G.R. No. 117359 July 23, 1998 Davao Gulf Lumber Corporation, Petitioner, V. Commissioner of Internal Revenue and Court of Appeals, Respondents

G.R. No.
117359 July 23, 1998
DAVAO GULF LUMBER CORPORATION, Petitioner, v. COMMISSIONER OF

INTERNAL REVENUE and COURT OF APPEALS, Respondents.
PANGANIBAN, J.:
Because taxes are the lifeblood of the nation, statutes that allow exemptions are
construed strictly against the grantee and liberally in favor of the government.
Otherwise stated, any exemption from the payment of a tax must be clearly stated
in the language of the law; it cannot be merely implied therefrom.
Statement of the Case
This principium is applied by the Court in resolving this petition for review under
Rule 45 of the Rules of Court, assailing the Decision 1 of Respondent Court of
Appeals 2 in CA-GR SP No. 34581 dated September 26, 1994, which affirmed the
June 21, 1994 Decision 3 of the Court of Tax Appeals 4 in CTA Case No. 3574. The
dispositive portion of the CTA Decision affirmed by Respondent Court reads:
WHEREFORE, judgment is hereby rendered ordering the respondent to refund to

the petitioner the amount of P2,923.15 representing the partial refund of specific
taxes paid on manufactured oils and fuels. 5
The Antecedent Facts
The facts are undisputed. 6 Petitioner is a licensed forest concessionaire possessing

a Timber License Agreement granted by the Ministry of Natural Resources (now
Department of Environment and Natural Resources). From July 1, 1980 to January
31, 1982 petitioner purchased, from various oil companies, refined and
manufactured mineral oils as well as motor and diesel fuels, which it used
exclusively for the exploitation and operation of its forest concession. Said oil
companies paid the specific taxes imposed, under Sections 153 and 156 7 of the
1977 National Internal Revenue Code (NIRC), on the sale of said products. Being
included in the purchase price of the oil products, the specific taxes paid by the oil
companies were eventually passed on to the user, the petitioner in this case.
On December 13, 1982, petitioner filed before Respondent Commissioner of

Internal Revenue (CIR) a claim for refund in the amount of P120,825.11,
representing 25% of the specific taxes actually paid on the above-mentioned fuels
and oils that were used by petitioner in its operations as forest concessionaire. The
claim was based on Insular Lumber Co. vs. Court of Tax Appeals 8 and Section 5 of
RA 1435 which reads:
Sec. 5. The proceeds of the additional tax on manufactured oils shall accrue to the
road and bridge funds of the political subdivision for whose benefit the tax is
collected: Provided, however, That whenever any oils mentioned above are used by
miners or forest concessionaires in their operations, twenty-five per centum of the
specific tax paid thereon shall be refunded by the Collector of Internal Revenue
upon submission of proof of actual use of oils and under similar conditions
enumerated in subparagraphs one and two of section one hereof, amending section
one hundred forty-two of the Internal Revenue Code: Provided, further, That no
new road shall be constructed unless the routes or location thereof shall have been
approved by the Commissioner of Public Highways after a determination that such
road can be made part of an integral and articulated route in the Philippine Highway
System, as required in section twenty-six of the Philippine Highway Act of 1953.
It is an unquestioned fact that petitioner complied with the procedure for refund,
including the submission of proof of the actual use of the aforementioned oils in its
forest concession as required by the above-quoted law. Petitioner, in support of its
claim for refund, submitted to the CIR the affidavits of its general manager, the
president of the Philippine Wood Products Association, and three disinterested
persons, all attesting that the said manufactured diesel and fuel oils were actually
used in the exploitation and operation of its forest concession.
On January 20, 1983, petitioner filed at the CTA a petition for review docketed as
CTA Case No. 3574. On June 21, 1994, the CTA rendered its decision finding
petitioner entitled to a partial refund of specific taxes the latter had paid in the
reduced amount of P2,923.15. The CTA ruled that the claim on purchases of
lubricating oil (from July 1, 1980 to January 19, 1981) and on manufactured oils
other than lubricating oils (from July 1, 1980 to January 4, 1981) had prescribed.
Disallowed on the ground that they were not included in the original claim filed
before the CIR were the claims for refund on purchases of manufactured oils from
January 1, 1980 to June 30, 1980 and from February 1, 1982 to June 30, 1982. In
regard to the other purchases, the CTA granted the claim, but it computed the
refund based on rates deemed paid under RA 1435, and not on the higher rates
actualhy paid by petitioner under the NIRC.
Insisting that the basis for computing the refund should be the increased rates
prescribed by Sections 153 and 156 of the NIRC, petitioner elevated the matter to
the Court of Appeals. As noted earlier, the Court of Appeals affirmed the CTA
Decision. Hence, this petition for review. 9
Public Respondent's Ruling
In its petition before the Court of Appeals, petitioner raised the following
arguments:
I. The respondent Court of Tax Appeals failed to apply the Supreme Court's
Decision in Insular Lumber Co. v. Court of Tax Appeals which granted the claim for
partial refund of specific taxes paid by the claimant, without qualification or
limitation.
II. The respondent Court of Tax Appeals ignored the increase in rates imposed by
succeeding amendatory laws,under which the petitioner paid the specific taxes on
manufactured and diesel fuels.
III. In its decision, the respondent Court of Tax Appeals ruled contrary to
established tenets of law when it lent itself to interpreting Section 5 of R.A. 1435,
when the construction of said law is not necessary.
IV. Sections 1 and 2 of R.A. 1435 are not the operative provisions to be applied but
rather, Sections 153 and 156 of the National Internal Revenue Code, as amended.
V. To rule that the basis for computation of the refunded taxes should be Sections 1
and 2 of R.A. 1435 rather than Section 153 and 156 of the National Internal
Revenue Code is unfair, erroneous, arbitrary, inequitable and oppressive. 10
The Court of Appeals held that the claim for refund should indeed be computed on
the basis of the amounts deemed paid under Sections 1 and 2 of RA 1435. In so
ruling, it cited our pronouncement in Commissioner of Internal Revenue v. Rio Tuba
Nickel Mining Corporation 11 and subsequent Resolution dated June 15, 1992
clarifying the said Decision. Respondent Court further ruled that the claims for
refund which prescribed and those which were not filed at the administrative level
must be excluded.
The Issue
In its Memorandum, petitioner raises one critical issue:
Whether or not petitioner is entitled under Republic Act No. 1435 to the refund of
25% of the amount of specific taxes it actually paid on various refined and
manufactured mineral oils and other oil products taxed under Sec. 153 and Sec.
156 of the 1977 (Sec. 142 and Sec. 145 of the 1939) National Internal Revenue
Code. 12
In the main, the question before us pertains only to the computation of the tax
refund. Petitioner argues that the refund should be based on the increased rates of
specific taxes which it actually paid, as prescribed in Sections 153 and 156 of the
NIRC. Public respondent, on the other hand, contends that it should be based on
specific taxes deemed paid under Sections 1 and 2 of RA 1435.
The Court's Ruling
The petition is not meritorious.
Petitioner Entitled to Refund
Under Sec. 5 of RA 1435

At the outset, it must be stressed that petitioner is entitled to a partial refund under
Section 5 of RA 1435, which was enacted to provide means for increasing the
Highway Special Fund.
The rationale for this grant of partial refund of specific taxes paid on purchases of
manufactured diesel and fuel oils rests on the character of the Highway Special
Fund. The specific taxes collected on gasoline and fuel accrue to the Fund, which is
to be used for the construction and maintenance of the highway system. But
because the gasoline and fuel purchased by mining and lumber concessionaires are
used within their own compounds and roads, and their vehicles seldom use the
national highways, they do not directly benefit from the Fund and its use. Hence,
the tax refund gives the mining and the logging companies a measure of relief in
light of their peculiar situation. 13 When the Highway Special Fund was abolished in
1985, the reason for the refund likewise ceased to exist. 14 Since petitioner
purchased the subject manufactured diesel and fuel oils from July 1, 1980 to
January 31, 1982 and submitted the required proof that these were actually used in
operating its forest concession, it is entitled to claim the refund under Section 5 of
RA 1435.
Tax Refund Strictly Constrtued
Against the Grantee
Petitioner submits that it is entitled to the refund of 25 percent of the specific taxes
it had actually paid for the petroleum products used in its operations. In other
words, it claims a refund based on the increased rates under Sections 153 and 156
of the NIRC. 15 Petitioner argues that the statutory grant of the refund privilege,
specifically the phrase "twenty-five per centum of the specific tax paid thereon shall
be refunded by the Collector of Internal Revenue," is "clear and unambiguous"
enough to require construction or qualification thereof. 16 In addition, it cites our
pronouncement in Insular Lumber vs. Court of Tax Appeals: 17
. . . Sec. 5 [of RA 1435] makes reference to subparagraphs 1 and 2 of Section 1

only for the purpose of prescribing the procedure for refund. This express reference
cannot be expanded in scope to include the limitation of the period of refund. If the
limitation of the period of refund of specific taxes paid on oils used in aviation and
agriculture is intended to cover similar taxes paid on oil used by miners and forest
concessionaires, there would have been no need of dealing with oil used by miners
and forest concessions separately and Section 5 would very well have been included
in Section 1 of Republic Act No. 1435, notwithstanding the different rate of
exemption.
Petitioner then reasons that "the express mention of Section 1 of RA 1435 in

Section 5 cannot be expanded to include a limitation on the tax rates to be applied .
. . [otherwise,] Section 5 should very well have been included in Section 1 . . . ." 18
The Court is nor persuaded. The relevant statutory provisions do not clearly support
petitioner's claim for refund. RA 1435 provides:
Sec. 1 Section one hundred and forty-two of the National Internal Revenue Code,
as amended, is further amended to read as follows:
Sec. 142. Specific tax on manufactured oils and other fuels. - On refined and
manufactured mineral oils and motor fuels, there shall be collected the following
taxes:
(a) Kerosene or petroleum, per liter of volume capacity, two and one-half centavos;
(b) Lubricating oils, per liter of volume capacity, seven centavos;
(c) Naptha, gasoline, and all other similar products of distillation, per liter of volume
capacity, eight centavos; and
(d) On denatured alcohol to be used for motive power, per liter of volume capacity,
one centavo: Provided, That if the denatured alcohol is mixed with gasoline, the
specific tax on which has already been paid, only the alcohol content shall be
subject to the tax herein prescribed. For the purpose of this subsection, the
removal of denatured alcohol of not less than one hundred eighty degrees proof
(ninety per centum absolute alcohol) shall be deemed to have been removed for
motive power, unless shown to the contrary.
Whenever any of the oils mentioned above are, during the five years from June
eighteen, nineteen hundred and fifty two, used in agriculture and aviation, fifty per
centum of the specific tax paid thereon shall be refunded by the Collector of
Internal Revenue upon the submission of the following:
(1) A sworn affidavit of the producer and two disinterested persons proving that the
said oils were actually used in agriculture, or in lieu thereof.
(2) Should the producer belong to any producers' association or federation, duly
registered with the Securities and Exchange Commission, the affidavit of the
president of the association or federation, attesting to the fact that the oils were
actually used in agriculture.
(3) In the case of aviation oils, a sworn certificate satisfactory to the Collector
proving that the said oils were actually used in aviation: Provided, That no such
refunds shall be granted in respect to the oils used in aviation by citizens and
corporations of foreign countries which do not grant equivalent refunds or
exemptions in respect to similar oils used in aviation by citizens and corporations of
the Philippines.
Sec. 2 Section one hundred and forty-five of the National Internal Revenue Code,
as amended, is further amended to read as follows:
Sec. 145. Specific Tax on Diesel fuel oil. - On fuel oil, commercially known as diesel
fuel oil, and on all similar fuel oils, having more or less the same generating power,
there shall be collected, per metric ton, one peso.
xxx xxx xxx
Sec. 5. The proceeds of the additional tax on manufactured oils shall accrue to the
road and bridge funds of the political subdivision for whose benefit the tax is
collected: Provided, however, That whenever any oils mentioned above are used by
miners or forest concessionaires in their operations, twenty-five per centum of the
specific tax paid thereon shall be refunded by the Collector of Internal Revenue
upon submission of proof of actual use of oils and under similar conditions
enumerated in subparagraphs one and two of section one hereof, amending section
one hundred forty-two of the Internal Revenue Code: Provided, further, That no
new road shall be constructed unless the route or location thereof shall have been
approved by the Commissioner of Public Highways after a determination that such
road can be made part of an integral and articulated route in the Philippine Highway
System, as required in section twenty-six of the Philippine Highway Act of 1953.
Subsequently the 1977 NIRC, PD 1672 and EO 672 amended the first two
provisions, renumbering them and prescribing higher rates. Accordingly, petitioner
paid specific taxes on petroleum products purchased from July 1, 1980 to January
31, 1982 under the following statutory provisions.
From February 8, 1980 to March 20, 1981, Sections 153 and 156 provided as
follows:
taxes which shall attach to the articles hereunder enumerated as soon as they are
in existence as such:
(a) Kerosene, per liter of volume capacity, seven centavos;
(b) Lubricating oils, per liter of volume capacity, eighty centavos;
(c) Naphtha, gasoline and all other similar products of distillation, per liter of
volume capacity, ninety-one centavos: Provided, That on premium and aviation
gasoline, the tax shall be one peso per liter of volume capacity;
one centavo: Provided, That unless otherwise provided for by special laws, if the
denatured alcohol is mixed with gasoline, the specific tax on which has already
been paid, only the alcohol content shall be subject to the tax herein prescribed.
For the purposes of this subsection, the removal of denatured alcohol of not less
than one hundred eighty degrees proof (ninety per centum absolute alcohol) shall
be deemed to have been removed for motive power, unless shown to the contrary;
(e) Processed gas, per liter of volume capacity, three centavos;
(f) Thinners and solvents, per liter of volume capacity, fifty-seven centavos;
(g) Liquefied petroleum gas, per kilogram, fourteen centavos: Provided, That
liquefied petroleum gas used for motive power shall be taxed at the equivalent rate
as the specific tax on diesel fuel oil;
(h) Asphalts, per kilogram, eight centavos;
(i) Greases, waxes and petrolatum, per kilogram, fifty centavos;
(j) Aviation turbo jet fuel, per liter of volume capacity, fifty-five centavos. (As
amended by Sec. 1, P.D. No. 1672.)
xxx xxx xxx
Sec. 156. Specific tax on diesel fuel oil. - On fuel oil, commercially known as diesel
fuel oil, and on all similar fuel oils, having more or less the same generating power,
per liter of volume capacity, seventeen and one-half centavos, which tax shall
attach to this fuel oil as soon as it is in existence as such.
Then on March 21, 1981, these provisions were amended by EO 672 to read:
taxes which shall attach to the articles hereunder enumerated as soon as they are
in existence as such:
(a) Kerosene, per liter of volume capacity, nine centavos;
(b) Lubricating oils, per liter of volume capacity, eighty centavos;
(c) Naphtha, gasoline and all other similar products of distillation, per liter of
volume capacity, one peso and six centavos: Provided, That on premium and
aviation gasoline, the tax shall be one peso and ten centavos and one peso,
respectively, per liter of volume capacity;
one centavo; Provided, That unless otherwise provided for by special laws, if the
denatured alcohol is mixed with gasoline, the specific tax on which has already
been paid, only the alcohol content shall be subject to the tax herein prescribed.
For the purpose of this subsection, the removal of denatured alcohol of not less
than one hundred eighty degrees proof (ninety per centum absolute alcohol) shall
be deemed to have been removed for motive power, unless shown to the contrary;
(e) Processed gas, per liter of volume capacity, three centavos;
(f) Thinners and solvents, per liter of volume capacity, sixty-one centavos;
(g) Liquefied petroleum gas, per kilogram, twenty-one centavos: Provided, That,
liquified petroleum gas used for motive power shall be taxed at the equivalent rate
as the specific tax on diesel fuel oil;
(h) Asphalts, per kilogram, twelve centavos;
(i) Greases, waxes and petrolatum, per kilogram, fifty centavos;
(j) Aviation turbo-jet fuel, per liter of volume capacity, sixty-four centavos.
xxx xxx xxx
Sec. 156. Specific tax on diesel fuel oil. - On fuel oil, commercially known as diesel
fuel oil, and all similar fuel oils, having more or less the same generating power,
per liter of volume capacity, twenty-five and one-half centavos, which tax shall
attach to this fuel oil as soon as it is in existence as such.
A tax cannot be imposed unless it is supported by the clear and express language
of a statute; 19 on the other hand, once the tax is unquestionably imposed, "[a]
claim of exemption from tax payments must be clearly shown and based on
language in the law too plain to be mistaken." 20 Since the partial refund authorized
under Section 5, RA 1435, is in the nature of a tax exemption, 21 it must be
construed strictissimi Juris against the grantee. Hence, petitioner's claim of refund
on the basis of the specific taxes it actually paid must expressly be granted in a
statute stated in a language too clear to be mistaken.
We have carefully scrutinized RA 1435 and the subsequent pertinent statutes and
found no expression of a legislative will authorizing a refund based on the higher
rates claimed by petitioner. The mere fact that the privilege of refund was included
in Section 5, and not in Section 1, is insufficient to support petitioner's claim. When
the law itself does not explicitly provide that a refund under RA 1435 may be based
on higher rates which were nonexistent at the time of its enactment, this Coure
cannot presume otherwise. A legislative lacuna cannot be filled by judicial fiat. 22
The issue is not really novel. In Commissioner of Internal Revenue vs. Court of
Appeals and Atlas Consolidated Mining and Development
Corporation 23 (the second Atlas case), the CIR contended that the refund should be
based on Sections 1 and 2 of RA 1435, not Sections 153 and 156 of the NIRC of
1977. In categorically ruling that Private Respondent Atlas Consolidated Mining and
Development Corporation was entitled to a refund based on Sections 1 and 2 of RA
1435, the Court, through Mr. Justice Hilario G. Davide, Jr., reiterated our
pronouncement in Commissioner of Internal Revenue vs. Rio Tuba Nickel and
Mining Corporation:
Our Resolution of 25 March 1992 modifying our 30 September 1991 Decision in

the Rio Tuba case sets forth the controlling doctrine. In that Resolution, we stated:
Since the private respondent's claim for refund covers specific taxes paid from 1980
to July 1983 then we find that the private respondent is entitled to a refund. It
should be made clear, however, that Rio Tuba is not entitled to the whole amount it
claims as refund.
The specific taxes on oils which Rio Tuba paid for the aforesaid period were no
longer based on the rates specified by Sections 1 and 2 of R.A. No. 1435 but on the
increased rates mandated under Sections 153 and 156 of the National Internal
Revenue Code of 1977. We note however, that the latter law does not specifically
provide for a refund to these mining and lumber companies of specific taxes paid on
manufactured and diesel fuel oils.
In Insular Lumber Co. v. Court of Tax Appeals, (104 SCRA 710 [1981]), the Court
held that the authorized partial refund under Section 5 of R.A. No. 1435 partakes of
the nature of a tax exemption and therefore cannot be allowed unless granted in
the most explicit and categorical language. Since the grant of refund privileges
must be strictly construed against the taxpayer, the basis for the refund shall be
the amounts deemed paid under Sections 1 and 2 of R.A. No. 1435.
ACCORDINGLY, the decision in G.R. Nos. 83583-84 is hereby MODIFIED. The

private respondent's CLAIM for REFUND is GRANTED, computed on the basis of the
amounts deemed paid under Sections 1 and 2 of R.A. No. 1435, without interest. 24
We rule, therefore, that since Atlas's claims for refund cover specific taxes paid
before 1985, it should be granted the refund based on the rates specified by
Sections 1 and 2 of R.A. No. 1435 and not on the increased rates under Sections
153 and 156 of the Tax Code of 1977, provided the claims are not yet barred by
prescription. (Emphasis supplied.)
Insular Lumber Co. and First Atlas Case
Not Inconsistent With Rio Tuba
and Second Atlas Case
Petitioner argues that the applicable jurisprudence in this case should

be Commissioner of Internal Revenue vs. Atlas Consolidated and Mining Corp. (the
first Atlas case), an unsigned resolution, and Insular Lumber Co. vs. Court of Tax
Appeals, an en banc decision. 25 Petitioner also asks the Court to take a "second
look" at Rio Tuba and the second Atlas case, both decided by Divisions, in view
of Insular which was decided en banc. Petitioner posits that "[I]n view of the
similarity of the situation of herein petitioner with Insular Lumber Company
(claimant in Insular Lumber) and Rio Tuba Nickel Mining Corporation (claimant
in Rio Tuba), a dilemma has been created as to whether or not Insular Lumber,
which has been decided by the Honorable Court en banc, or Rio Tuba, which was
decided only [by] the Third Division of the Honorable Court, should
apply." 26
We find no conflict between these two pairs of cases. Neither Insular Lumber Co.
nor the first Atlas case ruled on the issue of whether the refund privilege under
Section 5 should be computed based on the specific tax deemed paid under
Sections 1 and 2 of RA 1435, regardless of what was actually paid under the
increased rates. Rio Tuba and the second Atlas case did.
Insular Lumber Co. decided a claim for refund on specific tax paid on petroleum
products purchased in the year 1963, when the increased rates under the NIRC of
1977 were nor yet in effect. Thus, the issue now before us did not exist at the time,
since the applicable rates were still those prescribed under Sections 1 and 2 of RA
1435.
On the other hand, the issue raised in the first Atlas case was whether the claimant
was entitled to the refund under Section 5, notwithstanding its failure to pay any
additional tax under a municipal or city ordinance. Although Atlas purchased
petroleum products in the years, 1976 to 1978 when the rates had already been
changed, the Court did not decide or make any pronouncement on the issue in that
case.
Clearly, it is impossible for these two decisions to clash with our pronouncement
in Rio Tuba and second Atlas case, in which we ruled that the refund granted be
computed on the basis of the amounts deemed paid under Sections 1 and 2 of RA
1435. In this light, we find no basis for petitioner's invocation of the constitutional
proscription that "no doctrine or principle of law laid down by the Court in a decision
rendered en banc or in division may be modified or reversed except by the Court
sitting en banc. 27
Finally, petitioner asserts that "equity and justice demand that the computation of
the tax refunds be based on actual amounts paid under Sections 153 and 156 of
the NIRC." 28 We disagree. According to an eminent authority on taxation, "there is
no tax exemption solely on the, ground of equity." 29
WHEREFORE, the petition is hereby DENIED and the assailed Decision of the Court
of Appeals is AFFIRMED.
SO ORDERED.
G.R. No. 120880 June 5, 1997

