ASTURIAS SUGAR CENTRAL, INC. vs.

COMMISSIONER OF CUSTOMS and COURT OF

TAX APPEALS (1969) penned by CASTRO

The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal sugar
for exert, the sugar so produced being placed in containers known as jute bags. In 1957 it made two
importations of jute bags. In the first shipment, the petitioner filed Re-exportation and Special Import Tax
Bond no. 1 in the amounts of P25,088 and P2,464.50 and in the second shipment, the petitioner filed Re-
exportation and Special Import Tax Bond no. 6 in the amounts of P42,112 and P7,984.44, On February 6,
1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., requested the Commissioner of
Customs for a week's extension of Re-exportation and Special Import Tax Bond no. 6 which was to
expire the following day, this request was denied by the Commissioner. Due to the petitioner's failure to
show proof of the exportation of the balance of 86,353 jute bags within one year from their importation,
the Collector of Customs of Iloilo, on March 17, 1958, required it to pay the amount of P28,629.42
representing the customs duties and special import tax due thereon, which amount the petitioner paid
under protest. The petitioner demanded the refund of the amount it had paid, on the ground that its request
for extension of the period of one year was filed on time, and that its failure to export the jute bags within
the required one-year period was due to delay in the arrival of the vessel on which they were to be loaded
and to the picketing of the Central railroad line. Alternatively, the petitioner asked for refund of the same
amount in the form of a drawback under section 106(b) in relation to section 105(x) of the Tariff and
Customs Code. The Collector of Customs denied the claim for refund. Court of Tax Appeals affirmed the
decision.
The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of the
Tariff and Customs Code due to its failure to export the jute bags within one year, by authority of section
106 (b) of the Tariff and Customs Code, it is entitled to a 99% drawback of the duties it had paid, averring
further that sec. 106(b) does not presuppose immediate payment of duties and taxes at the time of
importation.

WON petitioner is entitled to a drawback of the duties it had paid, by virtue of sections 106 (b) of the
Tariff and Customs Code and sec. 105(x) of the Tariff and Customs Code.

No. The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to an
importer. The first, under sec. 105 (x), gives him the privilege of importing, free from import duties, the
containers mentioned therein as long as he exports them within one year from the date of acceptance of
the import entry, which period as shown above, is not extendible. The second, presented by sec. 106 (b),
contemplates a case where import duties are first paid, subject to refund to the extent of 99% of the
amount paid, provided the articles mentioned therein are exported within three years from importation.
The basic purpose of the two provisions is the same, which is, to enable a local manufacturer to compete
in foreign markets, by relieving him of the disadvantages resulting from having to pay duties on imported
merchandise, thereby building up export trade and encouraging manufacture in the country. 12 But there is
a difference, and it is this: under section 105(x) full exemption is granted to an importer who justifies the
grant of exemption by exporting within one-year. The petitioner, having opted to take advantage of the
provisions of section 105(x), may not, after having failed to comply with the conditions imposed thereby,
avoid the consequences of such failure by being allowed a drawback under section 106(b) of the same Act
without having complied with the conditions of the latter section. For it is not to be supposed that the
legislature had intended to defeat compliance with the terms of section 105(x) thru a refuge under the
provisions of section 106(b). A construction should be avoided which affords an opportunity to defeat
compliance with the terms of a statute. 13 Rather courts should proceed on the theory that parts of a statute
may be harmonized and reconciled with each other. A construction of a statute which creates an
inconsistency should be avoided when a reasonable interpretation can be adopted which will not do
violence to the plain words of the act and will carry out the intention of Congress.
GR No. 153866 CIR vs. Seagate

FACTS: Respondent is a resident foreign corporation duly

registered with the Securities and Exchange Commission to do
business in the Philippines and is registered with the
Philippine Export Zone Authority (PEZA). The respondent is Value
Added Tax-registered entity and filed for the VAT returns. An
administrative claim for refund of VAT input taxes in the amount
of P28,369,226.38 with supporting documents (inclusive of the
P12,267,981.04 VAT input taxes subject of this Petition for
Review), was filed on 4 October 1999, but no final action has
been received by the respondent from the petitioner on the claim
for VAT refund. CIR asserts that by virtue of the PEZA
registration alone of respondent, the latter is not subject to
the VAT. Consequently, the capital goods and services respondent
has purchased are not considered used in the VAT business, and
no VAT refund or credit is due.

