COMM. OF CUSTOMS vs.
MANILA STAR FERRY The penalty of forfeiture is imposed on any vessel,
G.R. No. L-31776-78 October 21, 1993
FACTS:
Manila Star Ferry - owner and operator of
tugboat Orestes
United Navigation & Transport Corporation -
owner and operator of bargelighter UN-L-106
Ceaba Shipping Agency - owner and operator of
an ocean-going vessel S/S Argo
The patrol boat of Philippines Navy caught the crew of
the S/S Argo in the act of unloading foreign-made goods
onto the UN-L-106, which was towed by the tugboat
Orestes and escorted by two wooden bancas of unknown
ownership, in Manila Bay.
The foreign-made goods were not manifested and
declared by the vessel for discharge in Manila.
Said vessels and watercraft were charged with smuggling
and declared by the Collector of Customs as forfeited in
favor of the Philippine government by virtue of Section
2530 (a) and (c) of the Tariff and Customs Code.
On appeal, the Court of Tax Appeals modified the
decision and ordered payment of fine instead of
forfeiture of the vessels and watercraft.
Hence, this appeal.
ISSUE:
Whether or not the subject vessels and watercraft were
engaged in smuggling and should be forfeited in favor
of the government under Section 2530 (a) and (c) of the
Tariff and Customs Code.
RULING:
Sec. 2530.Property Subject to Forfeiture Under Tariff and
Customs Laws. Any vessel or aircraft, cargo, articles
and other objects shall, under the following conditions,
be subject to forfeiture:
a. Any vessel or aircraft, including cargo,
which shall be used lawfully in the
importation or exportation of articles into
or from any Philippine port or place except
a port of entry; and any vessel which, being
of less than thirty tons capacity shall be
used in the importation of articles into any
Philippine port or place except into a port of
the Sulu sea where importation in such
vessel may be authorized by the
Commissioner, with the approval of the
department head.
xxxx xxxx xxxx
c. Any vessel or aircraft into which shall be
transferred cargo unladen contrary to law
prior to the arrival of the importing vessel
or aircraft at her port of destination.
engaged in smuggling if the conditions enumerated in
Section 2530 (a) are compresent.
These conditions are:
(1) The vessel is "used unlawfully in the importation or
exportation of articles into or from" the Philippines;
(2) The articles are imported or exported into or from
"any Philippine port or place, except a port of entry;" or
(3) If the vessel has a capacity of less than 30 tons and is
"used in the importation of articles into any Philippine
Port or place other than a port of the Sulu Sea, where
importation in such vessel may be authorized by the
Commissioner, with the approval of the department
head."
There is no question that the vessel S/S Argo was
apprehended while unloading goods of foreign origin
onto the barge UN-L-106 and the tugboat Orestes,
without the necessary papers showing that the goods
were entered lawfully though a port of entry and that
taxes and duties on said goods had been paid.
However, while the S/S Argo was caught unloading
smuggled goods in Manila Bay, the said vessel and the
goods cannot be forfeited in favor of the government
because the Port of Manila is a port of entry.
The Commissioner of Customs argues that the phrase
"except a port of entry" should mean "except a port of
destination," and inasmuch as there is no showing that
the Port of Manila was the port of destination of the S/S
Argo, its forfeiture was in order.
Section 2530(a) in unmistakable terms provides that a
vessel engaged in smuggling "in a port of entry" cannot
be forfeited. This is the clear and plain meaning of the
law. It is not within the province of the Court to inquire
into the wisdom of the law, for indeed, we are bound by
the words of the statute
Nevertheless, although the vessel cannot be forfeited, it
is subject to a fine of not more than P10,000.00 for
failure to supply the requisite manifest for the unloaded
cargo under Section 2521 of Code, which reads as
follows:
Sec. 2521. Failure to Supply Requisite
Manifests. If any vessel or aircraft enters or
departs from a port of entry without
submitting the proper manifest to the
customs authorities, or shall enter or depart
conveying unmanifested cargo other than as
stated in the next preceding section hereof,
such vessel or aircraft shall be fined in a sum
not exceeding ten thousand pesos.
The barge-lighter UN-L-106 and the tugboat Orestes, on
the other hand, are subject to forfeiture under paragraph
(c) of Section 2530 of the Tariff and Customs Code. The
barge-lighter and tugboat fall under the term "vessel"
which includes every sort of boat, craft or other artificial
contrivance used, or capable of being used, as a means of
transportation on water

Said section 2530 (c) prescribes the forfeiture of' any
vessel or aircraft into which shall be transferred cargo
unladen contrary to law before the arrival of the vessel
or aircraft at her port of destination. Manila was not the
port of destination, much less a port of call of the S/S
Argo, the importing vessel. The S/S Argo left Hongkong
and was bound for Jesselton, North Borneo, Djakarta and
Surabaja, Indonesia; and yet it stopped at the Port of
Manila to unload the smuggled goods onto the UN-L-106
and the Orestes.
Forfeiture proceedings are proceedings in rem and are
directed against the res. It is no defense that the owner
of the vessel sought to be forfeited had no actual
knowledge that his property was used illegally. The
absence or lack of actual knowledge of such use is a
defense personal to the owner himself which cannot in
any way absolve the vessel from the liability of forfeiture
Commissioner of Customs v. Court of Appeals.
CHEVRON PHILIPPINES vs. BUREAU OF CUSTOMS G.R.
No. 178759 August 11, 2008
FACTS:
Chevron Phils. Inc., is engaged in the business of
importing, distributing and marketing of petroleum
products in the Philippines. In 1996, the importations
subject of this case arrived and were covered by 8 bills of
lading. The shipments were unloaded from the carrying
vessels onto petitioners oil tanks over a period of 3 days
from the date of their arrival. Subsequently, the IMPORT
ENTRY DECLARATIONS (IEDS) were filed and 90% of the
total customs duties were paid. The IMPORT ENTRY AND
INTERNAL REVENUE DECLARATIONS (IEIRDS) of the
shipments were thereafter filed.
The importations were appraised at a duty rate of 3% as
provided under RA 8180 and petitioner paid the import
duties amounting to P316,499,021. Prior to the
effectivity of RA 8180 on April 16, 1996, the rate of duty
on imported crude oil was 10%.Three years later, then
Finance Secretary received a letter denouncing the
deliberate concealment, manipulation and scheme
employed by petitioner in the Importation Of Crude Oil,
Thereby Resulting In Huge Losses Of Revenue For The
Government. This letter was endorsed to the Bureau of
Customs (BOC) for investigation.
On August 1, 2000, petitioner received a demand letter
from the District Collector requiring the immediate
settlement of the amount of P73,535,830 representing
the difference between the 10% and 3% tariff rates on
the shipments. Petitioner objected to the using of the
10% duty rate and insisted that the 3% tariff rate should
instead be applied. Furthermore it raised the defense of
prescription against the assessment pursuant to Section
1603 of the Tariff and Customs Code (TCC). Thus, it
prayed that the assessment for deficiency customs duties
be cancelled and the notice of demand be withdrawn.
The Special Investigator found that there was an
irregularity in the filing and acceptance of the import
entries beyond the 30-day non-extendible period
prescribed under Section 1301 of the TCC and in the
release of the shipments after the same had already
been deemed abandoned in favor of the government.
Petitioner was then ordered to pay P1,180,170,769.21
representing the total dutiable value of the importations.
The CTA en banc held that it was the filing of the IEIRDs
that constituted entry under the TCC.
Reason:Since these were filed beyond the 30-
day period, they were not seasonably "entered"
in accordance with Section 1301 in relation to
Section 205 of the TCC. Consequently, they were
deemed abandoned under Sections 1801 and
1802 of the TCC. It also ruled that the notice
required under Customs Memorandum Order
 was not necessary in view of petitioner's actual
knowledge of the arrival of the shipments. It
likewise agreed with the CTA Division's finding
that petitioner committed fraud when it failed
to file the IEIRD within the 30-day period with
the intent to "evade the higher rate." Petitioner
was ordered to pay respondent the total
dutiable value of the oil shipments amounting to
P893,781,768.21.
ISSUE 1:
PETITIONER INSISTS THAT UNDER SECTION 1301 OF THE
TARIFF AND CUSTOMS CODE IMPORTED ARTICLES
MUST BE ENTERED WITHIN A NON EXTENDABLE PERIOD
OF 30 DAYS FROM THE DATE OF DISCHARGE OF THE
LAST PACKAGE FROM A VESSEL, OTHERWISE THE
BUREAU OF CUSTOMS WILL DEEM THE IMPORTED
GOODS IMPLIEDLY ABANDONED UNDER SECTION 1801
Whether or not entry under Section 1301 in relation
to Section 1801 of the TCC refers to the IED or the IEIRD
HELD:
"entry" in sections 1301 and 1801 of the tcc refers to
both the ied and ieird.
Under Section 1301 of the TCC, imported articles must be
entered within a non-extendible period of 30 days from
the date of discharge of the last package from a vessel.
Otherwise, the BOC will deem the imported goods
impliedly abandoned under Section 1801. Thus:
Section 1301. Persons Authorized to
Make Import Entry. - Imported articles
must be entered in the customhouse at
the port of entry within thirty (30) days,
which shall not be extendible from date
of discharge of the last package from the
vessel or aircraft either (a) by the
importer, being holder of the bill of
lading, (b) by a duly licensed customs
broker acting under authority from a
holder of the bill or (c) by a person duly
empowered to act as agent or attorney-
in-fact for each holder: Provided, That
where the entry is filed by a party other
than the importer, said importer shall
himself be required to declare under oath
and under the penalties of falsification or
perjury that the declarations and
statements contained in the entry are
true and correct: Provided, further, That
such statements under oath shall
constitute prima facie evidence of
knowledge and consent of the importer
of violation against applicable provisions
of this Code when the importation is
found to be unlawful. (Emphasis supplied)
Section 1801. Abandonment, Kinds and
Effect of. - An imported article is
deemed abandoned under any of the
following circumstances:
xxx xxx xxx
b. When the owner, importer,
consignee or interested party after due
notice, fails to file an entry within thirty
(30) days, which shall not be
extendible, from the date of discharge
of the last package from the vessel or
aircraft, or having filed such entry, fails
to claim his importation within fifteen
(15) days, which shall not likewise be
extendible, from the date of posting of
the notice to claim such importation.
(Emphasis supplied)
The term "entry" in customs law has a triple meaning. It
means (1) the documents filed at the customs house; (2)
the submission and acceptance of the documents and (3)
the procedure of passing goods through the customs
house.22
The IED serves as basis for the payment of advance
duties on importations whereas the IEIRD evidences the
final payment of duties and taxes. The question is: was
the filing of the IED sufficient to constitute "entry" under
the TCC?
The law itself, in Section 205, defines the meaning of the
technical term "entered" as used in the TCC:
Section 205. Entry, or Withdrawal from Warehouse, for
Consumption. - Imported articles shall be deemed
"entered" in the Philippines for consumption when the
specified entry form is properly filed and accepted,
together with any related documents regained by the
provisions of this Code and/or regulations to be filed
with such form at the time of entry, at the port or station
by the customs official designated to receive such entry
papers and any duties, taxes, fees and/or other lawful
charges required to be paid at the time of making such
entry have been paid or secured to be paid with the
customs official designated to receive such monies,
provided that the article has previously arrived within the
limits of the port of entry.
xxx xxx xxx
(Emphasis supplied)
Clearly, the operative act that constitutes "entry" of the
imported articles at the port of entry is the filing and
acceptance of the "specified entry form" together with
the other documents required by law and regulations.
There is no dispute that the "specified entry form" refers
to the IEIRD. Section 205 defines the precise moment
when the imported articles are deemed "entered.
ISSUE 2: EXISTENCE OF FRAUD By the very nature of its functions, the CTA is a highly
specialized court specifically created for the purpose of
HELD: reviewing tax and customs cases. It is dedicated
exclusively to the study and consideration of revenue-
Fraud, in its general sense, is deemed to comprise
related problems and has necessarily developed an
anything calculated to deceive, including all acts,
expertise on the subject. Thus, as a general rule, its
omissions and concealment involving a breach of legal or
findings and conclusions are accorded great respect and
equitable duty, trust or confidence justly reposed,
are generally upheld by this Court, unless there is a clear
resulting in the damage to another or by which an undue
showing of a reversible error or an improvident exercise
and unconscionable advantage is taken of another.
of authority. There is no such showing here.
The evidence showed that petitioner bided its time to file
the IEIRD so as to avail of a lower rate of duty. (At or
about the time these developments were taking place,
the bill lowering the duty on these oil products from 10%
to 3% was already under intense discussion in Congress.)
There was a calculated and preconceived course of
action adopted by petitioner purposely to evade the
payment of the correct customs duties then prevailing.
This was done in collusion with the former District
Collector, who allowed the acceptance of the late IEIRDs
and the collection of duties using the 3% declared rate. A
clear indication of petitioners deliberate intention to
defraud the government was its non-disclosure of
discrepancies on the duties declared in the IEDs (10%)
and IEIRDs (3%) covering the shipments

