HONDA CARS v.

HONDA CARS TECHNICAL SPECIALIST

On 2006, petitioner Honda Cars Philippines, Inc., (company) and respondent Honda Cars
Technical Specialists and Supervisory Union, entered into a collective bargaining agreement. Prior
to April 1, 2005, the union members were receiving a transportation allowance of 3,300.00 a
month. On September 3, 2005, the company and the union entered into a Memorandum of
Agreement5 (MOA) converting the transportation allowance into a monthly gasoline allowance. It
was provided, that in the event the amount of gasoline is not fully consumed, the gasoline not used
may be converted into cash, subject to whatever tax may be applicable. Since the cash conversion is
paid in the monthly payroll as an excess gas allowance, the company considers the amount as part of
the managers’ and AVPs’ compensation that is subject to income tax on compensation.

The union, on the other hand, argued that the gasoline allowance for its members is a "negotiated
item" under their CBA on fringe benefits. The disagreement between the company and the union
on the matter resulted in a grievance which they referred to the CBA grievance procedure for
resolution. As it remained unsettled there, they submitted the issue to a panel of voluntary
arbitrators as required by the CBA. The Panel of Voluntary Arbitrators declared that the cash
conversion of the unused gasoline allowance enjoyed by the members of the union is a fringe
benefit subject to the fringe benefit tax, not to income tax

WON the Voluntary Arbitrator has jurisdiction to settle tax matters?

No. The Voluntary Arbitrator has no competence to rule on the taxability of the gas allowance and
on the propriety of the withholding of tax. These issues are clearly tax matters, and do not involve
labor disputes. To be exact, they involve tax issues within a labor relations setting as they pertain to
questions of law on the application of Section 33 (A) of the NIRC. They do not require the
application of the Labor Code or the interpretation of the MOA and/or company personnel
policies.

LG ELECTRONICS v. CIR

FACTS:
On March 21, 1998 petitioner LG Electronics Philippines, Inc. (LG) was assessed deficiency
income tax for the taxable year of 1994. It filed administrative protest with the Bureau of Internal
Revenue against the tax assessment claiming that the assessment did not have factual and legal
bases.
LG filed a Petition for Review before the Court of Tax Appeals then raised the issue to the
Supreme Court. Meanwhile, LG availed itself of the tax amnesty provided under Republic Act No.
9480.

ISSUE:
Whether or not petitioner LG Electronics Philippines, Inc. is entitled to the immunities and
privileges granted under Tax Amnesty Act of 1997.

RULING:

Yes. LG has properly availed itself of the tax amnesty under RA No. 9840 by paying the correct
amount and submitting the required documents. LG’s completion of the requirements and
compliance with the procedure laid down in the law and the implementing rules entitled it to the
privileges and immunities under the tax amnesty program.

Moreover, tax assessments that are disputed administratively or judicially are still covered by the tax
amnesty law except those cases excluded from the coverage of the law like tax cases subject of final
and executory judgments by the courts. The present case has not become final and executory when
LG availed of the tax amnesty program.

NOTES:

Nature of a tax amnesty

A tax amnesty is a general pardon or the intentional overlooking by the State of its authority to
impose penalties on persons otherwise guilty of violation of a tax law. It partakes of an absolute
waiver by the government of its right to collect what is due it and to give tax evaders who wish to
relent a chance to start with a clean slate. A tax amnesty, much like a tax exemption, is never favored
or presumed in law. The grant of a tax amnesty, similar to a tax exemption, must be construed
strictly against the taxpayer and liberally in favor of the taxing authority.

What is the role of tax amnesties in the government’s collection of taxes?

Tax amnesty is a general pardon to taxpayers who want to start a clean tax slate. It also gives the
government a chance to collect uncollected tax from tax evaders without having to go through the
tedious process of a tax case.

