cir vs. petron

of 23 /23
 Republic of the Philippines Supreme Court Manila SECOND DIVISION  COMMI SSI ONER OF INTERNAL REVENUE,  Petitioner,  - versus -  PETRON CORPORATION,  Respondent. G. R. No. 185568  Present:  CARPIO, J ., Chairperson,  BRION, PR!, "RNO, and R#", JJ.  Pro$ul%ated:  March &', &('& ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !  D E C I S I O N  SERENO,  J.:  )his is a Petition for Revie* on Certiorari under Rule + of the ' Rules of Civil Procedure filed b/ the Co$$issioner of Internal Revenue 0CIR1 assailin% the 2ecision 3'4  dated (5 2ece$ber &((6 of the Court of )a7 Appeals n Banc 0C)A n Banc1 in C)A B No. 5''. )he assailed 2ecision reversed and set aside the 2ecision 3&4 dated (+ Ma/ &(( of the Court of )a7 Appeals "econd 2ivision 0C)A "econd 2ivision1 in C)A Case No. 8+&5, *hich ordered respondent Petron Corporation 0Petron1 to pa/ deficienc/ e7cise ta7es for the ta7able /ears ' to '6, to%ether *ith surchar%es and delin9uenc/ interests i$posed thereon. 1

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Page 1: CIR vs. Petron

7/18/2019 CIR vs. Petron 1/23

Republic of the Philippines

Supreme CourtManila







- versus - 



G. R. No. 185568




CARPIO, J ., Chairperson,


PR!,"RNO, and

R#", JJ.




March &', &('&

! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !






)his is a Petition for Revie* on Certiorari under Rule + of the ' Rules

of Civil Procedure filed b/ the Co$$issioner of Internal Revenue 0CIR1 assailin%

the 2ecision3'4 dated (5 2ece$ber &((6 of the Court of )a7 Appeals n Banc

0C)A n Banc1 in C)A B No. 5''. )he assailed 2ecision reversed and set aside

the 2ecision3&4dated (+ Ma/ &(( of the Court of )a7 Appeals "econd 2ivision

0C)A "econd 2ivision1 in C)A Case No. 8+&5, *hich ordered respondent Petron

Corporation 0Petron1 to pa/ deficienc/ e7cise ta7es for the ta7able /ears ' to

'6, to%ether *ith surchar%es and delin9uenc/ interests i$posed thereon.


Page 2: CIR vs. Petron

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Respondent Petron is a corporation en%a%ed in the production of petroleu$

 products and is a Board of Invest$ent 0BOI1 re%istered enterprise in accordance

*ith the provisions of the O$nibus Invest$ents Code of '6 0.O. &&81 under Certificate of Re%istration Nos. 6-'(5 and 2-'58.354 

The Facts


)he C)A n Banc in C)A B Case No. 5'' adopted the findin%s of fact b/

the C)A "econd 2ivision in C)A Case No. 8+&5. Considerin% that there are no

factual issues in this case, *e li;e*ise adopt the findin%s of fact b/ the C)A n

Banc, as follo*s:

  As culled fro$ the records and as a%reed upon b/ the parties in their <oint

"tipulation of =acts and Issues, these are the facts of the case.

2urin% the period coverin% the ta7able /ears ' to '6, petitioner 0herein respondent Petron1 had been an assi%nee of several )a7 Credit Certificates

0)CCs1 fro$ various BOI-re%istered entities for *hich petitioner utili>ed in the

 pa/$ent of its e7cise ta7 liabilities for the ta7able /ears ' to '6. )hetransfers and assi%n$ents of the said )CCs *ere approved b/ the 2epart$ent of 

=inance?s One "top "hop Inter-A%enc/ )a7 Credit and 2ut/ 2ra*bac; Center 02O= Center1, co$posed of representatives fro$ the appropriate %overn$enta%encies, na$el/, the 2epart$ent of =inance 02O=1, the Board of Invest$ents

0BOI1, the Bureau of Custo$s 0BOC1 and the Bureau of Internal Revenue


)a;in% %round on a BOI letter issued on ' Ma/ '6 *hich states that

@h/draulic oil, penetratin% oil, diesel fuels and industrial %ases are classified assupplies and considered the suppliers thereof as 9ualified transferees of ta7

credit,? petitioner ac;no*led%ed and accepted the transfers of the )CCs fro$ the

various BOI-re%istered entities.

  Petitioner?s acceptance and use of the )CCs as pa/$ent of its e7cise ta7

liabilities for the ta7able /ears ' to '6, had been continuousl/ approved b/the 2O= as *ell as the BIR?s Collection Pro%ra$ 2ivision throu%h its surrender 

and subse9uent issuance b/ the Assistant Co$$issioner of the Collection "ervice

of the BIR of the )a7 2ebit Me$os 0)2Ms1. 


Page 3: CIR vs. Petron

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  On <anuar/ 5(, &((&, respondent 3herein petitioner CIR4 issued the

assailed Assess$ent a%ainst petitioner for deficienc/ e7cise ta7es for the ta7able

/ears ' to '6, in the total a$ount of 5,((5,(58.5&, inclusive of ₱

surchar%es and interests, based on the %round that the )CCs utili>ed b/ petitioner 

in its pa/$ent of e7cise ta7es have been cancelled b/ the 2O= for havin% been

fraudulentl/ issued and transferred, pursuant to its COM Resolution No. (5-(-. )hus, petitioner, throu%h letters dated Au%ust 5', ' and "epte$ber ',

', *as re9uired b/ the 2O= Center to sub$it copies of its sales invoices and

deliver/ receipts sho*in% the consu$$ation of the sale transaction to certain)CC transferors.


Instead of sub$ittin% the docu$ents re9uired b/ the respondent, on

=ebruar/ &, &((&, petitioner filed its protest letter to the @Assess$ent? on the%rounds, a$on% others, that:


a.  )he BIR did not co$pl/ *ith the re9uire$ents of Revenue

Re%ulations '&- in issuin% the assess$ent letter dated <anuar/5(, &((&, hence, the assess$ent $ade a%ainst it is voidD

  b.  )he assi%n$entEtransfer of the )CCs to petitioner b/ the

)CC holders *as sub$itted to, e7a$ined and approved b/ the

concerned %overn$ent a%encies *hich processed the assi%n$ent inaccordance *ith la* and revenue re%ulationsD


c.  )here is no basis for the i$position of the (F surchar%e

in the a$ount of ',+8(,((.(( and interest penalties in the₱

a$ount of &8(,8&(,55.5& a%ainst itD₱

 d.  "o$e of the ite$s included in the @assess$ent? are alread/

 pendin% liti%ation and are subGect of the case entitled @Co$$issioner 

of Internal Revenue vs. Petron Corporation,? C.A. HR "P No. 55(

0C)A Case No. 81 and hence, should no lon%er be included in the

@assess$ent?D and


e.  )he assess$ent and collection of alle%ed e7cise ta7

deficiencies sou%ht to be collected b/ the BIR a%ainst petitioner throu%h the <anuar/ 5(, &((& letter are alread/ barred b/ prescription

under "ection &(5 of the National Internal Revenue Code.