FERDINAND R. MARCOS II, petitioner,
vs.
COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE and
HERMINIA D. DE GUZMAN, respondents.
TORRES, JR., J.:
In this Petition for Review on Certiorari, Government action is once again assailed as precipitate and
unfair, suffering the basic and oftly implored requisites of due process of law. Specifically, the
petition assails the Decision of the Court of Appeals dated November 29, 1994 in CA-G.R. SP No.
1
31363, where the said court held:
In view of all the foregoing, we rule that the deficiency income tax assessments and
estate tax assessment, are already final and (u)nappealable-and-the subsequent
levy of real properties is a tax remedy resorted to by the government, sanctioned by
Section 213 and 218 of the National Internal Revenue Code. This summary tax
remedy is distinct and separate from the other tax remedies (such as Judicial Civil
actions and Criminal actions), and is not affected or precluded by the pendency of
any other tax remedies instituted by the government.
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the

petition for certiorari with prayer for Restraining Order and Injunction.
No pronouncements as to costs.
SO ORDERED.
More than seven years since the demise of the late Ferdinand E. Marcos, the former President of
the Republic of the Philippines, the matter of the settlement of his estate, and its dues to the
government in estate taxes, are still unresolved, the latter issue being now before this Court for
resolution. Specifically, petitioner Ferdinand R. Marcos II, the eldest son of the decedent, questions
the actuations of the respondent Commissioner of Internal Revenue in assessing, and collecting
through the summary remedy of Levy on Real Properties, estate and income tax delinquencies upon
the estate and properties of his father, despite the pendency of the proceedings on probate of the
will of the late president, which is docketed as Sp. Proc. No. 10279 in the Regional Trial Court of
Pasig, Branch 156.
Petitioner had filed with the respondent Court of Appeals a Petition for Certiorari and Prohibition with
an application for writ of preliminary injunction and/or temporary restraining order on June 28, 1993,
seeking to —
I. Annul and set aside the Notices of Levy on real property dated February 22, 1993
and May 20, 1993, issued by respondent Commissioner of Internal Revenue;
II. Annul and set aside the Notices of Sale dated May 26, 1993;
III. Enjoin the Head Revenue Executive Assistant Director II (Collection Service),
from proceeding with the Auction of the real properties covered by Notices of Sale.
After the parties had pleaded their case, the Court of Appeals rendered its Decision on November
2
29, 1994, ruling that the deficiency assessments for estate and income tax made upon the petitioner
and the estate of the deceased President Marcos have already become final and unappealable, and
may thus be enforced by the summary remedy of levying upon the properties of the late President,
as was done by the respondent Commissioner of Internal Revenue.
WHEREFORE, premises considered judgment is hereby rendered DISMISSING the

petition for Certiorari with prayer for Restraining Order and Injunction.
No pronouncements as to cost.
SO ORDERED.
Unperturbed, petitioner is now before us assailing the validity of the appellate court's decision,
assigning the following as errors:
A. RESPONDENT COURT MANIFESTLY ERRED IN RULING THAT THE

SUMMARY TAX REMEDIES RESORTED TO BY THE GOVERNMENT ARE NOT
AFFECTED AND PRECLUDED BY THE PENDENCY OF THE SPECIAL
PROCEEDING FOR THE ALLOWANCE OF THE LATE PRESIDENT'S ALLEGED
WILL. TO THE CONTRARY, THIS PROBATE PROCEEDING PRECISELY PLACED
ALL PROPERTIES WHICH FORM PART OF THE LATE PRESIDENT'S ESTATE IN
CUSTODIA LEGIS OF THE PROBATE COURT TO THE EXCLUSION OF ALL
OTHER COURTS AND ADMINISTRATIVE AGENCIES.
B. RESPONDENT COURT ARBITRARILY ERRED IN SWEEPINGLY DECIDING

THAT SINCE THE TAX ASSESSMENTS OF PETITIONER AND HIS PARENTS
HAD ALREADY BECOME FINAL AND UNAPPEALABLE, THERE WAS NO NEED
TO GO INTO THE MERITS OF THE GROUNDS CITED IN THE PETITION.
INDEPENDENT OF WHETHER THE TAX ASSESSMENTS HAD ALREADY
BECOME FINAL, HOWEVER, PETITIONER HAS THE RIGHT TO QUESTION THE
UNLAWFUL MANNER AND METHOD IN WHICH TAX COLLECTION IS SOUGHT
TO BE ENFORCED BY RESPONDENTS COMMISSIONER AND DE GUZMAN.
THUS, RESPONDENT COURT SHOULD HAVE FAVORABLY CONSIDERED THE
MERITS OF THE FOLLOWING GROUNDS IN THE PETITION:
(1) The Notices of Levy on Real Property were issued beyond the
period provided in the Revenue Memorandum Circular No. 38-68.
(2) [a] The numerous pending court cases questioning the late
President's ownership or interests in several properties (both
personal and real) make the total value of his estate, and the
consequent estate tax due, incapable of exact pecuniary
determination at this time. Thus, respondents' assessment of the
estate tax and their issuance of the Notices of Levy and Sale are
premature, confiscatory and oppressive.
[b] Petitioner, as one of the late President's compulsory heirs, was

never notified, much less served with copies of the Notices of Levy,
contrary to the mandate of Section 213 of the NIRC. As such,
petitioner was never given an opportunity to contest the Notices in
violation of his right to due process of law.
C. ON ACCOUNT OF THE CLEAR MERIT OF THE PETITION, RESPONDENT
COURT MANIFESTLY ERRED IN RULING THAT IT HAD NO POWER TO GRANT
INJUNCTIVE RELIEF TO PETITIONER. SECTION 219 OF THE NIRC
NOTWITHSTANDING, COURTS POSSESS THE POWER TO ISSUE A WRIT OF
PRELIMINARY INJUNCTION TO RESTRAIN RESPONDENTS COMMISSIONER'S
AND DE GUZMAN'S ARBITRARY METHOD OF COLLECTING THE ALLEGED
DEFICIENCY ESTATE AND INCOME TAXES BY MEANS OF LEVY.
The facts as found by the appellate court are undisputed, and are hereby adopted:
On September 29, 1989, former President Ferdinand Marcos died in Honolulu,

Hawaii, USA.
On June 27, 1990, a Special Tax Audit Team was created to conduct investigations
and examinations of the tax liabilities and obligations of the late president, as well as
that of his family, associates and "cronies". Said audit team concluded its
investigation with a Memorandum dated July 26, 1991. The investigation disclosed
that the Marcoses failed to file a written notice of the death of the decedent, an estate
tax returns [sic], as well as several income tax returns covering the years 1982 to
1986, — all in violation of the National Internal Revenue Code (NIRC).
Subsequently, criminal charges were filed against Mrs. Imelda R. Marcos before the
Regional Trial of Quezon City for violations of Sections 82, 83 and 84 (has penalized
under Sections 253 and 254 in relation to Section 252 — a & b) of the National
Internal Revenue Code (NIRC).
The Commissioner of Internal Revenue thereby caused the preparation and filing of
the Estate Tax Return for the estate of the late president, the Income Tax Returns of
the Spouses Marcos for the years 1985 to 1986, and the Income Tax Returns of
petitioner Ferdinand "Bongbong" Marcos II for the years 1982 to 1985.
On July 26, 1991, the BIR issued the following: (1) Deficiency estate tax assessment
no. FAC-2-89-91-002464 (against the estate of the late president Ferdinand Marcos
in the amount of P23,293,607,638.00 Pesos); (2) Deficiency income tax assessment
no. FAC-1-85-91-002452 and Deficiency income tax assessment no. FAC-1-86-91-
002451 (against the Spouses Ferdinand and Imelda Marcos in the amounts of
P149,551.70 and P184,009,737.40 representing deficiency income tax for the years
1985 and 1986); (3) Deficiency income tax assessment nos. FAC-1-82-91-002460 to
FAC-1-85-91-002463 (against petitioner Ferdinand "Bongbong" Marcos II in the
amounts of P258.70 pesos; P9,386.40 Pesos; P4,388.30 Pesos; and P6,376.60
Pesos representing his deficiency income taxes for the years 1982 to 1985).
The Commissioner of Internal Revenue avers that copies of the deficiency estate and
income tax assessments were all personally and constructively served on August 26,
1991 and September 12, 1991 upon Mrs. Imelda Marcos (through her caretaker Mr.
Martinez) at her last known address at No. 204 Ortega St., San Juan, M.M. (Annexes
"D" and "E" of the Petition). Likewise, copies of the deficiency tax assessments
issued against petitioner Ferdinand "Bongbong" Marcos II were also personally and
constructively served upon him (through his caretaker) on September 12, 1991, at
his last known address at Don Mariano Marcos St. corner P. Guevarra St., San Juan,
M.M. (Annexes "J" and "J-1" of the Petition). Thereafter, Formal Assessment notices
were served on October 20, 1992, upon Mrs. Marcos c/o petitioner, at his office,
House of Representatives, Batasan Pambansa, Quezon City. Moreover, a notice to
Taxpayer inviting Mrs. Marcos (or her duly authorized representative or counsel), to a
conference, was furnished the counsel of Mrs. Marcos, Dean Antonio Coronel — but
to no avail.
The deficiency tax assessments were not protested administratively, by Mrs. Marcos
and the other heirs of the late president, within 30 days from service of said
assessments.
On February 22, 1993, the BIR Commissioner issued twenty-two notices of levy on
real property against certain parcels of land owned by the Marcoses — to satisfy the
alleged estate tax and deficiency income taxes of Spouses Marcos.
On May 20, 1993, four more Notices of Levy on real property were issued for the
purpose of satisfying the deficiency income taxes.
On May 26, 1993, additional four (4) notices of Levy on real property were again
issued. The foregoing tax remedies were resorted to pursuant to Sections 205 and
213 of the National Internal Revenue Code (NIRC).
In response to a letter dated March 12, 1993 sent by Atty. Loreto Ata (counsel of
herein petitioner) calling the attention of the BIR and requesting that they be duly
notified of any action taken by the BIR affecting the interest of their client Ferdinand
"Bongbong" Marcos II, as well as the interest of the late president — copies of the
aforesaid notices were, served on April 7, 1993 and on June 10, 1993, upon Mrs.
Imelda Marcos, the petitioner, and their counsel of record, "De Borja, Medialdea, Ata,
Bello, Guevarra and Serapio Law Office".
Notices of sale at public auction were posted on May 26, 1993, at the lobby of the
City Hall of Tacloban City. The public auction for the sale of the eleven (11) parcels
of land took place on July 5, 1993. There being no bidder, the lots were declared
forfeited in favor of the government.
On June 25, 1993, petitioner Ferdinand "Bongbong" Marcos II filed the instant
petition for certiorari and prohibition under Rule 65 of the Rules of Court, with prayer
for temporary restraining order and/or writ of preliminary injunction.
It has been repeatedly observed, and not without merit, that the enforcement of tax laws and the
collection of taxes, is of paramount importance for the sustenance of government. Taxes are the
lifeblood of the government and should be collected without unnecessary hindrance. However, such
collection should be made in accordance with law as any arbitrariness will negate the very reason for
government itself. It is therefore necessary to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the
common good, may be achieved. 3
Whether or not the proper avenues of assessment and collection of the said tax obligations were
taken by the respondent Bureau is now the subject of the Court's inquiry.
Petitioner posits that notices of levy, notices of sale, and subsequent sale of properties of the late
President Marcos effected by the BIR are null and void for disregarding the established procedure
for the enforcement of taxes due upon the estate of the deceased. The case of Domingo
vs. Garlitos is specifically cited to bolster the argument that "the ordinary procedure by which to
4
settle claims of indebtedness against the estate of a deceased, person, as in an inheritance (estate)
tax, is for the claimant to present a claim before the probate court so that said court may order the
administrator to pay the amount therefor." This remedy is allegedly, exclusive, and cannot be
effected through any other means.
Petitioner goes further, submitting that the probate court is not precluded from denying a request by
the government for the immediate payment of taxes, and should order the payment of the same only
within the period fixed by the probate court for the payment of all the debts of the decedent. In this
regard, petitioner cites the case of Collector of Internal Revenue vs. The Administratrix of the Estate
of Echarri (67 Phil 502), where it was held that:
The case of Pineda vs. Court of First Instance of Tayabas and Collector of Internal
Revenue (52 Phil 803), relied upon by the petitioner-appellant is good authority on
the proposition that the court having control over the administration proceedings has
jurisdiction to entertain the claim presented by the government for taxes due and to
order the administrator to pay the tax should it find that the assessment was proper,
and that the tax was legal, due and collectible. And the rule laid down in that case
must be understood in relation to the case of Collector of Customs
vs. Haygood, supra., as to the procedure to be followed in a given case by the
government to effectuate the collection of the tax. Categorically stated, where during
the pendency of judicial administration over the estate of a deceased person a claim
for taxes is presented by the government, the court has the authority to order
payment by the administrator; but, in the same way that it has authority to order
payment or satisfaction, it also has the negative authority to deny the same. While
there are cases where courts are required to perform certain duties mandatory and
ministerial in character, the function of the court in a case of the present character is
not one of them; and here, the court cannot be an organism endowed with latitude of
judgment in one direction, and converted into a mere mechanical contrivance in
another direction.
On the other hand, it is argued by the BIR, that the state's authority to collect internal revenue taxes
is paramount. Thus, the pendency of probate proceedings over the estate of the deceased does not
preclude the assessment and collection, through summary remedies, of estate taxes over the same.
According to the respondent, claims for payment of estate and income taxes due and assessed after
the death of the decedent need not be presented in the form of a claim against the estate. These
can and should be paid immediately. The probate court is not the government agency to decide
whether an estate is liable for payment of estate of income taxes. Well-settled is the rule that the
probate court is a court with special and limited jurisdiction.
Concededly, the authority of the Regional Trial Court, sitting, albeit with limited jurisdiction, as a
probate court over estate of deceased individual, is not a trifling thing. The court's jurisdiction, once
invoked, and made effective, cannot be treated with indifference nor should it be ignored with
impunity by the very parties invoking its authority.
In testament to this, it has been held that it is within the jurisdiction of the probate court to approve
the sale of properties of a deceased person by his prospective heirs before final adjudication; to
5
determine who are the heirs of the decedent; the recognition of a natural child; the status of a
6 7
woman claiming to be the legal wife of the decedent; the legality of disinheritance of an heir by the
8
testator; and to pass upon the validity of a waiver of hereditary rights.

9 10
The pivotal question the court is tasked to resolve refers to the authority of the Bureau of Internal
Revenue to collect by the summary remedy of levying upon, and sale of real properties of the
decedent, estate tax deficiencies, without the cognition and authority of the court sitting in probate
over the supposed will of the deceased.
The nature of the process of estate tax collection has been described as follows:
Strictly speaking, the assessment of an inheritance tax does not directly involve the
administration of a decedent's estate, although it may be viewed as an incident to the
complete settlement of an estate, and, under some statutes, it is made the duty of
the probate court to make the amount of the inheritance tax a part of the final decree
of distribution of the estate. It is not against the property of decedent, nor is it a claim
against the estate as such, but it is against the interest or property right which the
heir, legatee, devisee, etc., has in the property formerly held by decedent. Further,
under some statutes, it has been held that it is not a suit or controversy between the
parties, nor is it an adversary proceeding between the state and the person who
owes the tax on the inheritance. However, under other statutes it has been held that
the hearing and determination of the cash value of the assets and the determination
of the tax are adversary proceedings. The proceeding has been held to be
necessarily a proceeding in rem. 11
In the Philippine experience, the enforcement and collection of estate tax, is executive in character,
as the legislature has seen it fit to ascribe this task to the Bureau of Internal Revenue. Section 3 of
the National Internal Revenue Code attests to this:
Sec. 3. Powers and duties of the Bureau. — The powers and duties of the Bureau of
Internal Revenue shall comprehend the assessment and collection of all national
internal revenue taxes, fees, and charges, and the enforcement of all forfeitures,
penalties, and fines connected therewith, including the execution of judgments in all
cases decided in its favor by the Court of Tax Appeals and the ordinary courts. Said
Bureau shall also give effect to and administer the supervisory and police power
conferred to it by this Code or other laws.
Thus, it was in Vera vs. Fernandez that the court recognized the liberal treatment of claims for
12
taxes charged against the estate of the decedent. Such taxes, we said, were exempted from the
application of the statute of non-claims, and this is justified by the necessity of government funding,
immortalized in the maxim that taxes are the lifeblood of the government. Vectigalia nervi sunt rei
publicae — taxes are the sinews of the state.
Taxes assessed against the estate of a deceased person, after administration is

opened, need not be submitted to the committee on claims in the ordinary course of
administration. In the exercise of its control over the administrator, the court may
direct the payment of such taxes upon motion showing that the taxes have been
assessed against the estate.
Such liberal treatment of internal revenue taxes in the probate proceedings extends so far, even to
allowing the enforcement of tax obligations against the heirs of the decedent, even after distribution
of the estate's properties.
Claims for taxes, whether assessed before or after the death of the deceased, can
be collected from the heirs even after the distribution of the properties of the
decedent. They are exempted from the application of the statute of non-claims. The
heirs shall be liable therefor, in proportion to their share in the inheritance.
13
Thus, the Government has two ways of collecting the taxes in question. One, by
going after all the heirs and collecting from each one of them the amount of the tax
proportionate to the inheritance received. Another remedy, pursuant to the lien
created by Section 315 of the Tax Code upon all property and rights to property
belong to the taxpayer for unpaid income tax, is by subjecting said property of the
estate which is in the hands of an heir or transferee to the payment of the tax due the
estate. (Commissioner of Internal Revenue vs. Pineda, 21 SCRA 105, September
15, 1967.)
From the foregoing, it is discernible that the approval of the court, sitting in probate, or as a
settlement tribunal over the deceased is not a mandatory requirement in the collection of estate
taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding with the levying and
sale of the properties allegedly owned by the late President, on the ground that it was required to
seek first the probate court's sanction. There is nothing in the Tax Code, and in the pertinent
remedial laws that implies the necessity of the probate or estate settlement court's approval of the
state's claim for estate taxes, before the same can be enforced and collected.
On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden
not to authorize the executor or judicial administrator of the decedent's estate to deliver any
distributive share to any party interested in the estate, unless it is shown a Certification by the
Commissioner of Internal Revenue that the estate taxes have been paid. This provision disproves
the petitioner's contention that it is the probate court which approves the assessment and collection
of the estate tax.
If there is any issue as to the validity of the BIR's decision to assess the estate taxes, this should
have been pursued through the proper administrative and judicial avenues provided for by law.
Section 229 of the NIRC tells us how:
Sec. 229. Protesting of assessment. — When the Commissioner of Internal Revenue

or his duly authorized representative finds that proper taxes should be assessed, he
shall first notify the taxpayer of his findings. Within a period to be prescribed by
implementing regulations, the taxpayer shall be required to respond to said notice. If
the taxpayer fails to respond, the Commissioner shall issue an assessment based on
his findings.
Such assessment may be protested administratively by filing a request for

reconsideration or reinvestigation in such form and manner as may be prescribed by
implementing regulations within (30) days from receipt of the assessment; otherwise,
the assessment shall become final and unappealable.
If the protest is denied in whole or in part, the individual, association or corporation

adversely affected by the decision on the protest may appeal to the Court of Tax
Appeals within thirty (30) days from receipt of said decision; otherwise, the decision
shall become final, executory and demandable. (As inserted by P.D. 1773)
Apart from failing to file the required estate tax return within the time required for the filing of the
same, petitioner, and the other heirs never questioned the assessments served upon them, allowing
the same to lapse into finality, and prompting the BIR to collect the said taxes by levying upon the
properties left by President Marcos.
Petitioner submits, however, that "while the assessment of taxes may have been validly undertaken
by the Government, collection thereof may have been done in violation of the law. Thus, the manner
and method in which the latter is enforced may be questioned separately, and irrespective of the
finality of the former, because the Government does not have the unbridled discretion to enforce
collection without regard to the clear provision of law."
14
Petitioner specifically points out that applying Memorandum Circular No. 38-68, implementing
Sections 318 and 324 of the old tax code (Republic Act 5203), the BIR's Notices of Levy on the
Marcos properties, were issued beyond the allowed period, and are therefore null and void:
. . . the Notices of Levy on Real Property (Annexes O to NN of Annex C of this

Petition) in satisfaction of said assessments were still issued by respondents well
beyond the period mandated in Revenue Memorandum Circular No. 38-68. These
Notices of Levy were issued only on 22 February 1993 and 20 May 1993 when at
least seventeen (17) months had already lapsed from the last service of tax
assessment on 12 September 1991. As no notices of distraint of personal property
were first issued by respondents, the latter should have complied with Revenue
Memorandum Circular No. 38-68 and issued these Notices of Levy not earlier than
three (3) months nor later than six (6) months from 12 September 1991. In
accordance with the Circular, respondents only had until 12 March 1992 (the last day
of the sixth month) within which to issue these Notices of Levy. The Notices of Levy,
having been issued beyond the period allowed by law, are thus void and of no
effect.
15
We hold otherwise. The Notices of Levy upon real property were issued within the prescriptive
period and in accordance with the provisions of the present Tax Code. The deficiency tax
assessment, having already become final, executory, and demandable, the same can now be
collected through the summary remedy of distraint or levy pursuant to Section 205 of the NIRC.
The applicable provision in regard to the prescriptive period for the assessment and collection of tax
deficiency in this instance is Article 223 of the NIRC, which pertinently provides:
Sec. 223. Exceptions as to a period of limitation of assessment and collection of

taxes. — (a) In the case of a false or fraudulent return with intent to evade tax or of a
failure to file a return, the tax may be assessed, or a proceeding in court for the
collection of such tax may be begun without assessment, at any time within ten (10)
years after the discovery of the falsity, fraud, or omission: Provided, That, in a fraud
assessment which has become final and executory, the fact of fraud shall be
judicially taken cognizance of in the civil or criminal action for the collection thereof.
xxx xxx xxx
(c) Any internal revenue tax which has been assessed within the period of limitation
above prescribed, may be collected by distraint or levy or by a proceeding in court
within three years following the assessment of the tax.
xxx xxx xxx

