Cases Full Text Compiled 3

G.R. No.
210987, November 24, 2014
THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY, Petitioner, v. THE SECRETARY
OF FINANCE AND THE COMMISSIONER OF INTERNAL REVENUE, Respondents.
DECISION
VELASCO JR., J.:
Nature of the Case
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing and
seeking the reversal of the Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 127984, dated
May 23, 20131 and January 21, 2014, which dismissed outright the petitioner’s appeal from the
Secretary of Finance’s review of BIR Ruling No. 015-122 for lack of jurisdiction.cralawred
The Facts
Petitioner The Philippine American Life and General Insurance Company (Philamlife) used to own
498,590 Class A shares in Philam Care Health Systems, Inc. (PhilamCare), representing 49.89% of the
latter’s outstanding capital stock. In 2009, petitioner, in a bid to divest itself of its interests in the health
maintenance organization industry, offered to sell its shareholdings in Philam Care through competitive
bidding.Thus, on September 24, 2009,petitioner’s Class A shares were sold for USD 2,190,000, or PhP
104,259,330 based on the prevailing exchange rate at the time of the sale, to STI Investments, Inc., who
emerged as the highest bidder.3chanRoblesvirtualLawlibrary
After the sale was completed and the necessary documentary stamp and capital gains taxes were paid,
Philamlife filed an application for a certificate authorizing registration/tax clearance with the Bureau of
Internal Revenue (BIR) Large Taxpayers Service Division to facilitate the transfer of the shares. Months
later, petitioner was informed that it needed to secure a BIR ruling in connection with its application due
to potential donor’s tax liability. In compliance, petitioner, on January 4, 2012,requested a ruling4 to
confirm that the sale was not subject to donor’s tax, pointing out, in its request, the following: that the
transaction cannot attract donor’s tax liability since there was no donative intent and, ergo, no taxable
donation, citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009;5 that the shares were sold
at their actual fair market value and at arm’s length; that as long as the transaction conducted is at
arm’s length––such that a bonafide business arrangement of the dealings is done in the ordinary course
of business––a sale for less than an adequate consideration is not subject to donor’s tax; and that
donor’s tax does not apply to sale of shares sold in an open bidding process.
On January 4, 2012, however, respondent Commissioner on Internal Revenue (Commissioner) denied

Philamlife’s request through BIR Ruling No. 015-12. As determined by the Commissioner, the selling
price of the shares thus sold was lower than their book value based on the financial statements of
Philam Care as of the end of 2008.6 As such,the Commisioner held, donor’s tax became imposable on
the price difference pursuant to Sec. 100 of the National Internal Revenue Code (NIRC),
viz:chanroblesvirtuallawlibrary
SEC. 100. Transfer for Less Than Adequate and full Consideration. - Where property, other than real
property referred to in Section 24(D), is transferred for less than an adequate and full consideration in
money or money’s worth, then the amount by which the fair market value of the property exceeded the
value of the consideration shall, for the purpose of the tax imposed by this Chapter, be deemed a gift,
and shall be included in computing the amount of gifts made during the calendar year.
The afore-quoted provision, the Commissioner added, is implemented by Revenue Regulation 6-2008
(RR 6-2008), which provides:chanroblesvirtuallawlibrary
SEC. 7. SALE, BARTER OR EXCHANGE OF SHARES OF STOCK NOT TRADED THROUGH A LOCAL STOCK
EXCHANGE PURSUANT TO SECS. 24(C), 25(A)(3), 25(B), 27(D)(2), 28(A)(7)(c), 28(B)(5)(c) OF THE TAX
CODE, AS AMENDED. —
x x x x
(c) Determination of Amount and Recognition of Gain or Loss –
(c.1) In the case of cash sale, the selling price shall be the consideration per deed of sale.
x x x x
(c.1.4) In case the fair market value of the shares of stock sold, bartered, or exchanged is greater than
the amount of money and/or fair market value of the property received, the excess of the fair market
value of the shares of stock sold, bartered or exchanged over the amount of money and the fair market
value of the property, if any, received as consideration shall be deemed a gift subject to the donor’s tax
under Section 100 of the Tax Code, as amended.
x x x x
(c.2) Definition of ‘fair market value’ of Shares of Stock. – For purposes of this Section, ‘fair market
value’ of the share of stock sold shall be:
x x x x
(c.2.2) In the case of shares of stock not listed and traded in the local stock exchanges, the book value of
the shares of stock as shown in the financial statements duly certified by an independent certified public
accountant nearest to the date of sale shall be the fair market value.
In view of the foregoing, the Commissioner ruled that the difference between the book value and the
selling price in the sales transaction is taxable donation subject to a 30% donor’s tax under Section 99(B)
of the NIRC.7 Respondent Commissioner likewise held that BIR Ruling [DA-(DT-065) 715-09], on which
petitioner anchored its claim, has already been revoked by Revenue Memorandum Circular (RMC) No.
25-2011.8chanRoblesvirtualLawlibrary
Aggrieved, petitioner requested respondent Secretary of Finance (Secretary) to review BIR Ruling No.
015-12, but to no avail. For on November 26, 2012, respondent Secretary affirmed the Commissioner’s
assailed ruling in its entirety.9chanRoblesvirtualLawlibrary
Ruling of the Court of Appeals
Not contented with the adverse results, petitioner elevated the case to the CA via a petition for review
under Rule 43, assigning the following errors:10chanRoblesvirtualLawlibrary
A.
The Honorable Secretary of Finance gravely erred in not finding that the application of Section 7(c.2.2)
of RR 06-08 in the Assailed Ruling and RMC 25-11 is void insofar as it alters the meaning and scope of
Section 100 of the Tax Code.cralawred
B.
The Honorable Secretary of Finance gravely erred in finding that Section 100 of the Tax Code is
applicable to the sale of the Sale of Shares.
1.
The Sale of Shares were sold at their fair market value and for fair and full consideration in money or
money’s worth.cralawred
2.
The sale of the Sale Shares is a bona fide business transaction without any donative intent and is
therefore beyond the ambit of Section 100 of the Tax Code.cralawred
3.
It is superfluous for the BIR to require an express provision for the exemption of the sale of the Sale
Shares from donor’s tax since Section 100 of the Tax Code does not explicitly subject the transaction to
donor’s tax.
C.
The Honorable Secretary of Finance gravely erred in failing to find that in the absence of any of the
grounds mentioned in Section 246 of the Tax Code, rules and regulations, rulings or circulars – such as
RMC 25-11 – cannot be given retroactive application to the prejudice of Philamlife.
On May 23, 2013, the CA issued the assailed Resolution dismissing the CA Petition,
thusly:chanroblesvirtuallawlibrary
WHEREFORE, the Petition for Review dated January 9, 2013 is DISMISSED for lack of jurisdiction.
SO ORDERED.
In disposing of the CA petition, the appellate court ratiocinated that it is the Court of Tax Appeals (CTA),
pursuant to Sec. 7(a)(1) of Republic Act No. 1125 (RA 1125),11 as amended,which has jurisdiction over
the issues raised. The outright dismissal, so the CA held, is predicated on the postulate that BIR Ruling
No. 015-12was issued in the exercise of the Commissioner’s power to interpret the NIRC and other tax
laws. Consequently,requesting for its review can be categorized as “other matters arising under the
NIRC or other laws administered by the BIR,”which is under the jurisdiction of the CTA, not the CA.
Philamlife eventually sought reconsideration but the CA, in its equally assailed January 21, 2014
Resolution, maintained its earlier position.Hence, the instant recourse.cralawred
Issues
Stripped to the essentials, the petition raises the following issues in both procedure and substance:
1. Whether or not the CA erred in dismissing the CA Petition for lack of jurisdiction; and
2. Whether or not the price difference in petitioner’s adverted sale of shares in PhilamCare attracts
donor’s tax.
Procedural Arguments
Petitioner’s contentions
Insisting on the propriety of the interposed CA petition, Philamlife, while conceding that respondent
Commissioner issued BIR Ruling No. 015-12in accordance with her authority to interpret tax laws,
argued nonetheless that such ruling is subject to review by the Secretary of Finance under Sec. 4 of the
NIRC, to wit:chanroblesvirtuallawlibrary
SECTION 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. – The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions
thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals.
Petitioner postulates that there is a need to differentiate the rulings promulgated by the respondent
Commissioner relating to those rendered under the first paragraph of Sec. 4 of the NIRC, which are
appealable to the Secretary of Finance, from those rendered under the second paragraph of Sec. 4 of
the NIRC, which are subject to review on appeal with the CTA. This distinction, petitioner argues, is
readily made apparent by Department Order No. 7-02,12 as circularized by RMC No. 40-A-02.
Philamlife further averred that Sec. 7 of RA 1125, as amended, does not find application in the case at
bar since it only governs appeals from the Commissioner’s rulings under the second paragraph and does
not encompass rulings from the Secretary of Finance in the exercise of his power of review under the
first,as what was elevated to the CA. It added that under RA 1125, as amended, the only decisions of the
Secretary appealable to the CTA are those rendered in customs cases elevated to him automatically
under Section 2315 of the Tariff and Customs Code.13chanRoblesvirtualLawlibrary
There is, thus, a gap in the law when the NIRC, as couched, and RA 1125, as amended, failed to supply
where the rulings of the Secretary in its exercise of its power of review under Sec. 4 of the NIRC are
appealable to. This gap, petitioner submits, was remedied by Bristish American Tabacco v.
Camacho14 wherein the Court ruled that where what is assailed is the validity or constitutionality of a
law, or a rule or regulation issued by the administrative agency, the regular courts have jurisdiction to
pass upon the same.
In sum, appeals questioning the decisions of the Secretary of Finance in the exercise of its power of
review under Sec. 4 of the NIRC are not within the CTA’s limited special jurisdiction and, according to
petitioner, are appealable to the CA via a Rule 43 petition for review.
Respondents’ contentions
Before the CA, respondents countered petitioner’s procedural arguments by claiming that even
assuming arguendo that the CTA does not have jurisdiction over the case, Philamlife, nevertheless,
committed a fatal error when it failed to appeal the Secretary of Finance’s ruling to the Office of the
President (OP). As made apparent by the rules, the Department of Finance is not among the agencies
and quasi-judicial bodies enumerated under Sec. 1, Rule 43 of the Rules of Court whose decisions and
rulings are appealable through a petition for review.15 This is in stark contrast to the OP’s specific
mention under the same provision, so respondents pointed out.
To further reinforce their argument, respondents cite the President’s power of review emanating from
his power of control as enshrined under Sec. 17 of Article VII of the Constitution, which
reads:chanroblesvirtuallawlibrary
Section 17. The President shall have control of all the executive departments, bureaus, and offices. He
shall ensure that the laws be faithfully executed.
The nature and extent of the President’s constitutionally granted power of control have been defined in
a plethora of cases, most recently in Elma v. Jacobi,16 wherein it was held
that:chanroblesvirtuallawlibrary
x x x This power of control, which even Congress cannot limit, let alone withdraw, means the power of
the Chief Executive to review, alter, modify, nullify, or set aside what a subordinate, e.g., members of
the Cabinet and heads of line agencies, had done in the performance of their duties and to substitute
the judgment of the former for that of the latter.
In their Comment on the instant petition, however, respondents asseverate that the CA did not err in its
holding respecting the CTA’s jurisdiction over the controversy.cralawred
The Court’s Ruling
The petition is unmeritorious.
Reviews by the Secretary of