Rule-making power of administrative agencies

While tax amnesty, similar to a tax exemption, must be construed strictly against the taxpayer and
liberally in favor of the taxing authority, it is also a well-settled doctrine that the rule-making power
of administrative agencies cannot be extended to amend or expand statutory requirements or to
embrace matters not originally encompassed by the law. Administrative regulations should always
be in accord with the provisions of the statute they seek to carry into effect, and any resulting
inconsistency shall be resolved in favor of the basic law.

BIR’s representation in appellate proceedings

The institution or commencement before a proper court of civil and criminal actions and
proceedings arising under the Tax Reform Act which “shall be conducted by legal officers of the
Bureau of Internal Revenue” is not in dispute. An appeal from such court, however, is not a matter
of right. Section 220 of the Tax Reform Act must not be understood as overturning the long
established procedure before this Court in requiring the Solicitor General to represent the interest
of the Republic. This Court continues to maintain that it is the Solicitor General who has the
primary responsibility to appear for the government in appellate proceedings.

CIR v. SMC

FACTS:
When SMC's October 19, 1999 letter requested the registration and authority to manufacture "San
Mig Light," to be taxed at ₱12.15 per liter, the BIR granted the request, thus confirming SMC can
register, manufacture, and sell "San Mig Light" as a new brand.

The CIR argues that "San Mig Light," launched in November 1999, is not a new brand but merely
a low-calorie variant of "San Miguel Pale Pilsen." Thus, the application of the higher excise tax rate
for variant products is appropriate (₱19.91 per liter instead of ₱9.15 per liter) and SMC should not
be entitled to a refund or issuance of a tax credit certificate. The CTA sided with SMC; hence, this
petition by the CIR with the SC.

ISSUES:
[1] Can the BIR validly reclassify brands?
[2] Is "San Mig Light" is a new brand and not a variant of "San Miguel Pale Pilsen"?
[3] Is it not that estoppel does not apply to the government in case of collection of taxes?
[4] Is SMC entitled to a refund of excess payment of excise taxes on "San Mig Light"?

HELD:
[1] No, any reclassification of fermented liquor products should be by act of Congress.
(Section 143 of the Tax Code)
The CIR's letters and Notices of Discrepancy, which effectively changed San Mig Light's brand's
classification from "new brand to variant of existing brand," necessarily changes San Mig Light's tax
bracket. Based on the legislative intent behind the classification freeze provision, petitioner has no
power to do this. A reclassification of a fermented liquor brand introduced between January 1,
1997 and December 31, 2003, such as "San Mig Light," must be by act of Congress. There was
none in this case.

[2] A new brand still because the BIR has no power to reclassify.

Also, a 'variant of a brand' shall refer to a brand on which a modifier is prefixed and/or suffixed to
the root name of the brand. The word "Light" cannot he considered as a mere suffix to the word
"San Miguel," hut it is part and parcel of an entirely new brand name, "San Mig Light."

Though the "escudo" logo appears on both "Pale Pilsen" bottle and "San Mig Light" bottle and can,
the same cannot be considered as an indication that "San Mig Light" is merely a variant of the
brand "Pale Pilsen", since the said "escudo" insignia is the corporate logo of petitioner. It merely
identifies the products, as having been manufactured by petitioner, but does not form part of its
brand. In fact, it appears not only in petitioner's beer products, but even in its non-beer products.

[3] While estoppel generally does not apply against government, especially when the case involves
the collection of taxes, an exception can be made when the application of the rule will cause
injustice against an innocent party. Respondent had already acquired a vested right on the tax
classification of its San Mig Light as a new brand. To allow petitioner to change its position will
result in deficiency assessments in substantial amounts against respondent to the latter's prejudice.

The authority of the Bureau of Internal Revenue to overrule, correct, or reverse the mistakes or
errors of its agents is conceded. However, this authority must be exercised reasonably.

[4] Yes, SMC is entitled to tax refund or tax credit certification. The Tax Code includes
remedies for erroneous collection and overpayment of taxes. Under Sections 229 and 204(C) of the
Tax Code, a taxpayer may seek recovery of erroneously paid taxes within two (2) years from date of
payment.