The omission to file an estate tax return, and the subsequent failure to contest or appeal the
assessment made by the BIR is fatal to the petitioner's cause, as under the above-cited provision, in
case of failure to file a return, the tax may be assessed at any time within ten years after the
omission, and any tax so assessed may be collected by levy upon real property within three years
following the assessment of the tax. Since the estate tax assessment had become final and
unappealable by the petitioner's default as regards protesting the validity of the said assessment,
there is now no reason why the BIR cannot continue with the collection of the said tax. Any objection
against the assessment should have been pursued following the avenue paved in Section 229 of the
NIRC on protests on assessments of internal revenue taxes.
Petitioner further argues that "the numerous pending court cases questioning the late president's
ownership or interests in several properties (both real and personal) make the total value of his
estate, and the consequent estate tax due, incapable of exact pecuniary determination at this time.
Thus, respondents' assessment of the estate tax and their issuance of the Notices of Levy and sale
are premature and oppressive." He points out the pendency of Sandiganbayan Civil Case Nos.
0001-0034 and 0141, which were filed by the government to question the ownership and interests of
the late President in real and personal properties located within and outside the Philippines.
Petitioner, however, omits to allege whether the properties levied upon by the BIR in the collection of
estate taxes upon the decedent's estate were among those involved in the said cases pending in the
Sandiganbayan. Indeed, the court is at a loss as to how these cases are relevant to the matter at
issue. The mere fact that the decedent has pending cases involving ill-gotten wealth does not affect
the enforcement of tax assessments over the properties indubitably included in his estate.
Petitioner also expresses his reservation as to the propriety of the BIR's total assessment of
P23,292,607,638.00, stating that this amount deviates from the findings of the Department of
Justice's Panel of Prosecutors as per its resolution of 20 September 1991. Allegedly, this is clear
evidence of the uncertainty on the part of the Government as to the total value of the estate of the
late President.
This is, to our mind, the petitioner's last ditch effort to assail the assessment of estate tax which had
already become final and unappealable.
It is not the Department of Justice which is the government agency tasked to determine the amount
of taxes due upon the subject estate, but the Bureau of Internal Revenue, whose determinations
16
and assessments are presumed correct and made in good faith. The taxpayer has the duty of
17
proving otherwise. In the absence of proof of any irregularities in the performance of official duties,
an assessment will not be disturbed. Even an assessment based on estimates is prima facie valid
and lawful where it does not appear to have been arrived at arbitrarily or capriciously. The burden of
proof is upon the complaining party to show clearly that the assessment is erroneous. Failure to
present proof of error in the assessment will justify the judicial affirmance of said assessment. In
18
this instance, petitioner has not pointed out one single provision in the Memorandum of the Special
Audit Team which gave rise to the questioned assessment, which bears a trace of falsity. Indeed,
the petitioner's attack on the assessment bears mainly on the alleged improbable and
unconscionable amount of the taxes charged. But mere rhetoric cannot supply the basis for the
charge of impropriety of the assessments made.
Moreover, these objections to the assessments should have been raised, considering the ample
remedies afforded the taxpayer by the Tax Code, with the Bureau of Internal Revenue and the Court
of Tax Appeals, as described earlier, and cannot be raised now via Petition for Certiorari, under the
pretext of grave abuse of discretion. The course of action taken by the petitioner reflects his
disregard or even repugnance of the established institutions for governance in the scheme of a well-
ordered society. The subject tax assessments having become final, executory and enforceable, the
same can no longer be contested by means of a disguised protest. In the main, Certiorari may not
be used as a substitute for a lost appeal or remedy. This judicial policy becomes more pronounced
19
in view of the absence of sufficient attack against the actuations of government.
On the matter of sufficiency of service of Notices of Assessment to the petitioner, we find the
respondent appellate court's pronouncements sound and resilient to petitioner's attacks.
Anent grounds 3(b) and (B) — both alleging/claiming lack of notice — We find, after
considering the facts and circumstances, as well as evidences, that there was
sufficient, constructive and/or actual notice of assessments, levy and sale, sent to
herein petitioner Ferdinand "Bongbong" Marcos as well as to his mother Mrs. Imelda
Marcos.
Even if we are to rule out the notices of assessments personally given to the
caretaker of Mrs. Marcos at the latter's last known address, on August 26, 1991 and
September 12, 1991, as well as the notices of assessment personally given to the
caretaker of petitioner also at his last known address on September 12, 1991 — the
subsequent notices given thereafter could no longer be ignored as they were sent at
a time when petitioner was already here in the Philippines, and at a place where said
notices would surely be called to petitioner's attention, and received by responsible
persons of sufficient age and discretion.
Thus, on October 20, 1992, formal assessment notices were served upon Mrs.
Marcos c/o the petitioner, at his office, House of Representatives, Batasan
Pambansa, Q.C. (Annexes "A", "A-1", "A-2", "A-3"; pp. 207-210,
Comment/Memorandum of OSG). Moreover, a notice to taxpayer dated October 8,
1992 inviting Mrs. Marcos to a conference relative to her tax liabilities, was furnished
the counsel of Mrs. Marcos — Dean Antonio Coronel (Annex "B", p. 211, ibid).
Thereafter, copies of Notices were also served upon Mrs. Imelda Marcos, the
petitioner and their counsel "De Borja, Medialdea, Ata, Bello, Guevarra and Serapio
Law Office", on April 7, 1993 and June 10, 1993. Despite all of these Notices,
petitioner never lifted a finger to protest the assessments, (upon which the Levy and
sale of properties were based), nor appealed the same to the Court of Tax Appeals.
There being sufficient service of Notices to herein petitioner (and his mother) and it
appearing that petitioner continuously ignored said Notices despite several
opportunities given him to file a protest and to thereafter appeal to the Court of Tax
Appeals, — the tax assessments subject of this case, upon which the levy and sale
of properties were based, could no longer be contested (directly or indirectly) via this
instant petition for certiorari.
20
Petitioner argues that all the questioned Notices of Levy, however, must be nullified for having been
issued without validly serving copies thereof to the petitioner. As a mandatory heir of the decedent,
petitioner avers that he has an interest in the subject estate, and notices of levy upon its properties
should have been served upon him.
We do not agree. In the case of notices of levy issued to satisfy the delinquent estate tax, the
delinquent taxpayer is the Estate of the decedent, and not necessarily, and exclusively, the petitioner
as heir of the deceased. In the same vein, in the matter of income tax delinquency of the late
president and his spouse, petitioner is not the taxpayer liable. Thus, it follows that service of notices
of levy in satisfaction of these tax delinquencies upon the petitioner is not required by law, as under
Section 213 of the NIRC, which pertinently states:
xxx xxx xxx
. . . Levy shall be effected by writing upon said certificate a description of the property
upon which levy is made. At the same time, written notice of the levy shall be mailed
to or served upon the Register of Deeds of the province or city where the property is
located and upon the delinquent taxpayer, or if he be absent from the Philippines, to
his agent or the manager of the business in respect to which the liability arose, or if
there be none, to the occupant of the property in question.
xxx xxx xxx
The foregoing notwithstanding, the record shows that notices of warrants of distraint and levy of sale
were furnished the counsel of petitioner on April 7, 1993, and June 10, 1993, and the petitioner
himself on April 12, 1993 at his office at the Batasang Pambansa. We cannot therefore,
21
countenance petitioner's insistence that he was denied due process. Where there was an
opportunity to raise objections to government action, and such opportunity was disregarded, for no
justifiable reason, the party claiming oppression then becomes the oppressor of the orderly functions
of government. He who comes to court must come with clean hands. Otherwise, he not only taints
his name, but ridicules the very structure of established authority.
IN VIEW WHEREOF, the Court RESOLVED to DENY the present petition. The Decision of the Court
of Appeals dated November 29, 1994 is hereby AFFIRMED in all respects.
SO ORDERED.
G.R. Nos. L-49839-46 April 26, 1991
JOSE B. L. REYES and EDMUNDO A. REYES, petitioners,

vs.
PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROÑO, in their capacities as appointed
and Acting Members of the CENTRAL BOARD OF ASSESSMENT APPEALS; TERESITA H.
NOBLEJAS, ROMULO M. DEL ROSARIO, RAUL C. FLORES, in their capacities as appointed
and Acting Members of the BOARD OF ASSESSMENT APPEALS of Manila; and NICOLAS
CATIIL in his capacity as City Assessor of Manila, respondents.
Barcelona, Perlas, Joven & Academia Law Offices for petitioners.
PARAS, J.:
This is a petition for review on certiorari to reverse the June 10, 1977 decision of the Central Board
of Assessment Appeals in CBAA Cases Nos. 72-79 entitled "J.B.L. Reyes, Edmundo Reyes, et al. v.
1
Board of Assessment Appeals of Manila and City Assessor of Manila" which affirmed the March 29,
1976 decision of the Board of Tax Assessment Appeals in BTAA Cases Nos. 614, 614-A-J, 615,
2
615-A, B, E, "Jose Reyes, et al. v. City Assessor of Manila" and "Edmundo Reyes and Milagros
Reyes v. City Assessor of Manila" upholding the classification and assessments made by the City
Assessor of Manila.
The facts of the case are as follows:
Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in
Tondo and Sta. Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling
sites by tenants. Said tenants were paying monthly rentals not exceeding three hundred pesos
(P300.00) in July, 1971. On July 14, 1971, the National Legislature enacted Republic Act No. 6359
prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units or of lands
on which another's dwelling is located, where such rentals do not exceed three hundred pesos
(P300.00) a month but allowing an increase in rent by not more than 10% thereafter. The said Act
also suspended paragraph (1) of Article 1673 of the Civil Code for two years from its effectivity
thereby disallowing the ejectment of lessees upon the expiration of the usual legal period of lease.
On October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the
prohibition to increase monthly rentals below P300.00 and by indefinitely suspending the
aforementioned provision of the Civil Code, excepting leases with a definite period. Consequently,
the Reyeses, petitioners herein, were precluded from raising the rentals and from ejecting the
tenants. In 1973, respondent City Assessor of Manila re-classified and reassessed the value of the
subject properties based on the schedule of market values duly reviewed by the Secretary of
Finance. The revision, as expected, entailed an increase in the corresponding tax rates prompting
petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals. They
averred that the reassessments made were "excessive, unwarranted, inequitable, confiscatory and
unconstitutional" considering that the taxes imposed upon them greatly exceeded the annual income
derived from their properties. They argued that the income approach should have been used in
determining the land values instead of the comparable sales approach which the City Assessor
adopted (Rollo, pp. 9-10-A). The Board of Tax Assessment Appeals, however, considered the
assessments valid, holding thus:
WHEREFORE, and considering that the appellants have failed to submit concrete evidence
which could overcome the presumptive regularity of the classification and assessments
appear to be in accordance with the base schedule of market values and of the base
schedule of building unit values, as approved by the Secretary of Finance, the cases should
be, as they are hereby, upheld.
SO ORDERED. (Decision of the Board of Tax Assessment Appeals, Rollo, p. 22).
The Reyeses appealed to the Central Board of Assessment Appeals. They submitted, among
1âwphi1
others, the summary of the yearly rentals to show the income derived from the properties.
Respondent City Assessor, on the other hand, submitted three (3) deeds of sale showing the
different market values of the real property situated in the same vicinity where the subject properties
of petitioners are located. To better appreciate the locational and physical features of the land, the
Board of Hearing Commissioners conducted an ocular inspection with the presence of two
representatives of the City Assessor prior to the healing of the case. Neither the owners nor their
authorized representatives were present during the said ocular inspection despite proper notices
served them. It was found that certain parcels of land were below street level and were affected by
the tides (Rollo, pp. 24-25).
On June 10, 1977, the Central Board of Assessment Appeals rendered its decision, the dispositive
portion of which reads:
WHEREFORE, the appealed decision insofar as the valuation and assessment of the lots
covered by Tax Declaration Nos. (5835) PD-5847, (5839), (5831) PD-5844 and PD-3824 is
affirmed.
For the lots covered by Tax Declaration Nos. (1430) PD-1432, PD-1509, 146 and (1) PD-
266, the appealed Decision is modified by allowing a 20% reduction in their respective
market values and applying therein the assessment level of 30% to arrive at the
corresponding assessed value.
SO ORDERED. (Decision of the Central Board of Assessment Appeals, Rollo, p. 27)
Petitioner's subsequent motion for reconsideration was denied, hence, this petition.
The Reyeses assigned the following error:
THE HONORABLE BOARD ERRED IN ADOPTING THE "COMPARABLE SALES

APPROACH" METHOD IN FIXING THE ASSESSED VALUE OF APPELLANTS'
PROPERTIES.
The petition is impressed with merit.
The crux of the controversy is in the method used in tax assessment of the properties in question.
Petitioners maintain that the "Income Approach" method would have been more realistic for in
disregarding the effect of the restrictions imposed by P.D. 20 on the market value of the properties
affected, respondent Assessor of the City of Manila unlawfully and unjustifiably set increased new
assessed values at levels so high and successive that the resulting annual real estate taxes would
admittedly exceed the sum total of the yearly rentals paid or payable by the dweller tenants under
P.D. 20. Hence, petitioners protested against the levels of the values assigned to their properties as
revised and increased on the ground that they were arbitrarily excessive, unwarranted, inequitable,
confiscatory and unconstitutional (Rollo, p. 10-A).
On the other hand, while respondent Board of Tax Assessment Appeals admits in its decision that
the income approach is used in determining land values in some vicinities, it maintains that when
income is affected by some sort of price control, the same is rejected in the consideration and study
of land values as in the case of properties affected by the Rent Control Law for they do not project
the true market value in the open market (Rollo, p. 21). Thus, respondents opted instead for the
"Comparable Sales Approach" on the ground that the value estimate of the properties predicated
upon prices paid in actual, market transactions would be a uniform and a more credible standards to
use especially in case of mass appraisal of properties (Ibid.). Otherwise stated, public respondents
would have this Court completely ignore the effects of the restrictions of P.D. No. 20 on the market
value of properties within its coverage. In any event, it is unquestionable that both the "Comparable
Sales Approach" and the "Income Approach" are generally acceptable methods of appraisal for
taxation purposes (The Law on Transfer and Business Taxation by Hector S. De Leon, 1988
Edition). However, it is conceded that the propriety of one as against the other would of course
depend on several factors. Hence, as early as 1923 in the case of Army & Navy Club, Manila v.
Wenceslao Trinidad, G.R. No. 19297 (44 Phil. 383), it has been stressed that the assessors, in
finding the value of the property, have to consider all the circumstances and elements of value and
must exercise a prudent discretion in reaching conclusions.
Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then enforced, the rule of taxation must not only
be uniform, but must also be equitable and progressive.
Uniformity has been defined as that principle by which all taxable articles or kinds of property of the
same class shall be taxed at the same rate (Churchill v. Concepcion, 34 Phil. 969 [1916]).
Notably in the 1935 Constitution, there was no mention of the equitable or progressive aspects of
taxation required in the 1973 Charter (Fernando "The Constitution of the Philippines", p. 221,
Second Edition). Thus, the need to examine closely and determine the specific mandate of the
Constitution.
Taxation is said to be equitable when its burden falls on those better able to pay. Taxation is
progressive when its rate goes up depending on the resources of the person affected (Ibid.).
The power to tax "is an attribute of sovereignty". In fact, it is the strongest of all the powers of
government. But for all its plenitude the power to tax is not unconfined as there are restrictions.
Adversely effecting as it does property rights, both the due process and equal protection clauses of
the Constitution may properly be invoked to invalidate in appropriate cases a revenue measure. If it
were otherwise, there would be truth to the 1903 dictum of Chief Justice Marshall that "the power to
tax involves the power to destroy." The web or unreality spun from Marshall's famous dictum was
brushed away by one stroke of Mr. Justice Holmes pen, thus: "The power to tax is not the power to
destroy while this Court sits. So it is in the Philippines " (Sison, Jr. v. Ancheta, 130 SCRA 655 [1984];
Obillos, Jr. v. Commissioner of Internal Revenue, 139 SCRA 439 [1985]).
In the same vein, the due process clause may be invoked where a taxing statute is so arbitrary that it
finds no support in the Constitution. An obvious example is where it can be shown to amount to
confiscation of property. That would be a clear abuse of power (Sison v. Ancheta, supra).
The taxing power has the authority to make a reasonable and natural classification for purposes of
taxation but the government's act must not be prompted by a spirit of hostility, or at the very least
discrimination that finds no support in reason. It suffices then that the laws operate equally and
uniformly on all persons under similar circumstances or that all persons must be treated in the same
manner, the conditions not being different both in the privileges conferred and the liabilities imposed
(Ibid., p. 662).
Finally under the Real Property Tax Code (P.D. 464 as amended), it is declared that the first
Fundamental Principle to guide the appraisal and assessment of real property for taxation purposes
is that the property must be "appraised at its current and fair market value."
By no strength of the imagination can the market value of properties covered by P.D. No. 20 be
equated with the market value of properties not so covered. The former has naturally a much lesser
market value in view of the rental restrictions.
Ironically, in the case at bar, not even the factors determinant of the assessed value of subject
properties under the "comparable sales approach" were presented by the public respondents,
namely: (1) that the sale must represent a bonafide arm's length transaction between a willing seller
and a willing buyer and (2) the property must be comparable property (Rollo, p. 27). Nothing can
justify or support their view as it is of judicial notice that for properties covered by P.D. 20 especially
during the time in question, there were hardly any willing buyers. As a general rule, there were no
takers so that there can be no reasonable basis for the conclusion that these properties were
comparable with other residential properties not burdened by P.D. 20. Neither can the given
circumstances be nonchalantly dismissed by public respondents as imposed under distressed
conditions clearly implying that the same were merely temporary in character. At this point in time,
the falsity of such premises cannot be more convincingly demonstrated by the fact that the law has
existed for around twenty (20) years with no end to it in sight.
Verily, taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. However, such collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself It is therefore necessary to reconcile the apparently
conflicting interests of the authorities and the taxpayers so that the real purpose of taxations, which
is the promotion of the common good, may be achieved (Commissioner of Internal Revenue v. Algue
Inc., et al., 158 SCRA 9 [1988]). Consequently, it stands to reason that petitioners who are burdened
by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle
of social justice should not now be penalized by the same government by the imposition of
excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.
By the public respondents' own computation the assessment by income approach would amount to
only P10.00 per sq. meter at the time in question.
PREMISES CONSIDERED, (a) the petition is GRANTED; (b) the assailed decisions of public
respondents are REVERSED and SET ASIDE; and (e) the respondent Board of Assessment
Appeals of Manila and the City Assessor of Manila are ordered to make a new assessment by the
income approach method to guarantee a fairer and more realistic basis of computation (Rollo, p. 71).
SO ORDERED.
G.R. No. 112024 January 28, 1999
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, COURT OF TAX APPEALS and COURT OF
APPEALS, respondent.
QUISUMBING, J.:
This petition for review assails the Resolution of the Court of Appeals dated September 22,
1
1993 affirming the Decision and a Resolution of the Court Of Tax Appeals which denied the claims
2 3
of the petitioner for tax refund and tax credits, and disposing as follows:
IN VIEW OF ALL, THE FOREGOING, the instant petition for review, is DENIED due
course. The Decision of the Court of Tax Appeals dated May 20, 1993 and its
resolution dated July 20, 1993, are hereby AFFIRMED in toto.
SO ORDERED. 4
The Court of Tax Appeals earlier ruled as follows:
WHEREFORE, Petitioner's claim for refund/tax credits of overpaid income tax for
1985 in the amount of P5,299,749.95 is hereby denied for having been filed beyond
the reglementary period. The 1986 claim for refund amounting to P234,077.69 is
likewise denied since petitioner has opted and in all likelihood automatically credited
the same to the succeeding year. The petition for review is dismissed for lack of
merit.
SO ORDERED. 5
The facts on record show the antecedent circumstances pertinent to this case.
Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly

organized under Philippine laws, filed its quarterly income tax returns for the first and second
quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00. The taxes due
were settled by applying PBCom's tax credit memos and accordingly, the Bureau of Internal
Revenue (BIR) issued Tax Debit Memo Nos. 0746-85 and 0747-85 for P3,401,701.00 and
P1,615,253.00, respectively.
Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns
for the year-ended December 31, 1986, the petitioner likewise reported a net loss of
P14,129,602.00, and thus declared no tax payable for the year.
But during these two years, PBCom earned rental income from leased properties. The lessees
withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and
P234,077.69 in 1986.
On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a
tax credit of P5,016,954.00 representing the overpayment of taxes in the first and second quarters of
1985.
Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their
lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69.
Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted
a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA). The petition
was docketed as CTA Case No. 4309 entitled: "Philippine Bank of Communications vs.
Commissioner of Internal Revenue."
The losses petitioner incurred as per the summary of petitioner's claims for refund and tax credit for
1985 and 1986, filed before the Court of Tax Appeals, are as follows:
1985 1986
——— ———
Net Income (Loss) (P25,317,288.00) (P14,129,602.00)
Tax Due NIL NIL
Quarterly tax.
Payments Made 5,016,954.00 —
Tax Withheld at Source 282,795.50 234,077.69
———————— ———————
Excess Tax Payments P5,299,749.50* P234,077.69
=============== =============
* CTA's decision reflects PBCom's 1985 tax claim as P5,299,749.95.