 On & March &((&, respondent, throu%h Assistant Co$$issioner d*in R.

Abella served a arrant of 2istraint andEor Jev/ on petitioner to enforce pa/$ent

of the 5,((5,(58.5& ta7 deficiencies.₱

 Respondent alle%edl/ served the arrant of 2istraint andEor Jev/ a%ainst

 petitioner *ithout first actin% on its letter-protest. )hus, construin% the arrant of 


Page 4: CIR vs. Petron

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2istraint andEor Jev/ as the final adverse decision of the BIR on its protest of the

assess$ent, petitioner filed the instant petition before this Konorable Court

3referrin% to the C)A "econd 2ivision4 on April &, &((&. 

On April 5(, &((&, respondent filed his Ans*er, raisin% the follo*in% as his

"pecial Affir$ative 2efenses:

8. In a post-audit conducted b/ the One-"top Inter-A%enc/ )a7

Credit and 2ut/ 2ra*bac; Center 0Center1 of the 2epart$ent of =inance 02O=1, pursuant to the Center?s 7co$ Resolution No. (5-

(-, it *as found that )CCs issued to Alliance )hread Co., Inc.,

Allstar "pinnin%, Inc., 2ia$ond Lnittin% Corp., =iber )echnolo%/

Corp., =ilstar )e7tile Industrial Corp., =JB International =iber Corp.,<ante7 Philippines, Inc., <ibte7 Industrial Corp., Master Colour 

"/ste$ Corp. and "pinte7 International, Inc. *ere fraudulentl/

obtained and *ere fraudulentl/ transferred to petitioner. As a result

of said findin%s, the )CCs and the )a7 2ebit Me$os 0)2Ms1 issued b/ the Center to petitioner a%ainst said )CCs *ere cancelled b/ the


. Prior to the cancellation of the aforesaid )CCs and )2Ms,

 petitioner had utili>ed the sa$e in the pa/$ent of its e7cise ta7liabilities. ith such cancellation, the )CCs and )2Ms have no

value in $one/ or $one/?s *orth and, therefore, the e7cise ta7es for 

*hich the/ *ere used as pa/$ent are no* dee$ed unpaidD

 6. )he cancellation b/ the 2O= of the aforesaid )CCs and )2Ms

has the presu$ption of re%ularit/ upon *hich respondent $a/

validl/ rel/D 

. Petitioner *as infor$ed b/ the 2O= of the post-audit

conducted on the )CCs and *as %iven the opportunit/ to sub$itdocu$ents sho*in% that the )CCs *ere transferred to it in pa/$ent

of petroleu$ products alle%edl/ delivered b/ it to the )CC

transferors upon *hich the )CC transfers *ere approved, *ith the

ad$onition that failure to sub$it the re9uired docu$ents *ouldresult in the cancellation of the transfers. Petitioner *as also

infor$ed of the cancellation of the )CCs and )2Ms and the reason

for their cancellationD 

'(. "ince petitioner is dee$ed not to have paid its e7cise ta7

liabilities, a pre-assess$ent notice is not re9uired under "ection &&6of the )a7 CodeD


''. )he letter dated <anuar/ &(, &((& 0should be <anuar/ 5(,

&((&1, de$andin% pa/$ent of petitioner?s e7cise ta7 liabilities


Page 5: CIR vs. Petron

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e7plicitl/ states the basis for said de$and, i.e., the cancellation of the

)CCs and )2MsD

 '&. )he %overn$ent is never estopped fro$ collectin% le%iti$ate

ta7es due to the error co$$itted b/ its a%ents 0isa/as Cebu

)er$inal Inc., vs. Co$$issioner of Internal Revenue, '5 "CRA &DAtlas Consolidated Minin% and 2evelop$ent Corporation vs.

Co$$issioner of Internal Revenue, '(& "CRA &+81. )he acceptance

 b/ the Bureau of Internal Revenue of the )CCs fraudulentl/ obtainedand fraudulentl/ transferred to petitioner as pa/$ent of its e7cise ta7

liabilities turned out to be a $ista;e after the post-audit *as

conducted. Kence, said pa/$ents *ere void and the e7cise ta7es

$a/ be validl/ collected fro$ petitioner.

'5. As found in the post-audit, petitioner and the )CC transferors

co$$itted fraud in the transfer of the )CCs *hen the/ $ade appear 

0sic1 that the transfers *ere in consideration for the deliver/ of  petroleu$ products b/ petitioner to the )CCs transferors, for *hich

reason said transfers *ere approved b/ the Center, *hen in fact there*ere no such deliveriesD


'+. Petitioner used the )CCs fraudulentl/ obtained andfraudulentl/ transferred in the pa/$ent of e7cise ta7es declared in its

e7cise ta7 returns *ith intent to evade ta7 to the e7tent of the value

represented b/ the )CCs, thereb/ renderin% the returns fraudulentD

'. "ince petitioner *ilfull/ filed fraudulent returns, it is liable

for the (F surchar%e and &(F annual interest i$posed under 

"ections &+6 and &+ of the )a7 CodeD 

'8. "ince petitioner *ilfull/ filed fraudulent returns *ith intent

to evade ta7, the prescriptive period to collect the ta7 is ten 0'(1/ears fro$ the discover/ of the fraud pursuant to "ection &&& of the

)a7 CodeD and


'. )he case pendin% in the Court of Appeals 0CA-H.R. "p. No.55( 3C)A Case No. 841, and the case at bar have distinct

causes of action. )he for$er involves the invalid transfers of the

)CCs to petitioner on the theor/ that it is not a 9ualified transfereethereof, *hile the latter involves the fraudulent procure$ent of said

)CCs and the fraudulent transfers thereof to petitioner.

 Ko*ever, on Nove$ber '&, &((&, respondent filed a Manifestation infor$in%

this Court that on Ma/ &, &((&, it had reduced the a$ount of deficienc/ e7cise

ta7es to &(,&5,&&+.+ as a result of its verification that so$e of the )CCs₱

*hich for$ed part of the ori%inal Assess$ent *ere alread/ included in a case


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 previousl/ filed *ith this Court. In effect, the a$ount of deficienc/ e7cise ta7es is

reco$puted as follo*s:

 Tr"#$%eror &"$'( T" Sur()"r*e I#tere$t Tot"+

Alliance )hread Co. Inc. ₱  '&,(6,6&5.((   ₱  8,(5,+''.(   ₱  '8,'+,&5.&'   ₱  5+,&8,&.&'

Allstar "pinnin%, Inc. 5,&8,5'(.(( '6,85&,8.(( +,6',+68. '(,8,+'.