Hence, due to the presence of fraud, the prescriptive

period of the finality of liquidation under Section 1603
was inapplicable:

Section 1603. Finality of Liquidation. When articles

have been entered and passed free of duty or final
adjustments of duties made, with subsequent delivery,
such entry and passage free of duty or settlements of
duties will, after the expiration of one (1) year, from the
date of the final payment of duties, in the absence of
fraud or protest or compliance audit pursuant to the
provisions of this Code, be final and conclusive upon all
parties, unless the liquidation of the import entry was
merely tentative.40

ISSUE 3: ON ABANDONMENT

Petitioners failure to file the required entries within a

non-extendible period of thirty days from date of
discharge of the last package from the carrying vessel
constituted implied abandonment of its oil importations.
This means that from the precise moment that the non-
extendible thirty-day period lapsed, the abandoned
shipments were deemed (that is, they became) the
property of the government. Therefore, when petitioner
withdrew the oil shipments for consumption, it
appropriated for itself properties which already belonged
to the government. Accordingly, it became liable for the
total dutiable value of the shipments of imported crude
oil amounting to P1,210,280,789.21 reduced by the total
amount of duties paid amounting to P316,499,021.00
thereby leaving a balance of P893,781,768.21.
 PROTON PILIPINAS CORP. vs. REPUBLIC G.R.
No. 165027 October 12, 2006
FACTS:
Herein petitioner Proton Pilipinas Corporation (Proton) is
a corporation duly organized and existing under
Philippine laws and duly registered5 with the Board of
Investments (BOI). It is engaged in the business of
importing, manufacturing, and selling vehicles.
Sometime in 1997, Devmark Textile Industries, Inc.
(Devmark), a corporation duly registered with the
Securities and Exchange Commission (SEC) and with the
BOI, and engaged in the business of spinning, knitting,
weaving, dyeing, and finishing all types of textile, yarns,
and fabrics, together with Texasia, Inc. (Texasia),
expressed the intention to purchase the various vehicles
distributed and marketed by petitioner. In payment
thereof, the above named companies offered petitioner
their Tax Credit Certificates (TCCs) worth P30,817,191.00.
The companies, through their officers, guaranteed
petitioner that the TCCs were valid, genuine, and
subsisting. They further assured petitioner that said TCCs
were a safe and a valid mode of payment for import
duties and taxes as they were issued by the Department
of Finance (DOF) and duly honored and accepted by the
Bureau of Customs (BOC).
Persuaded by the representations and assurances made
by the two companies as to the legality of the
transaction, Paul Y. Rodriguez, in his capacity as
Executive Vice-President of Proton, signed a Deed of
Assignment6 with Eulogio L. Reyes, General Manager of
Devmark. The terms and conditions of the Deed of
Assignment are as follows:
1. That the acceptance by the
ASSIGNEE of the above duty/taxes
credit certificate being assigned by
ASSIGNOR shall be subject to condition
that the [DOF] approves the proposed
assignment.
2. For the purpose of this assignment,
the above duty/taxes certificates being
assigned hereby to ASSIGNEE shall not
be credited as payment of ASSIGNORs
account unless and until ASSIGNEE has
in turn utilized/applied the same with
the [BOC] or Bureau of Internal
Revenue [BIR] for payment of each
duty/tax obligations.
3. ASSIGNEE undertakes to issue to
ASSIGNOR the Tax Credit
corresponding credit notes, as when
the above duty/taxes credit certificates
was (sic) use[d]/applied, either partially
or fully by the ASSIGNEE, in payment of
ASSIGNEEs duty/taxes obligation with
the [BOC] or [BIR], respectively.
4. Withstanding the above-stated
arrangement, such Tax Credit assigned
and transferred by the ASSIGNOR to
ASSIGNEE shall be subject to post-audit
by the Government and shall be
credited to the ASSIGNOR only upon
actual availment thereof by ASSIGNEE.
5. If the whole or any portion of the Tax
Credit assigned and transferred by
ASSIGNOR to the ASSIGNEE is
disallowed by the Government upon
post-audit or cannot be utilized for any
cause or reason not attributable to the
fault negligence of the ASSIGNEE, the
whole amount corresponding such Tax
Credit or such portion thereof as is
disallowed by the Government or
cannot be utilized by ASSIGNEE shall be
paid in cash to ASSIGNEE by the
ASSIGNOR immediately upon receipt of
written notice of such event.7
Consequently, the TCCs, as well as their transfers to
petitioner, were submitted to the DOF for evaluation and
approval. Thereafter, the DOF, through its
Undersecretary Antonio P. Belicena, cleared said TCCs for
transaction and approved them for transfer. For that
reason, petitioner delivered 13 vehicles with a total value
of P10,778,500.00 and post-dated checks worth
P10,592,618.00, in exchange for the said TCCs, to
Devmark and Texasia in accordance with their
agreement. In turn, petitioner used the TCCs for payment
of its customs duties and taxes to the BOC.
In the interim, the Office of the Ombudsman
(Ombudsman) under Hon. Aniano Desierto began
conducting an investigation on the alleged "P60 Billion
DOF Tax Credit Scam" in July 1998. On 30 March 1999,
Silverio T. Manuel, Jr., as Graft Investigator II, was given
the assignment to look into the alleged irregular
issuances of four TCCs to Devmark and its subsequent
transfer to and utilization by petitioner. Based on the
Fact-Finding Report8 dated 29 October 1999 of the Fact
Finding and Investigation Bureau, Ombudsman, the TCCs
were found to be irregularly and fraudulently issued by
several officers of the DOF, including its Department
Undersecretary Belicena, to Devmark.
As revealed in the said Report, all the pertinent
documents submitted by Devmark in support of its
application for the TCCs were fake and spurious. As a
consequence thereof, the transfers of the subject TCCs to
petitioner and their subsequent use of the same was
declared invalid and illegal. The Report recommended
among other things, that the directors of the petitioner
and Devmark, along with several DOF officers, be
criminally charged with violation of Section 3(e) and (j) of
Republic Act No. 3019,9 otherwise known as The Anti-
Graft and Corrupt Practices Act.
On the weight of the Fact-Finding Report, the
Ombudsman filed with the Sandiganbayan, Criminal
Cases No. 26168 to 7110 charging DOF Undersecretary
Belicena together with Reyes, General Manager of
Devmark, Peter Y. Rodriguez and Paul Y. Rodriguez, in
their capacity as Director and Executive Vice-
President/Chief Operating Officer of the petitioner,
respectively, for violation of Section 3(e) and (j) of
Republic Act No. 3019.
customs duties and taxes cannot be simultaneously
instituted and determined in the same proceedings as
the criminal cases before the Sandiganbayan, as it cannot
be made the civil aspect of the criminal cases filed before
it. It should be borne in mind that the tax and the
obligation to pay the same are all created by statute; so
are its collection and payment governed by statute.17
The payment of taxes is a duty which the law requires to
be paid. Said obligation is not a consequence of the
felonious acts charged in the criminal proceeding nor is it
a mere civil liability arising from crime that could be
wiped out by the judicial declaration of non-existence of
the criminal acts charged.18 Hence, the payment and
collection of customs duties and taxes in itself creates
civil liability on the part of the taxpayer. Such civil liability
to pay taxes arises from the fact, for instance, that one
has engaged himself in business, and not because of any
criminal act committed by him.