Finance pursuant to Sec. 4 of the
NIRC are appealable to the CTA
To recapitulate, three different, if not conflicting, positions as indicated below have been advanced by
the parties and by the CA as the proper remedy open for assailing respondents’ rulings:
1. Petitioners: The ruling of the Commissioner is subject to review by the Secretary under Sec. 4 of
the NIRC, and that of the Secretary to the CA via Rule 43;
2. Respondents: The ruling of the Commissioner is subject to review by the Secretary under Sec. 4
of the NIRC, and that of the Secretary to the Office of the President before appealing to the CA
via a Rule 43 petition; and
3. CA: The ruling of the Commissioner is subject to review by the CTA.
We now resolve.
Preliminarily,it bears stressing that there is no dispute that what is involved herein is the respondent
Commissioner’s exercise of power under the first paragraph of Sec. 4 of the NIRC––the power to
interpret tax laws. This, in fact, was recognized by the appellate court itself, but erroneously held that
her action in the exercise of such power is appealable directly to the CTA. As correctly pointed out by
petitioner, Sec. 4 of the NIRC readily provides that the Commissioner’s power to interpret the provisions
of this Code and other tax laws is subject to review by the Secretary of Finance. The issue that now
arises is this––where does one seek immediate recourse from the adverse ruling of the Secretary of
Finance in its exercise of its power of review under Sec. 4?
Admittedly, there is no provision in law that expressly provides where exactly the ruling of the Secretary
of Finance under the adverted NIRC provision is appealable to. However,We find that Sec. 7(a)(1) of RA
1125, as amended, addresses the seeming gap in the law as it vests the CTA, albeit impliedly, with
jurisdiction over the CA petition as “other matters”arising under the NIRC or other laws administered by
the BIR. As stated:chanroblesvirtuallawlibrary
Sec. 7. Jurisdiction. - The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,

refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue or other laws administered by the Bureau
of Internal Revenue. (emphasis supplied)
Even though the provision suggests that it only covers rulings of the Commissioner, We hold that it is,
nonetheless, sufficient enough to include appeals from the Secretary’s review under Sec. 4 of the NIRC.
It is axiomatic that laws should be given a reasonable interpretation which does not defeat the very
purpose for which they were passed.17 Courts should not follow the letter of a statute when to do so
would depart from the true intent of the legislature or would otherwise yield conclusions inconsistent
with the purpose of the act.18 This Court has, in many cases involving the construction of statutes,
cautioned against narrowly interpreting a statute as to defeat the purpose of the legislator, and rejected
the literal interpretation of statutes if to do so would lead to unjust or absurd
results.19chanRoblesvirtualLawlibrary
Indeed, to leave undetermined the mode of appeal from the Secretary of Finance would be an injustice
to taxpayers prejudiced by his adverse rulings. To remedy this situation, We imply from the purpose of
RA 1125 and its amendatory laws that the CTA is the proper forum with which to institute the appeal.
This is not, and should not, in any way, be taken as a derogation of the power of the Office of President
but merely as recognition that matters calling for technical knowledge should be handled by the agency
or quasi-judicial body with specialization over the controversy. As the specialized quasi-judicial agency
mandated to adjudicate tax, customs, and assessment cases, there can be no other court of appellate
jurisdiction that can decide the issues raised in the CA petition, which involves the tax treatment of the
shares of stocks sold.
Petitioner, though, next invites attention to the ruling in Ursal v. Court of Tax Appeals20 to argue against
granting the CTA jurisdiction by implication, viz:chanroblesvirtuallawlibrary
Republic Act No. 1125 creating the Court of Tax Appeals did not grant it blanket authority to decide any
and all tax disputes. Defining such special court’s jurisdiction, the Act necessarily limited its authority to
those matters enumerated therein. In line with this idea we recently approved said court’s order
rejecting an appeal to it by Lopez & Sons from the decision of the Collector of Customs, because in our
opinion its jurisdiction extended only to a review of the decisions of the Commissioner of Customs, as
provided by the statute — and not to decisions of the Collector of Customs. (Lopez & Sons vs. The Court
of Tax Appeals, 100 Phil., 850, 53 Off. Gaz., [10] 3065).
x x x x
x x x Republic Act No. 1125 is a complete law by itself and expressly enumerates the matters which the
Court of Tax Appeals may consider; such enumeration excludes all others by implication. Expressio unius
est exclusio alterius.
Petitioner’s contention is untenable. Lest the ruling in Ursal be taken out of context, but worse as a
precedent, it must be noted that the primary reason for the dismissal of the said case was that the
petitioner therein lacked the personality to file the suit with the CTA because he was not adversely
affected by a decision or ruling of the Collector of Internal Revenue, as was required under Sec. 11 of RA
1125.21 As held:chanroblesvirtuallawlibrary
We share the view that the assessor had no personality to resort to the Court of Tax Appeals. The rulings
of the Board of Assessment Appeals did not “adversely affect” him. At most it was the City of Cebu that
had been adversely affected in the sense that it could not thereafter collect higher realty taxes from the
abovementioned property owners. His opinion, it is true had been overruled; but the overruling inflicted
no material damage upon him or his office. And the Court of Tax Appeals was not created to decide
mere conflicts of opinion between administrative officers or agencies. Imagine an income tax examiner
resorting to the Court of Tax Appeals whenever the Collector of Internal Revenue modifies, or lower his
assessment on the return of a tax payer!22
The appellate power of the

