G.R. No. 182399, March 12, 2014
CS GARMENT, INC.,* Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondents.
D E C I S I O N
Petitioner [CS Garment] is a domestic corporation duly organized and existing under and by virtue of the laws of the Philippines with principal office at Road A, Cavite Ecozone, Rosario, Cavite. On the other hand, respondent is the duly appointed Commissioner of Internal Revenue of the Philippines authorized under law to perform the duties of said office, including, inter alia, the power to assess taxpayers for [alleged] deficiency internal revenue tax liabilities and to act upon administrative protests or requests for reconsideration/reinvestigation of such assessments.
Petitioner is registered with the Philippine Economic Zone Authority (PEZA) under Certificate of Registration No. 89-064, duly approved on December 18, 1989. As such, it is engaged in the business of manufacturing garments for sale abroad.
On November 24, 1999, petitioner [CS Garment] received from respondent [CIR] Letter of Authority No. 00012641 dated November 10, 1999, authorizing the examination of petitioner’s books of accounts and other accounting records for all internal revenue taxes covering the period January 1, 1998 to December 31, 1998.
On October 23, 2001, petitioner received five (5) formal demand letters with accompanying Assessment Notices from respondent, through the Office of the Revenue Director of Revenue Region No. 9, San Pablo City, requiring it to pay the alleged deficiency VAT, Income, DST and withholding tax assessments for taxable year 1998 in the aggregate amount of P2,046,580.10 broken down as follows:chanRoblesVirtualawlibrary
Deficiency VAT Basic tax due P314,194.00 Add: Surcharge 157,097.00 Interest 188,516.00 Total Amount Payable P 659,807.00 Deficiency Income Tax (at Normal Rate of 34%) Basic tax due P 78,639.00 Add: Surcharge 39,320.00 Interest 43,251.00 Total Amount Payable P 161,210.00 Deficiency Income Tax (at Special Rate of 5%) Basic tax due P 742,574.10 Add: Surcharge - Interest 408,416.00 Compromise Penalty 25,000.00 Total Amount Payable P 1,175,990.10 Deficiency DST Basic tax due P 806.00 Add: Surcharge 403.00 Interest 484.00 Total Amount Payable P 1,693.00 Deficiency EWT Basic tax due P22,800.00 Add: Surcharge 11,400.00 Interest 13,680.00 Total Amount Payable P 47,880.00 ______________ GRAND TOTAL P2,046,580.10 =============
On November 20, 2001, or within the 30-day period prescribed under Section 228 of the Tax Code, as amended, petitioner filed a formal written protest with the respondent assailing the above assessments.
On January 11, 2002, or within the sixty-day period after the filing of the protest, petitioner submitted to the Assessment Division of Revenue Region No. 9, San Pablo City, additional documents in support of its protest.
Respondent failed to act with finality on the protest filed by petitioner within the period of one hundred eighty (180) days from January 11, 2002 or until July 10, 2002. Hence, petitioner appealed before [the CTA] via a Petition for Review filed on August 6, 2002 or within thirty (30) days from the last day of the aforesaid 180-day period.
The case was raffled to the Second Division of [the CTA] for decision. After trial on the merits, the Second Division rendered the Assailed Decision on January 4, 2007 upon which the Second Division cancelled respondent’s assessment against CS Garments for deficiency expanded withholding taxes for CY 1998 amounting to P47,880.00, and partially cancelled the deficiency DST assessment amounting to P1,963.00. However, the Second Division upheld the validity of the deficiency income tax assessments by subjecting the disallowed expenses in the amount of P14,851,478.83 and a portion of the undeclared local sales P1,541,936.60 (amounting to P1,500,000.00) to income tax at the special rate of 5%. The remainder of undeclared local sales of P1,541,936.06 (amounting to P41,936.60) was subjected to income tax at the rate of 34%. The Second Division found that total tax liability of CS Garments amounted to P2,029,570.12, plus 20% delinquency interest pursuant to Section 249(C)(3), and computed the same as follows:chanRoblesVirtualawlibrary
Income Tax Deficiency Tax VAT DST at 5% at 34% TOTAL Basic Tax Due P 314,194.00 P 145.00 P 817,573.94 P 1,789.44 25% Surcharge 78,548.50 36.25 204,393.49 447.36 20% Interest 188,516.00 102.02 422,898.52 925.6 P 581,258.50 P 283.27 P 1,444,865.95 P 3,162.40 P 2,029,570.12
On January 29, 2007, CS Garments filed its “Motion for Partial Reconsideration” of the said decision. On May 25, 2007, in a resolution, the Second Division denied CS Garments’ motion for lack of merit. (Citations omitted)
2007 Tax Amnesty Law - Republic Act No. 9480
SECTION 2. Availment of the Amnesty. — Any person, natural or juridical, who wishes to avail himself of the tax amnesty authorized and granted under this Act shall file with the Bureau of Internal Revenue (BIR) a notice and Tax Amnesty Return accompanied by a Statement of Assets, Liabilities and Networth (SALN) as of December 31, 2005, in such form as may be prescribed in the implementing rules and regulations (IRR) of this Act, and pay the applicable amnesty tax within six months from the effectivity of the IRR.
