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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-17725 February 28, 1962

REPUL!C OF T"E P"!L!PP!NES,plaintiff-appellee,

vs.M#MUL#O LUMER COMP#N$, ET #L.,defendants-

appellants.

Office of the Solicitor General for plaintiff-appellee.Arthur Tordesillas for defendants-appellants.

#RRER#,J.:

From the decision of the Court of First nstance of Manila !in

Civil Case No. "#$%%& orderin' it to pa( to plaintiff Republic

of the Philippines the sum of P#,)%*."+ ith interestthereon from the date of the filin' of the complaint until full(

paid, plus costs, defendant Mambulao /umber Compan(

interposed the present appeal.$

0he facts of the case are briefl( stated in the decision of the

trial court, to it1 .

0he facts of this case are not contested and ma( be

briefl( summari2ed as follos1 !a& under the first

cause of action, for forest char'es coverin' the period

from 3eptember $%, $45* to Ma( *#, $45",defendants admitted that the( have a liabilit( of

P5)+."+, hich liabilit( is covered b( a bond

e6ecuted b( defendant 7eneral nsurance 8 3uret(Corporation for Mambulao /umber Compan(, 9ointl(and severall( in character, on :ul( *4, $45", in favor

of herein plaintiff; !b& under the second cause of

action, both defendants admitted a 9oint and several

liabilit( in favor of plaintiff in the sum of P*4.+%,also covered b( a bond dated November *+, $45";

and !c& under the third cause of action, both

defendants admitted a 9oint and several liabilit( in

favor of plaintiff for P",4*)."%, also covered b( abond dated :ul( *%, $45#. 0hese three liabilities

a''re'ate to P#,)%*."+. f the liabilit( of defendants

in favor of plaintiff in the amount alread( mentioned

is admitted, then hat is the defense interposed b(

the defendants< 0he defense presented b( thedefendants is =uite unusual in more a(s than one. t

appears from E6h. " that from :ul( "$, $4#) to

>ecember *4, $45, defendant Mambulao /umberCompan( paid to the Republic of the Philippines

P),*%%.5* for ?reforestation char'es? and for the

period commencin' from April "%, $4#+ to :une *#,

$4#), said defendant paid P4*+.%) to the Republic ofthe Philippines for ?reforestation char'es?. 0hese

reforestation ere paid to the plaintiff in pursuance of

3ection $ of Republic Act $$5 hich provides that

there shall be collected, in addition to the re'ular

forest char'es provided under 3ection *# of

Commonealth Act # @non as the National

nternal Revenue Code, the amount of P%.5% on eachcubic meter of timber... cut out and removed from

an( public forest for commercial purposes. 0he

amount collected shall be e6pended b( the director of

forestr(, ith the approval of the secretar( ofa'riculture and commerce, for reforestation and

afforestation of atersheds, denuded areas ... and

other public forest lands, hich upon investi'ation,

are found needin' reforestation or afforestation ....0he total amount of the reforestation char'es paid b(

Mambulao /umber Compan( is P4,$*+.5%, and it is

the contention of the defendant Mambulao /umber

Compan( that since the Republic of the Philippineshas not made use of those reforestation char'es

collected from it for reforestin' the denuded area of

the land covered b( its license, the Republic of the

Philippines should refund said amount, or, if it cannotbe refunded, at least it should be compensated ith

hat Mambulao /umber Compan( oed the

Republic of the Philippines for reforestation char'es.

n line ith this thou'ht, defendant Mambulao

/umber Compan( rote the director of forestr(, onFebruar( *$, $45+ letter E6h. $, in para'raph # of

hich said defendant re=uested that our account

ith (our bureau be credited ith all the reforestationchar'es that (ou have imposed on us from :ul( $,

$4#+ to :une $#, $45, amountin' to around

P*,4)).* .... 0his letter of defendant Mambulao

/umber Compan( as ansered b( the director offorestr( on March $*, $45+, mar@ed E6h. *, in hich

the director of forestr( =uoted an opinion of the

secretar( of 9ustice, to the effect that he has no

discretion to e6tend the time for pa(in' thereforestation char'es and also e6plained h( not all

denuded areas are bein' reforested.