2ia$ond Lnittin% Corporation 58,8+,6.(( '6,56&,&5.( +,&8+,6.5 '(+,+'',856.6

=iber )echnolo%/ Corp. &,5((,''.(( '&,8(,+.( 5+,&,8.( &,&+,(&&.+(

=ilstar )e7tile Corp. +(,8,65.(( &(,565,6'.( +,6(&,(.'8 '',+,&&+.88

=JB International =iber Corp. &,5+,8.(( '&,8,5+.( 5+,,&.'+ 5,6,&.8+

<ante7 Philippines, Inc. '&,(58,'&.(( 8,('6,(8.(( ',6'&,+.&+ 55,688,65.&+

<ibte7 Industrial Corp. ',(8,5(&.(( ,5,''.(( &(,8'(,5'.& +5,68,&.&

Master Colour s/ste$ Corp. 55,555,58.(( '8,888,86.(( ++,6&&,'8.(8 +,6&&,+'.(8

"pinte7 International Inc. '+,'&,+(6.(( ,+8,&(+.(( ',6,586.' +',&8,6(.'

  Tot"+ 5-,//,50.//₱ ₱  16,5/,-.5/   ₱  -0/,/,0/0.0   ₱  /,-,0.0


2urin% the pendenc/ of the case, but after respondent had alread/

sub$itted his =or$al Offer of vidence for this Court?s consideration, he filed an@r%ent Motion to Reopen Case? on Au%ust &+, &((+ on the %round that additional

evidence consistin% of docu$ents presented to the Center in support of the )CC

transferor?s clai$s for ta7 credit as *ell as docu$ent supportin% the applicationsfor approval of the transfer of the )CCs to petitioner, $ust be presented to prove

the fraudulent issuance and transfer of the subGect )CCs. Respondent sub$its that

it is i$perative on his part to do so considerin% that, *ithout necessaril/ ad$ittin%that the evidence presented in the case of Pilipinas "hell Petroleu$ Corporation

vs. Co$$issioner of Internal Revenue, to prove fraud is not clear and convincin%,

he $a/ suffer the sa$e fate that had befallen upon therein respondent *hen thisCourt held, a$on% others, that @there is no clear and convincin% evidence that the

)a7 Credit Certificates 0)CCs1 transferred to "hell 0for brevit/1 and used b/ it in

the pa/$ent of e7cise ta7es, *ere fraudulentl/ issued to the )CC transferors and

*ere fraudulentl/ transferred to "hell.? 

An @Opposition to r%ent Motion to Reopen Case? *as filed b/ petitioner 

on "epte$ber 5, &((+ contendin% that to sustain respondent?s $otion *ould@s$ac; of procedural disorder and spa*n a reversion of the proceedin%s. hile

liti%ation is not a %a$e of technicalities, it is a truis$ that ever/ case $ust be

 presented in accordance *ith the prescribed procedure to insure an orderl/ad$inistration of Gustice.?


On October +, &((+, this Court resolved to %rant respondent?s Motion and

allo*ed respondent to present additional evidence in support of his ar%u$ents, butdeferred the resolution of respondent?s ori%inal =or$al Offer of vidence until

after the respondent has ter$inated his presentation of evidence. "ubse9uent to

this Court?s Resolution, respondent then filed on October &(, &((+, a Re9uest for the Issuance of "ubpoena 2uces )ecu$ to the 7ecutive 2irector of the Center or 

his dul/ authori>ed representative, and on October &', &((+, a "ubpoena Ad

)estificandu$ to Ms. li>abeth R. Cru>, also of the Center. 


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  Petitioner filed a @Motion for Reconsideration 0Re: Resolution dated

October +, &((+1? on October &, &((+, *ith respondent filin% his @Opposition? on

 Nove$ber +, &((+, and petitioner subse9uentl/ filin% its @Repl/ to Opposition? on2ece$ber &(, &((+. Petitioner?s $otion *as denied b/ this Court in a Resolution

dated =ebruar/ &6, &(( for lac; of $erit.

  On March '6, &((, petitioner filed an @r%ent Motion to Revert Case to

the =irst 2ivision? *ith respondent?s @Manifestation? filed on April 8, &(( statin%

that @the 9uestion of *hich 2ivision of this Konorable Court shall hear the instantcase is an internal $atter *hich is better left to the sound discretion of this

Konorable Court *ithout interference b/ a part/ liti%ant?. On April &6, &((, this

Court denied the Motion of petitioner for lac; of $erit.

On Nove$ber , &((, the Court finall/ resolved respondent?s @=or$al

Offer of vidence? filed on Ma/ , &((+ and @"upple$ental =or$al Offer of 

vidence? filed on Au%ust &, &((. On Nove$ber &&, &((, respondent filed a

@Motion for Partial Reconsideration? of the Court?s Resolution to ad$it 7hibits5' and 5'-A on the %round that he alread/ sub$itted and offered certified true

copies of said e7hibits, *hich the Court %ranted in its Resolution on <anuar/ ',&((8.


Ko*ever, on =ebruar/ '(, &((8, respondent filed a @Motion to A$end=or$al Offer of vidence? pra/in% that he be allo*ed to a$end his for$al offer 

since so$e e7hibits althou%h attached thereto *ere inadvertentl/ not $entioned in

the =or$al Offer of vidence. Petitioner?s @Opposition? *as filed on March '+,

&((8. )his Court %ranted respondent?s $otion in the Resolution dated April &+,&((8 and considerin% that the parties alread/ filed their respective Me$oranda,

this case *as then considered sub$itted for decision.

 On Ma/ '8, &((8, ho*ever, respondent filed an @O$nibus Motion?

 pra/in% that this Court ta;e Gudicial notice of the fact that the )CCs issued b/ the

Center, includin% the )CCs in this instant case, contained the standard @Jiabilit/Clause? and that the case be consolidated *ith C)A Case No. 8'58, on the %round

that both cases involve the sa$e parties and co$$on 9uestions of la* or fact. An

@OppositionECo$$ent on O$nibus Motion? *as filed b/ petitioner on <une &8,

&((8, and @Repl/ to OppositionECo$$ent? *as filed b/ respondent on <ul/ ',&((8.


