G.R. No.

125346 - 165499 November 11, 2014

LA SUERTE CIGAR & CIGARETTE FACTORY, Petitioner,

vs.
COURT OF APPEALS and COMMISSIONER OF INTERNAL
REVENUE, Respondents.

Ponente: J. Marvic Mario Victor F. Leonen

Facts:
These cases involve the taxability of stemmed leaf tobacco imported and locally
purchased by cigarette manufacturers for use as raw material in the manufacture
of their cigarettes. La Suerte Cigar is a domestic corporation engaged in the
production and production of cigars and cigarettes. La Suerte imports leaf
tobacco from foreign sources and purchase locally produced leaf tobacco in the
manufacture of cigars and cigarettes. On January 3, 1990, La Suerte received a
letter from the then Commissioner Jose U. Ong demanding the payment of
P34,934,827.67 as deficiency excise tax on its entire importation and local
purchase of stemmed leaf tobacco. La Suerte protested stressing that the BIR
assessment was based solely on Section 141(B) of the Tax Code without,
however, applying Section 137 thereof, which expressly allows the sale of
stemmed leaf tobacco as raw material by one manufacturer directly to another
without payment without payment of excise tax. The Commissioner insisted that
stemmed leaf tobacco is subject to excise tax “ unless there is an express grant
of exemption from the payment of tax.” The Court of Tax Appeals decided in
favor of La Suerte. The Commissioner appealed the decision in the Court of
Appeals which ruled against La Suerte and found that R.R. No. V-39 (The
Tobacco Products Regulation) limits the tax exemption on transfers of stemmed
leaf tobacco the transfer between two manufacturers.

Issue:
 A.) Whether stemmed leaf tobacco is subject to excise tax?
B.) Whether the imported stemmed leaf tobacco is covered by any
exemption?
C.) Whether the excise tax imposed on stemmed leaf tobacco constitutes
double taxation?

Ruling:
A.) Stemmed leaf tobacco is subject to the specific tax under Section 141(b)
of the Tax Code. It is partially prepared tobacco. The removal of the stem
or midrib from the leaf tobacco makes the resulting stemmed leaf tobacco
prepared or partially prepared tobacco. Since the Tax Code contained no
definition of “partially prepared tobacco”, then the term should be
construed in its general, ordinary, and comprehensive sense.
B.) However, importation of stemmed leaf tobacco is not included in the
exemption under Section 137. The transaction contemplated in Section
137 does not include importation of stemmed leaf tobacco for the reason
that the law uses the term “sold” to describe the transaction of transferring
the raw materials from manufacturer to another.
C.) Finally, excise taxes are essentially taxes on property because the are
levied on certain specified goods or articles manufactured or produced in
the Philippines for domestic sale or consumption or for any other
disposition, and on goods imported. In this case, there is no double
taxation in the prohibited sense despite the fact that they are paying the
specific tax on the raw material and on the finished product in which the
raw material was a part, because the specific tax is imposed by explicit
provisions of the Tax Code on two different articles or products, one is on
the stemmed leaf tobacco and the other is on the cigar or cigarette.
 G.R. No. 177332 October 01, 2014

NATIONAL POWER CORPORATION, Petitioner,

vs.
CITY OF CABANATUAN, REPRESENTED BY ITS CITY MAYOR, HON.
HONORATO PEREZ, Respondents.

Ponente: J. Marvic Mario Victor F. Leonen

Facts:
The City of Cabanatuanassessed the NAPOCORa franchise tax amounting to
P808,606.41, representing 75% of 1% of its gross receipts for 1992. NAPOCOR
refused to pay, arguing that it is exempt from paying the franchise tax.The City
filed a complaintbefore the Regional Trial Court of Cabanatuan City, demanding
NAPOCOR to pay the assessed tax due plus 25% surcharge and interest of 2%
per month of the unpaid tax, and costs of suit. The trial court declared that the
City could not impose a franchise tax on NAPOCOR and accordingly dismissed
the complaint for lack of merit. The Court of Appealsreversed the trial court and
found NAPOCOR liable to pay franchise tax.