In turn, petitioner filed a criminal case for Estafa against

the officers of Devmark with the City Prosecutor of
Mandaluyong, docketed as I.S. No. 00-42921-K, entitled,
Proton Pilipinas, Inc. v. Robert Liang. The BOC on the
other hand, filed Civil Case No. 02-10265011 against
petitioner before the RTC for the collection of taxes and
customs duties, which remain unpaid because the
subject TCCs had been cancelled brought about by
petitioners use of fraudulent TCCs in paying its
obligations.

Petitioner then filed a Motion to Dismiss12 the aforesaid

civil case filed against it by BOC on the grounds of lack of
jurisdiction, prematurity of action, and litis pendentia.
The said Motion, however, was denied by the trial court
in its Order dated 24 January 2003. Petitioner sought
reconsideration of the above-mentioned Order, but the
same was likewise denied in another Order dated 15
April 2003.

ISSUE: WON THE CIVIL CASE FOR COLLECTION OF

UNPAID CUSTOM DUTIES AND TAXED BE
SIMULTANEOUSLY INSTITUTED AND DETERMINED IN
THE SAME PROCEEDINGS AS THE CRIMINALS CASES
BEFORE THE SANDIGANBAYAN AS IT CANNOT BE MADE
THE CIVIL ASPECT OF THE CRIMINAL CASES BEFORE IT.

HELD: NO!

Said obligation is not a consequence of the felonies acts

charged before it: said obligation is not a consequence of
the felonious acts charged in the criminal proceeding nor
is it a mere civil liability arising from crime that could be
wiped out by the judicial declaration of non existence of
the criminal acts charged.

While it is true that according to the aforesaid Section 4,

of Republic Act No. 8249, the institution of the criminal
action automatically carries with it the institution of the
civil action for the recovery of civil liability, however, in
the case at bar, the civil case for the collection of unpaid
 RENATO DIAZ vs. SECRETARY OF FINANCE
G.R. No. 193007 July 19, 2011
FACTS:
Petitioners Renato V. Diaz and Aurora Ma. F. Timbol filed
this petition for declaratory relief[1] assailing the validity
of the impending imposition of VAT by the BIR on the
collections of tollway operators.
Petitioners hold the view that Congress did not, when it
enacted the NIRC, intend to include toll fees within the
meaning of sale of services that are subject to VAT; that a
toll fee is a users tax, not a sale of services; that to
impose VAT on toll fees would amount to a tax on public
service; and that, since VAT was never factored into the
formula for computing toll fees, its imposition would
violate the non-impairment clause of the constitution.
The government avers that the NIRC imposes VAT on all
kinds of services of franchise grantees, including tollway
operations, except where the law provides otherwise;
that the Court should seek the meaning and intent of the
law from the words used in the statute; and that the
imposition of VAT on tollway operations has been the
subject as early as 2003 of several BIR rulings and
circulars.
Finally, the government contends that the non-inclusion
of VAT in the parametric formula for computing toll rates
cannot exempt tollway operators from VAT. In any event,
it cannot be claimed that the rights of tollway operators
to a reasonable rate of return will be impaired by the
VAT since this is imposed on top of the toll rate. Further,
the imposition of VAT on toll fees would have very
minimal effect on motorists using the tollways.
Petitioners point out that tollway operators cannot be
regarded as franchise grantees under the NIRC since they
do not hold legislative franchises.
ISSUES:
1. Whether or not the government is unlawfully
expanding VAT coverage by including tollway operators
and tollway operations in the terms franchise grantees
and sale of services under Section 108 of the Code; and
2. Whether or not the imposition of VAT on tollway
operators a) amounts to a tax on tax and not a tax on
services; b) will impair the tollway operators right to a
reasonable return of investment under their TOAs; and
c) is not administratively feasible and cannot be
implemented.
COURTS RULING:
On the Substantive Issues:
One. The relevant law in this case is Section 108 of the
NIRC, as amended. VAT is levied, assessed, and collected,
according to Section 108, on the gross receipts derived
from the sale or exchange of services as well as from the
use or lease of properties. The third paragraph of Section
108 defines sale or exchange of services as follows:
The phrase sale or exchange of services means the
performance of all kinds of services in the Philippines
for others for a fee, remuneration or consideration,
including those performed or rendered by construction
and service contractors; stock, real estate, commercial,
customs and immigration brokers; lessors of property,
whether personal or real; warehousing services; lessors
or distributors of cinematographic films; persons
engaged in milling, processing, manufacturing or
repacking goods for others; proprietors, operators or
keepers of hotels, motels, resthouses, pension houses,
inns, resorts; proprietors or operators of restaurants,
refreshment parlors, cafes and other eating places,
including clubs and caterers; dealers in securities;
lending investors; transportation contractors on their
transport of goods or cargoes, including persons who
transport goods or cargoes for hire and other domestic
common carriers by land relative to their transport of
goods or cargoes; common carriers by air and sea
relative to their transport of passengers, goods or
cargoes from one place in the Philippines to another
place in the Philippines; sales of electricity by
generation companies, transmission, and distribution
companies; services of franchise grantees of electric
utilities, telephone and telegraph, radio and television
broadcasting and all other franchise grantees except
those under Section 119 of this Code and non-life
insurance companies (except their crop insurances),
including surety, fidelity, indemnity and bonding
companies; and similar services regardless of whether
or not the performance thereof calls for the exercise or
use of the physical or mental faculties. (Underscoring
supplied)
It is plain from the above that the law imposes VAT on all
kinds of services rendered in the Philippines for a fee,
including those specified in the list. The enumeration of
affected services is not exclusive.[11] By qualifying services
with the words all kinds, Congress has given the term
services an all-encompassing meaning. The listing of
specific services are intended to illustrate how pervasive
and broad is the VATs reach rather than establish
concrete limits to its application. Thus, every activity that
can be imagined as a form of service rendered for a fee
should be deemed included unless some provision of law
especially excludes it.
Now, do tollway operators render services for a
fee? Presidential Decree (P.D.) 1112 or the Toll Operation
Decree establishes the legal basis for the services that
tollway operators render. Essentially, tollway operators
construct, maintain, and operate expressways, also
called tollways, at the operators expense. Tollways serve
as alternatives to regular public highways that meander
through populated areas and branch out to local
roads. Traffic in the regular public highways is for this
reason slow-moving. In consideration for constructing
tollways at their expense, the operators are allowed to
collect government-approved fees from motorists using
the tollways until such operators could fully recover their
expenses and earn reasonable returns from their
investments.
When a tollway operator takes a toll fee from a
motorist, the fee is in effect for the latters use of the
tollway facilities over which the operator enjoys private
proprietary rights[12]that its contract and the law
recognize. In this sense, the tollway operator is no
different from the following service providers under
Section 108 who allow others to use their properties or
facilities for a fee:
1. Lessors of property, whether personal or real;
2. Warehousing service operators;
3. Lessors or distributors of cinematographic films;
4. Proprietors, operators or keepers of hotels, motels,
resthouses, pension houses, inns, resorts;
5. Lending investors (for use of money);
6. Transportation contractors on their transport of goods
or cargoes, including persons who transport goods or
cargoes for hire and other domestic common carriers by
land relative to their transport of goods or cargoes; and
7. Common carriers by air and sea relative to their
transport of passengers, goods or cargoes from one place
in the Philippines to another place in thePhilippines.
Services to be subject to VAT need not fall under the
traditional concept of services, the personal or
professional kinds that require the use of human
knowledge and skills.
And not only do tollway operators come under the
broad term all kinds of services, they also come under
the specific class described in Section 108 as all other
franchise grantees who are subject to VAT, except those
under Section 119 of this Code.
Tollway operators are franchise grantees and they do
not belong to exceptions (the low-income radio and/or
television broadcasting companies with gross annual
incomes of less than P10 million and gas and water
utilities) that Section 119[13] spares from the payment of
VAT. The word franchise broadly covers government
grants of a special right to do an act or series of acts of
public concern.
Nothing in Section 108 indicates that the franchise
grantees it speaks of are those who hold legislative
franchises. Indeed, franchises conferred or granted by
local authorities, as agents of the state, constitute as
much a legislative franchise as though the grant had
been made by Congress itself.[15] The term franchise has
been broadly construed as referring, not only to
authorizations that Congress directly issues in the form
of a special law, but also to those granted by
administrative agencies to which the power to grant
franchises has been delegated by Congress.
Tollway operators are, owing to the nature and object of
their business, franchise grantees. The franchise in this
case is evidenced by a Toll Operation Certificate.[18]
Petitioners contend that the public nature of the services
rendered by tollway operators excludes such services
from the term sale of services under Section 108 of the
Code. But, again, nothing in Section 108 supports this
contention. The reverse is true. In specifically including
by way of example electric utilities, telephone, telegraph,
and broadcasting companies in its list of VAT-covered
businesses, Section 108 opens other companies
rendering public service for a fee to the imposition of
VAT. Businesses of a public nature such as public utilities
and the collection of tolls or charges for its use or service
is a franchise.
Two. Petitioners argue that a toll fee is a users tax and to
impose VAT on toll fees is tantamount to taxing a
tax.[21] Actually, petitioners base this argument on the
following discussion in Manila International Airport
Authority (MIAA) v. Court of Appeals:
No one can dispute that properties of public dominion
mentioned in Article 420 of the Civil Code, like roads,
canals, rivers, torrents, ports and bridges constructed by
the State,are owned by the State. The term ports
includes seaports and airports.
The MIAA Airport Lands and Buildings constitute a port
constructed by the State. Under Article 420 of the Civil
Code, the MIAA Airport Lands and Buildings are
properties of public dominion and thus owned by the
State or the Republic of the Philippines.
x x x The operation by the government of a tollway
does not change the character of the road as one for
public use. Someone must pay for the maintenance of
the road, either the public indirectly through the taxes
they pay the government, or only those among the
public who actually use the road through the toll fees
they pay upon using the road. The tollway system is
even a more efficient and equitable manner of taxing
the public for the maintenance of public roads.
The charging of fees to the public does not determine
the character of the property whether it is for public
dominion or not. Article 420 of the Civil Code defines
property of public dominion as one intended for public
use. Even if the government collects toll fees, the road
is still intended for public use if anyone can use the road
under the same terms and conditions as the rest of the
public. The charging of fees, the limitation on the kind
of vehicles that can use the road, the speed restrictions
and other conditions for the use of the road do not
affect the public character of the road.
The terminal fees MIAA charges to passengers, as well
as the landing fees MIAA charges to airlines, constitute
the bulk of the income that maintains the operations of
MIAA.The collection of such fees does not change the
character of MIAA as an airport for public use. Such fees
are often termed users tax. This means taxing those
among the public who actually use a public facility
instead of taxing all the public including those who
never use the particular public facility. A users tax is
more equitable a principle of taxation mandated in the
1987 Constitution.[23] (Underscoring supplied)
As can be seen, the discussion in the MIAA case on toll
roads and toll fees was made, not to establish a rule that
tollway fees are users tax, but to make the point that
airport lands and buildings are properties of public
dominion and that the collection of terminal fees for
their use does not make them private properties. Tollway
fees are not taxes. Indeed, they are not assessed and For this reason, VAT on tollway operations cannot be a
collected by the BIR and do not go to the general coffers tax on tax even if toll fees were deemed as a users tax.
of the government. VAT is assessed against the tollway operators gross
receipts and not necessarily on the toll fees. Although
Petitioners assume that what the Court said above, the tollway operator may shift the VAT burden to the
equating terminal fees to a users tax must also pertain to tollway user, it will not make the latter directly liable for
tollway fees. But the main issue in the MIAA case was the VAT. The shifted VAT burden simply becomes part of
whether or not Paraaque City could sell airport lands and the toll fees that one has to pay in order to use the
buildings under MIAA administration at public auction to tollways.
satisfy unpaid real estate taxes. Since local governments
have no power to tax the national government, the Court
held that the City could not proceed with the auction
sale. MIAA forms part of the national government
although not integrated in the department
framework.[24] Thus, its airport lands and buildings are
properties of public dominion beyond the commerce of
man under Article 420(1)[25] of the Civil Code and could
not be sold at public auction.