SECTION 4. Presumption of Correctness of the SALN. — The SALN as of December 31, 2005 shall be considered as true and correct except where the amount of declared networth is understated to the extent of thirty percent (30%) or more as may be established in proceedings initiated by, or at the instance of, parties other than the BIR or its agents: Provided, That such proceedings must be initiated within one year following the date of the filing of the tax amnesty return and the SALN. Findings of or admission in congressional hearings, other administrative agencies of government, and/or courts shall be admissible to prove a thirty percent (30%) under-declaration.
SECTION 6. Immunities and Privileges. — Those who availed themselves of the tax amnesty under Section 5 hereof, and have fully complied with all its conditions shall be entitled to the following immunities and privileges:chanRoblesVirtualawlibrary
(a) The taxpayer shall be immune from the payment of taxes, as well as additions thereto, and the appurtenant civil, criminal or administrative penalties under the National Internal Revenue Code of 1997, as amended, arising from the failure to pay any and all internal revenue taxes for taxable year 2005 and prior years. (b) The taxpayer’s Tax Amnesty Return and the SALN as of December 31, 2005 shall not be admissible as evidence in all proceedings that pertain to taxable year 2005 and prior years, insofar as such proceedings relate to internal revenue taxes, before judicial, quasi-judicial or administrative bodies in which he is a defendant or respondent, and except for the purpose of ascertaining the networth beginning January 1, 2006, the same shall not be examined, inquired or looked into by any person or government office. However, the taxpayer may use this as a defense, whenever appropriate, in cases brought against him. (c) The books of accounts and other records of the taxpayer for the years covered by the tax amnesty availed of shall not be examined: Provided, That the Commissioner of Internal Revenue may authorize in writing the examination of the said books of accounts and other records to verify the validity or correctness of a claim for any tax refund, tax credit (other than refund or credit of taxes withheld on wages), tax incentives, and/or exemptions under existing laws.
All these immunities and privileges shall not apply where the person failed to file a SALN and the Tax Amnesty Return, or where the amount of networth as of December 31, 2005 is proven to be understated to the extent of thirty percent (30%) or more, in accordance with the provisions of Section 3 hereof.
SECTION 7. When and Where to File and Pay. — The filing of the Tax Amnesty Return and the payment of the amnesty tax for those availing themselves of the tax amnesty shall be made within six months starting from the effectivity of the IRR. It shall be filed at the office of the Revenue District Officer which has jurisdiction over the legal residence or principal place of business of the filer. The Revenue District Officer shall issue an acceptance of payment form authorizing an authorized agent bank, or in the absence thereof, the collection agent or municipal treasurer concerned, to accept the amnesty tax payment.
Department of Finance Order No. 29-07: Rules and Regulations to Implement R.A. 9480
SECTION 6. Method of Availment of Tax Amnesty. —
x x x x
3. Payment of Amnesty Tax and Full Compliance. — Upon filing of the Tax Amnesty Return in accordance with Sec. 6 (2) hereof, the taxpayer shall pay the amnesty tax to the authorized agent bank or in the absence thereof, the Collection Agent or duly authorized Treasurer of the city or municipality in which such person has his legal residence or principal place of business.
The RDO shall issue sufficient Acceptance of Payment Forms, as may be prescribed by the BIR for the use of — or to be accomplished by — the bank, the collection agent or the Treasurer, showing the acceptance of the amnesty tax payment. In case of the authorized agent bank, the branch manager or the assistant branch manager shall sign the acceptance of payment form.
The Acceptance of Payment Form, the Notice of Availment, the SALN, and the Tax Amnesty Return shall be submitted to the RDO, which shall be received only after complete payment. The completion of these requirements shall be deemed full compliance with the provisions of R.A. 9480. (Emphases supplied)cralawvirtualawlibrary
A BASIC GUIDE ON THE TAX AMNESTY ACT OF 2007
The following is a basic guide for taxpayers who wish to avail of tax amnesty pursuant of Republic Act No. 9480 (Tax Amnesty Act of 2007).