ISSUE: Whether or not Seagate, a VAT-Registered PEZA Enterprise

is entitled to tax refund or credit.

HELD: Yes, Seagate is entitled to refund or credit. As a PEZA-

registered enterprise within a special economic zone, respondent
is entitled to the fiscal incentives and benefit provided for in
either PD 66 or EO 226. It shall, moreover, enjoy all
privileges, benefits, advantages or exemptions under both
Republic Act Nos. (RA) 7227 and 7844.

Respondent, which as an entity is exempt, is different from its

transactions which are not exempt. The end result, however, is
that it is not subject to the VAT. The non-taxability of
transactions that are otherwise taxable is merely a necessary
incident to the tax exemption conferred by law upon it as an
entity, not upon the transactions themselves.

The petitioner’s assertion that the capital goods and services

respondent has purchased are not considered used in the VAT
business, and thus no VAT refund or credit is due is non
sequitur. On this matter, the SC held that by the VAT’s very
nature as a tax on consumption, the capital goods and services
respondent has purchased are subject to the VAT, although at
zero rate.

Seagate has complied with all the requisites for VAT refund or
credit. First, respondent is a VAT-registered entity. Second,
the input taxes paid on the capital goods of respondent are duly
supported by VAT invoices and have not been offset against any
output taxes.

To summarize, special laws expressly grant preferential tax

treatment to business establishments registered and operating
within an ecozone, which by law is considered as a separate
customs territory. As such, respondent is exempt from all
internal revenue taxes, including the VAT, and regulations
pertaining thereto. Its sales transactions intended for export
may not be exempt, but like its purchase transactions, they are
zero-rated. No prior application for the effective zero rating
of its transactions is necessary. Being VAT-registered and
having satisfactorily complied with all the requisites for
claiming a tax refund of or credit for the input VAT paid on
capital goods purchased, respondent is entitled to such VAT
refund or credit.

Having determined that respondent’s purchase transactions are

subject to a zero VAT rate, the SC has determined that tax
refund or credit is in order.

G.R. No. L-66653 June 19, 1986

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
BURROUGHS LIMITED AND THE COURT OF TAX APPEALS, respondents.

Sycip, Salazar, Feliciano & Hernandez Law Office for private respondent.

PARAS, J.:

Petition for certiorari to review and set aside the Decision dated June 27, 1983 of respondent Court
of Tax Appeals in its C.T.A. Case No. 3204, entitled "Burroughs Limited vs. Commissioner of Internal
Revenue" which ordered petitioner Commissioner of Internal Revenue to grant in favor of private
respondent Burroughs Limited, tax credit in the sum of P172,058.90, representing erroneously
overpaid branch profit remittance tax.
Burroughs Limited is a foreign corporation authorized to engage in trade or business in the
Philippines through a branch office located at De la Rosa corner Esteban Streets, Legaspi Village,
Makati, Metro Manila.

Sometime in March 1979, said branch office applied with the Central Bank for authority to remit to its
parent company abroad, branch profit amounting to P7,647,058.00. Thus, on March 14, 1979, it paid
the 15% branch profit remittance tax, pursuant to Sec. 24 (b) (2) (ii) and remitted to its head office
the amount of P6,499,999.30 computed as follows:

Amount applied for remittance................................ P7,647,058.00

Deduct: 15% branch profit

remittance tax ..............................................1,147,058.70

Net amount actually remitted.................................. P6,499,999.30

Claiming that the 15% profit remittance tax should have been computed on the basis of the amount
actually remitted (P6,499,999.30) and not on the amount before profit remittance tax
(P7,647,058.00), private respondent filed on December 24, 1980, a written claim for the refund or tax
credit of the amount of P172,058.90 representing alleged overpaid branch profit remittance tax,
computed as follows:

Profits actually remitted .........................................P6,499,999.30

Remittance tax rate .......................................................15%

Branch profit remittance tax-

due thereon ......................................................P 974,999.89

Branch profit remittance

tax paid .............................................................Pl,147,058.70

Less: Branch profit remittance

tax as above computed................................................. 974,999.89

Total amount refundable........................................... P172,058.81

On February 24, 1981, private respondent filed with respondent court, a petition for review, docketed
as C.T.A. Case No. 3204 for the recovery of the above-mentioned amount of P172,058.81.