Tollway fees are not taxes. Indeed, they are not assessed
and collected by the BIR and do not go to the general
coffers of the government.

In sum, fees paid by the public to tollway operators for

use of the tollways, are not taxes in any sense. A tax is
imposed under the taxing power of the government
principally for the purpose of raising revenues to fund
public expenditures.[27] Toll fees, on the other hand, are
collected by private tollway operators as reimbursement
for the costs and expenses incurred in the construction,
maintenance and operation of the tollways, as well as to
assure them a reasonable margin of income. Although
toll fees are charged for the use of public facilities,
therefore, they are not government exactions that can
be properly treated as a tax. Taxes may be imposed only
by the government under its sovereign authority, toll
fees may be demanded by either the government or
private individuals or entities, as an attribute of
ownership.

Parenthetically, VAT on tollway operations cannot be

deemed a tax on tax due to the nature of VAT as an
indirect tax. In indirect taxation, a distinction is made
between the liability for the tax and burden of the tax.
The seller who is liable for the VAT may shift or pass on
the amount of VAT it paid on goods, properties or
services to the buyer. In such a case, what is transferred
is not the sellers liability but merely the burden of the
VAT.

Thus, the seller remains directly and legally liable for

payment of the VAT, but the buyer bears its burden since
the amount of VAT paid by the former is added to the
selling price. Once shifted, the VAT ceases to be a tax and
simply becomes part of the cost that the buyer must pay
in order to purchase the good, property or service.