Who may avail of the amnesty?
x x x x
X Withholding agents with respect to their withholding tax liabilities X Those with pending cases:
- Under the jurisdiction of the PCGG
- Involving violations of the Anti-Graft and Corrupt Practices Act
- Involving violations of the Anti-Money Laundering Law
- For tax evasion and other criminal offenses under the NIRC and/or the RPC
X Issues and cases which were ruled by any court (even without finality) in favor of the BIR prior to amnesty availment of the taxpayer. (e.g. Taxpayers who have failed to observe or follow BOI and/or PEZA rules on entitlement to Income Tax Holiday Incentives and other incentives) X Cases involving issues ruled with finality by the Supreme Court prior to the effectivity of R.A. 9480 (e.g. DST on Special Savings Account) X Taxes passed-on and collected from customers for remittance to the BIR X Delinquent Accounts/Accounts Receivable considered as assets of the BIR/Government, including self-assessed tax (Emphasis supplied)
Republic Act No. 9480
SECTION 8. Exceptions. — The tax amnesty provided in Section 5 hereof shall not extend to the following persons or cases existing as of the effectivity of this Act:chanRoblesVirtualawlibrary
x x x x(f) Tax cases subject of final and executory judgment by the courts.DOF Order No. 29-07: Rules and Regulations to Implement R.A. 9480
SECTION 5. Exceptions. — The tax amnesty shall not extend to the following persons or cases existing as of the effectivity of R.A. 9480:chanRoblesVirtualawlibrary
x x x x7. Tax cases subject of final and executory judgment by the courts. (Emphases supplied)cralawvirtualawlibrary
The BIR’s inclusion of “issues and cases which were ruled by any court (even without finality) in favor of the BIR prior to amnesty availment of the taxpayer” as one of the exceptions in RMC 19-2008 is misplaced. RA 9480 is specifically clear that the exceptions to the tax amnesty program include ’tax cases subject of final and executory judgment by the courts.’ The present case has not become final and executory when Metrobank availed of the tax amnesty program.29 (Emphasis supplied)redjgc
* The case title indicated in the petition filed with this Court was followed. According to petitioner, its corporate name under its Articles of Incorporation is “CS Garment, Inc.” and not “CS Garments, Inc.,” as previously referred to in the proceedings before the Court of Tax Appeals. See Petition for Review at 1, f.n. 1 (filed on 23 May 2008), rollo at 10.
1CS Garments, Inc. v. Commissioner of Internal Revenue, EB Case No. 287 (CTA en banc, 14 January 2008), slip op., rollo at 40-62 (hereinafter CTA en banc Decision).
2CS Garments, Inc. v. Commissioner of Internal Revenue, EB Case No. 287 (CTA en banc, 2 April 2008), slip op., rollo at 37-39 (hereinafter CTA en banc Resolution). Both the Decision and the Resolution of the CTA en banc were penned by CTA Associate Justice Caesar A. Casanova and concurred in by Justices Ernesto D. Acosta, Juanito C. Castañeda, Jr., Lovell R. Bautista, Erlinda P. Uy, and Olga Palanca-Enriquez.
3CS Garments, Inc. v. Commissioner of Internal Revenue, CTA Case No. 6520 (CTA 2nd Div., 4 January 2007), slip op., rollo at 63-94 (hereinafter CTA 2nd Div. Decision).
4CS Garments, Inc. v. Commissioner of Internal Revenue, CTA Case No. 6520 (CTA 2nd Div., 25 May 2007), slip op., rollo at 95-97 (hereinafter CTA Sec.2nd Div. Resolution). Both the Decision and the Resolution of the CTA Second Division were penned by CTA Associate Justice Juanito C. Castañeda, Jr. and concurred in by Justices Erlinda P. Uy and Olga Palanca-Enriquez.
5 CTA en banc Decision, supra note 1, at 2-5, rollo at 41-44.
6 Annexes A to E of CS Garment’s Manifestation and Motion dated 25 September 2008, rollo at 171-175.
7 Comment (on Petitioner’s Manifestation and Motion dated September 25, 2008) of the OSG (filed on 26 January 2009), rollo at 212-220.
8 Order dated 8 February 2010, rollo at 229-230.
9 Order dated 17 July 2013, rollo at 321-323.
10 To clarify, an order to “move in the premises,” which is a term of art employed in this Court, simply means that the parties are obliged to inform the Court of pertinent developments that may help in the immediate disposition of the case. See Oliveras v. Lopez, G.R. No. L-29727, 14 December 1988, 168 SCRA 431.
11Rollo at 324-352.