On June 27, 1983, respondent court rendered its Decision, the dispositive portion of which reads—

ACCORDINGLY, respondent Commission of Internal Revenue is hereby ordered to grant a tax

credit in favor of petitioner Burroughs Limited the amount of P 172,058.90. Without pronouncement
as to costs.
 SO ORDERED.

Unable to obtain a reconsideration from the aforesaid decision, petitioner filed the instant petition
before this Court with the prayers as herein earlier stated upon the sole issue of whether the tax
base upon which the 15% branch profit remittance tax shall be imposed under the provisions of
section 24(b) of the Tax Code, as amended, is the amount applied for remittance on the profit
actually remitted after deducting the 15% profit remittance tax. Stated differently is private
respondent Burroughs Limited legally entitled to a refund of the aforementioned amount of
P172,058.90.

We rule in the affirmative. The pertinent provision of the National Revenue Code is Sec. 24 (b) (2) (ii)
which states:

Sec. 24. Rates of tax on corporations....

(b) Tax on foreign corporations. ...

(2) (ii) Tax on branch profits remittances. Any profit remitted abroad by a branch to its
head office shall be subject to a tax of fifteen per cent (15 %) ...

In a Bureau of Internal Revenue ruling dated January 21, 1980 by then Acting Commissioner of
Internal Revenue Hon. Efren I. Plana the aforequoted provision had been interpreted to mean that
"the tax base upon which the 15% branch profit remittance tax ... shall be imposed...(is) the
profit actually remitted abroad and not on the total branch profits out of which the remittance is to be
made. " The said ruling is hereinbelow quoted as follows:

In reply to your letter of November 3, 1978, relative to your query as to the tax base
upon which the 15% branch profits remittance tax provided for under Section 24 (b)
(2) of the 1977 Tax Code shall be imposed, please be advised that the 15% branch
profit tax shall be imposed on the branch profits actually remitted abroad and not on
the total branch profits out of which the remittance is to be made.

Please be guided accordingly.

Applying, therefore, the aforequoted ruling, the claim of private respondent that it made an
overpayment in the amount of P172,058.90 which is the difference between the remittance tax
actually paid of Pl,147,058.70 and the remittance tax that should have been paid of P974,999,89,
computed as follows

Profits actually remitted......................................... P6,499,999.30

Remittance tax rate.............................................................. 15%

Remittance tax due................................................... P974,999.89

is well-taken. As correctly held by respondent Court in its assailed decision-

Respondent concedes at least that in his ruling dated January 21, 1980 he held that
under Section 24 (b) (2) of the Tax Code the 15% branch profit remittance tax shall
be imposed on the profit actually remitted abroad and not on the total branch profit
out of which the remittance is to be made. Based on such ruling petitioner should
 have paid only the amount of P974,999.89 in remittance tax computed by taking the
15% of the profits of P6,499,999.89 in remittance tax actually remitted to its head
office in the United States, instead of Pl,147,058.70, on its net profits of
P7,647,058.00. Undoubtedly, petitioner has overpaid its branch profit remittance tax
in the amount of P172,058.90.

Petitioner contends that respondent is no longer entitled to a refund because Memorandum Circular
No. 8-82 dated March 17, 1982 had revoked and/or repealed the BIR ruling of January 21, 1980.
The said memorandum circular states—

Considering that the 15% branch profit remittance tax is imposed and collected at
source, necessarily the tax base should be the amount actually applied for by the
branch with the Central Bank of the Philippines as profit to be remitted abroad.

Petitioner's aforesaid contention is without merit. What is applicable in the case at bar is still the
Revenue Ruling of January 21, 1980 because private respondent Burroughs Limited paid the branch
profit remittance tax in question on March 14, 1979. Memorandum Circular No. 8-82 dated March
17, 1982 cannot be given retroactive effect in the light of Section 327 of the National Internal
Revenue Code which provides-

Sec. 327. 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 shag not be given
retroactive application if the revocation, modification, or reversal will be prejudicial to
the taxpayer 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, or (c) where the taxpayer acted in bad faith. (ABS-CBN Broadcasting Corp.
v. CTA, 108 SCRA 151-152)

The prejudice that would result to private respondent Burroughs Limited by a retroactive application
of Memorandum Circular No. 8-82 is beyond question for it would be deprived of the substantial
amount of P172,058.90. And, insofar as the enumerated exceptions are concerned, admittedly,
Burroughs Limited does not fall under any of them.