CTA includes certiorari
Petitioner is quick to point out, however, that the grounds raised in its CA petition included the nullity of
Section 7(c.2.2) of RR 06-08 and RMC 25-11. In an attempt to divest the CTA jurisdiction over the
controversy, petitioner then cites British American Tobacco, wherein this Court has expounded on the
limited jurisdiction of the CTA in the following wise:chanroblesvirtuallawlibrary
While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does
not include cases where the constitutionality of a law or rule is challenged. Where what is assailed is
the validity or constitutionality of a law, or a rule or regulation issued by the administrative agency in
the performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the
same. The determination of whether a specific rule or set of rules issued by an administrative agency
contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the
Constitution vests the power of judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts,
including the regional trial courts. This is within the scope of judicial power, which includes the authority
of the courts to determine in an appropriate action the validity of the acts of the political departments.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.23
Vis-a-vis British American Tobacco, it bears to stress what appears to be a contrasting ruling in Asia
International Auctioneers, Inc. v. Parayno, Jr., to wit:chanroblesvirtuallawlibrary
Similarly, in CIR v. Leal, pursuant to Section 116 of Presidential Decree No. 1158 (The National Internal
Revenue Code, as amended) which states that “[d]ealers in securities shall pay a tax equivalent to six
(6%) per centum of their gross income. Lending investors shall pay a tax equivalent to five (5%) per cent,
of their gross income,” the CIR issued Revenue Memorandum Order (RMO) No. 15-91 imposing 5%
lending investor’s tax on pawnshops based on their gross income and requiring all investigating units of
the BIR to investigate and assess the lending investor’s tax due from them. The issuance of RMO No. 15-
91 was an offshoot of the CIR’s finding that the pawnshop business is akin to that of “lending investors”
as defined in Section 157(u) of the Tax Code. Subsequently, the CIR issued RMC No. 43-91 subjecting
pawn tickets to documentary stamp tax. Respondent therein, Josefina Leal, owner and operator of
Josefina’s Pawnshop, asked for a reconsideration of both RMO No. 15-91 and RMC No. 43-91, but the
same was denied by petitioner CIR. Leal then filed a petition for prohibition with the RTC of San Mateo,
Rizal, seeking to prohibit petitioner CIR from implementing the revenue orders. The CIR, through the
OSG, filed a motion to dismiss on the ground of lack of jurisdiction. The RTC denied the motion.
Petitioner filed a petition for certiorari and prohibition with the CA which dismissed the petition “for
lack of basis.” In reversing the CA, dissolving the Writ of Preliminary Injunction issued by the trial court
and ordering the dismissal of the case before the trial court, the Supreme Court held that “[t]he
questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the Commissioner
implementing the Tax Code on the taxability of pawnshops.” They were issued pursuant to the CIR’s
power under Section 245 of the Tax Code “to make rulings or opinions in connection with the
implementation of the provisions of internal revenue laws, including ruling on the classification of
articles of sales and similar purposes.” The Court held that under R.A. No. 1125 (An Act Creating the
Court of Tax Appeals), as amended, such rulings of the CIR are appealable to the CTA.
In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually
rulings or opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the
SSEZ to implement Section 12 of R.A. No. 7227 which provides that “exportation or removal of goods
from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs
duties and taxes under the Customs and Tariff Code and other relevant tax laws of the
Philippines.” They were issued pursuant to the power of the CIR under Section 4 of the National
Internal Revenue Code x x x.24 (emphasis added)
The respective teachings in British American Tobacco and Asia International Auctioneers, at first blush,
appear to bear no conflict––that when the validity or constitutionality of an administrative rule or
regulation is assailed, the regular courts have jurisdiction; and if what is assailed are rulings or opinions
of the Commissioner on tax treatments, jurisdiction over the controversy is lodged with the CTA.The
problem with the above postulates, however, is that they failed to take into consideration one crucial
point––a taxpayer can raise both issues simultaneously.
Petitioner avers that there is now a trend wherein both the CTA and the CA disclaim jurisdiction over tax
cases: on the one hand, mere prayer for the declaration of a tax measure’s unconstitutionality or
invalidity before the CTA can result in a petition’s outright dismissal, and on the other hand, the CA will
likewise dismiss the same petition should it find that the primary issue is not the tax measure’s validity
but the assessment or taxability of the transaction or subject involved.To illustrate this point, petitioner
cites the assailed Resolution, thusly:chanroblesvirtuallawlibrary
Admittedly, in British American Tobacco vs. Camacho, the Supreme Court has ruled that the
determination of whether a specific rule or set of rules issued by an administrative agency contravenes
the law or the constitution is within the jurisdiction of the regular courts, not the CTA.
x x x x
Petitioner essentially questions the CIR’s ruling that Petitioner’s sale of shares is a taxable donation
under Sec. 100 of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely
questioned incidentally since it was used by the CIR as bases for its unfavourable opinion. Clearly, the
Petition involves an issue on the taxability of the transaction rather than a direct attack on the
constitutionality of Sec. 100, Sec.7 (c.2.2.) of RR 06-08 and RMC 25-11. Thus, the instant Petition
properly pertains to the CTA under Sec. 7 of RA 9282.
As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers are now at a
quandary on what mode of appeal should be taken, to which court or agency it should be filed, and
which case law should be followed.
Petitioner’s above submission is specious.
In the recent case of City of Manila v. Grecia-Cuerdo,25 the Court en banc has ruled that the CTA now has
the power of certiorari in cases within its appellate jurisdiction. To elucidate:chanroblesvirtuallawlibrary
The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of original
jurisdiction which must be expressly conferred by the Constitution or by law and cannot be implied from
the mere existence of appellate jurisdiction. Thus, xxx this Court has ruled against the jurisdiction of
courts or tribunals over petitions for certiorari on the ground that there is no law which expressly gives
these tribunals such power. It must be observed, however, that xxx these rulings pertain not to regular
courts but to tribunals exercising quasi-judicial powers. With respect to the Sandiganbayan, Republic Act
No. 8249 now provides that the special criminal court has exclusive original jurisdiction over petitions
for the issuance of the writs of mandamus, prohibition, certiorari, habeas corpus, injunctions, and other
ancillary writs and processes in aid of its appellate jurisdiction.
In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme
Court, in the exercise of its original jurisdiction, to issue writs of certiorari, prohibition and mandamus.
With respect to the Court of Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the
appellate court, also in the exercise of its original jurisdiction, the power to issue, among others, a writ
of certiorari, whether or not in aid of its appellate jurisdiction. As to Regional Trial Courts, the power to
issue a writ of certiorari, in the exercise of their original jurisdiction, is provided under Section 21 of BP
129.
The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA,
Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested
in one Supreme Court and in such lower courts as may be established by law and that judicial power
includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.
On the strength of the above constitutional provisions, it can be fairly interpreted thatthe power of the
CTA includes that of determining whether or not there has been grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling
within the exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by
constitutional mandate, is vested with jurisdiction to issue writs of certiorari in these cases.
Indeed, 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. (emphasis added)
Evidently, City of Manila can be considered as a departure from Ursal in that in spite of there
being no express grant in law, the CTA is deemed granted with powers of certiorari by
implication. Moreover,City of Manila diametrically opposes British American Tobacco to the
effect that it is now within the power of the CTA, through its power of certiorari, to rule on the
validity of a particular administrative rule or regulation so long as it is within its appellate
jurisdiction. Hence, it can now rule not only on the propriety of an assessment or tax
treatment of a certain transaction, but also on the validity of the revenue regulation or
revenue memorandum circular on which the said assessment is based.
Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition not
only contested the applicability of Sec. 100 of the NIRC over the sales transaction but likewise
questioned the validity of Sec. 7(c.2.2) of RR 06-08 and RMC 25-11 does not divest the CTA of
its jurisdiction over the controversy, contrary to petitioner’s arguments.
The price difference is

subject to donor’s tax
Petitioner’s substantive argumentsare unavailing. The absence of donative intent, if that be the
case, does not exempt the sales of stock transaction from donor’s tax since Sec. 100 of the NIRC
categorically states that the amount by which the fair market value of the property exceeded the
value of the consideration shall be deemed a gift. Thus, even if there is no actual donation, the
difference in price is considered a donation by fiction of law.
Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the
parameters for determining the “fair market value” of a sale of stocks. Such issuance was made
pursuant to the Commissioner’s power to interpret tax laws and to promulgate rules and
regulations for their implementation.
Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was
being applied retroactively in contravention to Sec. 246 of the NIRC.26 Instead, it merely called
for the strict application of Sec. 100, which was already in force the moment the NIRC was
enacted.
SECOND DIVISION
[G.R. NO. 156946 : July 15, 2009]
SECRETARY OF FINANCE, Petitioner, v. ORO MAURA SHIPPING

LINES, Respondent.
DECISION
BRION, J.:
We resolve the petition1 filed by the Secretary of Finance

(petitioner), assailing the Decision dated August 26, 2002,2 and
Resolution dated January 20, 20033 of the Court of Appeals (CA) in
CA-G.R. SP No. 64644. The CA affirmed the decision4 dated March
29, 2001 of the Court of Tax Appeals (CTA) holding that the
assessment made by the Customs Collector of the Port of Manila on
respondent Oro Maura Shipping Lines' (respondent) vessel M/V
"HARUNA" had become final and conclusive upon all parties, and
could no longer be subject to re-assessment.
FACTUAL ANTECEDENTS
On November 24, 1992, the Maritime Industry Authority (MARINA)

authorized the importation of one (1) unit vessel M/V "HARUNA";
ex: Shin Shu Maru No. 8, under a Bareboat Charter, for a period of
five (5) years from its actual delivery to the charterer. The original
parties to the bareboat charter agreement were Haruna Maritime
S.A., represented by Mr. Yoji Morinaga of Panama, and Mr. Guerrero
G. Dajao, proprietor and manager of Glory Shipping Lines, the
charterer.
On December 29, 1992, the Department of Finance (DOF), in its 1st

Indorsement, allowed the temporary registration of the M/V
"HARUNA" and its tax and duty-free release to Glory Shipping Lines,
subject to the conditions imposed by MARINA. The Bureau of
Customs (BOC) also required Glory Shipping Lines to post a bond in
the amount equal to 150% of the duties, taxes and other charges
due on the importation, conditioned on the re-exportation of the
vessel upon termination of the charter period, but in no case to
extend beyond the year 1999.
On March 16, 1993, Glory Shipping Lines posted Ordinary Re-Export
Bond No. C(9) 121818 for P1,952,000.00, conditioned on the re-
export of the vessel within a period of one (1) year from March 22,
1993, or, in case of default, to pay customs duty, tax and other
charges on the importation of the vessel in the amount
of P1,296,710.00.
On March 22, 1993, the M/V "HARUNA" arrived at the Port of

Mactan. Its Import Entry No. 120-93 indicated the vessel's dutiable
value to be P6,171,092.00 and its estimated customs duty to
be P1,296,710.00.
On March 22, 1994, Glory Shipping Lines' re-export bond expired.