12 Id. at 366-374.
13 Compliance (filed on 29 November 2013) at 2, rollo at 367.
14Metropolitan Bank and Trust Co. v. Commissioner of Internal Revenue, G.R. No. 178797, 4 August 2009, 595 SCRA 234; and Philippine Banking Corporation (Now: Global Business Bank, Inc.) v. Commissioner of Internal Revenue, G.R. No. 170574, 30 January 2009, 577 SCRA 366.
16 R.A. 9480, Sec. 1.
17 BIR Revenue Memorandum Circular (RMC) No. 19-2008, 22 February 2008.
18See R.A. 9480, Sec. 2; Department of Finance Department Order No. (DOF D.O.) 29-07, Rule II, Sec. 6(1) (Implementing Rules and Regulations of R.A. 9480); BIR RMC No. 19-2008, 22 February 2008; and BIR RMC NO. 69-2007, 5 November 2007.
19 R.A. 9480, Sec. 5 provides: Grant of Tax Amnesty. — Except for the persons or cases covered in Section 8 hereof, any person, whether natural or juridical, may avail himself of the benefits of tax amnesty under this Act, and pay the amnesty tax due thereon, based on his networth as of December 31, 2005 as declared in the SALN as of said period, in accordance with the following schedule of amnesty tax rates and minimum amnesty tax payments required: x x x x
20 DOF D.O. 29-07, Rule II, Sec. 6(2)(c); BIR RMC No. 19-2008, 22 February 2008.
21 DOF D.O. 29-07, Rule II, Sec. 6(2)(c). See R.A. 9480, Sec. 6.
22 DOF D.O. 29-07, Rule II, Sec. 6(3); R.A. 9480, Secs. 2 & 7; and BIR RMC NO. 69-2007, 5 November 2007.
23See R.A. 9480, Sec. 2; DOF D.O. 29-07, Rule II, Sec. 6(1); BIR RMC No. 19-2008, 22 February 2008; and BIR RMC NO. 69-2007, 5 November 2007.
24 DOF D.O. 29-07, Rule II, Sec. 6(3).
25 DOF D.O. 29-07, Rule II, Sec. 6(3); Philippine Banking Corporation v. Commissioner of Internal Revenue, supra note 14. See R.A. 9480, Sec. 2 in relation to Sec. 6.cralawred
26 Compliance (filed on 29 November 2013) at 2, rollo at 367.
27 Compliance (filed on 29 November 2013) at 2, rollo at 367.
28 BIR RMC 19-2008, 22 February 2008.
29 Supra note 14.
30Metropolitan Bank and Trust Co. v. Commissioner of Internal Revenue, G.R. No. 178797, 4 August 2009, 595 SCRA 234 (citing Philippine Banking Corporation, supra note 14).
31People v. Maceren, G.R. No. L-32166, 18 October 1977, 79 SCRA 450 (citing Calalang v. Williams, 70 Phil. 726 ; People v. Rosenthal, 68 Phil. 328 ; U.S. v. Tupasi Molina, 29 Phil. 119 ; Santos v. Estenzo, 109 Phil. 419 ; Teoxon v. Members of the Board of Administrators, G.R. No. L-25619, 30 June 1970, 33 SCRA 585; Manuel v. General Auditing Office, G.R. No. L-28952, 29 December 1971, 42 SCRA 660; Deluao v. Casteel, G.R. No. L-21906, 29 August 1969, 29 SCRA 350; University of Santo Tomas v. Board of Tax Appeals, 93 Phil. 376 ; El Colector de Rentas Internas v. Villaflor, 69 Phil. 319 ; Wise & Co. v. Meer, 78 Phil. 655 ; and Del Mar v. Phil. Veterans Administration, G.R. No. L-27299, 27 June 1973, 51 SCRA 340); Land Bank of the Philippines v. Court of Appeals, G.R. Nos. 118712 and 118745, 05 July 1996, 258 SCRA 404 (citing Shell Philippines, Inc. v. Central Bank of the Philippines, 162 SCRA 628 ; Philippine Petroleum Corporation v. Municipality of Pililla, 198 SCRA 82 ; and Tayug Rural Bank v. Central Bank, 146 SCRA 120 ).
32 In Philippine Banking Corporation (supra note 14), we ruled that the BIR was “misplaced” in including in RMC 19-2008 as one of the exceptions those “issues and cases which were ruled by any court (even without finality) in favor of the BIR prior to amnesty availment of the taxpayer.” Since in that case the bank availed itself of the tax amnesty program before the judgment against it had become “final and executory,” we resolved to set aside the CTA Decision; see also Metropolitan Bank and Trust Co. v. Commissioner of Internal Revenue, G.R. No. 178797, 4 August 2009, 595 SCRA 234.
33 R.A. 9480, Sec. 6(a).