Consequently, VAT on tollway operations is not really a

tax on the tollway user, but on the tollway operator.
Under Section 105 of the Code, [31] VAT is imposed on any
person who, in the course of trade or business, sells or
renders services for a fee. In other words, the seller of
services, who in this case is the tollway operator, is the
person liable for VAT. The latter merely shifts the burden
of VAT to the tollway user as part of the toll fees.
 CIR vs. SM PRIME HOLDINGS, INC.
G.R. No. 193007 July 19, 2011
FACTS:
Respondents (SM Prime) and (First Asia) are domestic
corporations engaged in the business of operating
cinema houses, among others.
CTA Case No. 7079
On September 26, 2003, the (BIR) sent SM Prime a
Preliminary Assessment Notice (PAN) for value added tax
(VAT) deficiency on cinema ticket sales in the amount
of P119,276,047.40 for taxable year 2000.[8] In response,
SM Prime filed a letter-protest dated December 15,
2003.[9]
On December 12, 2003, the BIR sent SM Prime a Formal
Letter of Demand for the alleged VAT deficiency, which
the latter protested in a letter dated January 14, 2004.[10]
On September 6, 2004, the BIR denied the protest filed
by SM Prime and ordered it to pay the VAT deficiency for
taxable year 2000 in the amount of P124,035,874.12.[11]
CTA Case No. 7085
On May 15, 2002, the BIR sent First Asia a PAN for VAT
deficiency on
cinema ticket sales for taxable year 1999 in the total
amount of P35,823,680.93.[13] First Asia protested the
PAN in a letter dated July 9, 2002.[14]
Subsequently, the BIR issued a Formal Letter of Demand
for the alleged VAT deficiency which was protested by
First Asia in a letter dated December 12, 2002.[15]
On September 6, 2004, the BIR rendered a Decision
denying the protest and ordering First Asia to pay the
amount of P35,823,680.93 for VAT deficiency for taxable
year 1999.[16]
CTA Case No. 7111
On April 16, 2004, the BIR sent a PAN to First Asia for
VAT deficiency on cinema ticket sales for taxable year
2000 in the amount
of P35,840,895.78. First Asia protested the PAN through
a letter dated April 22, 2004.[18]
Thereafter, the BIR issued a Formal Letter of Demand for
alleged VAT deficiency.[19] First Asia protested the same
in a letter dated July 9, 2004.[20]
On October 5, 2004, the BIR denied the protest and
ordered First Asia to pay the VAT deficiency in the
amount of P35,840,895.78 for taxable year 2000.[21]
This prompted First Asia to file a Petition for Review
before the CTA on December 16, 2004. The case was
docketed as CTA Case No. 7111.[22]
CTA Case No. 7272
Re: Assessment Notice No. 008-02
A PAN for VAT deficiency on cinema ticket sales for the
taxable year 2002 in the total amount of P32,802,912.21
was issued against First Asia by the BIR. In response, First
Asia filed a protest-letter dated November 11, 2004. The
BIR then sent a Formal Letter of Demand, which was
protested by First Asia on December 14, 2004.[23]
Re: Assessment Notice No. 003-03
A PAN for VAT deficiency on cinema ticket sales in the
total amount of P28,196,376.46 for the taxable year 2003
was issued by the BIR against First Asia. In a letter
dated September 23, 2004, First Asia protested the
PAN. A Formal Letter of Demand was thereafter issued
by the BIR to First Asia, which the latter protested
through a letter dated November 11, 2004.
On May 11, 2005, the BIR rendered a Decision denying
the protests. It ordered First Asia to pay the amounts
of P33,610,202.91 and P28,590,826.50 for VAT deficiency
for taxable years 2002 and 2003, respectively.
Ruling of the CTA First Division
On September 22, 2006, the First Division of the CTA
rendered a Decision granting the Petition for
Review. Resorting to the language used and the
legislative history of the law, it ruled that the activity of
showing cinematographic films is not a service covered
by VAT under the National Internal Revenue Code (NIRC)
of 1997, as amended, but an activity subject to
amusement tax under RA 7160, otherwise known as the
Local Government Code (LGC) of 1991. The CTA First
Division held that the House of Representatives resolved
that there should only be one business tax applicable to
theaters and movie houses, which is the 30% amusement
tax imposed by cities and provinces under the LGC of
1991. Further, it held that consistent with the States
policy to have a viable, sustainable and competitive
theater and film industry, the national government
should be precluded from imposing its own business tax
in addition to that already imposed and collected by local
government units. The CTA First Division likewise found
that Revenue Memorandum Circular (RMC) No. 28-2001,
which imposes VAT on gross receipts from admission to
cinema houses, cannot be given force and effect because
it failed to comply with the procedural due process for
tax issuances under RMC No. 20-86.
Ruling of the CTA En Banc
The CTA En Banc held that Section 108 of the NIRC
actually sets forth an exhaustive enumeration of what
services are intended to be subject to VAT. And since the
showing or exhibition of motion pictures, films or movies
by cinema operators or proprietors is not among the
enumerated activities contemplated in the phrase sale or
exchange of services, then gross receipts derived by
cinema/ theater operators or proprietors from admission
tickets in showing motion pictures, film or movie are not
subject to VAT. It reiterated that the exhibition or
showing of motion pictures, films, or movies is instead
subject to amusement tax under the LGC of 1991. As
regards the validity of RMC No. 28-2001, the CTA En
Banc agreed with its First Division that the same cannot
be given force and effect for failure to comply with
RMC No. 20-86.
Petitioners Arguments
Petitioner argues that the enumeration of services
subject to VAT in Section 108 of the NIRC is not
exhaustive because it covers all sales of services unless
exempted by law. He claims that the CTA erred in
applying the rules on statutory construction and in using
extrinsic aids in interpreting Section 108 because the
provision is clear and unambiguous. Thus, he maintains
that the exhibition of movies by cinema operators or
proprietors to the paying public, being a sale of service, is
subject to VAT.
Respondents Arguments
Respondents, on the other hand, argue that a plain
reading of Section 108 of the NIRC of 1997 shows that
the gross receipts of proprietors or operators of
cinemas/theaters derived from public admission are not
among the services subject to VAT. Respondents insist
that gross receipts from cinema/theater admission
tickets were never intended to be subject to any tax
imposed by the national government. According to them,
the absence of gross receipts from cinema/theater
admission tickets from the list of services which are
subject to the national amusement tax under Section 125
of the NIRC of 1997 reinforces this legislative
intent. Respondents also highlight the fact that RMC No.
28-2001 on which the deficiency assessments were
based is an unpublished administrative ruling.
ISSUE:
Whether or not gross receipts of proprietors or
operators of cinemas/theaters derived from public
admission are among the services subject to VAT?
RULING:
The enumeration of services subject to VAT under Section
108 of the NIRC is not exhaustive
Section 108 of the NIRC of the 1997 reads:
SEC. 108. Value-added Tax on Sale of Services and Use or
Lease of Properties.
(A) Rate and Base of Tax. There shall be levied, assessed
and collected, a value-added tax equivalent to ten
percent (10%) of gross receipts derived from the sale or
exchange of services, including the use or lease of
properties.
The phrase sale or exchange of services means the
performance of all kinds of services in the Philippines for
others for a fee, remuneration or
consideration, including those performed or rendered by
construction and service contractors; stock, real estate,
commercial, customs and immigration brokers; lessors of
property, whether personal or real; warehousing
services; lessors or distributors of cinematographic
films; persons engaged in milling, processing,
manufacturing or repacking goods for others;
proprietors, operators or keepers of hotels, motels, rest
houses, pension houses, inns, resorts; proprietors or
operators of restaurants, refreshment parlors, cafes and
other eating places, including clubs and caterers; dealers
in securities; lending investors; transportation
contractors on their transport of goods or cargoes,
including persons who transport goods or cargoes for
hire and other domestic common carriers by land, air and
water relative to their transport of goods or cargoes;
services of franchise grantees of telephone and
telegraph, radio and television broadcasting and all other
franchise grantees except those under Section 119 of this
Code; services of banks, non-bank financial
intermediaries and finance companies; and non-life
insurance companies (except their crop insurances),
including surety, fidelity, indemnity and bonding
companies; and similar services regardless of whether or
not the performance thereof calls for the exercise or use
of the physical or mental faculties. The phrase sale or
exchange of services shall likewise include:
(1) The lease or the use of or the right or privilege to use
any copyright, patent, design or model, plan, secret
formula or process, goodwill, trademark, trade brand or
other like property or right;
(7) The lease of motion picture films, films, tapes and
discs; and
(8) The lease or the use of or the right to use radio,
television, satellite transmission and cable television
time
A cursory reading of the foregoing provision clearly
shows that the enumeration of the sale or exchange of
services subject to VAT is not exhaustive. The words,
including, similar services, and shall likewise include,
indicate that the enumeration is by way of example only.
Among those included in the enumeration is the lease of
motion picture films, films, tapes and discs. This,
however, is not the same as the showing or exhibition of
motion pictures or films. As pointed out by the CTA En
Banc:
Exhibition in Blacks Law Dictionary is defined as To show
or display. x x x To produce anything in public so that it
may be taken into possession (6th ed., p. 573). While the
word lease is defined as a contract by which one owning
such property grants to another the right to possess, use
and enjoy it on specified period of time in exchange for
periodic payment of a stipulated price, referred to as
rent (Blacks Law Dictionary, 6th ed., p. 889).
Since the activity of showing motion pictures, films or
movies by cinema/ theater operators or proprietors is
not included in the enumeration, it is incumbent upon
the court to the determine whether such activity falls
under the phrase similar services. The intent of the
legislature must therefore be ascertained.
The legislature never intended operators
or proprietors of cinema/theater houses to be covered
by VAT