In a Resolution pro$ul%ated on "epte$ber ', &((8, this Court %rantedrespondent?s $otion onl/ insofar as ta;in% Gudicial notice of the fact that each of 

the dorsal side of the )CCs contains the subGect @liabilit/ clause?, but denied

respondent?s $otion to consolidate considerin% that C.).A. Case No. 8'58 *asalread/ sub$itted for decision on April &+, &((8.3+4


The Ruling of the Court of Tax Appeals–Second Division


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(CTA Case o. !"#$% 

On (+ Ma/ &((, the C)A "econd 2ivision pro$ul%ated a 2ecision in C)A

Case No. 8+&5, the dispositive portion of *hich reads:

 23EREFORE, pre$ises considered, the instant Petition for Revie* is

hereb/ DENIED for lac; of $erit. Accordin%l/, petitioner is ORDERED TO

PA4 the respondent the reduced a$ount of SI 3UNDRED MILLION SEVEN


AND 51// PESOS 7P6//,6,-5-.5, representin% petitioner?s deficienc/

e7cise ta7es for the ta7able /ears ' to '6, reco$puted as follo*s:

 Tr"#$%eror &"$'( T" 59 Sur()"r*e /9 I#tere$t Tot"+

Alliance )hread Co. Inc. ₱  '&,(6,6&5.(( ₱  5,(',(.   ₱  '5,+8,(.86   ₱  &6,+,8(8.+5

Allstar "pinnin%, Inc. 5,&8,5'(.(( ,5'8,5&.( +',+6+,&.+8 66,(88,&(.8

2ia$ond Lnittin%Corporation

  58,8+,6.(( ,'','+8. +',(5,8.& 6,((,8.(+

=iber )echnolo%/ Corp. &,5((,''.(( 8,5&,&&. &6,,'5.& 8(,&(,6&.((

=ilstar )e7tile Corp. +(,8,65.(( '(,'',+. +,886,'.6( 8,8&6,&(.

=JB International =iber Corp. &,5+,8.(( 8,+65,85. &,'+,'+.&6 8',88,(65.(5

<ante7 Philippines, Inc. '&,(58,'&.(( 5,((,(+6.(( '5,','&&.( &6,&&&,58&.(

<ibte7 Industrial Corp. ',(8,5(&.(( 5,68,.( ',',&88.& 58,6,'+5.

Master Colour s/ste$ Corp. 55,555,58.(( 6,555,56+.(( 5,5',6(.66 ,('6,&.66

"pinte7 International Inc. '+,'&,+(6.(( 5,&6,'(&.(( '8,&6,8+(. 5+,5,'(.

  Tot"+   ₱  5-,//,50.//   ₱  6-,05,1-6.5   ₱  8-,--,6/./   ₱  6//,6,-5-.5


In addition, petitioner is ORDERED TO PA4 the respondent T2ENT4


PERCENT 7/9 DELI:UENC4 INTEREST per annu$ on the a$ount



7 6//,6,-5-.5₱ , co$puted fro$ <une &, &((& until the a$ount is full/ paid.




)he C)A "econd 2ivision held Petron liable for deficienc/ e7cise ta7es on

the %round that the cancellation b/ the 2O= of the )CCs previousl/ issued to and

utili>ed b/ respondent to settle its ta7 liabilities had the effect of nonpa/$ent of the

latter?s e7cise ta7es. )hese ta7es corresponded to the value of the )CCs Petron

used for pa/$ent. )he C)A "econd 2ivision ruled that pa/$ent can onl/ occur if 

the instru$ent used to dischar%e an obli%ation represents its stated value.384 It


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further ruled that Petron?s acceptance of the )CCs *as considered a contract

entered into b/ respondent *ith the CIR and subGect to post-audit, 34 *hich *as

considered a suspensive condition %overned b/ Article ''6' of the Civil Code.364 

=urther, the C)A "econd 2ivision found that the circu$stances pertainin% to

the issuance of the subGect )CCs and their transfer to Petron bri$ *ith

fraud.34 Kence, the said court concluded that since the )CCs used b/ Petron *ere

found to be spurious, respondent *as dee$ed to have not paid its e7cise ta7es and

ou%ht to be liable to the CIR in the a$ount of 8((,8,55. plus &F interests₱

and &(F surchar%es.3'(4


Petron filed a Motion for Reconsideration3''4 of the 2ecision of the C)A

"econd 2ivision, *hich denied the $otion in a Resolution dated '+ Au%ust &((.3'&4 )he court reiterated its conclusion that the )CCs utili>ed b/ Petron to pa/ the

latter?s e7cise ta7 liabilities did not result in pa/$ent after these )CCs *ere found

to be fraudulent in the post-audit b/ the 2O=. )he C)A "econd 2ivision also

affir$ed its rulin% that Petron *as liable for a &F late pa/$ent surchar%e and

&(F surchar%es under "ection &+63'54 of the National Internal Revenue Code

0NIRC1 of '.3'+4 

A%%rieved, Petron appealed the 2ecision to the C)A n Banc throu%h a

Petition for Revie*, *hich *as doc;eted as C)A B No. 5''. In its Petition,

Petron alle%ed that the "econd 2ivision erred in holdin% respondent liable to pa/

the a$ount of 8((,8,55. in deficienc/ e7cise ta7es *ith penalties and₱

interests coverin% the ta7able /ears '-'6. Petron pra/ed that the said

2ecision be reversed and set aside, and that CIR be enGoined fro$ collectin% thecontested e7cise ta7 deficienc/ assess$ent.3'4


)he C)A n Banc su$$ed up into one issue the %rounds relied upon b/

Petron in its Petition for Revie*, as follo*s:


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 hether or not the "econd 2ivision erred in holdin% petitioner liable for 

the a$ount of 8((,8,55. as deficienc/ e7cise ta7es for the /ears '-₱

'6, includin% surchar%es and interest, plus &F surchar%e and &(F delin9uenc/

interest per annu$ fro$ <une &, &((& until the a$ount is full/ paid.3'84 

The Ruling of the Court of Tax Appeals &n 'anc

(CTA &' Case o. $%


On (5 2ece$ber &((6, the C)A n Banc pro$ul%ated a 2ecision, *hich

reversed and set aside the C)A "econd 2ivision on (+ Ma/ &((. )he for$er 

absolved Petron fro$ an/ deficienc/ e7cise ta7 liabilit/ for ta7able /ears ' to

'6. Its rulin% in favor of Petron *as anchored on this Court?s pronounce$entsin Pilipinas Shell Petroleum Corp. v. Commissioner of Internal Revenue 0Shell 1,3'4 *hich found that the factual bac;%round and le%al issues therein *ere si$ilar to

those in the present case.


In resolvin% the issues, the C)A n Banc adopted the $ain points in Shell ,

*hich it 9uoted at len%th as basis for decidin% the appeal in favor of Petron. )he

%ist of the $ain points of Shell  cited b/ the said court is as follo*s:


a1 )he issued )CCs are i$$ediatel/ valid and effective and are not

subGect to a post-audit as a suspensive condition3'64

 b1 A )CC is subGect onl/ to the follo*in% conditions:

i1 Post-audit in the event of a co$putational discrepanc/

ii1 A reduction for an/ outstandin% account *ith the BIR 

andEor BOC

iii1 A revalidation of the )CC if not utili>ed *ithin one /ear 

fro$ issuance or date of utili>ation3'4 

c1 A transferee of a )CC should onl/ be a BOI-re%istered fir$ under the

I$ple$entin% Rules and Re%ulations of 7ecutive Order 0.O.1 No.