A forty five centavo difference was noted.
On May 20, 1993, the CTA rendered a decision which, as stated on the outset, denied the request of
petitioner for a tax refund or credit in the sum amount of P5,299,749.95, on the ground that it was
filed beyond the two-year reglementary period provided for by law. The petitioner's claim for refund
in 1986 amounting to P234,077.69 was likewise denied on the assumption that it was automatically
credited by PBCom against its tax payment in the succeeding year.
On June 22, 1993, petitioner filed a Motion for Reconsideration of the CTA's decision but the same
was denied due course for lack of merit. 6
Thereafter, PBCom filed a petition for review of said decision and resolution of the CTA with the
Court of Appeals. However on September 22, 1993, the Court of Appeals affirmed in toto the CTA's
resolution dated July 20, 1993. Hence this petition now before us.
The issues raised by the petitioner are:
I. Whether taxpayer PBCom — which relied in good faith on the

formal assurances of BIR in RMC No. 7-85 and did not immediately
file with the CTA a petition for review asking for the refund/tax credit
of its 1985-86 excess quarterly income tax payments — can be
prejudiced by the subsequent BIR rejection, applied retroactivity, of
its assurances in RMC No. 7-85 that the prescriptive period for the
refund/tax credit of excess quarterly income tax payments is not two
years but ten (10). 7
II. Whether the Court of Appeals seriously erred in affirming the CTA
decision which denied PBCom's claim for the refund of P234,077.69
income tax overpaid in 1986 on the mere speculation, without proof,
that there were taxes due in 1987 and that PBCom availed of tax-
crediting that year.8
Simply stated, the main question is: Whether or not the Court of Appeals erred in denying the plea
for tax refund or tax credits on the ground of prescription, despite petitioner's reliance on RMC No. 7-
85, changing the prescriptive period of two years to ten years?
Petitioner argues that its claims for refund and tax credits are not yet barred by prescription relying
on the applicability of Revenue Memorandum Circular No. 7-85 issued on April 1, 1985. The circular
states that overpaid income taxes are not covered by the two-year prescriptive period under the tax
Code and that taxpayers may claim refund or tax credits for the excess quarterly income tax with the
BIR within ten (10) years under Article 1144 of the Civil Code. The pertinent portions of the circular
reads:
REVENUE MEMORANDUM CIRCULAR NO. 7-85
SUBJECT: PROCESSING OF REFUND OR TAX

CREDIT OF EXCESS CORPORATE INCOME TAX
RESULTING FROM THE FILING OF THE FINAL
ADJUSTMENT RETURN.
TO: All Internal Revenue Officers and Others Concerned.
Sec. 85 And 86 Of the National Internal Revenue Code provide:
x x x x x x x x x
The foregoing provisions are implemented by Section 7 of Revenue Regulations

Nos. 10-77 which provide;
x x x x x x x x x
It has been observed, however, that because of the excess tax payments,
corporations file claims for recovery of overpaid income tax with the Court of Tax
Appeals within the two-year period from the date of payment, in accordance with
sections 292 and 295 of the National Internal Revenue Code. It is obvious that the
filing of the case in court is to preserve the judicial right of the corporation to claim
the refund or tax credit.
It should he noted, however, that this is not a case of erroneously or illegally paid tax
under the provisions of Sections 292 and 295 of the Tax Code.
In the above provision of the Regulations the corporation may request for the refund
of the overpaid income tax or claim for automatic tax credit. To insure prompt action
on corporate annual income tax returns showing refundable amounts arising from
overpaid quarterly income taxes, this Office has promulgated Revenue Memorandum
Order No. 32-76 dated June 11, 1976, containing the procedure in processing said
returns. Under these procedures, the returns are merely pre-audited which consist
mainly of checking mathematical accuracy of the figures of the return. After which,
the refund or tax credit is granted, and, this procedure was adopted to facilitate
immediate action on cases like this.
In this regard, therefore, there is no need to file petitions for review in the Court of
Tax Appeals in order to preserve the right to claim refund or tax credit the two year
period. As already stated, actions hereon by the Bureau are immediate after only a
cursory pre-audit of the income tax returns. Moreover, a taxpayer may recover from
the Bureau of Internal Revenue excess income tax paid under the provisions of
Section 86 of the Tax Code within 10 years from the date of payment considering
that it is an obligation created by law (Article 1144 of the Civil Code). (Emphasis
9
supplied.)
Petitioner argues that the government is barred from asserting a position contrary to its declared
circular if it would result to injustice to taxpayers. Citing ABS CBN Broadcasting Corporation vs.
Court of Tax Appeals petitioner claims that rulings or circulars promulgated by the Commissioner
10
of Internal Revenue have no retroactive effect if it would be prejudicial to taxpayers, In ABS-CBN

case, the Court held that the government is precluded from adopting a position inconsistent with one
previously taken where injustice would result therefrom or where there has been a misrepresentation
to the taxpayer.
Petitioner contends that Sec. 246 of the National Internal Revenue Code explicitly provides for this
rules as follows:
Sec. 246 Non-retroactivity of rulings— Any revocation, modification or reversal of

any of the rules and regulations promulgated in accordance with the preceding
section or any of the rulings or circulars promulgated by the Commissioner shall not
be given retroactive application if the revocation, modification or reversal will be
prejudicial to the taxpayers except in the following cases:
a). where the taxpayer deliberately misstates or omits

material facts from his return or in any document
required of him by the Bureau of Internal Revenue;
b). where the facts subsequently gathered by the

Bureau of Internal Revenue are materially different
from the facts on which the ruling is based;
c). where the taxpayer acted in bad faith.

Respondent Commissioner of Internal Revenue, through Solicitor General, argues that the two-year
prescriptive period for filing tax cases in court concerning income tax payments of Corporations is
reckoned from the date of filing the Final Adjusted Income Tax Return, which is generally done on
April 15 following the close of the calendar year. As precedents, respondent Commissioner cited
cases which adhered to this principle, to wit ACCRA Investments Corp. vs. Court of Appeals, et
al., and Commissioner of Internal Revenue vs. TMX Sales, Inc., et al.. Respondent
11 12
Commissioner also states that since the Final Adjusted Income Tax Return of the petitioner for the
taxable year 1985 was supposed to be filed on April 15, 1986, the latter had only until April 15, 1988
to seek relief from the court. Further, respondent Commissioner stresses that when the petitioner
filed the case before the CTA on November 18, 1988, the same was filed beyond the time fixed by
law, and such failure is fatal to petitioner's cause of action.
After a careful study of the records and applicable jurisprudence on the matter, we find that, contrary
to the petitioner's contention, the relaxation of revenue regulations by RMC 7-85 is not warranted as
it disregards the two-year prescriptive period set by law.
Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate
funds for the State to finance the needs of the citizenry and to advance the common weal. Due
13
process of law under the Constitution does not require judicial proceedings in tax cases. This must
necessarily be so because it is upon taxation that the government chiefly relies to obtain the means
to carry on its operations and it is of utmost importance that the modes adopted to enforce the
collection of taxes levied should be summary and interfered with as little as possible. 14
From the same perspective, claims for refund or tax credit should be exercised within the time fixed
by law because the BIR being an administrative body enforced to collect taxes, its functions should
not be unduly delayed or hampered by incidental matters.
Sec. 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec. 229, NIRC of 1997)
provides for the prescriptive period for filing a court proceeding for the recovery of tax erroneously or
illegally collected, viz.:
Sec. 230. Recovery of tax erroneously or illegally collected. — No suit or proceeding

shall be maintained in any court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of
any penalty claimed to have been collected without authority, or of any sum alleged
to have been excessive or in any manner wrongfully collected, until a claim for refund
or credit has been duly filed with the Commissioner; but such suit or proceeding may
be maintained, whether or not such tax, penalty, or sum has been paid under protest
or duress.
In any case, no such suit or proceedings shall begun after the expiration of two years
from the date of payment of the tax or penalty regardless of any supervening cause
that may arise after payment; Provided however, That the Commissioner may, even
without a written claim therefor, refund or credit any tax, where on the face of the
return upon which payment was made, such payment appears clearly to have been
erroneously paid. (Emphasis supplied)
The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of
Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced.
The two-year prescriptive period provided, should be computed from the time of filing the Adjustment
Return and final payment of the tax for the year.
In Commissioner of Internal Revenue vs. Philippine American Life Insurance Co., this Court
15
explained the application of Sec. 230 of 1977 NIRC, as follows:
Clearly, the prescriptive period of two years should commence to run only from the
time that the refund is ascertained, which can only be determined after a final
adjustment return is accomplished. In the present case, this date is April 16, 1984,
and two years from this date would be April 16, 1986. . . . As we have earlier said in
the TMX Sales case, Sections 68. 69, and 70 on Quarterly Corporate Income
16 17 18
Tax Payment and Section 321 should be considered in conjunction with it 19
When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive
period of two years to ten years on claims of excess quarterly income tax payments, such circular
created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did
not simply interpret the law; rather it legislated guidelines contrary to the statute passed by
Congress.
It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the
sense of more specific and less general interpretations of tax laws) which are issued from time to
time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed
upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the
courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be
erroneous. Thus, courts will not countenance administrative issuances that override, instead of
20
remaining consistent and in harmony with the law they seek to apply and implement. 21
In the case of People vs. Lim, it was held that rules and regulations issued by administrative
22
officials to implement a law cannot go beyond the terms and provisions of the latter.
Appellant contends that Section 2 of FAO No. 37-1 is void because it is not only
inconsistent with but is contrary to the provisions and spirit of Act. No 4003 as
amended, because whereas the prohibition prescribed in said Fisheries Act was for
any single period of time not exceeding five years duration, FAO No 37-1 fixed no
period, that is to say, it establishes an absolute ban for all time. This discrepancy
between Act No. 4003 and FAO No. 37-1 was probably due to an oversight on the
part of Secretary of Agriculture and Natural Resources. Of course, in case of
discrepancy, the basic Act prevails, for the reason that the regulation or rule issued
to implement a law cannot go beyond the terms and provisions of the
latter. . . . In this connection, the attention of the technical men in the offices of
Department Heads who draft rules and regulation is called to the importance and
necessity of closely following the terms and provisions of the law which they intended
to implement, this to avoid any possible misunderstanding or confusion as in the
present case. 23
Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of
its officials or agents. As pointed out by the respondent courts, the nullification of RMC No. 7-85
24
issued by the Acting Commissioner of Internal Revenue is an administrative interpretation which is

not in harmony with Sec. 230 of 1977 NIRC. for being contrary to the express provision of a statute.
Hence, his interpretation could not be given weight for to do so would, in effect, amend the statute.
It is likewise argued that the Commissioner of Internal Revenue, after promulgating

RMC No. 7-85, is estopped by the principle of non-retroactively of BIR rulings. Again
We do not agree. The Memorandum Circular, stating that a taxpayer may recover the
excess income tax paid within 10 years from date of payment because this is an
obligation created by law, was issued by the Acting Commissioner of Internal
Revenue. On the other hand, the decision, stating that the taxpayer should still file a
claim for a refund or tax credit and corresponding petition fro review within the
two-year prescription period, and that the lengthening of the period of limitation on
refund from two to ten years would be adverse to public policy and run counter to the
positive mandate of Sec. 230, NIRC, - was the ruling and judicial interpretation of the
Court of Tax Appeals. Estoppel has no application in the case at bar because it was
not the Commissioner of Internal Revenue who denied petitioner's claim of refund or
tax credit. Rather, it was the Court of Tax Appeals who denied (albeit correctly) the
claim and in effect, ruled that the RMC No. 7-85 issued by the Commissioner of
Internal Revenue is an administrative interpretation which is out of harmony with or
contrary to the express provision of a statute (specifically Sec. 230, NIRC), hence,
cannot be given weight for to do so would in effect amend the statute. 25
Art. 8 of the Civil Code recognizes judicial decisions, applying or interpreting statutes as part of the
26
legal system of the country. But administrative decisions do not enjoy that level of recognition. A
memorandum-circular of a bureau head could not operate to vest a taxpayer with shield against
judicial action. For there are no vested rights to speak of respecting a wrong construction of the law
by the administrative officials and such wrong interpretation could not place the Government in
estoppel to correct or overrule the same. Moreover, the non-retroactivity of rulings by the
27
Commissioner of Internal Revenue is not applicable in this case because the nullity of RMC No. 7-85
was declared by respondent courts and not by the Commissioner of Internal Revenue. Lastly, it must
be noted that, as repeatedly held by this Court, a claim for refund is in the nature of a claim for
exemption and should be construed in strictissimi juris against the taxpayer. 28
On the second issue, the petitioner alleges that the Court of Appeals seriously erred in affirming
CTA's decision denying its claim for refund of P234,077.69 (tax overpaid in 1986), based on mere
speculation, without proof, that PBCom availed of the automatic tax credit in 1987.
Sec. 69 of the 1977 NIRC (now Sec. 76 of the 1997 NIRC) provides that any excess of the total
29
quarterly payments over the actual income tax computed in the adjustment or final corporate income
tax return, shall either (a) be refunded to the corporation, or (b) may be credited against the
estimated quarterly income tax liabilities for the quarters of the succeeding taxable year.
The corporation must signify in its annual corporate adjustment return (by marking the option box
provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax
credit for the succeeding taxable year. To ease the administration of tax collection, these remedies
are in the alternative, and the choice of one precludes the other.
As stated by respondent Court of Appeals:
Finally, as to the claimed refund of income tax over-paid in 1986 — the Court of Tax
Appeals, after examining the adjusted final corporate annual income tax return for
taxable year 1986, found out that petitioner opted to apply for automatic tax credit.
This was the basis used (vis-avis the fact that the 1987 annual corporate tax return
was not offered by the petitioner as evidence) by the CTA in concluding that
petitioner had indeed availed of and applied the automatic tax credit to the
succeeding year, hence it can no longer ask for refund, as to [sic] the two remedies
of refund and tax credit are alternative.
30
That the petitioner opted for an automatic tax credit in accordance with Sec. 69 of the 1977 NIRC, as
specified in its 1986 Final Adjusted Income Tax Return, is a finding of fact which we must respect.
Moreover, the 1987 annual corporate tax return of the petitioner was not offered as evidence to
contovert said fact. Thus, we are bound by the findings of fact by respondent courts, there being no
showing of gross error or abuse on their part to disturb our reliance thereon.
31
WHEREFORE, the, petition is hereby DENIED, The decision of the Court of Appeals appealed from
is AFFIRMED, with COSTS against the petitioner. 1âwphi1.nêt
SO ORDERED.
G.R. No. L-22074 April 30, 1965
THE PHILIPPINE GUARANTY CO., INC., petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX
APPEALS, respondents.
Josue H. Gustilo and Ramirez and Ortigas for petitioner.

Office of the Solicitor General and Attorney V.G. Saldajena for respondents.
BENGZON, J.P., J.:
The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance
contracts, on various dates, with foreign insurance companies not doing business in the Philippines
namely: Imperio Compañia de Seguros, La Union y El Fenix Español, Overseas Assurance Corp.,
Ltd., Socieded Anonima de Reaseguros Alianza, Tokio Marino & Fire Insurance Co., Ltd., Union
Assurance Society Ltd., Swiss Reinsurance Company and Tariff Reinsurance Limited. Philippine
Guaranty Co., Inc., thereby agreed to cede to the foreign reinsurers a portion of the premiums on
insurance it has originally underwritten in the Philippines, in consideration for the assumption by the
latter of liability on an equivalent portion of the risks insured. Said reinsurrance contracts were
signed by Philippine Guaranty Co., Inc. in Manila and by the foreign reinsurers outside the
Philippines, except the contract with Swiss Reinsurance Company, which was signed by both parties
in Switzerland.
The reinsurance contracts made the commencement of the reinsurers' liability simultaneous with that
of Philippine Guaranty Co., Inc. under the original insurance. Philippine Guaranty Co., Inc. was
required to keep a register in Manila where the risks ceded to the foreign reinsurers where entered,
and entry therein was binding upon the reinsurers. A proportionate amount of taxes on insurance
premiums not recovered from the original assured were to be paid for by the foreign reinsurers. The
foreign reinsurers further agreed, in consideration for managing or administering their affairs in the
Philippines, to compensate the Philippine Guaranty Co., Inc., in an amount equal to 5% of the
reinsurance premiums. Conflicts and/or differences between the parties under the reinsurance
contracts were to be arbitrated in Manila. Philippine Guaranty Co., Inc. and Swiss Reinsurance
Company stipulated that their contract shall be construed by the laws of the Philippines.
Pursuant to the aforesaid reinsurance contracts, Philippine Guaranty Co., Inc. ceded to the foreign
reinsurers the following premiums:
1953 . . . . . . . . . . . . . . . . . . . . . P842,466.71
1954 . . . . . . . . . . . . . . . . . . . . . 721,471.85
Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it file its
income tax returns for 1953 and 1954. Furthermore, it did not withhold or pay tax on them.
Consequently, per letter dated April 13, 1959, the Commissioner of Internal Revenue assessed
against Philippine Guaranty Co., Inc. withholding tax on the ceded reinsurance premiums, thus:
1953
Gross premium per investigation . . . . . . . . . . P768,580.00
Withholding tax due thereon at 24% . . . . . . . . P184,459.00
25% surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . 46,114.00
Compromise for non-filing of withholding
100.00
income tax return . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL AMOUNT DUE & COLLECTIBLE . . . . P230,673.00

==========
1954
Gross premium per investigation . . . . . . . . . . P780.880.68
Withholding tax due thereon at 24% . . . . . . . . P184,411.00
25% surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . P184,411.00
Compromise for non-filing of withholding
100.00
income tax return . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL AMOUNT DUE & COLLECTIBLE . . . . P234,364.00

==========
Philippine Guaranty Co., Inc., protested the assessment on the ground that reinsurance premiums
ceded to foreign reinsurers not doing business in the Philippines are not subject to withholding tax.
Its protest was denied and it appealed to the Court of Tax Appeals.
On July 6, 1963, the Court of Tax Appeals rendered judgment with this dispositive portion:
IN VIEW OF THE FOREGOING CONSIDERATIONS, petitioner Philippine Guaranty Co., Inc.

is hereby ordered to pay to the Commissioner of Internal Revenue the respective sums of
P202,192.00 and P173,153.00 or the total sum of P375,345.00 as withholding income taxes
for the years 1953 and 1954, plus the statutory delinquency penalties thereon. With costs
against petitioner.
Philippine Guaranty Co, Inc. has appealed, questioning the legality of the Commissioner of Internal
Revenue's assessment for withholding tax on the reinsurance premiums ceded in 1953 and 1954 to
the foreign reinsurers.
Petitioner maintain that the reinsurance premiums in question did not constitute income from
sources within the Philippines because the foreign reinsurers did not engage in business in the
Philippines, nor did they have office here.
The reinsurance contracts, however, show that the transactions or activities that constituted the
undertaking to reinsure Philippine Guaranty Co., Inc. against loses arising from the original
insurances in the Philippines were performed in the Philippines. The liability of the foreign reinsurers
commenced simultaneously with the liability of Philippine Guaranty Co., Inc. under the original
insurances. Philippine Guaranty Co., Inc. kept in Manila a register of the risks ceded to the foreign
reinsurers. Entries made in such register bound the foreign resinsurers, localizing in the Philippines
the actual cession of the risks and premiums and assumption of the reinsurance undertaking by the
foreign reinsurers. Taxes on premiums imposed by Section 259 of the Tax Code for the privilege of
doing insurance business in the Philippines were payable by the foreign reinsurers when the same
were not recoverable from the original assured. The foreign reinsurers paid Philippine Guaranty Co.,
Inc. an amount equivalent to 5% of the ceded premiums, in consideration for administration and
management by the latter of the affairs of the former in the Philippines in regard to their reinsurance
activities here. Disputes and differences between the parties were subject to arbitration in the City of
Manila. All the reinsurance contracts, except that with Swiss Reinsurance Company, were signed by
Philippine Guaranty Co., Inc. in the Philippines and later signed by the foreign reinsurers abroad.
Although the contract between Philippine Guaranty Co., Inc. and Swiss Reinsurance Company was
signed by both parties in Switzerland, the same specifically provided that its provision shall be
construed according to the laws of the Philippines, thereby manifesting a clear intention of the
parties to subject themselves to Philippine law.
Section 24 of the Tax Code subjects foreign corporations to tax on their income from sources within
the Philippines. The word "sources" has been interpreted as the activity, property or service giving
rise to the income. 1 The reinsurance premiums were income created from the undertaking of the
foreign reinsurance companies to reinsure Philippine Guaranty Co., Inc., against liability for loss
under original insurances. Such undertaking, as explained above, took place in the Philippines.
These insurance premiums, therefore, came from sources within the Philippines and, hence, are
subject to corporate income tax.
The foreign insurers' place of business should not be confused with their place of
activity. Business should not be continuity and progression of transactions 2 while activity may
consist of only a single transaction. An activity may occur outside the place of business. Section 24
of the Tax Code does not require a foreign corporation to engage in business in the Philippines in
subjecting its income to tax. It suffices that the activity creating the income is performed or done in
the Philippines. What is controlling, therefore, is not the place of business but the place
of activity that created an income.
Petitioner further contends that the reinsurance premiums are not income from sources within the
Philippines because they are not specifically mentioned in Section 37 of the Tax Code. Section 37 is
not an all-inclusive enumeration, for it merely directs that the kinds of income mentioned therein
should be treated as income from sources within the Philippines but it does not require that other
kinds of income should not be considered likewise. 1äwphï1.ñët
The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a

necessary burden to preserve the State's sovereignty and a means to give the citizenry an army to
resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve,
public improvement designed for the enjoyment of the citizenry and those which come within the
State's territory, and facilities and protection which a government is supposed to provide.
Considering that the reinsurance premiums in question were afforded protection by the government
and the recipient foreign reinsurers exercised rights and privileges guaranteed by our laws, such
reinsurance premiums and reinsurers should share the burden of maintaining the state.
Petitioner would wish to stress that its reliance in good faith on the rulings of the Commissioner of
Internal Revenue requiring no withholding of the tax due on the reinsurance premiums in question
relieved it of the duty to pay the corresponding withholding tax thereon. This defense of petitioner
may free if from the payment of surcharges or penalties imposed for failure to pay the corresponding
withholding tax, but it certainly would not exculpate if from liability to pay such withholding tax The
Government is not estopped from collecting taxes by the mistakes or errors of its agents. 3
In respect to the question of whether or not reinsurance premiums ceded to foreign reinsurers not
doing business in the Philippines are subject to withholding tax under Section 53 and 54 of the Tax
Code, suffice it to state that this question has already been answered in the affirmative in Alexander
Howden & Co., Ltd. vs. Collector of Internal Revenue, L-19393, April 14, 1965.
Finally, petitioner contends that the withholding tax should be computed from the amount actually
remitted to the foreign reinsurers instead of from the total amount ceded. And since it did not remit
any amount to its foreign insurers in 1953 and 1954, no withholding tax was due.
The pertinent section of the Tax Code States:
Sec. 54. Payment of corporation income tax at source. — In the case of foreign corporations
subject to taxation under this Title not engaged in trade or business within the Philippines
and not having any office or place of business therein, there shall be deducted and withheld
at the source in the same manner and upon the same items as is provided in Section fifty-
three a tax equal to twenty-four per centum thereof, and such tax shall be returned and paid
in the same manner and subject to the same conditions as provided in that section.
The applicable portion of Section 53 provides:
(b) Nonresident aliens. — All persons, corporations and general copartnerships

(compañias colectivas), in what ever capacity acting, including lessees or mortgagors of real
or personal property, trustees acting in any trust capacity, executors, administrators,
receivers, conservators, fiduciaries, employers, and all officers and employees of the
Government of the Philippines having the control, receipt, custody, disposal, or payment of
interest, dividends, rents, salaries, wages, premiums, annuities, compensation,
remunerations, emoluments, or other fixed or determinable annual or periodical gains,
profits, and income of any nonresident alien individual, not engaged in trade or business
within the Philippines and not having any office or place of business therein, shall (except in
the case provided for in subsection [a] of this section) deduct and withhold from such annual
or periodical gains, profits, and income a tax equal to twelve per
centum thereof: Provided That no deductions or withholding shall be required in the case of
dividends paid by a foreign corporation unless (1) such corporation is engaged in trade or
business within the Philippines or has an office or place of business therein, and (2) more
than eighty-five per centum of the gross income of such corporation for the three-year period
ending with the close of its taxable year preceding the declaration of such dividends (or for
such part of such period as the corporation has been in existence)was derived from sources
within the Philippines as determined under the provisions of section thirty-
seven: Provided, further, That the Collector of Internal Revenue may authorize such tax to be
deducted and withheld from the interest upon any securities the owners of which are not
known to the withholding agent.
The above-quoted provisions allow no deduction from the income therein enumerated in determining
the amount to be withheld. According, in computing the withholding tax due on the reinsurance
premium in question, no deduction shall be recognized.
WHEREFORE, in affirming the decision appealed from, the Philippine Guaranty Co., Inc. is hereby
ordered to pay to the Commissioner of Internal Revenue the sums of P202,192.00 and P173,153.00,
or a total amount of P375,345.00, as withholding tax for the years 1953 and 1954, respectively. If the
amount of P375,345.00 is not paid within 30 days from the date this judgement becomes final, there
shall be collected a surcharged of 5% on the amount unpaid, plus interest at the rate of 1% a month
from the date of delinquency to the date of payment, provided that the maximum amount that may
be collected as interest shall not exceed the amount corresponding to a period of three (3) years.
With costs againsts petitioner.
G.R. No. 125704 August 28, 1998