WHEREFORE, the assailed decision of respondent Court of Tax Appeals is hereby AFFIRMED. No
pronouncement as to costs.

SO ORDERED.

PHIL. BANK OF COMMUNICATIONS v. CIR

GR No. 112024, January 28, 1999
302 SCRA 250

FACTS: Petitioner PBCom filed its first and second quarter income tax returns, reported profits, and paid
income
taxes amounting to P5.2M in 1985. However, at the end of the year 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 P14.1 M, and thus declared no tax payable for the year. In 1988, the bank requested from CIR for a tax
credit and tax refunds representing overpayment of taxes. Pending investigation of the respondent CIR,
petitioner instituted a Petition for Review before the Court of Tax Appeals (CTA). CTA denied its petition for
tax
credit and refund for failing to file within the prescriptive period to which the petitioner belies arguing the
Revenue Circular No.7-85 issued by the CIR itself states that claim for overpaid taxes are not covered by the
two-year prescriptive period mandated under the Tax Code.

ISSUE: Is the contention of the petitioner correct? Is the revenue circular a valid exemption to the NIRC?

HELD: No. 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 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.
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.

HAGONOY MARKET VENDOR ASSOCIATION, petitioner, vs. MUNICIPALITY OF HAGONOY,

BULACAN, respondent.
G.R. No. 137621. February 6, 2002
PUNO, J.
(Jeka)
Tickler: The Sanggunian Bayan of Hagonoy enacted an ordinace, Kautusan Blg. 28, increasing the stall
rentals of the market vendors in Hagonoy. Article 3 provided that it shall take effect upon approval. The
petitioner’s President filed an appeal with the Secretary of Justice assailing the constitutionality of the
tax ordinance. The Secretary of Justice dismissed the appeal on the ground that it was filed out f time
(beyond 30 days from the effectivity of the Ordinance).
SC held that the appeal of the petitioner with the Secretary of Justice is already time-barred. The periods
stated in Section 187 of the Local Government Code are mandatory. Ordinance No. 28 is a revenue
measure adopted by the municipality of Hagonoy to fix and collect public market stall rentals. It is
essential that the validity of revenue measures is not left uncertain for a considerable length of time.
Furthermore, it was held that Section 6c.04 of the 1993 Municipal Revenue Code and Section 191 of the
Local Government Code limiting the percentage of increase that can be imposed apply to tax rates, not
rentals.
Facts:
1. The Sangguniang Bayan of Hagonoy, Bulacan, enacted an ordinance,
a. Kautusan Blg. 28: increasing the stall rentals of the market vendors in Hagonoy.
b. Article 3 provided that it shall take effect upon approval.
c. The subject ordinance was posted from November 4-25, 1996.
2. The petitioner’s members were personally given copies of the approved Ordinance and were
informed that it shall be enforced in January, 1998.
a. The petitioner’s President filed an appeal with the Secretary of Justice assailing the
constitutionality of the tax ordinance.
b. Petitioner claimed it was unaware of the posting of the ordinance.
3. Respondent opposed the appeal.
a. It contended that the ordinance took effect on October 6, 1996 and that the
ordinance, as approved, was posted as required by law.
 4. Petitioner’s appeal, made over a year later, was already time-barred.
a. Secretary of Justice: Dismissed the appeal on the ground that it was filed out of
time, i.e., beyond thirty (30) days from the effectivity of the Ordinance on October 1,
1996
b. Citing the case of Tañada vs. Tuvera, the Secretary of Justice held that the date of
effectivity of the subject ordinance retroacted to the date of its approval in October
1996, after the required publication or posting has been complied with, pursuant to
Section 3 of said ordinance
5. Motion for reconsideration was denied
a. Petitioner appealed to the Court of Appeals.
b. Petitioner did not assail the finding of the Secretary of Justice that their appeal was
filed beyond the reglementary period.
c. Instead, it urged that the Secretary of Justice should have overlooked this “mere
technicality” and ruled on its petition on the merits
6. CA: dismissed for being formally deficient as it was not accompanied by certified true copies of
the assailed Resolutions of the Secretary of Justice