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d1 )he liabilit/ clause in the )CCs provides onl/ for the solidar/

liabilit/ of the transferee relative to its transfer in the event it is a part/

to the fraud.3&'4

e1 A transferee can rel/ on the Center?s approval of the )CCs? transfer and subse9uent acceptance as pa/$ent of the transferee?s e7cise ta7


f1 A )CC cannot be cancelled b/ the Center, as it *as alread/ cancelled

after the transferee had applied it as pa/$ent for the latter?s e7cise ta7



)he C)A n Banc also found that Petron had no participation in or ;no*led%e

of the fraudulent issuance and transfer of the subGect )CCs. In fact, the parties

$ade a Goint stipulation on this $atter in C)A Case No. 8+&5 before the C)A

"econd 2ivision.3&+4


In resolvin% the issue of *hether the %overn$ent is estopped fro$ collectin%

ta7es due to the fault of its a%ents, the C)A n Banc 9uoted Shell  as follo*s:


hile *e a%ree *ith respondent that the "tate in the perfor$ance of %overn$ent function is not estopped b/ the ne%lect or o$ission of its a%ents, and

no*here is this truer than in the field of ta7ation, <et t)'$ pr'#('p+e ("##ot =e

"pp+'e> to ?or@ '#u$t'(e "*"'#$t "# '##o(e#t p"rt<.3&4 0$phasis


=inall/, the C)A n Banc ruled that Petron *as considered an innocent

transferee of the subGect )CCs and $a/ not be preGudiced b/ a re-assess$ent of 

e7cise ta7 liabilities that respondent has alread/ settled, *hen due, *ith the use of 

the )CCs.3&84 Petron is thus considered to have not fraudulentl/ filed its e7cise ta7

returns. Conse9uentl/, the assess$ent issued b/ the CIR a%ainst it had no le%al

 basis.3&4 )he dispositive portion of the assailed (5 2ece$ber &((6 2ecision of the

C)A n Banc reads:



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23EREFORE, the instant petition for Revie* is hereb/ GRANTED.

Accordin%l/, the Ma/ +, &(( 2ecision and Au%ust '+, &(( Resolution of the

C)A "econd 2ivision in C)A Case No. 8+&5 entitled,  Petron Corporation, petitioner vs. Commissioner of Internal Revenue, respondent , are

hereb/ REVERSED and SET ASIDE. In addition, the de$and and collection of 

the deficienc/ e7cise ta7es of PETRON in the a$ount of 8((,8,55.₱

e7cludin% penalties and interest coverin% the ta7able /ears ' to '6 are

hereb/ CANCELLED and SET ASIDE, and respondent-Co$$issioner of 

Internal Revenue is hereb/ ENBOINED fro$ collectin% the said a$ountfro$ PETRON.



)he CIR $oved for the reconsideration of the C)A n Banc 2ecision, but

the $otion *as denied in a Resolution dated '+ Au%ust &((.3&4


The )ssues


)he CIR appealed the 2ecision of the C)A n Banc b/ filin% a Petition for 

Revie* on Certiorari under Rule + of the Rules of Court. 35(4 Petitioner assails the

2ecision b/ raisin% the follo*in% issues:


I)" CI" )A JIABIJI)I" =ROM ' )O '6.





=RA2JN) AC)". )K =IN2INH O= )K C)A "CON22II"ION )KA) )K )A CR2I) CR)I=ICA)" R

=RA2JN)J# )RAN"=RR2 B# )K )RAN"=ROR-




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A""IHN2 )O R"PON2N) R OI2, I) 2I2 NO) ACIR

AN# AJI2 )I)J OR )K )CC".




)A" 2 )O )K MI")AL" O= I)" AHN)". 



R"PON2N)?" R)RN" R =AJ", )K A""""MN)

PR"CRIB" IN )N 0'(1 #AR" =ROM )K 2I"COR# O= )K

=AJ"I)# )KRO= PR"AN) )O "C)ION && O= )K "AMCO2.35'4


The Court*s Ruling 


e DEN4 the CIR?s Petition for lac; of $erit.


Article &' of .O. &&8 defines a ta7 credit as follo*s:

  AR)ICJ &'. )a7 credit shall $ean an/ of the credits a%ainst ta7es

andEor duties e9ual to those actuall/ paid or *ould have been paid to evidence*hich a ta7 credit certificate shall be issued b/ the "ecretar/ of =inance or his

representative, or the Board, if so dele%ated b/ the "ecretar/ of =inance. )he ta7

credit certificates includin% those issued b/ the Board pursuant to la*s repealed

 b/ this Code but *ithout in an/ *a/ di$inishin% the scope of ne%otiabilit/ under their la*s of issue are transferable under such conditions as $a/ be deter$ined b/

the Board after consultation *ith the 2epart$ent of =inance. )he ta7 credit

certificate shall be used to pa/ ta7es, duties, char%es and fees due to the National


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Hovern$entD Provided, )hat the ta7 credits issued under this Code shall not for$

 part of the %ross inco$e of the %ranteeEtransferee for inco$e ta7 purposes under 

"ection & of the National Internal Revenue Code and are therefore not ta7able:Provided, further, )hat such ta7 credits shall be valid onl/ for a period of ten 0'(1

/ears fro$ date of issuance.


nder Article 5 0G1 of the O$nibus Invest$ent Code of '6,35&4 ta7 credits

are %ranted to entities re%istered *ith the Bureau of Invest$ent 0BOI1 and are

%iven for ta7es and duties paid on ra* $aterials used for the $anufacture of their 

e7port products.


A )CC is defined under "ection ' of Revenue Re%ulation 0RR1 No. -

&(((, issued b/ the BIR on ' Au%ust &(((, as follo*s: 

B. )a7 Credit Certificate $eans a certification, dul/ issued

to the ta7pa/er na$ed therein, b/ the Co$$issioner or his dul/

authori>ed representative, reduced in a BIR Accountable =or$ in

accordance *ith the prescribed for$alities, ac;no*led%in% that the

%rantee-ta7pa/er na$ed therein is le%all/ entitled a ta7 credit, the $one/

value of *hich $a/ be used in pa/$ent or in satisfaction of an/ of his

internal revenue ta7 liabilit/ 0e7cept those e7cluded1, or $a/ be

converted as a cash refund, or $a/ other*ise be disposed of in the

$anner and in accordance *ith the li$itations, if an/, as $a/ be prescribed b/ the provisions of these Re%ulations.