PHILEX MINING CORPORATION, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, COURT OF APPEALS, and THE COURT OF TAX
APPEALS, respondents.
ROMERO, J.:
Petitioner Philex Mining Corp. assails the decision of the Court of Appeals promulgated on April 8,
1996 in CA-G.R. SP No. 36975 affirming the Court of Tax Appeals decision in CTA Case No. 4872
1
dated March 16, 1995 ordering it to pay the amount of P110,677,668.52 as excise tax liability for
2
the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from
August 6, 1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977.
The facts show that on August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax
liabilities for the 2nd, 3rd and 4th quarter of 1991 as well as the 1st and 2nd quarter of 1992 in the
total amount of P123,821.982.52 computed as follows:
PERIOD COVERED BASIC TAX 25% SURCHARGE INTEREST TOTAL EXCISE
TAX DUE
2nd Qtr., 1991 12,911,124.60 3,227,781.15 3,378,116.16 19,517,021.91
3rd Qtr., 1991 14,994,749.21 3,748,687.30 2,978,409.09 21,721,845.60
4th Qtr., 1991 19,406,480.13 4,851,620.03 2,631,837.72 26,889,937.88
————— ————— —————— ——————
47,312,353.94 11,828,088.48 8,988,362.97 68,128,805.39
————— ————— —————— ——————
1st Qtr., 1992 23,341,849.94 5,835,462.49 1,710,669.82 30,887,982.25
2nd Qtr., 1992 19,671,691.76 4,917,922.94 215,580.18 24,805,194.88
————— ————— —————— ——————
43,013,541.70 10,753,385.43 1,926,250.00 55,693,177.13
————— ————— —————— ——————
90,325,895.64 22,581,473.91 10,914,612.97 123,821,982.52 3
========= ========= ========= =========

In a letter dated August 20, 1992, Philex protested the demand for payment of the tax liabilities
4
stating that it has pending claims for VAT input credit/refund for the taxes it paid for the years 1989
to 1991 in the amount of P119,977,037.02 plus interest. Therefore these claims for tax credit/refund
should be applied against the tax liabilities, citing our ruling in Commissioner of Internal Revenue v.
Itogon-Suyoc Mines, Inc. 5
In reply, the BIR, in a letter dated September 7, 1992, found no merit in Philex's position. Since
6
these pending claims have not yet been established or determined with certainty, it follows that no
legal compensation can take place. Hence, the BIR reiterated its demand that Philex settle the
amount plus interest within 30 days from the receipt of the letter.
In view of the BIR's denial of the offsetting of Philex's claim for VAT input credit/refund against its
excise tax obligation, Philex raised the issue to the Court of Tax Appeals on November 6, 1992. In 7
the course of the proceedings, the BIR issued Tax Credit Certificate SN 001795 in the amount of
P13,144,313.88 which, applied to the total tax liabilities of Philex of P123,821,982.52; effectively
lowered the latter's tax obligation to P110,677,688.52.
Despite the reduction of its tax liabilities, the CTA still ordered Philex to pay the remaining balance of
P110,677,688.52 plus interest, elucidating its reason, to wit:
Thus, for legal compensation to take place, both obligations must be liquidated and
demandable. "Liquidated" debts are those where the exact amount has already been
determined (PARAS, Civil Code of the Philippines, Annotated, Vol. IV, Ninth Edition,
p. 259). In the instant case, the claims of the Petitioner for VAT refund is still pending
litigation, and still has to be determined by this Court (C.T.A. Case No. 4707). A
fortiori, the liquidated debt of the Petitioner to the government cannot, therefore, be
set-off against the unliquidated claim which Petitioner conceived to exist in its favor
(see Compañia General de Tabacos vs. French and Unson, No. 14027, November 8,
1918, 39 Phil. 34). 8
Moreover, the Court of Tax Appeals ruled that "taxes cannot be subject to set-off on compensation
since claim for taxes is not a debt or contract." The dispositive portion of the CTA
9
decision provides:
10
In all the foregoing, this Petition for Review is hereby DENIED for lack of merit and
Petitioner is hereby ORDERED to PAY the Respondent the amount of
P110,677,668.52 representing excise tax liability for the period from the 2nd quarter
of 1991 to the 2nd quarter of 1992 plus 20% annual interest from August 6, 1994
until fully paid pursuant to Section 248 and 249 of the Tax Code, as amended.
Aggrieved with the decision, Philex appealed the case before the Court of Appeals docketed as CA-
GR. CV No. 36975. Nonetheless, on April 8, 1996, the Court of Appeals a Affirmed the Court of
11
Tax Appeals observation. The pertinent portion of which reads: 12
WHEREFORE, the appeal by way of petition for review is hereby DISMISSED and
the decision dated March 16, 1995 is AFFIRMED.
Philex filed a motion for reconsideration which was, nevertheless, denied in a Resolution dated July
11, 1996. 13
However, a few days after the denial of its motion for reconsideration, Philex was able to obtain its
VAT input credit/refund not only for the taxable year 1989 to 1991 but also for 1992 and 1994,
computed as follows: 14
Period Covered Tax Credit Date
By Claims For Certificate of
VAT refund/credit Number Issue Amount
1994 (2nd Quarter) 007730 11 July 1996 P25,317,534.01
1994 (4th Quarter) 007731 11 July 1996 P21,791,020.61
1989 007732 11 July 1996 P37,322,799.19
1990-1991 007751 16 July 1996 P84,662,787.46
1992 (1st-3rd Quarter) 007755 23 July 1996 P36,501,147.95
In view of the grant of its VAT input credit/refund, Philex now contends that the same should, ipso
jure, off-set its excise tax liabilities since both had already become "due and demandable, as well
15
as fully liquidated;" hence, legal compensation can properly take place.

16
We see no merit in this contention.
In several instances prior to the instant case, we have already made the pronouncement that taxes
cannot be subject to compensation for the simple reason that the government and the taxpayer are
not creditors and debtors of each other. There is a material distinction between a tax and debt.
17
Debts are due to the Government in its corporate capacity, while taxes are due to the Government in
its sovereign capacity. We find no cogent reason to deviate from the aforementioned distinction.
18
Prescinding from this premise, in Francia v. Intermediate Appellate Court, we categorically held
19
that taxes cannot be subject to set-off or compensation, thus:
We have consistently ruled that there can be no off-setting of taxes against the
claims that the taxpayer may have against the government. A person cannot refuse
to pay a tax on the ground that the government owes him an amount equal to or
greater than the tax being collected. The collection of a tax cannot await the results
of a lawsuit against the government.
The ruling in Francia has been applied to the subsequent case of Caltex Philippines, Inc. v.
Commission on Audit, which reiterated that:
20
. . . a taxpayer may not offset taxes due from the claims that he may have against the
government. Taxes cannot be the subject of compensation because the government
and taxpayer are not mutually creditors and debtors of each other and a claim for
taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.
Further, Philex's reliance on our holding in Commissioner of Internal Revenue v. Itogon-Suyoc

Mines Inc., wherein we ruled that a pending refund may be set off against an existing tax liability
even though the refund has not yet been approved by the Commissioner, is no longer without any
21
support in statutory law.
It is important to note, that the premise of our ruling in the aforementioned case was anchored on
Section 51 (d) of the National Revenue Code of 1939. However, when the National Internal Revenue
Code of 1977 was enacted, the same provision upon which the Itogon-Suyoc pronouncement was
based was omitted. Accordingly, the doctrine enunciated in Itogon-Suyoc cannot be invoked by
22
Philex.
Despite the foregoing rulings clearly adverse to Philex's position, it asserts that the imposition of
surcharge and interest for the non-payment of the excise taxes within the time prescribed was
unjustified. Philex posits the theory that it had no obligation to pay the excise tax liabilities within the
prescribed period since, after all, it still has pending claims for VAT input credit/refund with BIR. 23
We fail to see the logic of Philex's claim for this is an outright disregard of the basic principle in tax
law that taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. Evidently, to countenance Philex's whimsical reason would render ineffective our tax
24
collection system. Too simplistic, it finds no support in law or in jurisprudence.
To be sure, we cannot allow Philex to refuse the payment of its tax liabilities on the ground that it has
a pending tax claim for refund or credit against the government which has not yet been granted. It
must be noted that a distinguishing feature of a tax is that it is compulsory rather than a matter of
bargain. Hence, a tax does not depend upon the consent of the taxpayer. If any taxpayer can
25 26
defer the payment of taxes by raising the defense that it still has a pending claim for refund or credit,
this would adversely affect the government revenue system. A taxpayer cannot refuse to pay his
taxes when they fall due simply because he has a claim against the government or that the
collection of the tax is contingent on the result of the lawsuit it filed against the
government. Moreover, Philex's theory that would automatically apply its VAT input credit/refund
27
against its tax liabilities can easily give rise to confusion and abuse, depriving the government of
authority over the manner by which taxpayers credit and offset their tax liabilities.
Corollarily, the fact that Philex has pending claims for VAT input claim/refund with the government is
immaterial for the imposition of charges and penalties prescribed under Section 248 and 249 of the
Tax Code of 1977. The payment of the surcharge is mandatory and the BIR is not vested with any
authority to waive the collection thereof. The same cannot be condoned for flimsy
28
reasons, similar to the one advanced by Philex in justifying its non-payment of its tax liabilities.
29
Finally, Philex asserts that the BIR violated Section 106 (e) of the National Internal Revenue Code
30
of 1977, which requires the refund of input taxes within 60 days, when it took five years for the
31
latter to grant its tax claim for VAT input credit/refund.

32
In this regard, we agree with Philex. While there is no dispute that a claimant has the burden of proof
to establish the factual basis of his or her claim for tax credit or refund, however, once the claimant
33
has submitted all the required documents it is the function of the BIR to assess these documents
with purposeful dispatch. After all, since taxpayers owe honestly to government it is but just that
government render fair service to the taxpayers. 34
In the instant case, the VAT input taxes were paid between 1989 to 1991 but the refund of these
erroneously paid taxes was only granted in 1996. Obviously, had the BIR been more diligent and
judicious with their duty, it could have granted the refund earlier. We need not remind the BIR that
simple justice requires the speedy refund of wrongly-held taxes. Fair dealing and nothing less, is
35
expected by the taxpayer from the BIR in the latter's discharge of its function. As aptly held in Roxas
v. Court of Tax Appeals: 36
The power of taxation is sometimes called also the power to destroy. Therefore it
should be exercised with caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the "hen that lays the golden egg" And, in order to maintain the general public's trust
and confidence in the Government this power must be used justly and not
treacherously.
Despite our concern with the lethargic manner by which the BIR handled Philex's tax claim, it is a
settled rule that in the performance of governmental function, the State is not bound by the neglect
of its agents and officers. Nowhere is this more true than in the field of taxation. Again, while we
37
understand Philex's predicament, it must be stressed that the same is not a valid reason for the non-
payment of its tax liabilities.
To be sure, this is not to state that the taxpayer is devoid of remedy against public servants or
employees, especially BIR examiners who, in investigating tax claims are seen to drag their feet
needlessly. First, if the BIR takes time in acting upon the taxpayer's claim for refund, the latter can
seek judicial remedy before the Court of Tax Appeals in the manner prescribed by law. Second, if
38
the inaction can be characterized as willful neglect of duty, then recourse under the Civil Code and
the Tax Code can also be availed of.
Art. 27 of the Civil Code provides:
Art. 27. Any person suffering material or moral loss because a public servant or
employee refuses or neglects, without just cause, to perform his official duty may file
an action for damages and other relief against the latter, without prejudice to any
disciplinary action that may be taken.
More importantly, Section 269 (c) of the National Internal Revenue Act of 1997 states:
x x x x x x x x x
(c) Wilfully neglecting to give receipts, as by law required for any sum collected in the
performance of duty or wilfully neglecting to perform, any other duties enjoyed by
law.
Simply put, both provisions abhor official inaction, willful neglect and unreasonable delay in the
performance of official duties. In no uncertain terms must we stress that every public employee or
39
servant must strive to render service to the people with utmost diligence and efficiency. Insolence
and delay have no place in government service. The BIR, being the government collecting arm, must
and should do no less. It simply cannot be apathetic and laggard in rendering service to the taxpayer
if it wishes to remain true to its mission of hastening the country's development. We take judicial
notice of the taxpayer's generally negative perception towards the BIR; hence, it is up to the latter to
prove its detractors wrong.
In sum, while we can never condone the BIR's apparent callousness in performing its duties, still, the
same cannot justify Philex's non-payment of its tax liabilities. The adage "no one should take the law
into his own hands" should have guided Philex's action.
WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED. The assailed
decision of the Court of Appeals dated April 8, 1996 is hereby AFFIRMED.
SO ORDERED.
[G.R. No. L-12353. September 30, 1960.]
NORTH CAMARINES LUMBER Co., INC., Petitioner, v. COLLECTOR OF INTERNAL

REVENUE, Respondent.
Miguel V. San Jose and A. B. Christi for Petitioner.
Assistant Solicitor General Jose P. Alejandro and Atty. S. D. Paredes

for Respondent.
SYLLABUS
1. COURT OF TAX APPEALS; PERIOD FOR FILING PETITION FOR REVIEW; DECISION OF
COLLECTOR OF INTERNAL REVENUES, WHAT CONSTITUTES. — In computing the 30-
day period fixed in Section 11 of Republic Act No. 1125 within which a taxpayer may file
with the Court of Tax Appeals his petition for review of the decision of the Collector of
Internal Revenue, the said collector’s letter of demand, not the letter denying the
taxpayer’s request for reconsideration, should be considered.
DECISION
PARAS, J.:
This is an appeal from a resolution of the Court of Tax Appeals dismissing the petition
for review filed by the petitioner for lack of jurisdiction to try it on the merits, the same
having been filed beyond the 30-day period fixed in Section 11 of Republic Act No.
1125.
The petitioner, North Camarines Lumber Co., Inc., is a domestic corporation engaged in
the lumber business. On June 19, 1951 and July 31, 1951, it sold a total of 2,164,863
board feet of logs to the General Lumber Co., Inc., with the agreement that the latter
would assume responsibility for the payment of the sales tax thereon in the amount of
P7,768.51. After being consulted on the matter, the respondent Collector of Internal
Revenue, in his letters dated June 18, 1951 and August 6, 1951, advised the petitioner
that he was interposing no objection to the arrangement, provided the General Lumber
Co., Inc., would file the corresponding bonds to cover the sales tax liabilities.
The General Lumber Co., Inc., complied with the condition. In view, however, of its
failure and that of the surety to pay the tax liabilities, the respondent Collector, in his
letter dated August 30, 1955, required the petitioner to pay the total amount of
P9,598.72 as sales tax and incidental penalties in the sale of logs to the General
Lumber Co., Inc. Although the date of receipt by petitioner of this letter does not
appear in the records, it may be presumed to be September 9, 1955, when the
petitioner addressed a letter to the respondent Collector, which was received on
September 12, 1955, wherein the petitioner acknowledged receipt of the letter of
demand and at the same time requested for the reconsideration of the assessment.
This was denied by the respondent Collector in his letter of December 8, 1955, received
by the petitioner on January 5, 1956. The respondent Collector having denied the
second request for reconsideration in his letter dated January 30, 1956, which the
petitioner received on February 16, 1956, the latter, on March 13, 1956, filed a petition
for review with the Court of Tax Appeals. The Court, after a preliminary hearing on
respondent Collector’s motion to dismiss, ruled that, as the petition was filed beyond
the 30-day period prescribed by Section 11 of Republic Act No. 1125, it has no
jurisdiction to try the same. Accordingly, the case was dismissed.
In contending that the Court of Tax Appeals erred, the petitioner points out that Section
7, and not Section 11, of Republic Act No. 1125 confers and determines the jurisdiction
of the respondent court, and that Section 11 refers merely to the prescriptive period for
filing appeals.
While the petitioner is correct as to the attribute of Section 7, it should be remembered

that, for the respondent court to have jurisdiction over any case, the party seeking
redress must first invoke its exercise in the manner and within the time prescribed by
the law. Thus Section 7, which enumerates the specific cases falling within the
jurisdiction of the Court of Tax Appeals must be read together with Section 11, which
fixes the time for invoking said jurisdiction.
There is no question that petitioner’s case is covered by Section 7 and, therefore,

comes within the jurisdiction of the respondent court. But was said jurisdiction invoked
by toe petitioner within the period prescribed by Section 11?
The respondent court ruled that the time consumed by the petitioner in perfecting its
appeal after deducting the time during which the period for appeal was suspended by a
pending request for reconsideration is as follows: chanrob1es virtual 1aw library
From September 9, 1955, presumed date of receipt of
decision, to September 12, 1955, the filing of request
for reconsideration 3 days
From January 5, 1956, presumed date of receipt
of denial of reconsideration, to January
9, 1956, the filing of the second request
for reconsideration 4 days
From February 16, 1956, receipt of denial of second
request for reconsideration, to March
13, 1956, the filing of petition for review 26 days

Total 33 days
As the petitioner had consumed thirty-three days, its appeal was clearly filed out of
time. It is argued, however, that in computing the 30-day period fixed in Section 11 of
Republic Act No. 1125, the letter of the respondent Collector dated January 30, 1956,
denying the second request for reconsideration, should be considered as the final
decision contemplated in Section 7, and not the letter of demand dated August 30,
1955.
This contention is untenable. We cannot countenance the theory that would make the
commencement of the statutory 30-day period solely dependent on the will of the
taxpayer and place the latter in a position to put off indefinitely and at his convenience
the finality of a tax assessment. Such an absurd procedure would be detrimental to the
interest of the Government, for "taxes are the lifeblood of the government, and their
prompt and certain availability an imperious need." (Bull v. U.S. 295, U. S. 247.) .
Wherefore, the resolution appealed from is affirmed, with costs. So ordered.