On October 10, 1991, the LGC of 1991 was passed into
law. The local government retained the power to impose
amusement tax on proprietors, lessees, or operators of
theaters, cinemas, concert halls, circuses, boxing stadia,
and other places of amusement at a rate of not more
than thirty percent (30%) of the gross receipts from
admission fees under Section 140 thereof.[50] In the case
of theaters or cinemas, the tax shall first be deducted
and withheld by their proprietors, lessees, or operators
and paid to the local government before the gross
receipts are divided between said proprietors, lessees, or
operators and the distributors of the cinematographic
films. However, the provision in the Local Tax Code
expressly excluding the national government from
collecting tax from the proprietors, lessees, or operators
of theaters, cinematographs, concert halls, circuses and
other places of amusements was no longer included.
In 1994, RA 7716 restructured the VAT system by
widening its tax base and enhancing its
administration. Three years later, RA 7716 was amended
by RA 8241. Shortly thereafter, the NIRC of 1997[51] was
signed into law. Several amendments[52] were made to
expand the coverage of VAT. However, none pertain to
cinema/theater operators or proprietors. At present,
only lessors or distributors of cinematographic films are
subject to VAT. While persons subject to amusement
tax[53] under the NIRC of 1997 are exempt from the
coverage of VAT.
To hold otherwise would impose an unreasonable
burden on cinema/theater houses operators or
proprietors, who would be paying an additional
10%[55] VAT on top of the 30% amusement tax imposed
by Section 140 of the LGC of 1991, or a total of 40%
tax. Such imposition would result in injustice, as persons
taxed under the NIRC of 1997 would be in a better
position than those taxed under the LGC of 1991. We
need not belabor that a literal application of a law must
be rejected if it will operate unjustly or lead to absurd
results.[56] Thus, we are convinced that the legislature
never intended to include cinema/theater operators or
proprietors in the coverage of VAT.
Revenue Memorandum Circular No. 28-2001 is invalid
Considering that there is no provision of law imposing
VAT on the gross receipts of cinema/theater operators or
proprietors derived from admission tickets, RMC No. 28-
2001 which imposes VAT on the gross receipts from
admission to cinema houses must be struck down. We
cannot overemphasize that RMCs must not override,
supplant, or modify the law, but must remain consistent
and in harmony with, the law they seek to apply and
implement.[
FORT BONIFACIO DEV. CORP. vs. CIR
G.R. No. 173425 September 4, 2012
FACTS:
Petitioner was a real estate developer that bought from
the national government a parcel of land that used to be
the Fort Bonifacio reservation, now For Bonifacio Global
City. At the time of the said sale there was as yet no VAT
imposed so Petitioner did not pay any VAT on its
purchase. Subsequently, Petitioner started selling lots to
interested buyers. During this time, VAT was already in
effect. Realizing that its transitional input tax credit was
not applied in computing its output VAT for the first
quarter of 1997, petitioner on November 17, 1998 filed
with the BIR a claim for refund of the amount of P
359,652,009.47 erroneously paid as output VAT for the
said period. BIR disallowed the petitioner from claiming
refund. It avers that prior payment of taxes is necessary
for the availment of transitional input tax credit.
ISSUE:
Whether or not petitioner is entitled to transitional input
tax credit. If in the affirmative, is the petitioner entitled
to a refund erroneously paid as output VAT.
HELD:
YES. Petitioner is entitled to claim transitional input VAT.
SEC. 105. Transitional input tax credits. A
person who becomes liable to value-added tax
or any person who elects to be a VAT-registered
person shall, subject to the filing of an inventory
as prescribed by regulations, be allowed input
tax on his beginning inventory of goods,
materials and supplies equivalent to 8% of the
value of such inventory or the actual value-
added tax paid on such goods, materials and
supplies, whichever is higher, which shall be
creditable against the output tax.
Contrary to the view of the CTA and the CA, there is
nothing in the above-quoted provision to indicate that
prior payment of taxes is necessary for the availment of
the 8% transitional input tax credit. Obviously, all that is
required is for the taxpayer to file a beginning inventory
with the BIR.
If the intent of the law were to limit the input tax to
cases where actual VAT was paid, it could have simply
said that the tax base shall be the actual value-added tax
paid. Instead, the law as framed contemplates a situation
where a transitional input tax credit is claimed even if
there was no actual payment of VAT in the underlying
transaction. In such cases, the tax base used shall be the
value of the beginning inventory of goods, materials and
supplies.39
Moreover, prior payment of taxes is not required to avail
of the transitional input tax credit because it is not a tax
refund per se but a tax credit. Tax credit is not
synonymous to tax refund. Tax refund is defined as the
money that a taxpayer overpaid and is thus returned by
the taxing authority.40 Tax credit, on the other hand, is
an amount subtracted directly from ones total tax
liability.41 It is any amount given to a taxpayer as a
subsidy, a refund, or an incentive to encourage
investment. Thus, unlike a tax refund, prior payment of
taxes is not a prerequisite to avail of a tax credit.
FACTS:
While a tax liability is essential to the availment or use of
any tax credit, prior tax payments are not. On the
contrary, for the existence or grant solely of such credit,
neither a tax liability nor a prior tax payment is needed.
The Tax Code is in fact replete with provisions granting or
allowing tax credits, even though no taxes have been
previously paid.
ISSUE:
HELD:
CITY OF MANILA vs. HON. CARIDAD GRECIA-CUERDO
G.R. No. 175723 February 4, 2014
Petitioner City of Manila, through its treasurer,
petitioner Liberty Toledo, assessed taxes for the
taxable period from January to December 2002
against the private respondents. In addition to
the taxes purportedly due from private
respondents pursuant to Section 14, 15, 16, 17
of the Revised Revenue Code of Manila (RRCM),
said assessment covered the local business
taxes. Private respondents were constrained to
pay the P 19,316,458.77 assessment under
protest.
On January 24, 2004, private respondents filed
before the RTC of Pasay City the complaint
denominated as one for Refund or Recovery of
Illegally and/or ErroneouslyCollected Local
Business Tax, Prohibition with Prayer to Issue
TRO and Writ of Preliminary Injunction.
The RTC granted private respondents
application for a writ of preliminary injunction.
Petitioners filed a Motion for
Reconsideration but the RTC denied. Petitioners
then filed a special civil action for certiorari with
the CA but the CA dismissed petitioners petition
for certiorari holding that it has no jurisdiction
over the said petition.
The CA ruled that since appellate jurisdiction
over private respondents complaint for tax
refund, which was filed with the RTC, is vested
in the Court of Tax Appeals (CTA), pursuant to
its expanded jurisdiction under Republic Act No.
9282 (RA 9282), it follows that a petition
for certiorari seeking nullification of an
interlocutory order issued in the said case
should, likewise, be filed with the CTA.
Petitioners filed a Motion for
Reconsideration, but the CA denied it in its
Resolution hence, this petition
Whether or not the CTA has jurisdiction over a
special civil action for certiorari assailing an
interlocutory order issued by the RTC in a local
tax case.
Petition is denied
The CTA has jurisdiction over a special civil
action for certiorari assailing an interlocutory
order issued by the RTC in a local tax case. In
order for any appellate court to effectively
exercise its appellate jurisdiction, it must have
the authority to issue, among others, a writ of
certiorari. In transferring exclusive jurisdiction
over appealed tax cases to the CTA, it can
reasonably be assumed that the law intended to
transfer also such power as is deemed
necessary, if not indispensable, in aid of such
 appellate jurisdiction. There is no perceivable
reason why the transfer should only be
considered as partial, not total.
FACTS
Consistent with the above pronouncement, the
Court has held as early as the case of J.M.
Tuason & Co., Inc. v. Jaramillo, et al. [118 Phil.
1022 (1963)] that if a case may be appealed to
a particular court or judicial tribunal or body,
then said court or judicial tribunal or body has
jurisdiction to issue the extraordinary writ of
certiorari, in aid of its appellate jurisdiction.
This principle was affirmed in De Jesus v. Court
of Appeals (G.R. No. 101630, August 24, 1992)
where the Court stated that a court may issue a
writ of certiorari in aid of its appellate
jurisdiction if said court has jurisdiction to
review, by appeal or writ of error, the final
orders or decisions of the lower court.
ISSUE
HELD
LASCONA LAND Co. Inc. vs. CIR
G.R. No. 171251 March 5, 2012
The Commissioner of Internal Revenue (CIR)
issued an assessment against Lascona Land Co.,
Inc. (Lascona) informing the latter of its alleged
deficiency income tax for the year 1993 in the
amount of P753,266.56.
Consequently, on April 20, 1998, Lascona filed a
letter protest, but was denied by Norberto R.
Odulio, Officer-in-Charge (OIC), Regional
Director, Bureau of Internal Revenue, Revenue
Region No. 8, Makati City.
On April 12, 1999, Lascona appealed the
decision before the CTA.
Lascona alleged that the Regional Director erred
in ruling that the failure to appeal to the CTA
within thirty (30) days from the lapse of the 180-
day period rendered the assessment final and
executory.
The CIR, however, maintained that Lasconas
failure to timely file an appeal with the CTA after
the lapse of the 180-day reglementary period
provided under Section 228 of the National
Internal Revenue Code (NIRC) resulted to the
finality of the assessment.
Whether the subject assessment has become
final, executory and demandable due to the
failure of petitioner to file an appeal before the
CTA within thirty (30) days from the lapse of
the One Hundred Eighty (180)-day period
pursuant to Section 228 of the NIRC.
NO.
The Court has held that in case the
Commissioner failed to act on the disputed
assessment within the 180-day period from date
of submission of documents, a taxpayer can
either:
o (1) file a petition for review with the
Court of Tax Appeals within 30 days
after the expiration of the 180-day
period; or
o (2) await the final decision of the
Commissioner on the disputed
assessments and appeal such final
decision to the Court of Tax Appeals
within 30 days after receipt of a copy of
such decision. These options are