RR -&((( prescribes the re%ulations %overnin% the $anner of issuance

of )CCs and the conditions for their use, revalidation and transfer. nder the said

re%ulation, a )CC $a/ be used b/ the %rantee or its assi%nee in the pa/$ent of its

direct internal revenue ta7 liabilit/.3554 It $a/ be transferred in favor of an assi%nee

subGect to the follo*in% conditions: '1 the )CC transfer $ust be *ith prior 

approval of the Co$$issioner or the dul/ authori>ed representativeD &1 the transfer 

of a )CC should be li$ited to one transfer onl/D and 51 the transferee shall strictl/

use the )CC for the pa/$ent of the assi%nee?s direct internal revenue ta7 liabilit/

and shall not be convertible to cash. 35+4 A )CC is valid onl/ for '( /ears subGect to

the follo*in% rules: 0'1 it $ust be utili>ed *ithin five 01 /ears fro$ the date of 


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issueD and 0&1 it $ust be revalidated thereafter or be other*ise considered invalid.354


)he processin% of a )CC is entrusted to a speciali>ed a%enc/ called the

One-"top-"hop Inter-A%enc/ )a7 Credit and 2ut/ 2ra*bac; Center 0Center1,created on ( =ebruar/ '& under Ad$inistrative Order 0A.O.1 No. &&8. Its

 purpose is to e7pedite the processin% and approval of ta7 credits and dut/

dra*bac;s.3584 )he Center is co$posed of a representative fro$ the 2O= as its

chairpersonD and the $e$bers thereof are representatives of the Bureau of 

Invest$ent 0BOI1, Bureau of Custo$s 0BOC1 and Bureau of Internal Revenue

0BIR1, *ho are tas;ed to process the )CC and approve its application as pa/$ent

of an assi%nee?s ta7 liabilit/.354

 A )CC $a/ be assi%ned throu%h a 2eed of Assi%n$ent, *hich the assi%nee

sub$its to the Center for its approval. pon approval of the deed, the Center *ill

issue a 2O= )a7 2ebit Me$o 02O=-)2M1,3564 *hich *ill be utili>ed b/ the

assi%nee to pa/ the latter?s ta7 liabilities for a specified period. pon surrender of 

the )CC and the 2O=-)2M, the correspondin% Authorit/ to Accept Pa/$ent of 

7cise )a7es 0A)AP)1 *ill be issued b/ the BIR Collection Pro%ra$ 2ivision

and *ill be sub$itted to the issuin% office of the BIR for acceptance b/ the

Assistant Co$$issioner of Collection "ervice. )his act of the BIR si%nifies its

acceptance of the )CC as pa/$ent of the assi%nee?s e7cise ta7es. 

)hus, it is apparent that a )CC under%oes a strin%ent process of verification

 b/ various speciali>ed %overn$ent a%encies before it is accepted as pa/$ent of an

assi%nee?s ta7 liabilit/.


In the case at bar, the CIR disputes the rulin% of the C)A n Banc, *hich

found Petron to have had no participation in the fraudulent procure$ent and

transfer of the )CCs. Petitioner believes that there *as substantial evidence tosupport its alle%ation of a fraudulent transfer of the )CCs to Petron. 354 )he CIR 

further contends that respondent *as not a 9ualified transferee of the )CCs,

 because the latter did not suppl/ petroleu$ products to the co$panies that *ere the

assi%nors of the subGect )CCs.3+(4 


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 )he CIR bases its contentions on the 2O=?s post-audit findin%s statin% that,

for the periods coverin% ' to '6, Petron did not deliver fuel and other 

 petroleu$ products to the co$panies 0the transferor co$panies1 that had assi%ned

the subGect )CCs to respondent. Petitioner further alle%es that the findin%s indicate

that the transferor co$panies could not have had such a hi%h volu$e of e7portsales declared to the Center and $ade the basis for the issuance of the )CCs

assi%ned to Petron.3+'4 )hus, the CIR i$pu%ns the C)A n Banc rulin% that

respondent *as a transferee in %ood faith and for value of the subGect )CCs.3+&4 

 Not findin% $erit in the CIR?s contention, *e affir$ the rulin% of the C)A

n Banc findin% that Petron is a transferee in %ood faith and for value of the

subGect )CCs.

 =ro$ the records, *e observe that the CIR had no alle%ation that there *as a

deviation fro$ the process for the approval of the )CCs, *hich Petron used as

 pa/$ent to settle its e7cise ta7 liabilities for the /ears ' to '6.


)he CIR 9uotes the C)A "econd 2ivision and ur%es us to affir$ the latter?s

2ecision, *hich found Petron to have participated in the fraudulent issuance and

transfer of the )CCs. Ko*ever, an/ $erit in the position of petitioner on this issue

is ne%ated b/ the <oint "tipulation it entered into *ith Petron in the proceedin%s

 before the said 2ivision. As correctl/ noted b/ the C)A n Banc, herein parties Gointl/ stipulated before the "econd 2ivision in C)A Case No. 8+&5 as follo*s:

 '5. )hat petitioner 0Petron1 did not participate in the

 procure$ent and issuance of the )CCs, *hich )CCs *ere

transferred to Petron and later utili>ed b/ Petron in pa/$ent of its

e7cise ta7es.3+54 

)his stipulation of fact b/ the CIR a$ounts to an ad$ission and, havin%

 been $ade b/ the parties in a stipulation of facts at pretrial, is treated as a Gudicialad$ission. nder "ection +, Rule '& of the Rules of Court, a Gudicial ad$ission

re9uires no proof.3++4  )he Court cannot li%htl/ set it aside, especiall/ *hen the

opposin% part/ relies upon it and accordin%l/ dispenses *ith further proof of the

fact alread/ ad$itted. )he e7ception provided in Rule '&, "ection + is that an

ad$ission $a/ be contradicted onl/ b/ a sho*in% that it *as $ade throu%h a


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 palpable $ista;e, or that no such ad$ission *as $ade. In this case, ho*ever,

e7ception to the rule does not e7ist.


e a%ree *ith the pronounce$ent of the C)A n Banc that Petron has not

 been sho*n or proven to have participated in the alle%ed fraudulent acts involvedin the transfer and utili>ation of the subGect )CCs. Petron had the ri%ht to rel/ on

the Goint stipulation that absolved it fro$ an/ participation in the alle%ed fraud

 pertainin% to the issuance and procure$ent of the subGect )CCs. )he Goint

stipulation $ade b/ the parties conse9uentl/ obviated the opportunit/ of the CIR to

 present evidence on this $atter, as no proof is re9uired for an ad$ission $ade b/ a

 part/ in the course of the proceedin%s.3+4 )hus, the CIR cannot no* be allo*ed to

chan%e its stand and rene%e on that ad$ission.

 Moreover, a close e7a$ination of the ar%u$ents proffered b/ the CIR in

their Petition calls for a reevaluation of the sufficienc/ of evidence in the case. )he

CIR see;s to persuade this Court to believe that there is substantial evidence to

 prove that Petron co$$itted a $isrepresentation, because the petroleu$ products

*ere delivered not to the transferor but to other co$panies. 3+84 )hus, the )CCs

assi%ned b/ the transferor co$panies to Petron *ere fraudulent. Clearl/, a

recalibration of the sufficienc/ of evidence presented b/ the CIR is needed for a

different conclusion to be reached.