SECOND DIVISION
[ G.R. No. 213394, April 06, 2016 ]
SPOUSES EMMANUEL D. PACQUIAO AND JINKEE J. PACQUIAO, PETITIONERS,
VS. THE COURT OF TAX APPEALS - FIRST DIVISION AND THE COMMISSION OF
INTERNAL REVENUE, RESPONDENTS.
DECISION
MENDOZA, J.:
Before this Court is a petition for review on certiorari[1] under Rule 65 of the Rules of Court filed by petitioner spouses,
now Congressman Emmanuel D. Pacquiao (Pacquiao) and Vice-Governor Jinkee J. Pacquiao (Jinkee), to set aside
and annul the April 22, 2014 Resolution[2] and the July 11, 2014 Resolution[3] of the Court of Tax Appeals (CTA), First
Division, in CTA Case No. 8683.
Through the assailed issuances, the CTA granted the petitioners' Urgent Motion to Lift Warrants of Distraint & Levy
and Garnishment and for the Issuance of an Order to Suspend the Collection of Tax (with Prayer for the Issuance of
a Temporary Restraining Order[4] [Urgent Motion], dated October 18, 2013, but required them, as a condition, to
deposit a cash bond in the amount of P3,298,514,894.35-or post a bond of P4,947,772,341.53.
The Antecedents
The genesis of the foregoing controversy began a few years before the petitioners became elected officials in their
own right. Prior to their election as public officers, the petitioners relied heavily on Pacquiao's claim to fame as a
world-class professional boxer. Due to his success, Pacquiao was able to amass income from both the Philippines
and the United States of America (US). His income from the US came primarily from the purses he received for the
boxing matches he took part under Top Rank, Inc. On the other hand, his income from the Philippines consisted of
talent fees received from various Philippine corporations for product endorsements, advertising commercials and
television appearances.
In compliance with his duty to his home country, Pacquiao filed his 2008 income tax return on April 15, 2009 reporting
his Philippine-sourced income.[5] It was subsequently amended to include his US-sourced income.[6]
The controversy began on March 25, 2010, when Pacquiao received a Letter of Authority[7] (March LA) from the
Regional District Office No. 43 (RDO) of the Bureau of Internal Revenue (BIR) for the examination of his books of
accounts and other accounting records for the period covering January 1, 2008 to December 31, 2008.
On April 15, 2010, Pacquiao filed his 2009 income tax return,[8] which although reflecting his Philippines-sourced
income, failed to include his income derived from his earnings in the US.[9] He also failed to file his Value Added Tax
(VAT) returns for the years 2008 and 2009.[10]
Finding the need to directly conduct the investigation and determine the tax liabilities of the petitioners, respondent
Commissioner on Internal Revenue (CIR) issued another Letter of Authority, dated July 27, 2010 (July LA),
authorizing the BIR's National Investigation Division (NID) to examine the books of accounts and other accounting
records of both Pacquiao and Jinkee for the last 15 years, from 1995 to 2009.[11] On September 21, 2010 and
September 22, 2010, the CIR replaced the July LA by issuing to both Pacquiao[12] and Jinkee[13] separate electronic
versions of the July LA pursuant to Revenue Memorandum Circular (RMC) No. 56-2010.[14]
Due to these developments, the petitioners, through counsel, wrote a letter[15] questioning the propriety of the CIR
investigation. According to the petitioners, they were already subjected to an earlier investigation by the BIR for the
years prior to 2007, and no fraud was ever found to have been committed. They added that pursuant to the March LA
issued by the RDO, they were already being investigated for the year 2008.
In its letter,[16] dated December 13, 2010, the NID informed the counsel of the petitioners that the July LA issued by
the CIR had effectively cancelled and superseded the March LA issued by its RDO. The same letter also stated that:
Although fraud had been established in the instant case as determined by the Commissioner, your clients
would still be given the opportunity to present documents as part of their procedural rights to due process with regard
to the civil aspect thereof. Moreover, any tax credits and/or payments from the taxable year 2007 & prior years will be
properly considered and credited in the current investigation.[17]
[Emphasis Supplied]
The CIR informed the petitioners that its reinvestigation of years prior to 2007 was justified because the assessment
thereof was pursuant to a "fraud investigation" against the petitioners under the "Run After Tax
Evaders" (RATE) program of the BIR.
On January 5 and 21, 2011, the petitioners submitted various income tax related documents for the years 2007-2009.
[18]
As for the years 1995 to 2006, the petitioners explained that they could not furnish the bureau with the books of
accounts and other, tax related documents as they had already been disposed in accordance with Section 235 of the
Tax Code.[19] They added that even if they wanted to, they could no longer find copies of the documents because
during those years, their accounting records were then managed by previous counsels, who had since passed away.
Finally, the petitioners pointed out that their tax liabilities for the said years had already been fully settled with then
CIR Jose Mario Buñag, who after a review, found no fraud against them.[20]
On June 21; 2011, on the same day that the petitioners made their last compliance in submitting their tax-related
documents, the CIR issued a subpoena duces tecum[21] requiring the petitioners rto submit additional income tax and
VAT-related documents for the years 1995-2009.
After conducting its own- investigation, the CIR made its initial assessment finding that the petitioners were unable to
fully settle their tax liabilities. Thus, the CIR issued its Notice of Initial Assessment-Informal Conference (NIC),
[22]
dated January 31, 2012, directly addressed to the petitioners, informing them that based on the best evidence
obtainable, they were liable for deficiency income taxes in the amount of P714,061,116.30 for 2008 and
P1,446,245,864.33 for 2009, inclusive of interests and surcharges. After being informed of this development, the
counsel for the petitioners sought to have the conference reset but he never received a response.
Then, on "February 20, 2012, the CIR issued the Preliminary Assessment Notice[23] (PAN), informing the petitioners
that based on third-party information allowed under Section 5(B)[24] and 6 of the National Internal Revenue
Code (NIRC),[25] they found the petitioners liable not only for deficiency income taxes in the amount of
P714,061,116.30 for 2008 and P1,446;245,864.33 for 2009, but aiso for their non-payment of their VAT liabilities in
the amount P4,104,360.01 for 2008 and P 24,901,276.77 for 2009.
The petitioners filed their protest against the PAN.[26]
After denying the protest, the BIR issued its Formal Letter Demand[27] (FLD), dated May 2, 2012, finding the
petitioners liable for deficiency income tax and VAT amounting to P766,899,530.62 for taxable years 2008 and
P1,433,421,214.61 for 2009, inclusive of interests and surcharges. Again, the petitioners questioned the findings of
the CIR.[28]
On May 14, 2013, the BIR issued its Final Decision on Disputed Assessment (FDDA),[29] addressed to Pacquiao only,
informing him that the CIR found him liable for deficiency income tax and VAT for taxable years 2008 and 2009
which, inclusive of interests and surcharges, amounted to a total of P2,261,217,439.92.
Seeking to collect the total outstanding tax liabilities of the petitioners, the Accounts Receivable Monitoring Division of
the BIR (BIR-ARMD), issued the Preliminary Collection Letter (PCL),[30] dated July 19, 2013, demanding that both
Pacquiao and Jinkee pay the amount of P2,261,217,439.92, inclusive of interests and surcharges.
Then, on August 7, 2013, the BIR-ARMD sent Pacquiao and Jinkee the Final Notice Before Seizure (FNBS),
[31]
informing the petitioners of their last opportunity to make the necessary settlement of deficiency income and VAT
liabilities before the bureau would proceed against their property.
Although they no longer questioned the BIR's assessment of their deficiency VAT liability, the petitioners requested
that they be allowed to pay the same in four (4) quarterly installments. Eventually, through a series of installments,
Pacquiao and Jinkee paid a total P32,196,534.40 in satisfaction of their liability for deficiency VAT.[32]
Proceedings at the CTA
Aggrieved that they were being made liable for deficiency income taxes for the years 2008 and 2009, the
petitioners sought redress and filed a petition for review[33] with the CTA.
Before the CTA, the petitioners contended that the assessment of the CIR was defective because it was predicated
on its mere allegation that they were guilty of fraud.[34]
They also questioned the validity of the attempt by the CIR to collect deficiency taxes from Jinkee, arguing that she
was denied due process. According to the petitioners, as all previous communications and notices from the CIR were
addressed to both petitioners, the FDDA was void because it was only addressed to Pacquiao. Moreover, considering
that the PCL and FNBS were based on the FDDA, the same should likewise be declared void.[35]
The petitioners added that the CIR assessment, which was not based on actual transaction documents but
simply on "best possible sources," was not sanctioned by the Tax Code. They also argue that the assessment
failed to consider not only the taxes paid by Pacquiao to the US authorities for his fights, but also the deductions
claimed by him for his expenses.[36]
Pending the resolution by the CTA of their appeal, the petitioners sought the suspension of the issuance of warrants
of distraint and/or levy and warrants of garnishment.[37]
Meanwhile, in a letter,[38] dated October 14, 2013, the BIR-ARMD informed the petitioners that they were denying their
request to defer the collection enforcement action for lack of legal basis. The same letter also informed the petitioners
that despite their initial payment, the amount to be collected from both of them still amounted to P3,259,643,792.24,
for deficiency income tax for taxable years 2008 and 2009, and P46,920,235.74 for deficiency VAT for the same
period. A warrant of distraint and/or levy[39] against Pacquiao and Jinkee was included in the letter.
Aggrieved, the petitioners filed the subject Urgent Motion for the CTA to lift the warrants of distraint, levy and
garnishments issued by the CIR against their .assets and to enjoin the CIR from collecting the assessed deficiency
taxes pending the resolution of their appeal. As for- the cash deposit and bond requirement under Section 11 of
Republic Act (R.A.) No. 1125, the petitioners question the necessity thereof, arguing that the CIR's assessment of
their tax liabilities was highly questionable. At the same time, the petitioners manifested that they were willing to file a
bond for such reasonable amount to be fixed by the tax court.
On April 22, 2014, the CTA issued the first assailed resolution granting the petitioner's Urgent Motion, ordering the
CIR to desist from collecting on the deficiency tax assessments against the petitioners. In its resolution, the CTA
noted that the amount sought to be collected was way beyond the petitioners' net worth, which, based on Pacquiao's
Statement of Assets, Liabilities and Net Worth (SALN), only amounted to P1,185,984,697.00. Considering that the
petitioners still needed to cover the costs of their daily subsistence, the CTA opined that the collection of the total
amount of P3,298,514,894.35 from the petitioners would be highly prejudicial to their interests and should, thus, be
suspended pursuant to Section 11 of R.A. No. 1125, as amended.
The CTA, however, saw no justification that the petitioners should deposit less than the disputed amount. They were,
thus, required to deposit the amount of P3,298,514,894.35 or post a bond in the amount of P4,947,772,341.53.
The petitioners sought partial reconsideration of the April 22, 2014 CTA resolution, praying for the reduction of the
amount of the bond required or an extension of 30 days to file the same. On July 11, 2014, the CTA issued the
second assailed resolution[40] denying the petitioner's motion to reduce the required cash deposit or bond, but allowed
them an extension of thirty (30) days within which to file the same.
Hence, this petition, raising the following
GROUNDS
A.
Respondent Court acted with grave abuse of discretion amounting to lack or excess of jurisdiction in
presuming the correctness of a fraud assessment without evidentiary support other than the issuance of the
fraud assessments themselves, thereby violating Petitioner's constitutional right to due process.
B.
Respondent Court acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it
required the Petitioners to post a bond even if the tax collection processes employed by Respondent
Commissioner against Petitioners was patently in violation of law thereby blatantly breaching Petitioners'
constitutional right to due process, to wit:
1. Respondent Commissioner commenced tax collection process against Jinkee without issuing or
serving an FDDA against her.
2. Respondent Commissioner failed to comply with the procedural due process requirements for
summary tax collection remedies under Sections 207(A) and (B) of the Tax Code when she
commenced summary collection remedies before the expiration of the period for Petitioners to
pay the assessed deficiency taxes.
3. Respondent Commissioner failed to comply with the procedural due process requirements for
summary tax collection remedies under Section 208 of the Tax Code when she failed to serve
Petitioners with warrants of garnishment against their bank accounts.
4. The Chief of the ARMD, without any authority from Respondent Commissioner, increased the
aggregate amount of deficiency income tax and VAT assessed against Petitioners from
P2,261,217,439.92 to P3,298,514,894.35 after the filing of the Petition for Review with the Court of
Tax Appeals.
5. Respondent Commissioner arbitrarily refused to admit that Petitioners had already paid the
deficiency VAT assessments for the years 2008 and 2009.
C.
Respondent Court acted with grave abuse of discretion amounting to lack or excess of jurisdiction in
requiring Petitioners to post a cash bond in the amount of P3,298,514,894.35 or a surety bond in the amount
of P4,947,772,341.53, which is effectively an impossible condition given that their undisputed net worth is
only P1,185,984,697.00.
D.
Respondent Court acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it
imposed a bond requirement which will effectively prevent Petitioners from continuing the prosecution of its
appeal from the arbitrary and bloated assessments issued by Respondent Commissioner. [41]
Arguments of the Petitioners
Contending that the CTA En Bane has no certiorari jurisdiction over interlocutory orders issued by its division, the
petitioners come before the Court, asking it to 1] direct the CTA to dispense with the bond requirement imposed
under Section 11 of R.A. No. 1125, as amended; and 2] direct the CIR to suspend the collection of the deficiency
income tax and VAT for the years 2008 and 2009. The petitioners also pray that a temporary restraining
order (TRO) be issued seeking a similar relief pending the disposition of the subject petition.
In support of their position, the petitioners assert that the CTA acted with grave abuse of discretion amounting to lack
or excess of jurisdiction in requiring them to provide security required under Section 11 of R.A. No. 1125. Under the
circumstances, they claim that they should not be required to make a cash deposit or post a bond to stay the
collection of the questioned deficiency taxes considering that the assessment and collection efforts of the BIR was
marred by both procedural and substantive errors. They are synthesized as follows:
First. The CTA erred when it required them to make a cash deposit or post a bond on the basis of the fraud
assessment by the CIR. Similar to the argument they raised in their petition for review with the CTA, they insist that
the fraud assessment by the CIR could not serve as basis for security because the amount assessed by the CIR was
made without evidentiary basis,[42] but just grounded on the "best possible sources," without any detail.
Second... The BIR failed to accord them procedural due process when it initiated summary collection remedies even
before the expiration of the period allowed for them to pay the assessed deficiency taxes.[43] They also claimed that
they were not served with warrants of garnishment and that the warrants of garnishment served on their banks of
account were made even before they received the FDDA and PCL.[44]
Third. The BIR only served the FDDA to Pacquiao. There was no similar notice to Jinkee. Considering such failure,
the CIR effectively did not find Jinkee liable for deficiency taxes. The collection of deficiency taxes against Jinkee was
improper as it violated her right to due process of law.[45] Accordingly, the petitioners question the propriety of the
CIR's attempt to collect deficiency taxes from Jinkee.
Fourth. The amount assessed by the BIR as deficiency taxes included the deficiency VAT for the years 2008 and
2009 which they had already paid, albeit in installments.
Fifth. The posting of the required security is effectively an impossible condition given that their undisputed net worth is
only P1,185,984,697.00
Considering the issues raised, it is the position of the petitioners that the circumstances of the case warrant the
application of the exception provided under Section 11 of R.A. No. 1125 as affirmed by the ruling of the Court
in Collector of Internal Revenue v. Avelino[46] (Avelino) and Collector of Internal Revenue v. Zulueta,[47] (Zulueta) and
that they should have been exempted from posting the required security as a prerequisite to suspend the collection of
deficiency taxes from them.
On August 18, 2014, the Court resolved to grant the petitioners' prayer for the issuance of a TRO and to require the
CIR to file its comment.[48]
Arguments of the CIR
For its part,- the CIR asserts that the CTA was correct in insisting that the petitioners post the required cash deposit
or bond as a condition to suspend the collection of deficiency taxes. According to. the tax administrator, Section 11 of
R.A. No. 1125, as amended, is without exception when it states that notwithstanding an appeal to the CTA, a
taxpayer, in order to suspend the payment of his tax liabilities, is required to deposit the amount claimed by the CIR
or to file a surety bond for not more than double the amount due.[49]
As for the Court's rulings in Avelino and Zulueta invoked by the petitioners, the CIR argues that they are inapplicable
considering that in the said cases, it was ruled that the requirement of posting a bond to suspend the collection of
taxes could be dispensed with only if the methods employed by the CIR in the tax collection were clearly null and
void and prejudicial to the taxpayer.[50] The CIR points out that, in this case, the CTA itself made, no finding that its
collection by summary methods was void and even ruled that "the alleged illegality of the methods employed by the
respondent (CIR) to effect the collection of tax [is] not at all patent or evident xxx" and could only be determined after
a full-blown trial.[51] The CIR even suggests that the Court revisit its ruling in Avelino and Zulueta as Section 11 of
R.A. No. 1125, as amended, gives the CTA no discretion to allow the dispensation of the required bond as a
condition to suspend the collection of taxes.
Finally, the CIR adds that whether the assessment and collection of the petitioners' tax liabilities were proper as to
justify the application of Avelino and Zulueta is a question of fact which is not proper in a petition for certiorari under
Rule 65, considering that the rule is only confined to issues of jurisdiction.[52]
The Court's Ruling
Appeal will not suspend

the collection of tax;
Exception
Section 11 of R.A. No. 1125, as amended by R.A. No. 9282,[53] embodies the rule that an appeal to the CTA from the
decision of the CIR will not suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the
satisfaction of his tax liability as provided by existing law. When, in the view of the CTA, the collection may jeopardize
the interest of the Government and/or the taxpayer, it may suspend the said collection and require the taxpayer either
to deposit the amount claimed or to file a surety bond.
The application of the exception to the rule is the crux of the subject controversy. Specifically, Section 11 provides:
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
No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the Commissioner of
Customs or the Regional Trial Court, provincial, city or municipal treasurer or the Secretary of Finance, the Secretary
of Trade and Industry and Secretary of Agriculture, as the case may be shall suspend the payment, levy, distraint,
and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law:
Provided, however, That when in the opinion of the Court the collection by the aforementioned government
agencies may jeopardize the interest of the Government and/or the taxpayer, the Court at any stage of the
proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or
to file a surety bond for not more than double the amount with the Court.
xxxx
[Emphasis Supplied]
Essentially, the petitioners ascribe grave abuse of discretion on the part of the CTA when it issued the subject
resolutions requiring them to deposit-the amount of P3,298,514,894.35 or post a bond in the amount of
P4,947,772,341.53 as a condition for its order enjoining the CIR from collecting the taxes from them. The petitioners
anchor their contention on the premise that the assessment and collection processes employed by the CIR in
exacting their tax liabilities were in patent violation of their constitutional right to due process of law. They, thus, posit
that pursuant to Avelino and Zulueta, the tax court should have not only ordered the CIR to suspend the collection
efforts it was pursuing in satisfaction of their tax liability, but also dispensed with the requirement of depositing a cash
or filing a surety bond.
To recall, the Court in Avelino upheld the decision of the CTA to declare the warrants of garnishment, distraint and
levy and the notice of sale of the properties of Jose Avelino null and void and ordered the CIR to desist from
collecting the deficiency income taxes which were assessed for the years 1946 to 1948 through summary
administrative methods. The Court therein found that the demand of the then CIR was made without authority of law
because it was made five (5) years and thirty-five (35) days after the last two returns of Jose Avelino were filed -
clearly beyond the three (3)-year prescriptive period provided under what was then Section 51(d) of the National
Internal Revenue Code. Dismissing the contention of the CIR that the deposit of the amount claimed or the filing of a
bond as required by law was a requisite before relief was granted, the Court therein concurred with the opinion of the
CTA that the courts were clothed with authority to dispense with the requirement "if the method employed by the
Collector of Internal Revenue in the collection of tax is not sanctioned by law."[54]
In Zulueta, the Court likewise dismissed the argument that the CTA erred in issuing the injunction without requiring
the taxpayer either to deposit the amount claimed or to file a surety bond for an amount not more than double the tax
sought to be collected. The Court cited Collector of Internal Revenue v. Aurelio P. Reyes and the Court of Tax
Appeals[55] where it was written:
Xxx. At first blush it might be as contended by the Solicitor General, but a careful analysis of the second paragraph of
said Section 11 will lead Us to the conclusion that the requirement of the bond as a condition precedent to the
issuance of a writ of injunction applies only in cases where the processes by which the collection sought to be made
by means thereof are carried out in consonance with law for such cases provided and not when said processes are
obviously in violation of the law to the extreme that they have to be SUSPENDED for jeopardizing the interests of the
taxpayer.[56]
[Italics included]
The Court went on to explain the reason for empowering the courts to issue such injunctive writs. It wrote:
"Section 11 of Republic Act No. 1125 is therefore premised on the assumption that the collection by summary
proceedings is by itself in accordance with existing laws; and then what is suspended is the act of collecting,
whereas, in the case at bar what the respondent Court suspended was the use of the method employed to verify the
collection which was evidently illegal after the lapse of the three-year limitation period. The respondent Court issued
the injunction in question on the basis of its findings that the means intended to be used by petitioner in the collection
of the alleged deficiency taxes were in violation of law. It would certainly be an absurdity on the part of the Court
of Tax Appeals to declare that the collection by the summary methods of distraint and levy was violative of
the law, and then, on the same breath require the petitioner to deposit or file a bond as a prerequisite of the
issuance of a writ of injunction. Let us suppose, for the sake of argument, that the Court a quo would have
required the petitioner to post the bond in question and that the taxpayer would refuse or fail to furnish said bond,
would the Court a quo be obliged to authorize or allow the Collector of Internal Revenue to proceed with the collection
from the petitioner of the taxes due by a means it previously declared to be contrary to law?"[57]
[Italics included. Emphases and Underlining Supplied]

Thus, despite the amendments to the law, the Court still holds that the CTA has ample authority to issue injunctive
writs to restrain the collection of tax and to even dispense with the deposit of the amount claimed or the filing of
the required bond, whenever the method employed by the CIR in the collection of. tax jeopardizes the interests of a
taxpayer for being patently in violation of the law. Such authority emanates from the jurisdiction conferred to it not
only by Section 11 of R.A. No. 1125, but also by Section 7 of the same law, which, as amended provides:
Sec. 7. Jurisdiction. - The Court of Tax Appeals shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
l. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the
National Internal Revenue or other laws administered by the Bureau of Internal Revenue;
xxxx
[Emphasis Supplied]
From all the foregoing, it is clear that the authority of the courts to issue injunctive writs to restrain the collection of tax
and to dispense with the deposit of the amount claimed or the filing of the required bond is not simply confined to
cases where prescription has set in. As explained by the Court in those cases, whenever it is determined by the
courts that the method employed by the Collector of Internal Revenue in the collection of tax is not
sanctioned by law, the bond requirement under Section 11 of R.A. No. 1125 should be dispensed with. The
purpose of the rule is not only to prevent jeopardizing the interest of the taxpayer, but more importantly, to prevent the
absurd situation wherein the court would declare "that the collection by the summary methods of distraint and levy
was violative of law, and then, in the same breath require the petitioner to deposit or file a bond as a prerequisite for
the issuance of a writ of injunction."[58]
The determination of whether

the petitioners.' case falls
within the exception provided
under Section 11, R.A No. 1125
cannot be determined
at this point
Applying the foregoing precepts to the subject controversy, the Court finds no sufficient basis in the records for the
Court to determine whether the dispensation of the required cash deposit or bond provided under Section 11, R.A No.
1125 is appropriate.
It should first be highlighted that in rendering the assailed resolution, the CTA, without stating the facts and law, made
a determination that the illegality of the methods employed by the CIR to effect the collection of tax was not patent.
To quote the CTA:
In this case, the alleged illegality of the methods employed by respondent to effect the collection of tax is not at all
patent or evident as in the foregoing cases. At this early stage of the proceedings, it is premature for this Court to
rule on the issues of whether or not the warrants were defectively issued; or whether the service thereof was done in
violation of the rules; or whether or not respondent's assessments were valid. These matters are evidentiary in
nature, the resolution of which can only be made after a full blown trial.
Apropos, the Court finds no legal basis to apply Avelino and Zulueta to the instant case and exempt petitioners from
depositing a cash bond or filing a surety bond before a suspension order may be effected.[59]
Though it may be true that it would have been premature for the CTA to immediately determine whether the
assessment made against the petitioners was valid or whether the warrants were properly issued and served, still, it
behooved upon the CTA to properly determine, at least preliminarily, whether the CIR, in its assessment of the tax
liability of the petitioners, and its effort of collecting the same, complied with the law and the pertinent issuances
of the BIR itself. The CTA should have conducted a preliminary hearing and received evidence so it could have
properly determined whether the requirement of providing the required security under Section 11, R.A. No. 1125
could be reduced or dispensed with pendente lite.
The Court cannot make a