According to petitioner, the trial court and the Court of Appeals disregarded the
provisions of Section 168 of Republic Act No. 7160 or the Local Government
Code of 1991.

Issue:
A.) Is the City of Cabanatuan allowed to impose a surcharge or penalty higher
than 25%?

Ruling:
A.) No. We find this reasoning not compelling for us to deviate from the
express provisions of Section 168 of the Local Government Code.

This court has steadfastly adhered to the doctrine that its first and
fundamental duty is the application of the law according to its plain terms,
interpretation being called for only when such literal application is
impossible. Neither the court nor the City has the power to modify the
penalty.

If the legislative intent was to make the 25% surcharge proportionate to

the period of delay, the law should have provided for the same in clear
terms.

Generally, tax statutes are construed strictly against the government and
in favor of the taxpayer. "[Statutes levying taxes or duties [are] not to
extend their provisions beyond the clear import of the language used" and
"tax burdens are not to be imposed, nor presumed to be imposed beyond
what the statute[s] expressly and clearly [import]. . . ." Similarly, we cannot
impose a penalty for non-payment of a tax greater than what the law
provides. To do so would amount to a deprivation of property without due
process of law.
 G.R. No. 190021 October 22, 2014
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
BURMEISTER AND WAIN SCANDINAVIAN CONTRACTOR
MINDANAO, INC., Respondent.

Ponente: J. Estella Perlas-Bernabe

Facts:

Respondent is a corporation duly organized and existing under the laws of the
Philippines, and primarily engaged in the business of constructing, erecting,
assembling, commissioning, operating, maintaining, rehabilitating, and managing
industrial and power-generating plants and related facilities for the conversion
into electricity of coal distillate, and other fuels, provided by and under contract
with the Philippine Government, or any government-owned and controlled
corporations, or other entities engaged in the development, supply, or distribution
of electricity. It is registered as a value-added tax (VAT) taxpayer.
Respondent corporation subcontracted the actual O&M to Burmeister. NPC paid
the foreign consortium a mixture of currencies while the consortium, in turn, paid
Burmeister foreign currency inwardly remitted into the Philippines. BIR did not
want to grant refund since the services are “not destined for consumption
abroad.”

Issue:
Are the receipts of Burmeister entitled to VAT zero-rated status?
Ruling:
PARTIALLY. Respondent is entitled to the refund prayed for but only for the
period covered prior to the filing of CIR’s Answer in the CTA.

The claim has no merit since the consortium, which was the recipient of services
rendered by Burmeister, was deemed doing business within the Philippines since
its 15-year O&M with NPC can not be interpreted as an isolated transaction.

In addition, the services referring to ‘processing, manufacturing, repacking’ and

‘services other than those in (1)’ of Sec. 102 both require (i) payment in foreign
currency; (ii) inward remittance; (iii) accounted for by the BSP; AND (iv) that the
service recipient is doing business outside the Philippines. The Court ruled that if
this is not the case, taxpayers can circumvent just by stipulating payment in
foreign currency.

The refund was partially allowed since Burmeister secured a ruling from the BIR
allowing zero-rating of its sales to foreign consortium. However, the ruling is only
valid until the time that CIR filed its Answer in the CTA which is deemed
revocation of the previously-issued ruling. The Court said the revocation can not
retroact since none of the instances in Section 246 (bad faith, omission of facts,
etc.) are present.
 G.R. No. 183421 October 22, 2014
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
AICHI FORGING COMPANY OF ASIA, INC., Respondent.

Ponente: C.J. Maria Lourdes P. Sereno

Facts:
Aichi Forging Company of Asia, Inc. (respondent) is engaged in the business of
manufacturing, producing, and processing all kinds of steel and steel by-
products, such as closed impression die steel forging, and all automotive steel
parts.

Respondent filed with the BIR, an application for tax credit/refund representing
the former’s paid input value-added taxes (VAT) for the first quarter of taxable
year 2003. Respondent claimed that it was entitled to a refund/credit of the input
VAT paid on its purchases of goods, services, capital goods, and on its
importation of goods other than capital goods that were attributable to zerorated
sales.