mutually exclusive and resort to one
bars the application of the other.
Interpreting the above provision, the taxpayer
has two options in case of inaction by the CIR.
First is to appeal to the CTA within 30 days from
the lapse of the 180 day period; or second, wait
for the CIR to issue the decision and then
appeal, if adverse, to the CTA within 30 days
from the receipt of the decision by the taxpayer
(because even if the CIR failed to decide on the
case within the 180 day period, it can still decide
on it and may even issue a favorable judgment
to the taxpayer, hence it may be logical to wait
and only appeal if the adverse decision is
actually received).
 Therefore, as in Section 228, when the law
provided for the remedy to appeal the inaction
of the CIR, it did not intend to limit it to a single
remedy of filing of an appeal after the lapse of
the 180-day prescribed period.
Precisely, when a taxpayer protested an
assessment, he naturally expects the CIR to
decide either positively or negatively.
A taxpayer cannot be prejudiced if he chooses
to wait for the final decision of the CIR on the
protested assessment. More so, because the
law and jurisprudence have always
contemplated a scenario where the CIR will
decide on the protested assessment.
In the case at bar, LLCI chose to wait for the CIR
to decide on the case and it did not appeal
within 30 days from the lapse of the 180-day
period. LLCI received the adverse decision of the
CIR on March 12, 1999. It appealed on April 12,
1999 which is still within the 30-day period to
appeal to the CTA.
The revenue regulation in question is invalid
because in effect, it limited the remedy
provided for by the law. Section 228 of the NIRC
prevails over the said revenue regulation. The
said revenue regulation cannot validly take away
the option of the taxpayer to continue waiting,
even after the lapse of the 180 day period, for
the CIR to decide on the case and just appeal,
within 30 days from receipt, if the CIRs ruling is
adverse.
It must however be noted that these two
remedies are mutually exclusive.
ANGELES UNIVERSITY vs. CITY OF ANGELES
G.R. No. 189999 June 27, 2012
FACTS:
Petitioner Angeles University Foundation (AUF) is an
educational institution established on May 25, 1962 and
was converted into a non-stock, non-profit education
foundation under the provisions of Republic Act (R.A.)
No. 6055 on December 4, 1975.
Sometime in August 2005, petitioner filed with the Office
of the City Building Official an application for a building
permit for the construction of an 11-storey building of
the Angeles University Foundation Medical Center in its
main campus located at MacArthur Highway, Angeles
City, Pampanga. Said office issued a Building Permit Fee
Assessment. An Order of Payment was also issued by the
City Planning and Development Office requiring
petitioner to pay the Locational Clearance Fee.
In separate letters dated November 15, 2005 addressed
to respondents City Treasurer Juliet G. Quinsaat and
Acting City Building Official Donato N. Dizon, petitioner
claimed that it is exempt from the payment of the
building permit and locational clearance fees, citing legal
opinions rendered by the Department of Justice (DOJ).
Petitioner wrote the respondents reiterating its request
to reverse the disputed assessments and invoking the
DOJ legal opinions which have been affirmed by
Secretary Gonzalez. Despite petitioners plea, however,
respondents refused to issue the building permits for the
construction of the AUF Medical Center in the main
campus and renovation of a school building located at
Marisol Village. Petitioner then appealed the matter to
City Mayor Carmelo F. Lazatin but no written response
was received by petitioner.
Consequently, petitioner paid under protest the
following:
Medical Center (new construction): Building Permit and
Electrical Fee for P 217,475.20, Locational Clearance Fee
for 283,741.64, Fire Code Fee for 144,690.00 and a Total
of P 645,906.84.
School Building (renovation): Building Permit and
Electrical Fee for P 37,857.20, Locational Clearance Fee
for 6,000.57, Fire Code Fee for 5,967.7 and a Total of P
49,825.51
Petitioner likewise paid the following sums as required
by the City Assessors Office:
Real Property Tax Basic Fee for P 86,531.10, SEF for
43,274.54, Locational Clearance Fee for 1,125.00 and a
Total P130,930.64.
[GRAND TOTAL - P 826,662.99]
On August 31, 2006, petitioner filed a Complaint before
the trial court seeking the refund. On September 21,
2007, the trial court rendered judgment in favor of the
petitioner and against the respondent.
Respondents appealed to the CA which reversed the trial
court, holding that while petitioner is a tax-free entity, it
is not exempt from the payment of regulatory fees. The
CA noted that under R.A. No. 6055, petitioner was
granted exemption only from income tax derived from its
educational activities and real property used exclusively
for educational purposes. Regardless of the repealing
clause in the National Building Code, the CA held that
petitioner is still not exempt because a building permit
cannot be considered as the other charges mentioned in
Sec. 8 of R.A. No. 6055 which refers to impositions in the
nature of tax, import duties, assessments and other
collections for revenue purposes, following the ejusdem
generisrule.
ISSUE 1:
Whether petitioner is exempt from the payment of
building permit and related fees imposed under the
National Building Code.
HELD: NO .
R.A. No. 6055 granted tax exemptions to educational
institutions like petitioner which converted to non-stock,
non-profit educational foundations. Section 8 of said law
provides:
SECTION 8. The Foundation shall be exempt from the
payment of all taxes, import duties, assessments, and
other charges imposed by the Government onall income
derived from or property, real or personal, used
exclusively for the educational activities of the
Foundation.(Emphasis supplied.)
On February 19, 1977, Presidential Decree (P.D.) No.
1096 was issued adopting the National Building Code of
the Philippines. The said Code requires every person,
firm or corporation, including any agency or
instrumentality of the government to obtain a building
permit for any construction, alteration or repair of any
building or structure.[19]Building permit refers to a
document issued by the Building Official x x x to an
owner/applicant to proceed with the construction,
installation, addition, alteration, renovation, conversion,
repair, moving, demolition or other work activity of a
specific project/building/structure or portions thereof
after the accompanying principal plans, specifications
and other pertinent documents with the duly notarized
application are found satisfactory and substantially
conforming with the National Building Code of the
Philippines x x x and its Implementing Rules and
Regulations (IRR). Building permit fees refers to the basic
permit fee and other charges imposed under the
National Building Code.
Exempted from the payment of building permit fees are:
(1) public buildings and (2) traditional indigenous family
dwellings. Not being expressly included in the
enumeration of structures to which the building permit
fees do not apply, petitioners claim for exemption rests
solely on its interpretation of the term other charges
imposed by the National Government in the tax
exemption clause of R.A. No. 6055.
A charge is broadly defined as the price of, or rate for,
something, while the word fee pertains to a charge fixed
by law for services of public officers or for use of a
privilege under control of government.As used in the
Local Government Code of 1991 (R.A. No. 7160), charges
refers to pecuniary liability, as rents or fees against
persons or property, while fee means a charge fixed by
law or ordinance for the regulation or inspection of a
business or activity.
That charges in its ordinary meaning appears to be a
general term which could cover a specific fee does not
support petitioners position that building permit fees are
among those other charges from which it was expressly
exempted. Note that the other charges mentioned in
Sec. 8 of R.A. No. 6055 is qualified by the words imposed
by the Government on all x x x property used exclusively
for the educational activities of the foundation. Building
permit fees are not impositions on property but on the
activity subject of government regulation. While it may
be argued that the fees relate to particular properties,
i.e., buildings and structures, they are actually imposed
on certain activities the owner may conduct either to
build such structures or to repair, alter, renovate or
demolish the same. This is evident from the following
provisions of the National Building Code:
Section 301. Building Permits: No person, firm or
corporation, including any agency orinstrumentality of
the government shall erect, construct, alter, repair,
move, convert or demolish any building or structure or
causethe same to be done without first obtaining a
building permittherefor from the Building Official
assigned in the place where thesubject building is located
or the building work is to be done. (Italics supplied.)
That a building permit fee is a regulatory imposition is
highlighted by the fact that in processing an application
for a building permit, the Building Official shall see to it
that the applicant satisfies and conforms with approved
standard requirements on zoning and land use, lines and
grades, structural design, sanitary and sewerage,
environmental health, electrical and mechanical safety as
well as with other rules and regulations implementing
the National Building Code.[24] Thus, ancillary permits
such as electrical permit, sanitary permit and zoning
clearance must also be secured and the corresponding
fees paid before a building permit may be issued. And as
can be gleaned from the implementing rules and
regulations of the National Building Code, clearances
from various government authorities exercising and
enforcing regulatory functions affecting
buildings/structures, like local government units, may be
further required before a building permit may be
issued.[25]
Since building permit fees are not charges on property,
they are not impositions from which petitioner is
exempt.
ISSUE 2: Whether petitioners claim is exempted from
the payment of real property tax assessed against its
real presently occupied by informal settlers.
substituted for the words used exclusively without doing
violence to the Constitutions and the law. Solely is
synonymous with exclusively.
What is meant by actual, direct and exclusive use of the
property for charitable purposes is the direct and
immediate and actual application of the property itself to
the purposes for which the charitable institution is
organized. It is not the use of the income from the real
property that is determinative of whether the property is
used for tax-exempt purposes.[32] (Emphasis and
underscoring supplied.)