preliminary determination
on whether the CIR used
methods not sanctioned by law
Absent any evidence and preliminary determination by the CTA, the Court cannot make any factual finding and settle
the issue of whether the petitioners should comply with the security requirement under Section 11, R.A. No. 1125.
The determination of whether the methods, employed by the CIR in its assessment, jeopardized the interests of a
taxpayer for being patently in violation of the law is a question of fact that calls for the reception of
evidence which would serve as basis. In this regard, the CTA is in a better position to initiate this given its time and
resources. The remand of the "case to the CTA on this question is, therefore, more sensible and proper.
For the Court to make any finding of fact on this point would be premature. As stated earlier, there is no evidentiary
basis. All the arguments are mere allegations from both sides. Moreover, any finding by the Court would pre-empt
the CTA from properly exercising its jurisdiction and settle the main issues presented before it, that is, whether the
petitioners were afforded due process; whether the CIR has valid basis for its assessment; and whether the
petitioners should be held liable for the deficiency taxes.
Petition to be remanded to
the CTA; CTA to conduct
preliminary hearing
As the CTA is in a better, position to make such a preliminary determination, a remand to the CTA is in order. To
resolve the issue of whether the petitioners should be required to post the security bond under Section 11 of R.A. No.
1125, and, if so, in what, amount, the CTA must take into account, among others, the following:
First. Whether the requirement of a Notice of Informal Conference was complied with - The petitioners contend that
the BIR issued the PAN without first sending a NIC to petitioners. One of the first requirements of Section 3 of
Revenue Regulation (R.R.) No. 12-99,[60] the then prevailing regulation on the due process requirement in tax audits
and/or investigation,[61] is that a NIC be first accorded to the taxpayer. The use of the word "shall" in subsection 3.1.1
describes the mandatory nature of the service of a NIC. As with the other notices required under the regulation, the
purpose of sending a NIC is but part of the "due process requirement in the issuance of a deficiency tax assessment,"
the absence of which renders nugatory any assessment made by the tax authorities.[62]
Second. Whether the 15-year period subject of the CIR's investigation is arbitrary and excessive. - Section 203[63] of
the Tax Code provides a 3-year limit for the assessment. of internal revenue taxes. While the prescriptive period to
assess deficiency taxes may be extended to 10 years in cases where there is false, fraudulent, or non-filing of a tax
return - the fraud contemplated by law must be actual. It must be intentional, consisting of deception willfully and
deliberately done or resorted to in order to induce another to give up some right.[64]
Third. Whether fraud was duly established. - In its letter, dated December 13, 2010, the NID had been conducting a
fraud investigation against the petitioners under its RATE program and that it found that "fraud had been established
in the instant case as determined by the Commissioner." Under Revenue Memorandum Order (RMO) No. 27-10, it is
required that a preliminary investigation must first be conducted before a LA is issued.[65]
Fourth. Whether the FLD issued against the petitioners was irregular. - The FLD issued against the petitioners
allegedly stated that the amounts therein were "estimates based on best possible sources." A taxpayer should be
informed in writing of the law and the facts on which the assessment is made, otherwise, the assessment is void.
[66]
An assessment, in order to stand judicial scrutiny, must be based on facts. The presumption of the correctness of
an assessment, being a mere presumption, cannot be made to rest on another presumption.[67]
To stress, the petitioners had asserted that the assessment of the CIR was not based on actual transactions but
on "estimates based on best possible sources." This assertion has not been satisfactorily addressed by the CIR
in detail. Thus, there is a need for the CTA to conduct a preliminary hearing.
Fifth. Whether the FDDA, the PCL, the FNBS, and the Warrants of Distraint and/or Levy were validly issued. In its
hearing, the CTA must also determine if the following allegations of the petitioners have merit:,
a. The FDDA and PCL were issued against petitioner Pacquiao only. The Warrant of Distraint and/or
Levy/Garnishment issued by the CIR, however, were made against the assets of both petitioners;
b. The warrants of garnishment had been served on the banks of both petitioners even before the petitioners
received the FDDA and PCL;
c. The Warrant of Distraint and/or Levy/Garnishment against the petitioners was allegedly made prior to the
expiration of the period allowed for the petitioners to pay the assessed deficiency taxes;
d. The Warrant of Distraint and/or Levy/Garnishment against petitioners failed to take into consideration that
the deficiency VAT was already paid in full; and
e. Petitioners were not given a copy of the Warrants. Sections 207[68] and 208[69] of the Tax Code require the
Warrant of Distraint and/or Levy/Garnishment be served upon the taxpayer.
Additional Factors
In case the CTA finds that the petitioners should provide the necessary security under Section 11 of R.A. 1125, a
recomputation of the amount thereof is in order.- If there would be a need for a bond or to reduce the same, the CTA
should take note that the Court, in A.M. No. 15-92-01-CTA, resolved to approve the CTA En Banc Resolution No. 02-
2015, where the phrase "amount claimed" stated in Section 11 of R.A. No. 1125 was construed to refer to
the principal amount of the deficiency taxes, excluding penalties, interests and surcharges.
Moreover, the CTA should.also consider the claim of the petitioners that they already paid a total of P32,196,534.40
deficiency VAT assessed against' them.. Despite said payment, the CIR still assessed them the total amount of
P3,298,514,894.35, including the amount assessed as VAT deficiency, plus surcharges, penalties and interest. If so,
these should also be deducted from the.amount of the bond to be computed and required.
In the conduct of its preliminary hearing, the CTA must balance the scale between the inherent power of the State to
tax and its right to prosecute perceived transgressors of the law, on one side; and the constitutional rights of
petitioners to due process of law and the equal protection of the laws, on the other. In case of doubt, the tax court
must remember that as in all tax cases, such scale should favor the taxpayer, for a citizen's right to due process and
equal protection of the law is amply protected by the Bill of Rights under the Constitution.[70]
In view of all the foregoing, the April 22, 2014 and July 11, 2014 Resolutions of the CTA, in so far as it required the
petitioners to deposit first a cash bond in the amount of P3,298,514,894.35 or post a bond of P4,947,772,341.53,
should be further enjoined until the issues aforementioned are settled in a preliminary hearing to be conducted by it.
Thereafter, it should make a determination if the posting of a bond would still be required and, if so, compute it taking
into account the CTA En Banc Resolution, which was approved by the Court in A.M. No. 15-02-01-CTA, and the
claimed payment of P32,196,534.40, among others.
WHEREFORE, the petition is PARTIALLY GRANTED. Let a Writ of Preliminary Injunction be issued, enjoining the
implementation of the April 22, 2014 and July 11, 2014 Resolutions of the Court of Tax Appeals, First Division, in
CTA Case No. 8683, requiring the petitioners to first deposit a cash bond in the amount of P3,298,514,894.35 or post
a bond of P4,947,772,341.53, as a condition to restrain the collection of the deficiency taxes assessed against them.
The writ shall remain in effect until the issues aforementioned are settled in a preliminary hearing to be conducted by
the Court of Tax Appeals, First Division.
Accordingly, the case is hereby REMANDED to the Court of Tax Appeals, First Division, which is ordered to conduct
a preliminary hearing to determine whether the dispensation or reduction of the required cash deposit or bond
provided under Section 11, Republic Act No. 1125 is proper to restrain the collection of deficiency taxes assessed
against the petitioners.
If required, the Court of Tax Appeals, First Division, shall proceed to compute the amount of the bond in accordance
with the guidelines aforestated, particularly the provisions of A.M. No. 15-02-01-CTA. It should also take into account
the amounts already paid by the petitioners.
After the posting of the required bond, or if the Court of Tax Appeals, First Division, determines that no bond is
necessary, it shall proceed to hear and resolve the petition for review pending before it.
SO ORDERED.
FIRST DIVISION
[G.R. No. L-7859. December 22, 1955.]
WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the

deceased Antonio Jayme Ledesma, Plaintiff-Appellant, v. J. ANTONIO
ARANETA, as the Collector of Internal Revenue, Defendant-Appellee.
Ernesto J. Gonzaga for Appellant.
Solicitor General Ambrosio Padilla, First Assistant Solicitor General

Guillermo E. Torres and Solicitor Felicisimo R. Rosete for Appellee.
SYLLABUS
1. CONSTITUTIONAL LAW; TAXATION; POWER OF STATE TO LEVY TAX IN AND

SUPPORT OF SUGAR INDUSTRY. — As the protection and promotion of the sugar
industry is a matter of public concern the Legislature may determine within
reasonable bounds what is necessary for its protection and expedient for its
promotion. Here, the legislative must be allowed full play, subject only to the test of
reasonableness; and it is not contended that the means provided in section 6 of
Commonwealth Act No. 567 bear no relation to the objective pursued or are
oppressive in character. If objective an methods are alike constitutionally valid, no
reason is seen why the state may not levy taxes to raise funds for their prosecution
and attainment. Taxation may be made the implement. Taxation may be made the
implement of the state’s police power (Great Atl. & Pac. Tea Co. v. Grosjean, 301
U.S. 412, 81 L. Ed. 1193; U.S. v. Butler, 297 U.S. 1, 80 L. Ed. 477; M’Culloch v.
Maryland, 4 Wheat, 316, 4 L. Ed. 579).
2. ID.; ID.; POWER OF STATE TO SELECT SUBJECT OF TAXATION. — It is inherent

in the power to tax that a state be free to select the subjects of taxation, and it has
been repeatedly held that "inequalities which result from a singling out of one
particular class for taxation or exemption infringe no constitutional limitation
(Carmicheal v. Southern Coal & Coke Co., 301 U.S. 495, 81 L. Ed. 1245, citing
numerous authorities, at 1251).
DECISION
REYES, J. B. L., J.:
This case was initiated in the Court of First Instance of Negros Occidental to test the
legality of the taxes imposed by Commonwealth Act No. 567, otherwise known as
the Sugar Adjustment Act.
Promulgated in 1940, the law in question opens (section 1) with a declaration of
emergency, due to the threat to our industry by the imminent imposition of export
taxes upon sugar as provided in the Tydings-McDuffie Act, and the "eventual loss of
its preferential position in the United States market" ; wherefore, the national policy
was expressed "to obtain a readjustment of the benefits derived from the sugar
industry by the component elements thereof" and "to stabilize the sugar industry so
as to prepare it for the eventuality of the loss of its preferential position in the
United States market and the imposition of the export taxes." cralaw virtua1aw library
In section 2, Commonwealth Act 567 provides for an increase of the existing tax on
the manufacture of sugar, on a graduated basis, on each picul of sugar
manufactures; while section 3 levies on owners or persons in control of lands
devoted to the cultivation of sugar cane and ceded to others for a consideration, on
lease or otherwise —
"a tax equivalent to the difference between the money value of the rental or
consideration collected and the amount representing 12 per centum of the assessed
value of such land."cralaw virtua1aw library
According to section 6 of the law —
SEC. 6. All collections made under this Act shall accrue to a special fund in the
Philippine Treasury, to be known as the ’Sugar Adjustment and Stabilization Fund,’
and shall be paid out only for any or all of the following purposes or to attain any or
all of the following objectives, as may be provided by law.
First, to place the sugar industry in a position to maintain itself despite the gradual
loss of the preferential position of the Philippine sugar in the United States market,
and ultimately to insure its continued existence notwithstanding the loss of that
market and the consequent necessity of meeting competition in the free markets of
the world;
Second, to readjust the benefits derived from the sugar industry by all of the
component elements thereof — the mill, the landowner, the planter of the sugar
cane, and the laborers in the factory and in the field — so that all might continue
profitably to engage therein;
Third, to limit the production of sugar to areas more economically suited to the
production thereof; and
Fourth, to afford labor employed in the industry a living wage and to improve their
living and working conditions: Provided, That the President of the Philippines may,
until the adjournment of the next regular session of the National Assembly, make
the necessary disbursements from the fund herein created (1) for the establishment
and operation of sugar experiment station or stations and the undertaking of
researchers (a)to increase the recoveries of the centrifugal sugar factories with the
view of reducing manufacturing costs, (b) to produce and propagate higher yielding
varieties of sugar cane more adaptable to different distinct conditions in the
Philippines, (c) to lower the costs of raising sugar cane, (d) to improve the buying
quality of denatured alcohol from molasses for motor fuel, (e) to determine the
possibility of utilizing the other by-products of the industry, (f) to determine what
crop or crops are suitable for rotation and for the utilization of excess cane lands,
and (g) on other problems the solution of which would help rehabilitated and
stabilize the industry, and (2) for the improvement of living and working conditions
in sugar mills and sugar plantations, authorizing him to organize the necessary
agency or agencies to take charge of the expenditure and allocation of said funds to
carry out the purpose hereinbefore enumerated, and, likewise, authorizing the
disbursement from the fund herein created of the necessary amount of amounts
needed for salaries, wages, travelling expenses, equipment, and other sundry
expenses or said agency or agencies." cralaw virtua1aw library
Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate
of Antonio Jayme Ledesma, seeks to recover from the Collector of Internal Revenue
the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for
the crop years 1948-1949 and 1949-1950; alleging that such tax is unconstitutional
and void, being levied for the aid and support of the sugar industry exclusively,
which in plaintiff’s opinion is not a public purpose for which a tax may be
constitutionally levied. The action having been dismissed by the Court of First
Instance, the plaintiffs appealed the case directly to this Court (Judiciary Act,
section 17).
The basic defect in the plaintiff’s position is his assumption that the tax provided for
in Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of
the Act, and particularly of section 6 (heretofore quoted in full), will show that the
tax is levied with a regulatory purpose, to provide means for the rehabilitation and
stabilization of the threatened sugar industry. In other words, the act is primarily
an exercise of the police power.
This Court can take judicial notice of the fact that sugar production in one of the
great industries of our nation, sugar occupying a leading position among its export
products; that it gives employment to thousands of laborers in fields and factories;
that it is a great source of the state’s wealth, is one of the important sources of
foreign exchange needed by our government, and is thus pivotal in the plans of a
regime committed to a policy of currency stability. Its promotion, protection and
advancement, therefore redounds greatly to the general welfare. Hence it was
competent for the legislature to find that the general welfare demanded that the
sugar industry should be stabilized in turn; and in the wide field of its police power,
the law-making body could provide that the distribution of benefits therefrom be
readjusted among its components to enable it to resist the added strain of the
increase in taxes that it had to sustain (Sligh v. Kirkwood, 237 U. S. 52, 59 L. Ed.
835; Johnson v. State ex rel. Marey, 99 Fla. 1311, 128 So 853; Maxcy Inc. v.
Mayo, 103 Fla. 552, 139 So. 121).
As stated in Johnson v. State ex rel. Marey, with reference to the citrus industry in
Florida —
"The protection of a large industry constituting one of the great sources of the
state’s wealth and therefore directly or indirectly affecting the welfare of so great a
portion of the population of the State is affected to such an extent by public
interests as to be within the police power of the sovereign." (128 So. 857)
Once it is conceded, as it must, that the protection and promotion of the sugar
industry is a matter of public concern, it follows that the Legislature may determine
within reasonable bounds what is necessary for its protection and expedient for its
promotion. Here, the legislative discretion must be allowed full play, subject only to
the test of reasonableness; and it is not contended that the means provided in
section 6 of the law (above quoted) bear no relation to the objective pursued or are
oppressive in character. If objective and methods are alike constitutionally valid, no
reason is seen why the state may not be levy taxes to raise funds for their
prosecution and attainment. Taxation may be made the implement of the state’s
police power (Great Atl. & Pac. Tea Co. v. Grosjean, 301 U. S. 412, 81 L. Ed. 1193;
U. S. v. Butler, 297 U. S. 1, 80 L. Ed. 477; M’Culloch v. Maryland, 4 Wheat. 318, 4
L. Ed. 579).
That the tax to be levied should burden the sugar producers themselves can hardly
be a ground of complaint; indeed, it appears rational that the tax be obtained
precisely from those who are to be benefited from the expenditure of the funds
derived from it. At any rate, it is inherent in the power to tax that a state be free to
select the subjects of taxation, and it has been repeatedly held that "inequalities
which result from a singling out of one particular class for taxation, or exemption
infringe no constitutional limitation" (Carmichael v. Southern Coal & Coke Co., 301
U. S. 495, 81 L. Ed. 1245, citing numerous authorities, at p. 1251).
From the point of view we have taken it appears of no moment that the funds
raised under the Sugar Stabilization Act, now in question, should be exclusively
spent in aid of the sugar industry, since it is that very enterprise that is being
protected. It may be that other industries are also in need of similar protection; but
the legislature is not required by the Constitution to adhere to a policy of "all or
none." As ruled in Minnesota ex rel. Pearson v. Probate Court, 309 U. S. 270, 84 L.
Ed. 744, "if the law presumably hits the evil where it is most felt, it is not to be
overthrown because there are other instances to which it might have been applied;"
and that the legislative authority, exerted within its proper field, need not embrace
all the evils within its reach" (N. L. R. B. v. Jones & Laughlin Steel Corp. 301 U. S.
1, 81 L. Ed. 893).
Even from the standpoint that the Act is a pure tax measure, it cannot be said that
the devotion of tax money to experimental stations to seek increase of efficiency in
sugar production, utilization of by- products and solution of allied problems, as well
as to the improvement of living and working conditions in sugar mills or plantations,
without any part of such money being channeled directly to private persons,
constitutes expenditure of tax money for private purposes, (compare Everson v.
Board of Education, 91 L. Ed. 472, 168 ALR 1392, 1400).
The decision appealed from is affirmed, with costs against appellant. So ordered.
G.R. No. L-23645 October 29, 1968
BENJAMIN P. GOMEZ, petitioner-appellee,
vs.
ENRICO PALOMAR, in his capacity as Postmaster General, HON. BRIGIDO R. VALENCIA, in
his capacity as Secretary of Public Works and Communications, and DOMINGO GOPEZ, in
his capacity as Acting Postmaster of San Fernando, Pampanga, respondent-appellants.
Lorenzo P. Navarro and Narvaro Belar S. Navarro for petitioner-appellee.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Frine C. Zaballero and
Solicitor Dominador L. Quiroz for respondents-appellants.
CASTRO, J.:
This appeal puts in issue the constitutionality of Republic Act 1635, 1 as amended by Republic Act
2631,2 which provides as follows:
To help raise funds for the Philippine Tuberculosis Society, the Director of Posts shall order
for the period from August nineteen to September thirty every year the printing and issue of
semi-postal stamps of different denominations with face value showing the regular postage
charge plus the additional amount of five centavos for the said purpose, and during the said
period, no mail matter shall be accepted in the mails unless it bears such semi-postal
stamps: Provided, That no such additional charge of five centavos shall be imposed on
newspapers. The additional proceeds realized from the sale of the semi-postal stamps shall
constitute a special fund and be deposited with the National Treasury to be expended by the
Philippine Tuberculosis Society in carrying out its noble work to prevent and eradicate
tuberculosis.
The respondent Postmaster General, in implementation of the law, thereafter issued four (4)
administrative orders numbered 3 (June 20, 1958), 7 (August 9, 1958), 9 (August 28, 1958), and 10
(July 15, 1960). All these administrative orders were issued with the approval of the respondent
Secretary of Public Works and Communications.
The pertinent portions of Adm. Order 3 read as follows:
Such semi-postal stamps could not be made available during the period from August 19 to
September 30, 1957, for lack of time. However, two denominations of such stamps, one at "5
+ 5" centavos and another at "10 + 5" centavos, will soon be released for use by the public
on their mails to be posted during the same period starting with the year 1958.
xxx xxx xxx
During the period from August 19 to September 30 each year starting in 1958, no mail matter
of whatever class, and whether domestic or foreign, posted at any Philippine Post Office and
addressed for delivery in this country or abroad, shall be accepted for mailing unless it bears
at least one such semi-postal stamp showing the additional value of five centavos intended
for the Philippine Tuberculosis Society.
In the case of second-class mails and mails prepaid by means of mail permits or impressions
of postage meters, each piece of such mail shall bear at least one such semi-postal stamp if
posted during the period above stated starting with the year 1958, in addition to being
charged the usual postage prescribed by existing regulations. In the case of business reply
envelopes and cards mailed during said period, such stamp should be collected from the
addressees at the time of delivery. Mails entitled to franking privilege like those from the
office of the President, members of Congress, and other offices to which such privilege has
been granted, shall each also bear one such semi-postal stamp if posted during the said
period.
Mails posted during the said period starting in 1958, which are found in street or post-office
mail boxes without the required semi-postal stamp, shall be returned to the sender, if known,
with a notation calling for the affixing of such stamp. If the sender is unknown, the mail
matter shall be treated as nonmailable and forwarded to the Dead Letter Office for proper
disposition.
Adm. Order 7, amending the fifth paragraph of Adm. Order 3, reads as follows:
In the case of the following categories of mail matter and mails entitled to franking privilege
which are not exempted from the payment of the five centavos intended for the Philippine
Tuberculosis Society, such extra charge may be collected in cash, for which official receipt
(General Form No. 13, A) shall be issued, instead of affixing the semi-postal stamp in the
manner hereinafter indicated:
1. Second-class mail. — Aside from the postage at the second-class rate, the extra charge of
five centavos for the Philippine Tuberculosis Society shall be collected on each separately-
addressed piece of second-class mail matter, and the total sum thus collected shall be
entered in the same official receipt to be issued for the postage at the second-class rate. In
making such entry, the total number of pieces of second-class mail posted shall be stated,
thus: "Total charge for TB Fund on 100 pieces . .. P5.00." The extra charge shall be entered
separate from the postage in both of the official receipt and the Record of Collections.
2. First-class and third-class mail permits. — Mails to be posted without postage affixed
under permits issued by this Bureau shall each be charged the usual postage, in addition to
the five-centavo extra charge intended for said society. The total extra charge thus received
shall be entered in the same official receipt to be issued for the postage collected, as in
subparagraph 1.
3. Metered mail. — For each piece of mail matter impressed by postage meter under
metered mail permit issued by this Bureau, the extra charge of five centavos for said society
shall be collected in cash and an official receipt issued for the total sum thus received, in the
manner indicated in subparagraph 1.
4. Business reply cards and envelopes. — Upon delivery of business reply cards and
envelopes to holders of business reply permits, the five-centavo charge intended for said
society shall be collected in cash on each reply card or envelope delivered, in addition to the
required postage which may also be paid in cash. An official receipt shall be issued for the
total postage and total extra charge received, in the manner shown in subparagraph 1.
5. Mails entitled to franking privilege. — Government agencies, officials, and other persons
entitled to the franking privilege under existing laws may pay in cash such extra charge
intended for said society, instead of affixing the semi-postal stamps to their mails, provided
that such mails are presented at the post-office window, where the five-centavo extra charge
for said society shall be collected on each piece of such mail matter. In such case, an official
receipt shall be issued for the total sum thus collected, in the manner stated in subparagraph
1.
Mail under permits, metered mails and franked mails not presented at the post-office window
shall be affixed with the necessary semi-postal stamps. If found in mail boxes without such
stamps, they shall be treated in the same way as herein provided for other mails.
Adm. Order 9, amending Adm. Order 3, as amended, exempts "Government and its Agencies and
Instrumentalities Performing Governmental Functions." Adm. Order 10, amending Adm. Order 3, as
amended, exempts "copies of periodical publications received for mailing under any class of mail
matter, including newspapers and magazines admitted as second-class mail."
The FACTS. On September l5, 1963 the petitioner Benjamin P. Gomez mailed a letter at the post
office in San Fernando, Pampanga. Because this letter, addressed to a certain Agustin Aquino of
1014 Dagohoy Street, Singalong, Manila did not bear the special anti-TB stamp required by the
statute, it was returned to the petitioner.
In view of this development, the petitioner brough suit for declaratory relief in the Court of First
Instance of Pampanga, to test the constitutionality of the statute, as well as the implementing
administrative orders issued, contending that it violates the equal protection clause of the
Constitution as well as the rule of uniformity and equality of taxation. The lower court declared the
statute and the orders unconstitutional; hence this appeal by the respondent postal authorities.
For the reasons set out in this opinion, the judgment appealed from must be reversed.
I.
Before reaching the merits, we deem it necessary to dispose of the respondents' contention that
declaratory relief is unavailing because this suit was filed after the petitioner had committed a breach
of the statute. While conceding that the mailing by the petitioner of a letter without the additional anti-
TB stamp was a violation of Republic Act 1635, as amended, the trial court nevertheless refused to
dismiss the action on the ground that under section 6 of Rule 64 of the Rules of Court, "If before the
final termination of the case a breach or violation of ... a statute ... should take place, the action may
thereupon be converted into an ordinary action."
The prime specification of an action for declaratory relief is that it must be brought "before breach or
violation" of the statute has been committed. Rule 64, section 1 so provides. Section 6 of the same
rule, which allows the court to treat an action for declaratory relief as an ordinary action, applies only
if the breach or violation occurs after the filing of the action but before the termination thereof. 3
Hence, if, as the trial court itself admitted, there had been a breach of the statute before the firing of
this action, then indeed the remedy of declaratory relief cannot be availed of, much less can the suit
be converted into an ordinary action.
Nor is there merit in the petitioner's argument that the mailing of the letter in question did not
constitute a breach of the statute because the statute appears to be addressed only to postal
authorities. The statute, it is true, in terms provides that "no mail matter shall be accepted in the
mails unless it bears such semi-postal stamps." It does not follow, however, that only postal
authorities can be guilty of violating it by accepting mails without the payment of the anti-TB stamp. It
is obvious that they can be guilty of violating the statute only if there are people who use the mails
without paying for the additional anti-TB stamp. Just as in bribery the mere offer constitutes a breach
of the law, so in the matter of the anti-TB stamp the mere attempt to use the mails without the stamp
constitutes a violation of the statute. It is not required that the mail be accepted by postal authorities.
That requirement is relevant only for the purpose of fixing the liability of postal officials.
Nevertheless, we are of the view that the petitioner's choice of remedy is correct because this suit
was filed not only with respect to the letter which he mailed on September 15, 1963, but also with
regard to any other mail that he might send in the future. Thus, in his complaint, the petitioner prayed
that due course be given to "other mails without the semi-postal stamps which he may deliver for
mailing ... if any, during the period covered by Republic Act 1635, as amended, as well as other
mails hereafter to be sent by or to other mailers which bear the required postage, without collection
of additional charge of five centavos prescribed by the same Republic Act." As one whose mail was
returned, the petitioner is certainly interested in a ruling on the validity of the statute requiring the use
of additional stamps.
II.
We now consider the constitutional objections raised against the statute and the implementing
orders.
1. It is said that the statute is violative of the equal protection clause of the Constitution. More
specifically the claim is made that it constitutes mail users into a class for the purpose of the tax
while leaving untaxed the rest of the population and that even among postal patrons the statute
discriminatorily grants exemption to newspapers while Administrative Order 9 of the respondent
Postmaster General grants a similar exemption to offices performing governmental functions. .
The five centavo charge levied by Republic Act 1635, as amended, is in the nature of an excise tax,
laid upon the exercise of a privilege, namely, the privilege of using the mails. As such the objections
levelled against it must be viewed in the light of applicable principles of taxation.
To begin with, it is settled that the legislature has the inherent power to select the subjects of
taxation and to grant exemptions.4 This power has aptly been described as "of wide range and
flexibility."5 Indeed, it is said that in the field of taxation, more than in other areas, the legislature
possesses the greatest freedom in classification.6 The reason for this is that traditionally,
classification has been a device for fitting tax programs to local needs and usages in order to
achieve an equitable distribution of the tax burden. 7
That legislative classifications must be reasonable is of course undenied. But what the petitioner
asserts is that statutory classification of mail users must bear some reasonable relationship to the
end sought to be attained, and that absent such relationship the selection of mail users is
constitutionally impermissible. This is altogether a different proposition. As explained
in Commonwealth v. Life Assurance Co.:8
While the principle that there must be a reasonable relationship between classification made
by the legislation and its purpose is undoubtedly true in some contexts, it has no application
to a measure whose sole purpose is to raise revenue ... So long as the classification
imposed is based upon some standard capable of reasonable comprehension, be that
standard based upon ability to produce revenue or some other legitimate distinction, equal
protection of the law has been afforded. See Allied Stores of Ohio, Inc. v. Bowers, supra,
358 U.S. at 527, 79 S. Ct. at 441; Brown Forman Co. v. Commonwealth of Kentucky, 2d U.S.
56, 573, 80 S. Ct. 578, 580 (1910).
We are not wont to invalidate legislation on equal protection grounds except by the clearest
demonstration that it sanctions invidious discrimination, which is all that the Constitution forbids. The
remedy for unwise legislation must be sought in the legislature. Now, the classification of mail users
is not without any reason. It is based on ability to pay, let alone the enjoyment of a privilege, and on
administrative convinience. In the allocation of the tax burden, Congress must have concluded that
the contribution to the anti-TB fund can be assured by those whose who can afford the use of the
mails.
The classification is likewise based on considerations of administrative convenience. For it is now a