0he onl( issue to be resolved in this appeal is hether the sum

of P4,$*+.5% paid b( defendant-appellant compan( toplaintiff-appellee as reforestation char'es from $4#+ to $45

ma( be set off or applied to the pa(ment of the sum of

P#,)%*."+ as forest char'es due and oin' from appellant to

appellee. t is appellant?s contention that said sum ofP4,$*+.5%, not havin' been used in the reforestation of the

area covered b( its license, the same is refundable to it or ma(

be applied in compensation of said sum of P#,)%*."+ due from

it as forest char'es.1wph1.t

e find appellant?s claim devoid of an( merit. 3ection $ ofRepublic Act No. $$5, provides1

3EC0N $. 0here shall be collected, in addition to

the re'ular forest char'es provided for under 3ection

to hundred and si6t(-four of Commonealth ActNumbered Four Dundred 3i6t(-si6, @non as the

National nternal Revenue Code, the amount of fift(

centavos on each cubic meter of timber for the first

and second 'roups and fort( centavos for the thirdand fourth 'roups cut out and removed from an(

public forest for commercial purposes. 0he amount

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collected shall be e6pended b( the >irector of

Forestr(, ith the approval of the 3ecretar( of

A'riculture and Natural Resources !commerce&, forreforestation and afforestation of atersheds,

denuded areas and co'on and open lands ithin

forest reserves, communal forest, national par@s,

timber lands, sand dunes, and other public forestlands, hich upon investi'ation, are found needin'

reforestation or afforestation, or needin' to be under

forest cover for the 'roin' of economic trees for

timber, tannin', oils, 'ums, and other minor forestproducts or medicinal plants, or for atersheds

protection, or for prevention of erosion and floods

and preparation of necessar( plans and estimate of

costs and for reconnaisance surve( of public forestlands and for such other e6penses as ma( be deemed

necessar( for the proper carr(in' out of the purposes

of this Act.

All revenues collected b( virtue of, and pursuant to,the provisions of the precedin' para'raph and from

the sale of bar@s, medical plants and other products

derived from plantations as herein provided shall

constitute a fund to be @non as Reforestation Fund,to be e6pended e6clusivel( in carr(in' out the

purposes provided for under this Act. All provincial

or cit( treasurers and their deputies shall act as a'ents

of the >irector of Forestr( for the collection of therevenues or incomes derived from the provisions of

this Act. !Emphasis supplied.&

nder this provision, it seems =uite clear that the amount

collected as reforestation char'es from a timber licenses or

concessionaire shall constitute a fund to be @non as theReforestation Fund, and that the same shall be e6pended b(

the >irector of Forestr(, ith the approval of the 3ecretar( of

A'riculture and Natural Resources for the reforestation orafforestation, amon' others, of denuded areas hich, uponinvesti'ation, are found to be needin' reforestation or

afforestation. Note that there is nothin' in the la hich

re=uires that the amount collected as reforestation char'es

should be used e6clusivel( for the reforestation of the areacovered b( the license of a licensee or concessionaire, and that

if not so used, the same should be refunded to him. bserve

too, that the licensee?s area ma( or ma( not be reforested at all,

dependin' on hether the investi'ation thereof b( the >irectorof Forestr( shos that said area needs reforestation. 0he

conclusion seems to be that the amount paid b( a licensee as

reforestation char'es is in the nature of a ta6 hich forms a

part of the Reforestation Fund, pa(able b( him irrespective ofhether the area covered b( his license is reforested or not.

3aid fund, as the la e6pressl( provides, shall be e6pended in

carr(in' out the purposes provided for thereunder, namel(, the

reforestation or afforestation, amon' others, of denuded areasneedin' reforestation or afforestation.

Appellant maintains that the principle of a compensation in

Article $*+) of the ne Civil Code*is applicable, such that

the sum of P4,$*+.5% paid b( it as reforestation char'es ma(compensate its indebtedness to appellee in the sum of

P#,)%*."+ as forest char'es. But in the vie e ta@e of this

case, appellant and appellee are not mutuall( creditors and

debtors of each other. Conse=uentl(, the la on compensation

is inapplicable. n this point, the trial court correctl(observed1 .

nder Article $*+), NCC, compensation should ta@e

place hen to persons in their on ri'ht are

creditors and debtors of each other. ith respect to

the forest char'es hich the defendant Mambulao

/umber Compan( has paid to the 'overnment, the(are in the coffers of the 'overnment as ta6es

collected, and the 'overnment does not oe an(thin'

cr(stal clear that the Republic of the Philippines andthe Mambulao /umber Compan( are not creditors

and debtors of each other, because compensation

refers to mutual debts. ..

And the ei'ht of authorit( is to the effect that internalrevenue ta6es, such as the forest char'es in =uestion, can be

the sub9ect of set-off or compensation.