 )he funda$ental rule is that the scope of our Gudicial revie* under Rule +

of the Rules of Court is confined onl/ to errors of la* and does not e7tend to

9uestions of fact.3+4 It is basic that *here it is the sufficienc/ of evidence that is

 bein% 9uestioned, there is a 9uestion of fact.3+64 videntl/, the CIR does not point

out an/ specific provision of la* that *as *ron%l/ interpreted b/ the C)A n Banc

in the latter?s assailed 2ecision. Petitioner anchors it contention on the alle%ed

e7istence of the sufficienc/ of evidence it had proffered to prove that Petron *as

involved in the perpetration of fraud in the transfer and utili>ation of the subGect)CCs, an alle%ation that the C)A n Banc failed to consider. e have consistentl/

held that it is not the function of this Court to anal/>e or *ei%h the evidence all

over a%ain, unless there is a sho*in% that the findin%s of the lo*er court are totall/

devoid of support or are %larin%l/ erroneous as to constitute palpable error or %rave

abuse of discretion.3+4 "uch an e7ception does not obtain in the circu$stances of 

this case.


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)he CIR clai$s that Petron *as not an innocent transferee for value, because

the )CCs assi%ned to respondent *ere void. Petitioner based its alle%ations on the

 post-audit report of the 2O=, *hich declared that the subGect )CCs *ere obtained

throu%h fraud and, thus, had no $onetar/ value. 3(4 )he CIR adds that the )CCs*ere subGect to a post-audit b/ the Center to co$plete the pa/$ent of the e7cise

ta7 liabilit/ to *hich the/ *ere applied. Petitioner further contends that the

Jiabilit/ Clause of the )CCs $a;es the transferee or assi%nee solidaril/ liable *ith

the ori%inal %rantee for an/ fraudulent act pertinent to their procure$ent and

transfer. )he CIR assails the contrar/ rulin% of the C)A n Banc, *hich confined

the solidar/ liabilit/ onl/ to the ori%inal %rantee of the )CCs. )hus, petitioner 

 believes that the correct interpretation of the Jiabilit/ Clause in the )CCs $a;es

Petron and the transferor co$panies or the ori%inal %rantee solidaril/ liable for an/fraudulent act or violation of the pertinent la*s relatin% to the transfers of the


e are not persuaded b/ the CIR?s position on this $atter.


)he Jiabilit/ Clause of the )CCs reads:

Both the )RAN"=ROR and the )RAN"=R shall be Gointl/

and severall/ liable for an/ fraudulent act or violation of the pertinentla*s, rules and re%ulations relatin% to the transfer of this )A CR2I)



)he scope of this solidar/ liabilit/, as stated in the )CCs, *as clarified b/

this Court in Shell , as follo*s:)he above clause to our $ind clearl/ provides onl/ for the

solidar/ liabilit/ relative to the transfer of the )CCs fro$ the ori%inal

%rantee to a transferee. )here is nothin% in the above clause that provides

for the liabilit/ of the transferee in the event that the validit/ of the )CCissued to the ori%inal %rantee b/ the Center is i$pu%ned or *here the

)CC is declared to have been fraudulentl/ procured b/ the said ori%inal

%rantee. T)u$, t)e $o+'>"r< +'"='+'t<, '% "#<, "pp+'e$ o#+< to t)e $"+e o% 

t)e TCC to t)e tr"#$%eree =< t)e or'*'#"+ *r"#tee. An/ fraud or 

 breach of la* or rule relatin% to the issuance of the )CC b/ the Center to

the transferor or the ori%inal %rantee is the latterQs responsibilit/ and


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liabilit/. )he transferee in %ood faith and for value $a/ not be unGustl/

 preGudiced b/ the fraud co$$itted b/ the clai$ant or transferor in the

 procure$ent or issuance of the )CC fro$ the Center. It is not onl/ unGust

 but *ell-ni%h violative of the constitutional ri%ht not to be deprived of 

oneQs propert/ *ithout due process of la*. )hus, a re-assess$ent of ta7

liabilities previousl/ paid throu%h )CCs b/ a transferee in %ood faith andfor value is utterl/ confiscator/, $ore so *hen surchar%es and interests

are li;e*ise assessed.

A transferee in %ood faith and for value of a )CC *ho has relied

on the CenterQs representation of the %enuineness and validit/ of the )CC

transferred to it $a/ not be le%all/ re9uired to pa/ a%ain the ta7 covered

 b/ the )CC *hich has been belatedl/ declared null and void, that is,

after the )CCs have been full/ utili>ed throu%h settle$ent of internal

revenue ta7 liabilities. Conversel/, *hen the transferee is part/ to the

fraud as *hen it did not obtain the )CC for value or *as a part/ to or has

;no*led%e of its fraudulent issuance, said transferee is liable for the

ta7es and for the fraud co$$itted as provided for b/ la*.3&4 0$phasis



e also find that the post-audit report, on *hich the CIR based its

alle%ations, does not have the effect of a suspensive condition that *ould

deter$ine the validit/ of the )CCs.

 e held in Petron v. CIR 0 Petron1,354 *hich is on all fours *ith the instant

case, that )CCs are valid and effective fro$ their issuance and are not subGect to a

 post-audit as a suspensive condition for their validit/. Our rulin% in Petron finds

%uidance fro$ our earlier rulin% in Shell , *hich cate%oricall/ states that a )CC is

valid and effective upon its issuance and is not subGect to a post-audit. )he

i$plication on the instant case of the said earlier rulin% is that Petron has the ri%ht

to rel/ on the validit/ and effectivit/ of the )CCs that *ere assi%ned to it. In

finall/ deter$inin% their effectivit/ in the settle$ent of respondent?s e7cise ta7

liabilities, the validit/ of those )CCs should not depend on the results of the 2O=?s

 post-audit findin%s. e held thus in Petron:

As correctl/ pointed out b/ Petron, ho*ever, the issue about the

i$$ediate validit/ of )CCs and the use thereof in pa/$ent of ta7 liabilities

and duties are not $atters of first i$pression for this Court. )a;in% into


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consideration the definition and nature of ta7 credits and )CCs, this CourtQs

"econd 2ivision definitivel/ ruled in the aforesaid Pilipinas "hell case that

the post audit is not a suspensive condition for the validit/ of )CCs, thus:

Art. ''6' tells us that the condition is suspensive *hen the

ac9uisition of ri%hts or de$andabilit/ of the obli%ation $ust a*ait theoccurrence of the condition. Ko*ever, Art. ''6' does not appl/ to the

 present case since the parties did NO) a%ree to a suspensive

condition. Rather, specific la*s, rules, and re%ulations %overn the

subGect )CCs, not the %eneral provisions of the Civil Code. A$on%

the applicable la*s that cover the )CCs are O &&8 or the O$nibus

Invest$ents Code, Jetter of Instructions No. '5, O 8, RP-"

Militar/ A%ree$ent, "ec. '(8 0c1 of the )ariff and Custo$s Code,

"ec. '(8 of the NIRC, BIR Revenue Re%ulations 0RRs1, and others.