settled principle of law that "consideration of practical administrative convenience and cost in the
administration of tax laws afford adequate ground for imposing a tax on a well recognized and
defined class."9 In the case of the anti-TB stamps, undoubtedly, the single most important and
influential consideration that led the legislature to select mail users as subjects of the tax is the
relative ease and convenienceof collecting the tax through the post offices. The small amount of five
centavos does not justify the great expense and inconvenience of collecting through the regular
means of collection. On the other hand, by placing the duty of collection on postal authorities the tax
was made almost self-enforcing, with as little cost and as little inconvenience as possible.
And then of course it is not accurate to say that the statute constituted mail users into a class. Mail
users were already a class by themselves even before the enactment of the statue and all that the
legislature did was merely to select their class. Legislation is essentially empiric and Republic Act
1635, as amended, no more than reflects a distinction that exists in fact. As Mr. Justice Frankfurter
said, "to recognize differences that exist in fact is living law; to disregard [them] and concentrate on
some abstract identities is lifeless logic."10
Granted the power to select the subject of taxation, the State's power to grant exemption must
likewise be conceded as a necessary corollary. Tax exemptions are too common in the law; they
have never been thought of as raising issues under the equal protection clause.
It is thus erroneous for the trial court to hold that because certain mail users are exempted from the
levy the law and administrative officials have sanctioned an invidious discrimination offensive to the
Constitution. The application of the lower courts theory would require all mail users to be taxed, a
conclusion that is hardly tenable in the light of differences in status of mail users. The Constitution
does not require this kind of equality.
As the United States Supreme Court has said, the legislature may withhold the burden of the tax in
order to foster what it conceives to be a beneficent enterprise. 11 This is the case of newspapers
which, under the amendment introduced by Republic Act 2631, are exempt from the payment of the
additional stamp.
As for the Government and its instrumentalities, their exemption rests on the State's sovereign
immunity from taxation. The State cannot be taxed without its consent and such consent, being in
derogation of its sovereignty, is to be strictly construed. 12 Administrative Order 9 of the respondent
Postmaster General, which lists the various offices and instrumentalities of the Government exempt
from the payment of the anti-TB stamp, is but a restatement of this well-known principle of
constitutional law.
The trial court likewise held the law invalid on the ground that it singles out tuberculosis to the
exclusion of other diseases which, it is said, are equally a menace to public health. But it is never a
requirement of equal protection that all evils of the same genus be eradicated or none at all. 13 As this
Court has had occasion to say, "if the law presumably hits the evil where it is most felt, it is not to be
overthrown because there are other instances to which it might have been applied." 14
2. The petitioner further argues that the tax in question is invalid, first, because it is not levied for a
public purpose as no special benefits accrue to mail users as taxpayers, and second, because it
violates the rule of uniformity in taxation.
The eradication of a dreaded disease is a public purpose, but if by public purpose the petitioner
means benefit to a taxpayer as a return for what he pays, then it is sufficient answer to say that the
only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the
privileges of living in an organized society, established and safeguarded by the devotion of taxes to
public purposes. Any other view would preclude the levying of taxes except as they are used to
compensate for the burden on those who pay them and would involve the abandonment of the most
fundamental principle of government — that it exists primarily to provide for the common good. 15
Nor is the rule of uniformity and equality of taxation infringed by the imposition of a flat rate rather
than a graduated tax. A tax need not be measured by the weight of the mail or the extent of the
service rendered. We have said that considerations of administrative convenience and cost afford an
adequate ground for classification. The same considerations may induce the legislature to impose a
flat tax which in effect is a charge for the transaction, operating equally on all persons within the
class regardless of the amount involved.16 As Mr. Justice Holmes said in sustaining the validity of a
stamp act which imposed a flat rate of two cents on every $100 face value of stock transferred:
One of the stocks was worth $30.75 a share of the face value of $100, the other $172. The
inequality of the tax, so far as actual values are concerned, is manifest. But, here again
equality in this sense has to yield to practical considerations and usage. There must be a
fixed and indisputable mode of ascertaining a stamp tax. In another sense, moreover, there
is equality. When the taxes on two sales are equal, the same number of shares is sold in
each case; that is to say, the same privilege is used to the same extent. Valuation is not the
only thing to be considered. As was pointed out by the court of appeals, the familiar stamp
tax of 2 cents on checks, irrespective of income or earning capacity, and many others,
illustrate the necessity and practice of sometimes substituting count for weight ... 17
According to the trial court, the money raised from the sales of the anti-TB stamps is spent for the
benefit of the Philippine Tuberculosis Society, a private organization, without appropriation by law.
But as the Solicitor General points out, the Society is not really the beneficiary but only the agency
through which the State acts in carrying out what is essentially a public function. The money is
treated as a special fund and as such need not be appropriated by law. 18
3. Finally, the claim is made that the statute is so broadly drawn that to execute it the respondents
had to issue administrative orders far beyond their powers. Indeed, this is one of the grounds on
which the lower court invalidated Republic Act 1631, as amended, namely, that it constitutes an
undue delegation of legislative power.
Administrative Order 3, as amended by Administrative Orders 7 and 10, provides that for certain
classes of mail matters (such as mail permits, metered mails, business reply cards, etc.), the five-
centavo charge may be paid in cash instead of the purchase of the anti-TB stamp. It further states
that mails deposited during the period August 19 to September 30 of each year in mail boxes without
the stamp should be returned to the sender, if known, otherwise they should be treated as
nonmailable.
It is true that the law does not expressly authorize the collection of five centavos except through the
sale of anti-TB stamps, but such authority may be implied in so far as it may be necessary to prevent
a failure of the undertaking. The authority given to the Postmaster General to raise funds through the
mails must be liberally construed, consistent with the principle that where the end is required the
appropriate means are given. 19
The anti-TB stamp is a distinctive stamp which shows on its face not only the amount of the
additional charge but also that of the regular postage. In the case of business reply cards, for
instance, it is obvious that to require mailers to affix the anti-TB stamp on their cards would be to
make them pay much more because the cards likewise bear the amount of the regular postage.
It is likewise true that the statute does not provide for the disposition of mails which do not bear the
anti-TB stamp, but a declaration therein that "no mail matter shall be accepted in the mails unless it
bears such semi-postal stamp" is a declaration that such mail matter is nonmailable within the
meaning of section 1952 of the Administrative Code. Administrative Order 7 of the Postmaster
General is but a restatement of the law for the guidance of postal officials and employees. As for
Administrative Order 9, we have already said that in listing the offices and entities of the Government
exempt from the payment of the stamp, the respondent Postmaster General merely observed an
established principle, namely, that the Government is exempt from taxation.
ACCORDINGLY, the judgment a quo is reversed, and the complaint is dismissed, without
pronouncement as to costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Angeles and Capistrano, JJ., concur.
Zaldivar, J., is on leave.
Separate Opinions
FERNANDO, J., concurring:
I join fully the rest of my colleagues in the decision upholding Republic Act No. 1635 as amended by
Republic Act No. 2631 and the majority opinion expounded with Justice Castro's usual vigor and
lucidity subject to one qualification. With all due recognition of its inherently persuasive character, it
would seem to me that the same result could be achieved if reliance be had on police power rather
than the attribute of taxation, as the constitutional basis for the challenged legislation.
1. For me, the state in question is an exercise of the regulatory power connected with the
performance of the public service. I refer of course to the government postal function, one of
respectable and ancient lineage. The United States Constitution of 1787 vests in the federal
government acting through Congress the power to establish post offices. 1 The first act providing for
the organization of government departments in the Philippines, approved Sept. 6, 1901, provided for
the Bureau of Post Offices in the Department of Commerce and Police. 2 Its creation is thus a
manifestation of one of the many services in which the government may engage for public
convenience and public interest. Such being the case, it seems that any legislation that in effect
would require increase cost of postage is well within the discretionary authority of the government.
It may not be acting in a proprietary capacity but in fixing the fees that it collects for the use of the
mails, the broad discretion that it enjoys is undeniable. In that sense, the principle announced
in Esteban v. Cabanatuan City,3 in an opinion by our Chief Justice, while not precisely controlling
furnishes for me more than ample support for the validity of the challenged legislation. Thus: "Certain
exactions, imposable under an authority other than police power, are not subject, however, to
qualification as to the amount chargeable, unless the Constitution or the pertinent laws provide
otherwise. For instance, the rates of taxes, whether national or municipal, need not be reasonable, in
the absence of such constitutional or statutory limitation. Similarly, when a municipal corporation
fixes the fees for the use of its properties, such as public markets, it does not wield the police power,
or even the power of taxation. Neither does it assert governmental authority. It exercises merely a
proprietary function. And, like any private owner, it is — in the absence of the aforementioned
limitation, which does not exist in the Charter of Cabanatuan City (Republic Act No. 526) — free to
charge such sums as it may deem best, regardless of the reasonableness of the amount fixed, for
the prospective lessees are free to enter into the corresponding contract of lease, if they are
agreeable to the terms thereof or, otherwise, not enter into such contract."
2. It would appear likewise that an expression of one's personal view both as to

the attitude and awareness that must be displayed by inferior tribunals when the "delicate and
awesome" power of passing on the validity of a statute would not be inappropriate. "The Constitution
is the supreme law, and statutes are written and enforced in submission to its commands." 4 It is
likewise common place in constitutional law that a party adversely affected could, again to quote
from Cardozo, "invoke, when constitutional immunities are threatened, the judgment of the courts." 5
Since the power of judicial review flows logically from the judicial function of ascertaining the facts
and applying the law and since obviously the Constitution is the highest law before which statutes
must bend, then inferior tribunals can, in the discharge of their judicial functions, nullify legislative
acts. As a matter of fact, in clear cases, such is not only their power but their duty. In the language of
the present Chief Justice: "In fact, whenever the conflicting claims of the parties to a litigation cannot
properly be settled without inquiring into the validity of an act of Congress or of either House thereof,
the courts have, not only jurisdiction to pass upon said issue but, also, the duty to do so, which
cannot be evaded without violating the fundamental law and paving the way to its eventual
destruction."6
Nonetheless, the admonition of Cooley, specially addressed to inferior tribunals, must ever be kept
in mind. Thus: "It must be evident to any one that the power to declare a legislative enactment void
is one which the judge, conscious of the fallibility of the human judgment, will shrink from exercising
in any case where he can conscientiously and with due regard to duty and official oath decline the
responsibility."7
There must be a caveat however to the above Cooley pronouncement. Such should not be the case,
to paraphrase Freund, when the challenged legislation imperils freedom of the mind and of the
person, for given such an undesirable situation, "it is freedom that commands a momentum of
respect." Here then, fidelity to the great ideal of liberty enshrined in the Constitution may require the
judiciary to take an uncompromising and militant stand. As phrased by us in a recent decision, "if the
liberty involved were freedom of the mind or the person, the standard of its validity of governmental
acts is much more rigorous and exacting."8
So much for the appropriate judicial attitude. Now on the question of awareness of the controlling
constitutional doctrines.
There is nothing I can add to the enlightening discussion of the equal protection aspect as found in
the majority opinion. It may not be amiss to recall to mind, however, the language of Justice Laurel in
the leading case of People v. Vera,9 to the effect that the basic individual right of equal protection "is
a restraint on all the three grand departments of our government and on the subordinate
instrumentalities and subdivisions thereof, and on many constitutional powers, like the police power,
taxation and eminent domain."10 Nonetheless, no jurist was more careful in avoiding the dire
consequences to what the legislative body might have deemed necessary to promote the ends of
public welfare if the equal protection guaranty were made to constitute an insurmountable obstacle.
A similar sense of realism was invariably displayed by Justice Frankfurter, as is quite evident from
the various citations from his pen found in the majority opinion. For him, it would be a misreading of
the equal protection clause to ignore actual conditions and settled practices. Not for him the at times
academic and sterile approach to constitutional problems of this sort. Thus: "It would be a narrow
conception of jurisprudence to confine the notion of 'laws' to what is found written on the statute
books, and to disregard the gloss which life has written upon it. Settled state practice cannot
supplant constitutional guaranties, but it can establish what is state law. The Equal Protection
Clause did not write an empty formalism into the Constitution. Deeply embedded traditional ways of
carrying out state policy, such as those of which petitioner complains, are often tougher and truer
law than the dead words of the written text."11 This too, from the same distinguished jurist: "The
Constitution does not require things which are different in fact or opinion to be treated in law as
though they were the same."12
Now, as to non-delegation. It is to be admitted that the problem of non-delegation of legislative

power at times occasions difficulties. Its strict view has been announced by Justice Laurel in the
aforecited case of People v. Vera in this language. Thus: "In testing whether a statute constitutes an
undue delegation of legislative power or not, it is usual to inquire whether the statute was complete
in all its terms and provisions when it left the hands of the legislature so that nothing was left to the
judgment of any other appointee or delegate of the legislature. .... In United States v. Ang Tang
Ho ..., this court adhered to the foregoing rule; it held an act of the legislature void in so far as it
undertook to authorize the Governor-General, in his discretion, to issue a proclamation fixing the
price of rice and to make the sale of it in violation of the proclamation a crime." 13
Only recently, the present Chief Justice reaffirmed the above view in Pelaez v. Auditor
General,14 specially where the delegation deals not with an administrative function but one
essentially and eminently legislative in character. What could properly be stigmatized though to
quote Justice Cardozo, is delegation of authority that is "unconfined and vagrant, one not canalized
within banks which keep it from overflowing." 15
This is not the situation as it presents itself to us. What was delegated was power not legislative in
character. Justice Laurel himself, in a later case, People v. Rosenthal,16 admitted that within certain
limits, there being a need for coping with the more intricate problems of society, the principle of
"subordinate legislation" has been accepted, not only in the United States and England, but in
practically all modern governments. This view was reiterated by him in a 1940 decision, Pangasinan
Transportation Co., Inc. v. Public Service Commission.17 Thus: "Accordingly, with the growing
complexity of modern life, the multiplication of the subjects of governmental regulation, and the
increased difficulty of administering the laws, there is a constantly growing tendency toward the
delegation of greater powers by the legislature, and toward the approval of the practice by the
courts."
In the light of the above views of eminent jurists, authoritative in character, of both the equal
protection clause and the non-delegation principle, it is apparent how far the lower court departed
from the path of constitutional orthodoxy in nullifying Republic Act No. 1635 as amended.
Fortunately, the matter has been set right with the reversal of its decision, the opinion of the Court,
manifesting its fealty to constitutional law precepts, which have been reiterated time and time again
and for the soundest of reasons.

G.R. No. 117359 July 23, 1998 Davao Gulf Lumber Corporation, Petitioner, V. Commissioner of Internal Revenue and Court of Appeals, Respondents

Uploaded by

G.R. No. 117359 July 23, 1998 Davao Gulf Lumber Corporation, Petitioner, V. Commissioner of Internal Revenue and Court of Appeals, Respondents

Uploaded by

G.R. No.

117359 July 23, 1998

DAVAO GULF LUMBER CORPORATION, Petitioner, v. COMMISSIONER OF

Statement of the Case

WHEREFORE, judgment is hereby rendered ordering the respondent to refund to

The Antecedent Facts

The facts are undisputed. 6 Petitioner is a licensed forest concessionaire possessing

On December 13, 1982, petitioner filed before Respondent Commissioner of

Public Respondent's Ruling

In its Memorandum, petitioner raises one critical issue:

The Court's Ruling

The petition is not meritorious.

Petitioner Entitled to Refund

Under Sec. 5 of RA 1435

Tax Refund Strictly Constrtued

Against the Grantee

. . . Sec. 5 [of RA 1435] makes reference to subparagraphs 1 and 2 of Section 1

Petitioner then reasons that "the express mention of Section 1 of RA 1435 in

(b) Lubricating oils, per liter of volume capacity, seven centavos;

(a) Kerosene, per liter of volume capacity, seven centavos;

(b) Lubricating oils, per liter of volume capacity, eighty centavos;

(e) Processed gas, per liter of volume capacity, three centavos;

(h) Asphalts, per kilogram, eight centavos;

(i) Greases, waxes and petrolatum, per kilogram, fifty centavos;

xxx xxx xxx

(a) Kerosene, per liter of volume capacity, nine centavos;

(b) Lubricating oils, per liter of volume capacity, eighty centavos;

(e) Processed gas, per liter of volume capacity, three centavos;

(h) Asphalts, per kilogram, twelve centavos;

(i) Greases, waxes and petrolatum, per kilogram, fifty centavos;

xxx xxx xxx

Our Resolution of 25 March 1992 modifying our 30 September 1991 Decision in

ACCORDINGLY, the decision in G.R. Nos. 83583-84 is hereby MODIFIED. The

Insular Lumber Co. and First Atlas Case

Not Inconsistent With Rio Tuba

and Second Atlas Case

Petitioner argues that the applicable jurisprudence in this case should

G.R. No. 120880 June 5, 1997

31363, where the said court held:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the

WHEREFORE, premises considered judgment is hereby rendered DISMISSING the

A. RESPONDENT COURT MANIFESTLY ERRED IN RULING THAT THE

B. RESPONDENT COURT ARBITRARILY ERRED IN SWEEPINGLY DECIDING

[b] Petitioner, as one of the late President's compulsory heirs, was

On September 29, 1989, former President Ferdinand Marcos died in Honolulu,

testator; and to pass upon the validity of a waiver of hereditary rights.

Taxes assessed against the estate of a deceased person, after administration is

Section 229 of the NIRC tells us how:

Sec. 229. Protesting of assessment. — When the Commissioner of Internal Revenue

Such assessment may be protested administratively by filing a request for

If the protest is denied in whole or in part, the individual, association or corporation

. . . the Notices of Levy on Real Property (Annexes O to NN of Annex C of this

Sec. 223. Exceptions as to a period of limitation of assessment and collection of

xxx xxx xxx

xxx xxx xxx

in view of the absence of sufficient attack against the actuations of government.

xxx xxx xxx

JOSE B. L. REYES and EDMUNDO A. REYES, petitioners,

Barcelona, Perlas, Joven & Academia Law Offices for petitioners.

The facts of the case are as follows:

SO ORDERED. (Decision of the Board of Tax Assessment Appeals, Rollo, p. 22).

SO ORDERED. (Decision of the Central Board of Assessment Appeals, Rollo, p. 27)

The Reyeses assigned the following error:

THE HONORABLE BOARD ERRED IN ADOPTING THE "COMPARABLE SALES

The petition is impressed with merit.

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

The Court of Tax Appeals earlier ruled as follows:

Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly

Net Income (Loss) (P25,317,288.00) (P14,129,602.00)

Tax Due NIL NIL

Payments Made 5,016,954.00 —

Tax Withheld at Source 282,795.50 234,077.69

Excess Tax Payments P5,299,749.50* P234,077.69

* CTA's decision reflects PBCom's 1985 tax claim as P5,299,749.95.

I. Whether taxpayer PBCom — which relied in good faith on the

REVENUE MEMORANDUM CIRCULAR NO. 7-85