Almost two (2) months after, or on May 10, 1994, Glory Shipping
Lines sent a Letter of Guarantee to the Collector guaranteeing to
renew the Re-Export Bond on vessel M/V "HARUNA" on or before
May 20, 1994; otherwise, it would pay the duties and taxes on said
vessel. Glory Shipping Lines never complied with its Letter of
Guarantee; neither did it pay the duties and taxes and other
charges due on the vessel despite repeated demands made by the
Collector of the Port of Mactan.
Since the re-export bond was not renewed, the Collector of the Port
of Mactan assessed it customs duties and other charges amounting
to P1,952,000.00; thereafter, it sent Glory Shipping Lines several
demand letters dated April 22, 1996, June 21, 1996, and March 10,
1997, respectively. Glory Shipping Lines failed to pay the assessed
duties despite receipt of these demand letters.
Unknown to the Collector of the Port of Mactan, Glory Shipping

Lines had already offered to sell the vessel M/V "HARUNA" to the
respondent in October 1994. In fact, the respondent already applied
for an Authority to Import the vessel with MARINA on October 21,
1994, pegging the proposed acquisition cost of the vessel
at P1,100,000.00. MARINA granted this request through a letter
dated December 5, 1994, after finding that the proposed acquisition
cost of the vessel reasonable, taking into consideration the vessel's
depreciation due to wear and tear.
On December 2, 1994, Haruna Maritime S.A. and Glory Shipping
Lines sold the M/V "HARUNA" to the respondent without informing
or notifying the Collector of the Port of Mactan.
On December 13, 1994, Kariton and Company (Kariton),

representing the respondent, inquired with the DOF if it could pay
the duties and taxes due on the vessel, with the information that
the vessel was acquired by Glory Shipping Lines through a bareboat
charter and was previously authorized by the DOF to be released
under a re-export bond. The DOF referred Kariton's letter to the
Commissioner of Customs for appropriate action, per a 1st
Indorsement dated December 13, 1994. In turn, the Commissioner
of Customs, in a 2nd Indorsement dated December 14, 1994,
referred the DOF's 1st Indorsement to the Collector of Customs of
the Port of Manila.
On the basis of these indorsements and the MARINA appraisal,

Kariton filed Import Entry No. 179260 at the Port of Manila on
behalf of the respondent. The Collector of the Port of Manila
accepted the declared value of the vessel at P1,100,000.00 and
assessed duties and taxes amounting to P149,989.00, which the
respondent duly paid on January 4, 1995, as evidenced by Bureau
of Customs Official Receipt No. 50245666.
On November 5, 1997, after discovering that the vessel M/V

"HARUNA" had been sold to the respondent, the Collector of the
Port of Mactan sent the respondent a demand letter for the unpaid
customs duties and charges of Glory Shipping Lines. When the
respondent failed to pay, the Collector of the Port of Mactan
instituted seizure proceedings against the vessel M/V "HARUNA" for
violation of Section 2530, par. 1, subpar. (1) to (5) of the Tariff and
Customs Code of the Philippines (TCCP).
In his September 1998 Decision,5 the Collector of the Port of Mactan

ordered the forfeiture of the vessel in favor of the Government,
after finding that both Glory Shipping Lines and the respondent
acted fraudulently in the transaction.
The Cebu District Collector, acting on the respondent's appeal,

reversed the decision of the Collector of the Port of Mactan in his
December 1, 1998 decision, concluding that while there appeared to
be fraud in the sale of the vessel M/V "HARUNA" by Haruna
Maritime S.A. and Glory Shipping Lines to the respondent, there
was no proof that the respondent was a party to the
fraud.6 Moreover, the Cebu District Collector gave weight to
MARINA's appraisal of the dutiable value of the vessel. The decision
also held that in light of this appraisal that the Collector of Custom
of the Port of Manila used as basis for his assessment, the customs
duty the Collector of the Port of Manila imposed was unquestionably
proper.
On December 14, 1998, the Commissioner of Customs, in a 3rd

Indorsement,7 affirmed the decision of the Cebu District Collector
and recommended his approval to the petitioner.
In a 4th Indorsement dated January 8, 1999,8 the petitioner

affirmed the Commissioner's recommendation, but ordered a re-
assessment of the vessel based on the entered value, without
allowance for depreciation. The respondent filed a motion for
reconsideration, which the petitioner denied.
On May 15, 2000, the respondent filed a Petition for Review with
the CTA,9 assailing the petitioner's January 8, 1999 decision. In a
decision dated March 29, 2001, the CTA granted the respondent's
petition and set aside the petitioner's 4th Indorsement, thus
affirming the previous decision of the Commissioner of Customs.10
Dissatisfied with this outcome, the petitioner sought its review

through a petition filed with the CA; he claimed that the CTA erred
when it held that the petitioner no longer had authority to order the
re-assessment of the vessel.11
The CA affirmed the findings of the CTA in its decision dated August
26, 2002.12 The appellate court concluded that the assessment
made by the Collector of the Port of Manila had already become final
and conclusive on all parties, pursuant to Sections 1407 and 1603
of the TCCP; the respondent paid the assessed duties on January 4,
1995, while the Collector of the Port of Mactan demanded payment
of additional duties and taxes only on November 5, 1997, or more
than one year from the time the respondent paid. The CA also
upheld the findings of the Cebu District Collector, of the
Commissioner of Customs, and of the CTA that the fraud in this
case could not be imputed to the respondent since it was not shown
that the respondent knew about Glory Shipping Lines' infractions.
The CA subsequently denied petitioner's Motion for Reconsideration

in its resolution of January 20, 2003.13 Hence, this petition.
THE PETITION
The petitioner submits three issues for our resolution:
WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT THE

ASSESSMENT MADE BY THE MANILA CUSTOMS COLLECTOR ON THE
SUBJECT VESSEL HAD BECOME FINAL AND CONCLUSIVE UPON ALL
PARTIES.
II
WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT

RESPONDENT WAS AN "INNOCENT PURCHASER."
III
WHETHER THE COURT OF APPEALS ERRED IN NOT HOLDING THAT

A LIEN IN FAVOR OF THE GOVERNMENT AND AGAINST THE VESSEL
EXISTS.
The petitioner mainly argues that the CA committed a reversible

error when it held that the assessment of the Customs Collector of
the Port of Manila had become final and conclusive on all parties
pursuant to Sections 1407 and 1603 of the TCCP. According to the
petitioner, these provisions cannot limit the authority of the
Secretary of Finance or the Commissioner of Customs to assess or
collect deficiency duties; in the exercise of their supervisory powers,
the Commissioner and the Secretary may at any time direct the re-
assessment of dutiable articles and order the collection of deficiency
duties. Even assuming that Sections 1407 and 1603 of the TCCP
apply to the present case, the petitioner posits that the one-year
limitation14 set forth in these provisions presupposes that the return
and all entries, as passed upon and approved by the Collector,
reflect the accurate description and value of the imported article.
Where the article was misdeclared or undervalued, the statute of
limitations does not begin to run until a deficiency assessment has
been issued and settled in full. Lastly, the petitioner claims that the
respondent, being a direct and actual party to the importation,
should have ensured that the imported article was properly declared
and assessed the correct duties.
The respondent, on the other hand, claims that the appraisal of the
Collector can only be altered or modified within a year from
payment of duties, per Sections 1407 and 1603 of the TCCP; it is
only when there is fraud or protest or when the import entry was
merely tentative that settlement of duties will not attain finality. The
petitioner's allegation that there was misdeclaration or
undervaluation of the vessel is not supported by the evidence and is
contrary to the findings of the District Collector of the Port of Cebu,
which the petitioner himself affirmed in his 4th Indorsement dated
January 8, 1999. Moreover, the records show that the value of the
vessel was properly declared by the respondent at P1,100,000.00,
pursuant to the appraisal of the MARINA.
The core legal issue for our resolution is whether the Secretary of
Finance can order a re-assessment of the vessel M/V "HARUNA."
THE COURT'S RULING
We find the petition meritorious and rule that the petitioner can
order the re-assessment of the vessel M/V "HARUNA."
Procedural Issue
The Collector of the Port of Mactan found that the respondent