Issue: WON the appeal by the petitioner with the Secretary of Justice time-barred.
Held: YES. The appeal of the petitioner with the Secretary of Justice is already time-barred.
Ratio:
1. On failure to attach certified true copies of the assaild decision of the Secretary of Justice:
a. the petitioner satisfactorily explained the circumstances relative to its failure to attach
to its appeal certified true copies of the assailed Resolutions of the Secretary of Justice
b. Due to bad weather, the person in charge (at the Department of Justice) was no longer
available to certify to (sic) the Resolutions.
c. The following day, October 22, 1998, was declared a non-working holiday because of
(t)yphoon “Loleng.”
d. We find that the Court of Appeals erred in dismissing petitioner’s appeal on the
ground that it was formally deficient.
e. It is clear from the records that the petitioner exerted due diligence to get the copies of
its appealed Resolutions certified by the Department of Justice, but failed to do so on
account of typhoon “Loleng.”
f. respondent appellate court should have tempered its strict application of procedural
rules in view of the fortuitous event considering that litigation is not a game of
technicalities
2. However, the appeal of the petitioner with the Secretary of Justice is already time-barred.
a. Any question on the constitutionality or legality of tax ordinances or revenue
measures may be raised on appeal within thirty (30) days from the effectivity thereof
to the Secretary of Justice
b. Section 187 of the Local Gov’t Code : appeal of a tax ordinance or revenue measure
should be made to the Secretary of Justice within thirty (30) days from effectivity of the
ordinance and even during its pendency, the effectivity of the assailed ordinance shall
not be suspended.
c. Municipal Ordinance No. 28 took effect in October 1996. Petitioner filed its appeal
only in December 1997, more than a year after the effectivity of the ordinance in 1996.
d. Clearly, the Secretary of Justice correctly dismissed it for being time-barred.
e. The timeframe fixed by law for parties to avail of their legal remedies before competent
courts is not a “mere technicality” that can be easily brushed aside.
3. The periods stated in Section 187 of the Local Government Code are mandatory
a. Ordinance No. 28 is a revenue measure adopted by the municipality of Hagonoy to fix
and collect public market stall rentals.
b. It is essential that the validity of revenue measures is not left uncertain for a
considerable length of time.
4. On the argument that its period to appeal should be counted not from the time the ordinance
took effect in 1996 but from the time its members were personally given copies of the
approved ordinance in November 1997.
a. Two (2) grounds: first, no public hearing was conducted prior to the passage of the
ordinance and, second, the approved ordinance was not posted.
b. Petitioner’s bold assertion that there was no public hearing conducted prior to the
passage of Kautusan Blg. 28 is belied by its own evidence.
c. In petitioner’s two (2) communications with the Secretary of Justice, it enumerated the
various objections raised by its members before the passage of the ordinance in several
meetings called by the Sanggunian for the purpose.
d. These show beyond doubt that petitioner was aware of the proposed increase and in
fact participated in the public hearings therefore.
5. On the issue of publication or posting
a. In contrast, the respondent Sangguniang Bayan of the Municipality of Hagonoy,
Bulacan, presented evidence which clearly shows that the procedure for the
enactment of the assailed ordinance was complied with
b. After its approval, copies of the Ordinance were given to the Municipal Treasurer on the
same day.
c. On November 9, 1996, the Ordinance was approved by the Sangguniang
Panlalawigan. The Ordinance was posted during the period from November 4 - 25,
1996 in three (3) public places, viz: in front of the municipal building, at the bulletin
board of the Sta. Ana Parish Church and on the front door of the Office of the Market
Master in the public market
d. Posting was validly made in lieu of publication as there was no newspaper of local
circulation in the municipality of Hagonoy.
6. Section 6c.04 of the 1993 Municipal Revenue Code and Section 191 of the Local Government
Code limiting the percentage of increase that can be imposed apply to tax rates, not rentals.
a. Neither can it be said that the rates were not uniformly imposed or that the public
markets included in the Ordinance were unreasonably determined or classified.
b. To be sure, the Ordinance covered the three (3) concrete public markets: the two-
storey Bagong Palengke, the burnt but reconstructed Lumang Palengke and the more
recent Lumang Palengkewith wet market. However, the Palengkeng Bagong
Munisipyo or Gabaldon was excluded from the increase in rentals as it is only a
makeshift, dilapidated place, with no doors or protection for security, intended for
transient peddlers who used to sell their goods along the sidewalk