PSPC V CIR

PILIPINAS SHELL PETROLEUM CORPORATION V COMMISSIONER OF
INTERNAL REVENUE
G.R. 172598
DECEMBER 21, 2007
FACTS: PSPC is the PH subsidiary of the international petroleum giant Shell. From
1988 to 1997, PSPC paid part of its excise tax liabilities with Tax Credit Certificate which
it acquired through the Department of Finance One Stop Shop Inter-Agency Tax Credit
and Duty Drawback Center (Center).
Through the Center, PSPC acquired for value various Center-issued TCCs. When
PSPC signified its intent to use the TCCs to pay part of its excise tax liabilities, said
payments were approved by the Center through the issuance of Tax Debit Memoranda.
The BIR accepted the TCCs as payments.
However, the BIR sent a collection letter to PSPC for alleged deficiency of excise
tax liabilities, arguing that the PSPC was not a qualified transferee of TCCs. These TCCs
could have covered the alleged tax deficiencies.
The CTA ruled that the PSPC had tax deficiencies arising from the cancellation of
the TDM issued against it TCCs.
On November 3, 1999, the Center informed PSPC of the cancellation of the first
batch of TCCs transferred to PSPC and the TDM covering PSPC's use of these TCCs as
well as the corresponding TCC assignments.
ISSUE: Whether the Center had the power to cancel the TCCs by itself.
RULING: No. On the issue of the authority to cancel duly issued TCCs, we agree with
respondent that the Center has concurrent authority with the BIR and BOC to cancel the
TCCs it issued. The Center was created under Administrative Order No. (AO) 266 in
relation to EO 226. A scrutiny of said executive issuances clearly shows that the Center
was granted the authority to issue TCCs pursuant to its mandate under AO 266. Sec. 5
of AO 266 provides:
On the other hand, it is undisputed that the BIR under the NIRC and related
statutes has the authority to both issue and cancel TCCs it has issued and even those
issued by the Center, either upon full utilization in the settlement of internal revenue
tax liabilities or upon conversion into a tax refund of unutilized TCCs in specific cases
under the conditions provided. AO 266 however is silent on whether or not the Center
has authority to cancel a TCC it itself issued.
Sec. 3, letter l. of AO 266, in relation to letters a. and g., does give ample authority
to the Center to cancel the TCCs it issued. Evidently, the Center cannot carry out its
mandate if it cannot cancel the TCCs it may have erroneously issued or those that were
fraudulently issued. It is axiomatic that when the law and its implementing rules are
silent on the matter of cancellation while granting explicit authority to issue, an inherent
and incidental power resides on the issuing authority to cancel that which was issued.
A caveat however is required in that while the Center has authority to do so, it must
bear in mind the nature of the TCC's immediate effectiveness and validity for which
cancellation may only be exercised before a transferred TCC has been fully utilized or
canceled by the BIR after due application of the available tax credit to the internal
revenue tax liabilities of an innocent transferee for value, unless of course the claimant
or transferee was involved in the perpetration of the fraud in the TCC's issuance,
transfer, or utilization. The utilization of the TCC will not shield a guilty party from the
consequences of the fraud committed.
While we agree with respondent that the State in the performance of
governmental function is not estopped by the neglect or omission of its agents, and
nowhere is this truer than in the field of taxation, yet this principle cannot be applied to
work injustice against an innocent party. In the case at bar, PSPC's rights as an innocent
transferee for value must be protected. Therefore, the remedy for respondent is to go
after the claimant companies who allegedly perpetrated the fraud.
On the issue of the publication of the Center's Excom Resolution No. 03-05-99
providing for the "Guidelines and Procedures for the Cancellation, Recall and Recovery
of Fraudulently Issued Tax Credit Certificates," we find that the resolution is invalid
and unenforceable. It authorizes the cancellation of TCCs and TDM which are found to
have been granted without legal basis or based on fraudulent documents. The
cancellation of the TCCs and TDM is covered by a penal provision of the assailed
resolution. Such being the case, it should have been published and filed with the
National Administrative Register of the U.P. Law Center in accordance with Secs. 3, 4,
and 5, Chapter 2 of Book VII, EO 292 or the Administrative Code of 1987.
A rule which carries a penal sanction will bind the public if the public is
officially and specifically informed of the contents and penalties prescribed for the
breach of the rule. Since Excom Resolution No. 03-05-99 was neither registered with the
U.P.Law Center nor published, it is ineffective and unenforceable. Even if the resolution
need not be published, the punishment for any alleged fraudulent act in the
procurement of the TCCs must not be visited on PSPC, an innocent transferee for value,
which has not been shown to have participated in the fraud. Respondent must go after
the perpetrators of the fraud.

PSPC V CIR

Uploaded by

Copyright:

Available Formats

PSPC V CIR

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PSPC V CIR

Uploaded by

Copyright:

Available Formats

PILIPINAS SHELL PETROLEUM CORPORATION V COMMISSIONER OF

You might also like