HELD: No.
Section 28(3), Article VI of the 1987 Constitution
provides:
(3) Charitable institutions, churches and parsonages or
convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and improvements,
actually, directly and exclusively used for religious,
charitable or educational purposes shall be exempt from
taxation.
Section 234(b) of the Local Government Code of 1991
implements the foregoing constitutional provision by
declaring that --
SECTION 234. Exemptions from Real Property Tax. The
following are exempted from payment of the real
property tax:
Petitioner failed to discharge its burden to prove that its
real property is actually, directly and exclusively used for
educational purposes. While there is no allegation or
proof that petitioner leases the land to its present
occupants, still there is no compliance with the
constitutional and statutory requirement that said real
property is actually, directly and exclusively used for
educational purposes. The respondents correctly
assessed the land for real property taxes for the taxable
period during which the land is not being devoted solely
to petitioners educational activities. Accordingly, the CA
did not err in ruling that petitioner is likewise not entitled
to a refund of the real property tax it paid under protest.
WHEREFORE, the petition is DENIED. The Decision dated
July 28, 2009 and Resolution dated October 12, 2009 of
the Court of Appeals in CA-G.R. CV No. 90591 are
AFFIRMED.

(b) Charitable institutions, churches, parsonages or

convents appurtenant thereto, mosques, non-profit or
religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for
religious, charitable or educational purposes;

In Lung Center of the Philippines v. Quezon City,[31] this

Court held that only portions of the hospital actually,
directly and exclusively used for charitable purposes are
exempt from real property taxes, while those portions
leased to private entities and individuals are not exempt
from such taxes. We explained the condition for the tax
exemption privilege of charitable and educational
institutions, as follows:

Under the 1973 and 1987 Constitutions and Rep. Act No.
7160 in order to be entitled to the exemption, the
petitioner is burdened to prove, by clear and unequivocal
proof, that (a) it is a charitable institution; and (b) its real
properties are ACTUALLY, DIRECTLY and EXCLUSIVELY
used for charitable purposes. Exclusive is defined as
possessed and enjoyed to the exclusion of others;
debarred from participation or enjoyment; and
exclusively is defined, in a manner to exclude; as enjoying
a privilege exclusively. If real property is used for one or
more commercial purposes, it is not exclusively used for
the exempted purposes but is subject to taxation. The
words dominant use or principal use cannot be
 CITY OF IRIGA vs. CAM SUR III ELECTRIC COOP.
G.R. No. 192945 September 5, 2012
Doctrine
The Court reiterates that a franchise tax is a tax levied on
the exercise by an entity of the rights or privileges
granted to it by the government. In the absence of a
clear and subsisting legal provision granting it tax
exemption, a franchise holder, though non-profit in
nature, may validly be assessed franchise tax by a local
government unit.
FACTS:
CASURECO III is an electric cooperative duly organized
and existing by virtue of Presidential Decree (PD)
269,4rll as amended, and registered with the National
Electrification Administration (NEA). It is engaged in the
business of electric power distribution to various end-
users and consumers within the City of Iriga and the
municipalities of Nabua, Bato, Baao, Buhi, Bula and
Balatan of the Province of Camarines Sur, otherwise
known as the "Rinconada area."5rllrll
Sometime in 2003, petitioner City of Iriga required
CASURECO III to submit a report of its gross receipts for
the period 1997-2002 to serve as the basis for the
computation of franchise taxes, fees and other
charges.6rll The latter complied and was
subsequently assessed taxes.
On January 7, 2004, petitioner made a final demand on
CASURECO III to pay the franchise taxes due for the
period 1998-2003 and real property taxes due for the
period 1995-2003.8rll CASURECO III, however,
refused to pay said taxes on the ground that it is an
electric cooperative provisionally registered with the
Cooperative Development Authority (CDA),9rll and
therefore exempt from the payment of local taxes.
On March 15, 2004, petitioner filed a complaint for
collection of local taxes against CASURECO III before the
RTC, citing its power to tax under the Local Government
Code (LGC) and the Revenue Code of Iriga City.
It alleged that as of December 31, 2003, CASURECO III's
franchise and real property taxes liability, inclusive of
penalties, surcharges and interest, amounted to
Seventeen Million Thirty-Seven Thousand Nine Hundred
Thirty-Six Pesos and Eighty-Nine Centavos (P
17,037,936.89) and Nine Hundred Sixteen Thousand Five
Hundred Thirty-Six Pesos and Fifty Centavos (P
916,536.50), respectively.
In its Answer, CASURECO III denied liability for the
assessed taxes, asserting that the computation of the
petitioner was erroneous because it included 1) gross
receipts from service areas beyond the latters
territorial jurisdiction; 2) taxes that had already
prescribed; and 3) taxes during the period when it was
still exempt from local government tax by virtue of its
then subsisting registration with the CDA.
RTC ruled that the real property taxes due for the years
1995-1999 had already prescribed in accordance with the
LGC. However, it found CASURECO III liable for franchise
taxes for the years 2000-2003 based on its gross receipts
from Iriga City and the Rinconada area on the ground
that the "situs of taxation is the place where the privilege
is exercised."
On appeal, the CA found CASURECO III to be a non-profit
entity, not falling within the purview of "businesses
enjoying a franchise" pursuant to Section 137 of the LGC.
It explained that CASURECO III's non-profit nature is
diametrically opposed to the concept of a "business,"
which, as defined under Section 131 of the LGC, is a
"trade or commercial activity regularly engaged in as a
means of livelihood or with a view to profit."
Consequently, it relieved CASURECO III from liability to
pay franchise taxes.
ISSUE 1:
Whether or not CASURECO is exempt from franchise
tax?
RULING:
NO. CASURECO III is not exempt from payment of
franchise tax
PD 269, which took effect on August 6, 1973, granted
electric cooperatives registered with the NEA, like
CASURECO III, several tax privileges, one of which is
exemption from the payment of "all national
government, local government and municipal taxes and
fees, including franchise, filing, recordation, license or
permit fees or taxes."22rllrll
On March 10, 1990, Congress enacted into law RA 6938,
otherwise known as the "Cooperative Code of the
Philippines," and RA 693924 creating the CDA. The latter
law vested the power to register cooperatives solely on
the CDA, while the former provides that electric
cooperatives registered with the NEA under PD 269
which opt not to register with the CDA shall not be
entitled to the benefits and privileges under the said law.
On January 1, 1992, the LGC took effect, and Section 193
thereof withdrew tax exemptions or incentives
previously enjoyed by "all persons, whether natural or
juridical, including government-owned or controlled
corporations, except local water districts, cooperatives
duly registered under R.A. No. 6938, non-stock and non-
profit hospitals and educational
institutions."25rllrll
In Philippine Rural Electric Cooperatives Association, Inc.
(PHILRECA) v. The Secretary, Department of Interior and
Local Government,26rll the Court held that the tax
privileges granted to electric cooperatives registered
with NEA under PD 269 were validly withdrawn and only
those registered with the CDA under RA 6938 may
continue to enjoy the tax privileges under the
Cooperative Code.
Therefore, CASURECO III can no longer invoke PD 269 to
evade payment of local taxes. Moreover, its provisional
registration with the CDA which granted it exemption
for the payment of local taxes was extended only until
May 4, 1992. Thereafter, it can no longer claim any
exemption from the payment of local taxes, including
the subject franchise tax.
ISSUE 2:
Whether or not the city has the power to impose local
taxes?
RULING:
YES! Indisputably, petitioner has the power to impose
local taxes. The power of the local government units to
impose and collect taxes is derived from the Constitution
itself which grants them "the power to create its own
sources of revenues and to levy taxes, fees and charges
subject to such guidelines and limitation as the Congress
may provide."This explicit constitutional grant of power
to tax is consistent with the basic policy of local
autonomy and decentralization of governance. With this
power, local government units have the fiscal
mechanisms to raise the funds needed to deliver basic
services to their constituents and break the culture of
dependence on the national government. Thus,
consistent with these objectives, the LGC was enacted
granting the local government units, like petitioner, the
power to impose and collect franchise tax, to wit:
SEC. 137. Franchise Tax. - Notwithstanding any
exemption granted by any law or other special law, the
province may impose a tax on businesses enjoying a
franchise, at a rate not exceeding fifty percent (50%) of
one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt,
or realized, within its territorial jurisdiction. xxx
SEC. 151. Scope of Taxing Powers. - Except as otherwise
provided in this Code, the city, may levy the taxes, fees,
and charges which the province or municipality may
impose: Provided, however, That the taxes, fees and
charges levied and collected by highly urbanized and
independent component cities shall accrue to them and
distributed in accordance with the provisions of this
Code. The rates of taxes that the city may levy may
exceed the maximum rates allowed for the province or
municipality by not more than fifty percent (50%) except
the rates of professional and amusement taxes.
ISSUE 3:
Whether or not CASURECO is correct in maintaining tah
it is exempt from payment of FRANCHISE tax because of
its nature as a non profit cooperative as contemplated
in PD 269, and insists that only entities engaged in
business, and not non-profit entities like itself, are
subject to the said franchise tax.
RULING:
NO. The Court is not persuaded.
In National Power Corporation v. City of Cabanatuan,29
the Court declared that "a franchise tax is a tax on the
privilege of transacting business in the state and
exercising corporate franchises granted by the
state."30rll It is not levied on the corporation simply
for existing as a corporation, upon its property or its
income, but on its exercise of the rights or privileges
granted to it by the government.31rll "It is within this
context that the phrase tax on businesses enjoying a
franchise in Section 137 of the LGC should be
interpreted and understood."32rllrll
Thus, to be liable for local franchise tax, the following
requisites should concur: (1) that one has a "franchise" in
the sense of a secondary or special franchise; and (2) that
it is exercising its rights or privileges under this franchise
within the territory of the pertinent local government
unit.33rllrll
There is a confluence of these requirements in the case
at bar. By virtue of PD 269, NEA granted CASURECO III a
franchise to operate an electric light and power service
for a period of fifty (50) years from June 6, 1979,34rll
and it is undisputed that CASURECO III operates within
Iriga City and the Rinconada area. It is, therefore, liable
to pay franchise tax notwithstanding its non-profit
nature.
ISSUE 4:
CASURECO III further argued that its liability to pay
franchise tax, if any, should be limited to gross receipts
received from the supply of the electricity within the
City of Iriga and not those from the Rinconada area.
RULING:
Again, the Court is not convinced.
It should be stressed that what the petitioner seeks to
collect from CASURECO III is a franchise tax, which as
defined, is a tax on the exercise of a privilege. As Section
13735rll of the LGC provides, franchise tax shall be
based on gross receipts precisely because it is a tax on
business, rather than on persons or property.36rll
Since it partakes of the nature of an excise tax/37rll
the situs of taxation is the place where the privilege is
exercised, in this case in the City of Iriga, where
CASURECO III has its principal office and from where it
operates, regardless of the place where its services or
products are delivered. Hence, franchise tax covers all
gross receipts from Iriga City and the Rinconada area.