Aichi filed a Petition with the CTA and after trial, the CTA Division partly granted
the Petition and ordered the refund to respondent of the reduced amount.
On appeal, the CTA En Bancaffirmed the decision after finding no reversible
error.Respondent was found tohave complied with all the requisites for claiming a
refund under Section 112 (A) of the Tax Code.
Issue:
Whether Aichi filed its judicial claim for refund prematurely?

Ruling:
Yes, Section 112 of the NIRC of 1997 laid down the manner in which the refund
or credit of input tax may be made. In accordance with Section 112(D)of the
NIRC of 1997, petitioner had one hundred twenty (120) days from the date of
submission of complete documents in support of the application within which to
decide on the administrative claim.

We agree with petitioner that the judicial claim was prematurely filed, since
respondent failed to observe the mandatory 120-day waiting period to give the
CIR an opportunity to act on the administrative claim.

Strict compliance with the 120+30 day periods is necessary for such a claim to
prosper, whether before, during, or after the effectivity of the Atlas doctrine,
except for the period from the issuance of BIR Ruling No. DA-489-03 on 10
December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which
again reinstated the 120+30 day periods as mandatory and jurisdictional.

Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all
taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on
10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010,
where this Court held that the 120+30 day periods are mandatory and
jurisdictional.

Therefore, respondent's filing of the judicial claim barely two days after the
administrative claim is acceptable, as it fell within the period during which the
Court recognized the validity of BIR Ruling No. DA-489-03.
 G.R. No. 197228 October 8, 2014
DUTY FREE PHILIPPINES, Petitioner,
vs.
BUREAU OF INTERNAL REVENUE, represented by Hon. Anselmo G.
Adriano, Acting Regional Director, Revenue Region No. 8, Makati
City, Respondent.

Ponente: C.J. Maria Lourdes P. Sereno

Facts:

Petitioner is a merchandising system established by the then Ministry of Tourism

(now Department of Tourism) through the Philippine Tourism Authority (PTA),
pursuant to Executive Order (E.O.) No. 46 dated 4 September 1986.

Petitioner sought a clarification of its exemption from the expanded withholding

tax under Revenue Regulation (R.R.) No. 6-94 and alleged that this request for
clarification was a reiteration of its prior letter. It argued that as a tax-exempt
establishment under E.O. No. 46, it should not be subjected to the 1.1/2%
expanded withholding taxes on certain income payments that were withheld by
credit card companies in compliance with R.R. No. 6-94. In relation thereto,
petitioner also inquired on the procedure for the refund of accumulated taxes
withheld by credit card companies.
In response, respondent issued BIRRuling No. 136-95. Respondent opined that
E.O. No. 93 withdrew all the tax and duty incentives granted to government and
public entities, including petitioner. Hence, respondent denied the request of
petitioner for a refund of the withholding tax on certain payments made by credit
card companies and remitted to the BIR.
Petitioner requested a reconsideration which was later on denied through BIR
Ruling No. 38-2002 and ruled that petitioner, as a division of PTA, was now
subject to income tax.

Issue:
Whether the direct appeal taken by Duty Free from the decision CTA Division to
the Supreme Court is correct?

Ruling:
No, a party adversely affected by the resolution of the CTA division may, on
motion for reconsideration, file a petition for review with the CTA en banc.
Thereafter, the decision or ruling of the CTA en bancmay be elevated to this
Court. Simply stated, no decision of the CTA division may be elevated to this
Court under Rule 45 of the 1997 Rules of Civil Procedure without passing
through the CTA en banc.

In sum, this Court has no jurisdiction to review the Decision and Resolution
rendered by the Special First Division of the CTA. Thus, the instant Petition must
fail.

It is worth emphasizing that an appeal is neither a natural nor a constitutional

right, but is merely statutory. The implication of its statutory character is that the
party who intends to appeal must always comply with the procedures and rules
governing appeals; or else, the right of appeal may be lost or
squandered. Neither is the right to appeal a component of due process. It is a
mere statutory privilege and may be exercised only in the manner prescribed by,
and in accordance with, the provisions of law.