defrauded the BOC of the proper customs duty, but the District
Collector of Cebu held otherwise on appeal and absolved the
respondent from any participation in the fraud committed by Glory
Shipping Lines. These factual findings and conclusion were affirmed
by the Commissioner of Customs, by the CTA and, ultimately, by
the CA. Although in agreement with the conclusion, the petitioner,
however, ordered a reassessment of the dutiable value of the vessel
based on the original entered value, without allowance for
depreciation.
Factual findings of the lower courts, when affirmed by the CA, are
generally conclusive on the Court.15 For this reason, the Rules of
Court provide that only questions of law may be raised in a Petition
for Review on certiorari. We delve into factual issues and act on the
lower courts' factual findings only in exceptional circumstances,
such as when these findings contain palpable errors or are attended
by arbitrariness.16
After a review of the records of the present case, we find that the
CTA and the CA overlooked and misinterpreted factual
circumstances that, had they been brought to light and properly
considered, would have changed the outcome of this case. In
particular, a closer scrutiny of the surrounding circumstances of the
case and the respondent's actions reveal the existence of fraud that
deprived the State of the customs duties properly due to it.
A Critical Look at the Facts
Our examination of the facts tells us that there are four significant
phases that should be considered in appreciating the present case.
The first phase is the original tax and duty-free entry of the MV
Haruna when Glory Shipping Lines filed Import Entry No. 120-93
with the Collector of the Port of Mactan on March 22, 1993. The
vessel then had a declared dutiable value of P6,171,092.00 and the
estimated customs duty was P1,296,710.00. It was allowed
conditional entry on the basis of a one-year re-export bond that
lapsed and was not renewed. Despite a letter of guarantee
subsequently issued by Glory Shipping Lines and repeated demand
letters, no customs duties and charges were paid. The vessel
remained in the Philippines.
The second significant phase occurred when Glory Shipping Lines

offered to sell the vessel to the respondent in October 1994. At that
point, the respondent applied for an Authority to Import the vessel,
based on the proposed acquisition cost of P1,100,000.00. MARINA
granted the request based on the proposed acquisition cost, taking
depreciation into account.
From the first to the second phase, bad faith already intervened as
Glory Shipping Lines, instead of paying in accordance with its
commitment, simply turned around, disregarded the demand letters
of the Collector of the Port of Mactan, and offered the vessel for sale
to the respondent.
The respondent, for its part, already knew of the status of the
vessel (as it in fact subsequently manifested before the DOF); in
fact, what it asked for was an authority to import, although the
vessel was already in the Philippines. The respondent likewise was
the party which secured an appraisal from MARINA knowing fully
well of the vessel's value based on its previous history. It also
joined Glory Shipping Lines in the latter's attempt to evade the
payment of the customs duties and charges demanded by the
Collector of the Port of Mactan by pushing through with the
purchase of the vessel without any notification to the Collector of
the Port of Mactan - the Port that first administratively enforced the
rules on the vessel's importation resulting in its tax-free entry and
conditional release.
The third phase came when the respondent's representative asked

the DOF if it could pay the duties and taxes due on the vessel,
knowing fully well the vessel's history of entry into the country. The
respondent's declared value in the request was P1.1 Million based
on the lower appraisal that it secured from MARINA. The DOF
referred the matter to the Commissioner of Customs who in turn
made his own referral to the Collector of Customs of the Port of
Manila. It was the Collector of the Port of Manila who accepted the
declared value of P1.1 Million and assessed duties and taxes
amounting to P149,989.00. The respondent thus paid the customs
duties as approved by the Collector of the Port of Manila. As in the
second phase, no notice was given in this third phase to the Port of
Mactan as the Port that allowed the entry of the vessel into the
country and which had existing demand letters for the customs
duties and charges due on the vessel.
The fourth phase started on November 5, 1997 when the Collector
of the Port of Mactan acted after learning of the sale of the vessel to
the respondent. The Collector eventually instituted seizure
proceedings that led to the petition currently with us.
Evidence of Fraud
The tie-up between Glory Shipping Lines and the respondent in the
four phases identified above can better be appreciated if the
surrounding facts are considered.
An undisputed given in the narration of the four phases is the

valuation of P6,171,092.00 that Glory Shipping Lines gave when the
vessel first entered the country under Import Permit No. 120-93 on
March 22, 1993. When the respondent made its request with the
MARINA for authorization to import the same vessel after a span of
only 19 months, the respondent proposed an acquisition cost of
only P1,100,000.00. Consistent with this proposal, the respondent,
through Kariton, gave the vessel the same declared value in its own
Import Entry No. 179260 filed with the Collector of the Port of
Manila. Thus, in a little over a year and a half, the declared value of
the vessel decreased by P5,000,000.00, or an astonishing 80% of
its original price. We find this drop in value within a short period of
19 months to be too fantastic to be accepted without question, even
allowing for depreciation. Equally fantastic is the change in the
customs duties, taxes and other charges due which fell
from P1,296,710.00 in March 1993 to P149,989.00 in January 1995,
all because of the sale, the new application by the vendee, and the
change in the Port where the assessment and collection were made.
The drop alone from the undisputed original entry valuation

of P6,171,092.00 to the respondent's new valuation
of P1,100,000.00 (or a decrease of 80% from the original valuation)
is already a prima facieevidence of fraud that the rulings below did
not properly appreciate simply because they disregarded the
records of the original entry of the vessel through the Port of
Mactan. Section 2503 of the TCCP provides in this regard that:
Section 2503. Undervaluation, Misclassification and Misdeclaration

of Entry. - When the dutiable value of the imported articles shall be
so declared and entered that the duties, based on the declaration of
the importer on the face of the entry, would be less by ten percent
(10%) than should be legally collected, or when the imported
articles shall be so described and entered that the duties based on
the importer's description on the face of the entry would be less by
ten percent (10%) than should be legally collected based on the
tariff classification, or when the dutiable weight, measurement or
quantity of imported articles is found upon examination to exceed
by ten percent (10%) or more than the entered weight,
measurement or quantity, a surcharge shall be collected from the
importer in an amount of not less than the difference between the
full duty and the estimated duty based upon the declaration of the
importer, nor more than twice of such difference: Provided, That an
undervaluation, misdeclaration in weight, measurement or quantity
of more than thirty percent (30%) between the value, weight,
measurement, or quantity declared in the entry, and the actual
value, weight, quantity, or measurement shall constitute a prima
facie evidence of fraud penalized under Section 2530 of this Code:
Provided, further, That any misdeclared or underdeclared imported
articles/items found upon examination shall ipso facto be forfeited in
favor of the Government to be disposed of pursuant to the provision
of this Code.
When the undervaluation, misdescription, misclassification or

misdeclaration in the import entry is intentional, the importer shall
be subject to the penal provision under Section 3602 of this Code.
[Emphasis supplied.]
The 80% drop in valuation existing in this case renders the

consideration and application of Section 2503 unavoidable.
Significantly, the respondent never explained the considerable

disparity between the dutiable value declared by Glory Shipping
Lines and the dutiable value it declared - difference
of P5,000,000.00 - so as to overturn or contradict this prima
facie finding of fraud. We note that the exercise of due diligence
alone would have alerted it to Glory Shipping Lines' acquisition cost
and the vessel's declared value at its first entry. The respondent,
being in the shipping business, should have known the standard
prices of vessels and that the value it proposed to MARINA, as
described in the second phase above, is extraordinarily low
compared to the vessel's originally declared valuation. All these
strengthen, rather than weaken, the prima facie evidence of fraud
that the law dictates when an unconscionable disparity of valuations
exists.
Depreciation not factor in determining dutiable value
Neither can the respondent hide behind the excuse that the vessel's
dutiable value at P1,100,000.00 was approved by MARINA via the
Authority to Import, taking into consideration the vessel's
depreciation brought about by its ordinary wear and tear. In the
first place, we observe that nowhere in the TCCP does it state that
the depreciated value of an imported item can be used as the basis
to determine an imported item's dutiable value. Section 201 of P.D.
No. 1464 (the Tariff and Customs Code of 1978)17 in this regard
provides:
Sec. 201. - Basis of Dutiable Value. - The dutiable value of an

imported article subject to an ad valorem rate of duty shall be
based on the cost (fair market value) of same, like or similar
articles, as bought and sold or offered for sale freely in the usual
wholesale quantities in the ordinary course of trade in the principal
markets of the exporting country on the date of exportation to the
Philippines (excluding internal excise taxes to be remitted or
rebated) or where there is none on such date, then on the cost (fair
market value) nearest to the date of exportation, including the
value of all container, covering and/or packings of any kind and all
other expenses, costs and charges incident to placing the article in a
condition ready for shipment to the Philippines, and freight as well
as insurance premium covering the transportation of such articles to
the port of entry in the Philippines.
Where the fair market value or price of the article cannot be

ascertained thereat or where there exists a reasonable doubt as to
the fairness of such value or price, then the fair market value or
price in the principal market in the country of manufacture or origin,
if it is not the country of exportation, or in a third country with the
same stage of economic development as the country of exportation
shall be used.
When the dutiable value of the article cannot be ascertained in

accordance with the preceding paragraphs or where there exists a
reasonable doubt as to the cost (fair market value) of the imported
article declared in the entry, the correct dutiable value of the article
shall be ascertained by the Commissioner Of Customs from the
reports of the Revenue or Commercial Attache (Foreign Trade
Promotion Attache), pursuant to Republic Act Numbered Fifty-four
Hundred and Sixty-six or other Philippine diplomatic officers or
Customs Attaches and from such other information that may be
available to the Bureau of Customs. Such values shall be published
by the Commissioner of Customs from time to time.
When the dutiable value cannot be ascertained as provided in the

preceding paragraphs, or where there exists a reasonable doubt as
to the dutiable value of the imported article declared in the entry, it
shall be domestic wholesale selling price of such or similar article in
Manila or other principal markets in the Philippines or on the date
the duty become payable on the article under appraisement, on the
usual wholesale quantities and in the ordinary course of trade,
minus:
(a) not more than twenty-five (25) per cent thereof for expenses
and profits; andcralawlibra ry
(b) duties and taxes paid thereon. (as amended by E.O.