 No*here in the afore$entioned la*s does the post-audit beco$e

necessar/ for the validit/ or effectivit/ of the )CCs. No*here in theafore$entioned la*s is it provided that a )CC is issued subGect to a

suspensive condition.

777 777 777

. . . 0)1he )CCs are i$$ediatel/ valid and effective

after their issuance. As aptl/ pointed out in the dissent of 

<ustice Jovell Bautista in C)A B No. 8+, this is clear fro$

the Huidelines and instructions found at the bac; of each )CC,

*hich provide:

'. )his )a7 Credit Certificate 0)CC1 shall entitlethe %rantee to appl/ the ta7 credit a%ainst ta7es and duties until

the a$ount is full/ utili>ed, in accordance *ith the pertinent

ta7 and custo$s la*s, rules and re%ulations.

  777 777 777

+. )o ac;no*led%e application of pa/$ent, the

One-"top-"hop )a7 Credit Center shall issue the

correspondin% )a7 2ebit Me$o 0)2M1 to the %rantee.

)he authori>ed Revenue OfficerECusto$s Collector to

*hich pa/$entEutili>ation *as $ade shall acco$plish theApplication of )a7 Credit at the bac; of the certificate and

affi7 his si%nature on the colu$n provided.

)he fore%oin% %uidelines cannot be clearer on the validit/ and

effectivit/ of the )CC to pa/ or settle ta7 liabilities of the %rantee or 

transferee, as the/ do not $a;e the effectivit/ and validit/ of the )CC

dependent on the outco$e of a post-audit. In fact, if *e are to sustain the


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appellate ta7 court, it *ould be absurd to $a;e the effectivit/ of the

 pa/$ent of a )CC dependent on a post-audit since there is no conte$plation

of the situation *herein there is no post-audit. 2oes the pa/$ent $ade

 beco$e effective if no post-audit is conductedS Or does the so-called

suspensive condition still appl/ as no la*, rule, or re%ulation specifies a

 period *hen a post-audit should or could be conducted *ith a prescriptive periodS Clearl/, a ta7 pa/$ent throu%h a )CC cannot be both effective

*hen $ade and dependent on a future event for its effectivit/. Our s/ste$

of la*s and procedures abhors a$bi%uit/.


Moreover, if the )CCs are considered to be subGect to post-audit as a

suspensive condition, the ver/ purpose of the )CC *ould be defeated as

there *ould be no %uarantee that the )CC *ould be honored b/ the

%overn$ent as pa/$ent for ta7es. No investor *ould ta;e the ris; of 

utili>in% )CCs if these *ere subGect to a post-audit that $a/ invalidate

the$, *ithout prescribed %rounds or li$its as to the e7ercise of said post-


)he inescapable conclusion is that the )CCs are not subGect to post-

audit as a suspensive condition, and are thus valid and effective fro$ their 



In addition, Shell  and Petron reco%ni>ed an e7ception that holds the

transfereeEassi%nee liable if proven to have been a part/ to the fraud or to have had

;no*led%e of the fraudulent issuance of the subGect )CCs. As earlier $entioned,

the parties entered into a Goint stipulation of facts statin% that Petron did not

 participate in the procure$ent or issuance of those )CCs. )hus, *e affir$ the C)A

n Banc?s rulin% that respondent *as an innocent transferee for value thereof.


On the issue of estoppel, petitioner contends that the )CCs, *hich the Center 

had continuall/ approved as pa/$ent for respondent?s e7cise ta7 liabilities, *ere

subse9uentl/ found to be void. )hus, the CIR insists that the %overn$ent is not

estopped fro$ collectin% fro$ Petron the e7cise ta7 liabilities that had accrued tothe latter as a result of the voidance of these )CCs. Petitioner ar%ues that the "tate

should not be preGudiced b/ the ne%lect or o$ission of %overn$ent e$plo/ees

entrusted *ith the collection of ta7es.34 

e are not persuaded b/ the CIR?s ar%u$ent.


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e reco%ni>e the *ell-entrenched principle that estoppel does not appl/ to

the %overn$ent, especiall/ on $atters of ta7ation. )a7es are the nation?s lifeblood

throu%h *hich %overn$ent a%encies continue to operate and *ith *hich the "tate

dischar%es its functions for the *elfare of its constituents. 384 As an e7ception,ho*ever, this %eneral rule cannot be applied if it *ould *or; inGustice a%ainst an

innocent part/.34


Petron, in this case, *as not proven to have had an/ participation in or 

;no*led%e of the CIR?s alle%ation of the fraudulent transfer and utili>ation of the

subGect )CCs. Respondent?s status as a transferee in %ood faith and for value of 

these )CCs has been established and even stipulated upon b/ petitioner.364

 Respondent *as thereb/ provided a$ple protection fro$ the adverse findin%ssubse9uentl/ $ade b/ the Center.34 Hiven the circu$stances, the CIR?s invocation

of the non-applicabilit/ of estoppel in this case is $isplaced.


On the final issue it raised, the CIR contends that a &F surchar%e and a

&(F interest per annu$ $ust be i$posed upon Petron for respondent?s e7cise ta7

liabilities as $andated under "ections &+6 and &+ of the National Internal

Revenue Code 0NIRC1.38(4 Petitioner considers the ta7 returns filed b/ respondent

for the /ears ' to '6 as fraudulent on the basis of the post-audit findin% that

the )CCs *ere void. It ar%ues that the prescriptive period *ithin *hich to la*full/assess Petron for its ta7 liabilities has not prescribed under "ection &&& 0a1 38'4 of the

)a7 Code. )he CIR e7plains that respondent?s assess$ent on 5( <anuar/ &((& of 

respondent?s deficienc/ e7cise ta7 for the /ears ' to '6 *as *ell *ithin the

ten-/ear prescription period.38&4 

In the li%ht of the $ain rulin% in this case, *e affir$ the C)A n Banc

2ecision findin% Petron to be an innocent transferee for value of the subGect )CCs.

Conse9uentl/, the )a7 Returns it filed for the /ears ' to '6 are notconsidered fraudulent. Kence, the CIR had no le%al basis to assess the e7cise ta7es

or an/ penalt/ surchar%e or interest thereon, as respondent had alread/ paid the

appropriate e7cise ta7es usin% the subGect )CCs.


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23EREFORE, the CIR?s Petition is DENIED for lac; of $erit. )he C)A

n Banc 2ecision dated (5 2ece$ber &((6 in C)A B No. 5'' is

hereb/ AFFIRMED in toto. No pronounce$ent as to costs.