitioner’s motion for reconsideration production." Thus, Petron Corporation, not Silkair, is the
was likewise denied by the appellate court. statutory taxpayer which is entitled to claim a refund
based on Section 135 of the NIRC of 1997 and Article
Issue: Whether or not the petitioner is entitled to tax refund 4(2) of the Air Transport Agreement between RP and
Singapore.
Ruling: NO. PETITION DENIED.
Even if Petron Corporation passed on to Silkair the burden of the
The core issue presented is the legal personality of tax, the additional amount billed to Silkair for jet fuel is not a tax
petitioner to file an administrative claim for refund of but part of the price which Silkair had to pay as a purchaser.
excise taxes alleged to have been erroneously paid to its
supplier of aviation fuel here in the Philippines. The person entitled to claim a tax refund is the statutory
taxpayer. Section 22(N) of the NIRC defines a taxpayer as "any
In three previous cases involving the same parties, this person subject to tax." In Commissioner of Internal Revenue v.
Court has already settled the issue of whether petitioner Procter and Gamble Phil. Mfg. Corp., the Court ruled that:
is the proper party to seek the refund of excise taxes
paid on its purchase of aviation fuel from a local
4
‘A "person liable for tax" has been held to be a "person subject Revenue Regulations No. 3-2008 (RR 3-2008) provides that
to tax" and properly considered a "taxpayer." The terms "liable "subject to the subsequent filing of a claim for excise tax
for tax" and "subject to tax" both connote a legal obligation or credit/refund or product replenishment, all manufacturers of
duty to pay a tax.’ articles subject to excise tax under Title VI of the NIRC of 1997,
as amended, shall pay the excise tax that is otherwise due on
The excise tax is due from the manufacturers of the every removal thereof from the place of production that is
petroleum products and is paid upon removal of the intended for exportation or sale/delivery to international carriers
products from their refineries. Even before the aviation or to tax-exempt entities/agencies." The Department of Finance
jet fuel is purchased from Petron, the excise tax is and the BIR recognize the tax exemption granted to
already paid by Petron. Petron, being the manufacturer, international carriers but they consistently adhere to the view
is the "person subject to tax." In this case, Petron, which that manufacturers of articles subject to excise tax are the
paid the excise tax upon removal of the products from statutory taxpayers that are liable to pay the tax, thus, the
its Bataan refinery, is the "person liable for tax." proper party to claim any tax refunds.
Petitioner is neither a "person liable for tax" nor "a
person subject to tax." There is also no legal duty on the The above observation remains pertinent to this case because
part of petitioner to pay the excise tax; hence, petitioner the very same provision in the General Terms and Conditions for
cannot be considered the taxpayer. Aviation Fuel Supply Contract also appears in the documentary
evidence submitted by petitioner before the CTA. Except for its
Even if the tax is shifted by Petron to its customers and bare allegation of being "placed in a very complicated situation"
even if the tax is billed as a separate item in the aviation because Petron, "for fear of being assessed by Respondent, will
delivery receipts and invoices issued to its not allow the withdrawal and delivery of the petroleum products
customers, Petron remains the taxpayer because the without Petitioner’s pre-payment of the excise taxes," petitioner
excise tax is imposed directly on Petron as the has not demonstrated that it dutifully complied with its
manufacturer. Hence, Petron, as the statutory taxpayer, contractual undertaking to timely submit to Petron a valid
is the proper party that can claim the refund of the certificate of exemption so that Petron may subsequently file a
excise taxes paid to the BIR. claim for excise tax credit/refund pursuant to Revenue
Regulations No. 3-2008 (RR 3-2008). It was indeed premature
for petitioner to assert that the denial of its claim for tax refund
Petitioner’s contention that the CTA and CA rulings would put nullifies the tax exemption granted to it under Section 135 (b)
to naught the exemption granted under Section 135 (b) of of the 1997 Tax Code and Article 4 of the Air Transport
the 1997 Tax Code and Article 4 of the Air Transport Agreement Agreement.
is not well-taken. Since the supplier herein involved is also
Petron, our pronouncement in the second Silkair case, In the third Silkair case decided last year, the Court called
relative to the contractual undertaking of petitioner to submit a the attention to the consistent rulings in the previous
valid exemption certificate for the purpose, is relevant. We thus two Silkair cases that petitioner as the purchaser and
noted: end-consumer of the aviation fuel is not the proper party
to claim for refund of excise taxes paid thereon. The
The General Terms & Conditions for Aviation Fuel situation clearly called for the application of the doctrine, stare
Supply (Supply Contract) signed between petitioner (buyer) and decisis et non quieta movere. Follow past precedents and do not
Petron (seller) provide: disturb what has been settled. Once a case has been decided
one way, any other case involving exactly the same point at
issue, as in the case at bar, should be decided in the same
"11.3 If Buyer is entitled to purchase any Fuel sold pursuant to
the Agreement free of any taxes, duties or charges, Buyer manner. The Court thus finds no cogent reason to deviate from
those previous rulings on the same issues herein raised.
shall timely deliver to Seller a valid exemption
certificate for such purchase." (Emphasis supplied)