156)[Emphasis supplied.]
Even assuming that the depreciated value of the vessel can be

considered in determining the vessel's dutiable value, still, we find
that the decrease of 80% from the original price after the passage
of only 19 months cannot be believed and thus should not be
accepted.
Assuming further that MARINA merely committed a mistake in

approving the vessel's proposed acquisition cost at P1,100,000.00,
and that the Collector of the Port of Manila similarly erred, we
reiterate the legal principle that estoppel generally finds no
application against the State when it acts to rectify mistakes,
errors,18 irregularities, or illegal acts,19of its officials and agents,
irrespective of rank. This ensures efficient conduct of the affairs of
the State without any hindrance on the part of the government from
implementing laws and regulations, despite prior mistakes or even
illegal acts of its agents shackling government operations and
allowing others, some by malice, to profit from official error or
misbehavior. The rule holds true even if the rectification prejudices
parties who had meanwhile received benefits.20
This principle is particularly true when it comes to the collection of

taxes. As we stated in Intra-Strata Assurance Corporation v.
Republic of the Philippines:21
It has long been a settled rule that the government is not bound by
the errors committed by its agents. Estoppel does not also lie
against the government or any of its agencies arising from
unauthorized or illegal acts of public officers.22 This is particularly
true in the collection of legitimate taxes due where the collection
has to be made whether or not there is error, complicity, or plain
neglect on the part of the collecting agents.23 In CIR v. CTA, we
pointedly said:
It is axiomatic that the government cannot and must not be

estopped particularly in matters involving taxes. Taxes are the
lifeblood of the nation through which the government agencies
continue to operate and with which the State effects its functions for
the welfare of its constituents. Thus, it should be collected without
unnecessary hindrance or delay. [Emphasis supplied.]
The Respondent's Complicity
That the respondent fully participated in moves to defraud the BOC,

as shown by the recital of the four phases above, is further
supported by another factual circumstance - the respondent's
acknowledgment to the DOF that the vessel M/V "HARUNA"
conditionally entered the country under a re-export bond filed with
the BOC. This is plain from the 1st Indorsement of the DOF dated
December 13, 1994, which states:
1st Indorsement
December 13, 1994
Respectfully forwarded to the Commissioner of Customs, Manila, for

appropriate action, the herein letter of even date of Kariton &
Company, requesting in behalf of their client, ORO MAURA
SHIPPING LINE to pay the corresponding duties and taxes due on
the vessel MV "HARUNA" (ex. Shinsu Maru No. 8) which was
acquired by Glory Shipping Lines thru bareboat charter under P.D.
No. 760, as amended and previously authorized by this Department
to be released under a re-export bond pursuant to Section 1 of P.D.
No. 1711 amending P.D. No. 760 under our 1st Indorsement dated
December 29, 1992, copy attached, subject to pertinent import
laws, rules and regulations.
With the knowledge that the vessel was released under a re-export
bond, the respondent should have known that this original entry
was subject to specific conditions, among them, the obligation to
guarantee the re-export of the vessel within a given period, or
otherwise to pay the customs duties on the vessel. It should have
known, too, of the conditions of the vessel's release under the re-
export bond and of the state of Glory Shipping Lines' status of
compliance.
There was an original but incomplete importation by Glory Shipping

Lines that the respondent could not have simply disregarded
proceeds from knowledge of the vessel's history and the application
of the relevant law. In this respect, Section 1202 of the TCCP
provides:
Importation begins when the carrying vessel or aircraft enters the

jurisdiction of the Philippines with intention to unlade
therein. Importation is deemed terminated upon payment of
the duties, taxes and other charges due upon the articles, or
secured to be paid, at a port of entry and the legal permit for
withdrawal shall have been granted, or in case said articles are
free of duties, taxes and other charges, until they have legally left
the jurisdiction of the customs.
In order for an importation to be deemed terminated, the payment
of the duties, taxes, fees and other charges of the item brought into
the country must be in full. For as long as the importation has not
been completed, the imported item remains under the jurisdiction of
the BOC.24 From the perspective of process, the importation that
originally started with Glory Shipping Lines was therefore never
completed and terminated, so that the respondent's present
importation is merely a continuation of that original process.ςηαñrοbl εš νι r†υα l lαω lι brα rÿ
Saddled with knowledge of the underlying facts that preceded its

purchase, the conclusion that the respondent fully cooperated with
Glory Shipping Lines in avoiding the original charges and duties due
is unavoidable; the respondent provided the medium (1) to
disregard the original duties due on the vessel's first entry; and (2)
to avoid the Port of Mactan where demands for payment of overdue
custom duties already existed. In the process, it of course acted for
its own interest by securing for itself lower dutiable values and
lesser duties due. The fact that the respondent did all these
confirms that it participated in the moves to defraud the BOC of the
legitimate taxes due as originally assessed.
Finality of the Port of Manila Assessment
Our finding of fraud leads us to conclude that the assessment of the

Collector of the Port of Manila cannot become final and conclusive
pursuant to Section 1603 of the TCCP, which states:
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.
Nature of a tax lien
An important factual circumstance that the CTA and the CA appear

to have completely overlooked is that the vessel first entered the
Philippines through the Port of Mactan and it was the Collector of
the Port of Mactan who first acquired jurisdiction over the vessel
when he approved the vessel's temporary release from the custody
of the BOC, after Glory Shipping Lines filed Ordinary Re-Export
Bond No. C(9) 121818.
When this re-export bond expired on March 22, 1994, Glory

Shipping Lines filed a letter dated May 10, 1994 guaranteeing the
renewal of the re-export bond on or before May 20, 1994, otherwise
the duties, taxes and other charges on the vessel would be paid.
Therefore, when May 20, 1994 came and went without the renewal
of the vessel's re-export bond, the obligation to pay customs duties,
taxes and other charges on the importation in the amount
of P1,296,710.00 arose and attached to the vessel. Undoubtedly,
this lien was never paid by Glory Shipping Lines, thus it continued
to exist even after the vessel was sold to the respondent. Section
1204 of the TCCP in this regard states:
Section 1204. Liability of Importer for Duties. - Unless relieved by

laws or regulations, the liability for duties, taxes, fees and other
charges attaching on importation constitutes a personal debt
due from the importer to the government which can be
discharged only by payment in full of all duties, taxes, fees and
other charges legally accruing. It also constitutes a lien upon the
articles imported which may be enforced while such articles are in
custody or subject to the control of the government.
As defined by Black's Law Dictionary, a lien is a claim or charge on

property for payment of some debt, obligation or duty.25 In this
particular instance, the obligation is a tax lien that attaches to
imported goods, regardless of ownership.26
Consequently, when the respondent bought the vessel from Glory

Shipping Lines on December 2, 1994, the obligation to pay the
BOC P1,296,710.00 as customs duties had already attached to the
vessel and the non-renewal of the re-export bond made this liability
due and demandable. The subsequent transfer of ownership of the
vessel from Glory Shipping Lines to the respondent did not
extinguish this liability.
Therefore, while it is true that the respondent had already paid the
customs duties assessed by the Collector of the Port of Manila, this
payment did not have the effect of extinguishing the lien given the
tax lien that had attached to the vessel and the fact that what had
been paid was different from what was owed. From the point of
amount alone, the customs duties paid to the Collector at the Port
of Manila only amounted to P149,989.00, while the lien which had
attached to the vessel based on the unpaid assessment by the
Collector of the Port of Mactan amounted to P1,296,710.00.
Finally, we deem it necessary to reiterate our pronouncement in

Chevron Philippines v. Commissioner of the Bureau of
Customs,27 where we discussed the importance of tariff and
customs duties in the following manner:
Taxes are the lifeblood of the nation. Tariff and customs duties are
taxes constituting a significant portion of the public revenue which
enables the government to carry out the functions it has been
ordained to perform for the welfare of its constituents.28 Hence,
their prompt and certain availability is an imperative need29 and
they must be collected without unnecessary hindrance.30 [Emphasis
supplied.]
In keeping with this and other cited rulings, we find in favor of the
petitioner and uphold his order for the re-assessment of the value of
the vessel based on the entered value, which in this case should
follow the unpaid assessment made by the Collector of Customs of
the Port of Mactan.
WHEREFORE, we REVERSE the decision of the Court of Appeals

dated August 26, 2002 in CA-G.R. SP No. 64644, and REINSTATE
WITH MODIFICATION the ruling under former Finance Secretary
Edgardo Espiritu's 4th Indorsement dated January 8, 1999. The re-
assessment shall be based on the unpaid assessment by the
Collector of Customs of the Port of Mactan against respondent Oro
Maura Shipping Lines dated November 5, 1997, made on the basis
of M/V HARUNA's entered value, without allowance for depreciation,
but including other taxes and charges due. Seizure proceedings
shall proceed in due course unless the unpaid customs duties, other
taxes and charges are duly paid. Costs against the petitioner.
SO ORDERED.
G.R. No. 207843, July 15, 2015
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. COURT OF TAX APPEALS (SECOND

