DOCTRINE/NOTE:

A taxpayer may not offset taxes due from the claims that he may have against the government.

FACTS:

The Oil Price Stabilization Fund (OPSF) was created under Sec. 8, PD 1956, as amended by EO 137 for the
purpose of minimizing frequent price changes brought about by exchange rate adjustments. It will be
used to reimburse the oil companies for cost increase and possible cost under recovery incurred due to
reduction of domestic prices. Caltex Philippines questions the decisions of COA for disallowing the
offsetting of its claims for reimbursement with its due OPSF remittance.

COA sent a letter to Caltex directing the latter to remit to the OPSF its collection. Caltex requested COA
for an early release of its reimbursement certificates which the latter denied.

COA disallowed recover of financing charges, inventory losses and sales to marcopper and atlas but
allowed the recovery of product sale or those arising from export sales.

Petitioner's Contention:

Department of Finance issued Circular No. 4-88 allowing reimbursement. Denial of claim for
reimbursement would be inequitable. NCC (compensation) and Sec. 21, Book V, Title I-B of the Revised
Administrative Code (Retention of Money for Satisfaction of Indebtedness to Government) allows
offsetting. Amounts due do not arise as a result of taxation since PD 1956 did not create a source of
taxation, it instead established a special fund. This lack of public purpose behind OPSF exactions
distinguishes it from tax.

Respondent's Contention:

Based on Francia v. IAC, there's no offsetting of taxes against the claims that a taxpayer may have against
the government, as taxes do not arise from contracts or depend upon the will of the taxpayer, but are
imposed by law.

ISSUE:

1) WON the COA has over exercised its jurisdiction by declaring the offset of
2) WON petitioner can offset their taxes

Rulings:

1) No, under Section 2. (1) The Commission on Audit shall have the power, authority, and duty to
examine, audit, and settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions, agencies, or instrumentalities, including government-
owned or controlled corporations with original charters, and on a post-audit basis: (a)
constitutional bodies, commissions and offices that have been granted fiscal autonomy under
this Constitution; (b) autonomous state colleges and universities; (c) other government-owned
 or controlled corporations and their subsidiaries; and (d) such non-governmental entities
receiving subsidy or equity, directly or indirectly, from or through the Government, which are
required by law or the granting institution to submit to such audit as a condition of subsidy or
equity. However, where the internal control system of the audited agencies is inadequate, the
Commission may adopt such measures, including temporary or special pre-audit, as are
necessary and appropriate to correct the deficiencies. It shall keep the general accounts of the
Government and, for such period as may be provided by law, preserve the vouchers and other
supporting papers pertaining thereto.

The Commission shall have exclusive authority, subject to the limitations in this Article, to define
the scope of its audit and examination, establish the techniques and methods required therefor,
and promulgate accounting and auditing rules and regulations, including those for the
prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable
expenditures, or uses of government funds and properties.

2) No, there's no offsetting of taxes against the claims that a taxpayer may have against the
government, as taxes do not arise from contracts or depend upon the will of the taxpayer but
are imposed by law.