DIVISION) AND PETRON CORPORATION,*Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for certiorari1 are the Resolutions dated February 13, 20132 and May 8, 20133 of the
Court of Tax Appeals, Second Division (CTA) in CTA Case No. 8544 reversing and setting aside the earlier
dismissal of the petition for review filed by private respondent Petron Corporation (Petron) in the said case
on the bases of prematurity and lack of jurisdiction.
The Facts
Petron, which is engaged in the manufacture and marketing of petroleum products, imports alkylate as a
raw material or blending component for the manufacture of ethanol-blended motor gasoline.4 For the period
January 2009 to August 2011, as well as for the month of April 2012, Petron transacted an aggregate of 22
separate importations for which petitioner the Commissioner of Internal Revenue (CIR) issued Authorities to
Release Imported Goods (ATRIGs), categorically stating that Petron's importation of alkylate is exempt from
the payment of the excise tax because it was not among those articles enumerated as subject to excise tax
under Title VI of Republic Act No. (RA) 8424,5 as amended, or the 1997 National Internal Revenue Code
(NIRC). With respect, however, to Petron's alkylate importations covering the period September 2011 to
June 2012 (excluding April 2012), the CIR inserted, without prior notice, a reservation for all ATRlGs
issued,6 stating that:
ChanRobles Vi rtualaw lib rary
Lawlibra ryofCRAlaw
This is without prejudice to the collection of the corresponding excise taxes, penalties and interest
depending on the final resolution of the Office of the Commissioner on the issue of whether this item is
subject to the excise taxes under the National Internal Revenue Code of 1997, as amended.7
In June 2012, Petron imported 12,802,660 liters of alkylate and paid value-added tax (VAT) in the total
amount of P41,657,533.00 as evidenced by Import Entry and Internal Revenue Declaration (IEIRD) No. SN
122406532. Based on the Final Computation, said importation was subjected by the Collector of Customs of
Port Limay, Bataan, upon instructions of the Commissioner of Customs (COC), to excise taxes of P4.35 per
liter, or in the aggregate amount of P55,691,571.00, and consequently, to an additional VAT of 12% on the
imposed excise tax in the amount of P6,682,989.00.8 The imposition of the excise tax was supposedly
premised on Customs Memorandum Circular (CMC) No. 164-2012 dated July 18, 2012, implementing the
Letter dated June 29, 2012 issued by the CIR, which states that:
Lawlibra ryofCRAlaw
[A]lkylate which is a product of distillation similar to that of naphta, is subject to excise tax under Section 1
48(e) of the National Internal Revenue Code (NIRC) of 1997.9
In view of the CIR's assessment, Petron filed before the CTA a petition for review,10 docketed as CTA Case
No. 8544, raising the issue of whether its importation of alkylate as a blending component is subject to
excise tax as contemplated under Section 148 (e) of the NIRC.
On October 5, 2012, the CIR filed a motion to dismiss on the grounds of lack of jurisdiction and
prematurity.11 reda rclaw
Initially, in a Resolution12 dated November 15, 2012, the CTA granted the CIR's motion and dismissed the
case. However, on Petron's motion for reconsideration,13 it reversed its earlier disposition in a
Resolution14 dated February 13, 2013, and eventually denied the CIR's motion for
reconsideration15therefrom in a Resolution16 dated May 8, 2013. In effect, the CTA gave due course to
Petron's petition, finding that: (a) the controversy was not essentially for the determination of the
constitutionality, legality or validity of a law, rule or regulation but a question on the propriety or soundness
of the CIR's interpretation of Section 148 (e) of the NIRC which falls within the exclusive jurisdiction of the
CTA under Section 4 thereof, particularly under the phrase "other matters arising under [the NIRC]";17 and
(b) there are attending circumstances that exempt the case from the rule on non-exhaustion of
administrative remedies, such as the great irreparable damage that may be suffered by Petron from the
CIR's final assessment of excise tax on its importation.18 redarclaw
Aggrieved, the CIR sought immediate recourse to the Court, through the instant petition, alleging that the
CTA committed grave abuse of discretion when it assumed authority to take cognizance of the case despite
its lack of jurisdiction to do so.19 redarclaw
The Issue Before the Court
The core issue to be resolved is whether or not the CTA properly assumed jurisdiction over the petition
assailing the imposition of excise tax on Petron's importation of alkylate based on Section 148 (e) of the
NIRC.
The Court's Ruling
The petition is meritorious.
The CIR asserts that the interpretation of the subject tax provision, i.e., Section 148 (e) of the NIRC,
embodied in CMC No. 164-2012, is an exercise of her quasi-legislative function which is reviewable by the
Secretary of Finance, whose decision, in turn, is appealable to the Office of the President and, ultimately, to
the regular courts, and that only her quasi� judicial functions or the authority to decide disputed
assessments, refunds, penalties and the like are subject to the exclusive appellate jurisdiction of the
CTA.20 She likewise contends that the petition suffers from prematurity due to Petron's failure to exhaust all
available remedies within the administrative level in accordance with the Tariff and Customs Code (TCC).21 redarclaw
The CIR's position is well-grounded.
Section 4 of the NIRC confers upon the CIR both: (a) the power to interpret tax laws in the exercise of her
quasi-legislative function; and (b) the power to decide tax cases in the exercise of her quasi-judicial
function. It also delineates the jurisdictional authority to review the validity of the CIR's exercise of the said
powers, thus:
Lawlib raryofCRAlaw
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction
of the Commissioner, subject to review by the Secretary of Finance.
thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals. (Emphases and underscoring supplied)
The CTA is a court of special jurisdiction, with power to review by appeal decisions involving tax disputes
rendered by either the CIR or the COC. Conversely, it has no jurisdiction to determine the validity of a ruling
issued by the CIR or the COC in the exercise of their quasi-legislative powers to interpret tax laws. These
observations may be deduced from a reading of Section 7 of RA 1125,22 as amended by RA 9282,23 entitled
"An Act Creating the Court of Tax Appeals," enumerating the cases over which the CTA may exercise its
jurisdiction:
Lawl ibra ryofCRAlaw
Sec. 7. Jurisdiction. - The CTA shall exercise: Lawlib ra ryofCRAlaw

Law lib raryofCRAlaw
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,

refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue or other laws administered by the Bureau of
Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, tees or other charges, penalties in relations thereto, or other matters arising under
the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where
the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be
deemed a denial;
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or
resolved by them in the exercise of their original or appellate jurisdiction;
4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other
money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in
relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau
of Customs;
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over
cases involving the assessment and taxation of real property originally decided by the provincial or city
board of assessment appeals;
6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from
decisions of the Commissioner of Customs which are adverse to the Government under Section 2315 of the
Tariff and Customs Code;
7. Decisions ofthe Secretary ofTrade and Industry, in the case of non�agricultural product, commodity or
article, and the Secretary of Agriculture in the case of agricultural product, commodity or article, involving
dumping and countervailing duties under Section 301 and 302, respectively, of the Tariff and Customs Code,
and safeguard measures under Republic Act No. 8800, where either party may appeal the decision to
impose or not to impose said duties.
b. Jurisdiction over cases involving criminal offenses as herein provided:
Lawlib raryofCR Alaw
1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National Internal
Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of Internal Revenue
or the Bureau of Customs: Provided, however, That offenses or felonies mentioned in this paragraph where
the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million
pesos (P1,000,000.00) or where there is no specified amount claimed shall be tried by the regular Courts
and the jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court to the contrary
notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability for
taxes and penalties shall at all times be simultaneously instituted with, and jointly determined in the same
proceeding by the CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of
the civil action, and no right to reserve the filling of such civil action separately from the criminal action will
be recognized.
2. Exclusive appellate jurisdiction in criminal offenses:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases originally
decided by them, in their respective territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts in their respective jurisdiction.
c. Jurisdiction over tax collection cases as herein provided:
Lawl ibra ryofCRAlaw
1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes,
fees, charges and penalties: Provided, however, That collection cases where the principal amount of taxes
and fees, exclusive of charges and penalties, claimed is less than One million pesos (P1,000,000.00) shall be
tried by the proper Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court.
2. Exclusive appellate jurisdiction in tax collection cases:

La wlibra ryofCRAlaw
a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection cases
originally decided by them, in their respective territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
exercise of their appellate jurisdiction over tax collection cases originally decided by the Metropolitan Trial
Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction. (Emphasis
supplied)
In this case, Petron's tax liability was premised on the COC's issuance of CMC No. 164-2012, which gave
effect to the CIR's June 29, 2012 Letter interpreting Section 148 (e) of the NIRC as to include alkylate
among the articles subject to customs duties, hence, Petron's petition before the CTA ultimately�
challenging the legality and constitutionality of the CIR's aforesaid interpretation of a tax provision. In line
with the foregoing discussion, however, the CIR correctly argues that the CTA had no jurisdiction to take
cognizance of the petition as its resolution would necessarily involve a declaration of the validity or
constitutionality of the CIR's interpretation of Section 148 (e) of the NIRC, which is subject to the exclusive
review by the Secretary of Finance and ultimately by the regular courts. In British American Tobacco v.
Camacho,24 the Court ruled that the� CTA's jurisdiction to resolve tax disputes excludes the power to rule
on the constitutionality or validity of a law, rule or regulation, to wit:
Lawlibra ryofCRAlaw
While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not
include cases where the constitutionality of a law or rule is challenged. Where what is assailed is the validity
or constitutionality of a law, or a rule or regulation issued by the administrative agency in the performance
of its quasi� legislative function, the regular courts have jurisdiction to pass upon the same. x x x.25
In asserting its jurisdiction over the present case, the CTA explained that Petron's petition filed before it
"simply puts in question" the propriety or soundness of the CIR's interpretation and application of Section
148 (e) of the NIRC (as embodied in CMC No. 164-2012) "in relation to" the imposition of excise tax on
Petron's importation of alkylate; thus, the CTA posits that the case should be regarded as "other matters
arising under [the NIRC]" under the second paragraph of Section 4 of the NIRC, therefore falling within the
CTA's jurisdiction:26
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. The power to interpret
the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the
Commissioner, subject to review by the Secretary of Finance.
thereof administered by the Bureau of Internal Revenue is vested in the commissioner, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals. (Emphases and underscoring supplied)
The Court disagrees.
As the CIR aptly pointed out, the phrase "other matters arising under this Code," as stated in the second
paragraph of Section 4 of the NIRC, should be understood as pertaining to those matters directly related to
the preceding phrase "disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto" and must therefore not be taken in isolation to invoke the jurisdiction
of the CTA.27 In other words, the subject phrase should be used only in reference to cases that are, to begin
with, subject to the exclusive appellate jurisdiction of the CTA, i.e., those controversies over which the CIR
had exercised her quasi-judicial functions or her power to decide disputed assessments, refunds or internal
revenue taxes, fees or other charges, penalties imposed in relation thereto, not to those that involved the
CIR's exercise of quasi-legislative powers.
In Enrile v. Court of Appeals,28 the Court, applying the statutory construction principle of ejusdem
generis,29 explained the import of using the general clause "other matters arising under the Customs Law or
other law or part of law administered by the Bureau of Customs" in the enumeration of cases subject to the
exclusive appellate jurisdiction of the CTA, saying that:
Lawlibra ryof CRAlaw
[T]he 'other matters' that may come under the general clause should be of the same nature as those
that have preceded them applying the rule of construction known as ejusdem generis.30 (Emphasis and
underscoring supplied)
Hence, as the CIR's interpretation of a tax provision involves an exercise of her quasi-legislative functions,
the proper recourse against the subject tax ruling expressed in CMC No. 164-2012 is a review by the
Secretary of Finance and ultimately the regular courts. In Commissioner of Customs v. Hypermix Feeds
Corporation,31 the Court has held that:
Lawlib raryofCRAlaw
The determination of whether a specific rule or set of rules issued by an administrative agency contravenes
the law or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the
power of judicial review or the power to declare a law, treaty, international or executive agreement,
presidential decree, order, instruction, ordinance, or regulation in the courts, including the regional trial
courts. This is within the scope of judicial power, which includes the authority of the courts to determine in
an appropriate action the validity of the acts of the political departments. x x x.32
Besides, Petron prematurely invoked the jurisdiction of the CTA. Under Section 7 of RA 1125, as amended
by RA 9282, what is appealable to the CTA is the decision of the COC over a customs collector's adverse
ruling on a taxpayer's protest:
Lawlib raryofCR Alaw
SEC. 7. Jurisdiction. - The CTA shall exercise: Lawlib ra ryofCRAlaw

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under
the National Internal Revenue or other laws administered by the Bureau of Internal Revenue;
xxxx
4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other
money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in
relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau
of Customs;
xxxx
Section 11 of the same law is no less categorical in stating that what may be the subject of an appeal to the
CTA is a decision, ruling or inaction of the CIR or the COC, among others:
Lawlibra ryofCRAlaw
SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a decision,
ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of
Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of
Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty (30) days
after the receipt of such decision or ruling or after the expiration of the period fixed by law for action as
referred to in Section 7(a)(2) herein.
xxxx
In this case, there was even no tax assessment to speak of. While customs collector Federico Bulanhagui
himself admitted during the CTA's November 8, 2012 hearing that the computation he had written at the
back page of the IEIRD served as the final assessment imposing excise tax on Petron's importation of
alkylate,33 the Court concurs with the CIR's stance that the subject IEIRD was not yet the customs
collector's final assessment that could be the proper subject of review. And even if it were, the same should
have been brought first for review before the COC and not directly to the CTA. It should be stressed that the
CTA has no jurisdiction to review by appeal, decisions of the customs collector.34 The TCC prescribes that a
party adversely affected by a ruling or decision of the customs collector may protest such ruling or decision
upon payment of the amount due35 and, if aggrieved by the action of the customs collector on the matter
under protest, may have the same reviewed by the COC.36 It is only after the coc shall have made an
adverse ruling on the matter may the aggrieved party file an appeal to the CTA.37 redarclaw
Notably, Petron admitted to not having filed a protest of the assessment before the customs collector and
elevating a possible adverse ruling therein to the COC, reasoning that such a procedure would be costly and
impractical, and would unjustly delay the resolution of the issues which, being purely legal in nature
anyway, were also beyond the authority of the customs collector to resolve with finality.38 This admission is
at once decisive of the issue of the CTA's jurisdiction over the petition. There being no protest ruling by the
customs collector that was appealed to the COC, the filing of the petition before the CTA was premature as
there was nothing yet to review.39 reda rc law
Verily, the fact that there is no decision by the COC to appeal from highlights Petron's failure to exhaust
administrative remedies prescribed by law. Before a party is allowed to seek the intervention of the courts, it
is a pre-condition that he avail of all administrative processes afforded him, such that if a remedy within the
administrative machinery can be resorted to by giving the administrative officer every opportunity to decide
on a matter that comes within his jurisdiction, then such remedy must be exhausted first before the court's
power of judicial review can be sought, otherwise, the premature resort to the court is fatal to one's cause
of action.40 While there are exceptions to the principle of exhaustion of administrative remedies, it has not
been sufficiently shown that the present case falls under any of the exceptions.
WHEREFORE, the petition is GRANTED. The Resolutions dated February 13, 2013 and May 8, 2013 of the
Court of Tax Appeals (CTA), Second Division in CTA Case No. 8544 are hereby REVERSED and SET ASIDE.
The petition for review filed by private respondent Petron Corporation before the CTA is DISMISSED for
lack of jurisdiction and prematurity.
SO ORDERED. cralawlawlibra ry

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G.R. No.

210987, November 24, 2014

VELASCO JR., J.:

Nature of the Case

On January 4, 2012, however, respondent Commissioner on Internal Revenue (Commissioner) denied

(c) Determination of Amount and Recognition of Gain or Loss –

Ruling of the Court of Appeals

The Court’s Ruling

The petition is unmeritorious.

Reviews by the Secretary of

3. CA: The ruling of the Commissioner is subject to review by the CTA.

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

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,

The appellate power of the

Petitioner’s above submission is specious.

The price difference is

SECRETARY OF FINANCE, Petitioner, v. ORO MAURA SHIPPING

We resolve the petition1 filed by the Secretary of Finance

On November 24, 1992, the Maritime Industry Authority (MARINA)

On December 29, 1992, the Department of Finance (DOF), in its 1st

On March 22, 1993, the M/V "HARUNA" arrived at the Port of

On March 22, 1994, Glory Shipping Lines' re-export bond expired.

Unknown to the Collector of the Port of Mactan, Glory Shipping

On December 13, 1994, Kariton and Company (Kariton),

On the basis of these indorsements and the MARINA appraisal,

On November 5, 1997, after discovering that the vessel M/V

In his September 1998 Decision,5 the Collector of the Port of Mactan

The Cebu District Collector, acting on the respondent's appeal,

On December 14, 1998, the Commissioner of Customs, in a 3rd

In a 4th Indorsement dated January 8, 1999,8 the petitioner

Dissatisfied with this outcome, the petitioner sought its review

The CA subsequently denied petitioner's Motion for Reconsideration

The petitioner submits three issues for our resolution:

WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT THE

WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT

WHETHER THE COURT OF APPEALS ERRED IN NOT HOLDING THAT

The petitioner mainly argues that the CA committed a reversible

THE COURT'S RULING

The Collector of the Port of Mactan found that the respondent

A Critical Look at the Facts

The second significant phase occurred when Glory Shipping Lines

The third phase came when the respondent's representative asked

An undisputed given in the narration of the four phases is the

The drop alone from the undisputed original entry valuation

Section 2503. Undervaluation, Misclassification and Misdeclaration

When the undervaluation, misdescription, misclassification or

The 80% drop in valuation existing in this case renders the

Significantly, the respondent never explained the considerable

Depreciation not factor in determining dutiable value

Sec. 201. - Basis of Dutiable Value. - The dutiable value of an

Where the fair market value or price of the article cannot be

When the dutiable value of the article cannot be ascertained in

When the dutiable value cannot be ascertained as provided in the

(b) duties and taxes paid thereon. (as amended by E.O.

Even assuming that the depreciated value of the vessel can be

Assuming further that MARINA merely committed a mistake in

This principle is particularly true when it comes to the collection of