A claim for ta6es is not such a debt, demand, contract

or 9ud'ment as is alloed to be set-off under thestatutes of set-off, hich are construed uniforml(, inthe li'ht of public polic(, to e6clude the remed( in an

action or an( indebtedness of the state or

municipalit( to one ho is liable to the state or

municipalit( for ta6es. Neither are the( a propersub9ect of recoupment since the( do not arise out of

the contract or transaction sued on. ... !)% C.:.3. +"-

+#. & .

0he 'eneral rule, based on 'rounds of public polic( isell-settled that no set-off is admissible a'ainst

demands for ta6es levied for 'eneral or local

'overnmental purposes. 0he reason on hich the'eneral rule is based, is that ta6es are not in thenature of contracts beteen the part( and part( but

'ro out of a dut( to, and are the positive acts of the

'overnment, to the ma@in' and enforcin' of hich,

the personal consent of individual ta6pa(ers is notre=uired. ... f the ta6pa(er can properl( refuse to pa(

his ta6 hen called upon b( the Collector, because he

has a claim a'ainst the 'overnmental bod( hich is

not included in the ta6 lev(, it is plain that somele'itimate and necessar( e6penditure must be

curtailed. f the ta6pa(er?s claim is disputed, the

collection of the ta6 must aait and abide the result

of a lasuit, and meanhile the financial affairs ofthe 'overnment ill be thron into 'reat confusion.

!#+ Am. :ur. +-++.&

DEREFRE, the 9ud'ment of the trial court appealed from

is hereb( affirmed in all respects, ith costs a'ainst the

defendant-appellant. 3o ordered.

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E6ecution ma( issue onl( here the devisees,

le'atees or heirs have entered into possession of

their respective portions in the estate prior to

settlement and pa(ment of the debts and e6penses

of administration and it is later ascertained that

there are such debts and e6penses to be paid, in

hich case the court havin' 9urisdiction of the

estate ma(, b( order for that purpose, after hearin',

settle the amount of their several liabilities, and

order ho much and in hat manner each personshall contribute, and ma(issue e*ecutionif

circumstances re=uire !Rule )4, section ;see

alsoRule +#, 3ection #; Emphasis supplied.& And

this is not the instant case.

0he le'al basis for such a procedure is the fact that in the

testate or intestate proceedin's to settle the estate of a

deceased person, the properties belon'in' to the estate are

under the 9urisdiction of the court and such 9urisdiction

continues until said properties have been distributed amon'

the heirs entitled thereto. >urin' the pendenc( of the

proceedin's all the estate is in custodia le'is and the proper

procedure is not to allo the sheriff, in case of the court

9ud'ment, to sei2e the properties but to as@ the court for an

order to re=uire the administrator to pa( the amount due

from the estate and re=uired to be paid.

Another 'round for den(in' the petition of the provincial

fiscal is the fact that the court havin' 9urisdiction of the

estate had found that the claim of the estate a'ainst the

7overnment has been reco'ni2ed and an amount of

P**,*%% has alread( been appropriated for the purpose b(

a correspondin' la !Rep. Act No. *+%%&. nder the above

circumstances, both the claim of the 7overnment for

inheritance ta6es and the claim of the intestate for servicesrendered have alread( become overdue and demandable is

ell as full( li=uidated. Compensation, therefore, ta@es

place b( operation of la, in accordance ith the

provisions of Articles $*+4 and $*4% of the Civil Code, and

both debts are e6tin'uished to the concurrent amount, thus1

AR0. $*%%. hen all the re=uisites mentioned in

article $*+4 are present, compensation ta@es effect

b( operation of la, and e6tin'uished both debts to

the concurrent amount, eventhou'h the creditors

and debtors are not aare of the compensation.

t is clear, therefore, that the petitioner has no clear ri'ht to

e6ecute the 9ud'ment for ta6es a'ainst the estate of the

deceased alter 3cott Price. Furthermore, the petition

for certiorariand #anda#usis not the proper remed( for

the petitioner. Appeal is the remed(.

0he petition is, therefore, dismissed, ithout costs.

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Republic of the Philippines

SUPREME COURT

ManilaEN BANC

G.R. No. L-22(69 O3ober 15, 1966

!N T"E M#TTER OF T"E TEST#TE EST#TE OF P#TR!C!O

PONFERR#)#,deceased.

&O#:U!N COR)ERO,administrator-appellee,vs.

&OSE GON)#, ' * 3a4a3y a* Re4re*e'a0e o e Co++**o'er o

!'er'a/ Re0e'ue,claimant-appellant.

Arte#io G. +a,orar for ad#inistrator and appellee.

Office of the Solicitor General for clai#ant and appellant.S#NC"E,J.:

n 3eptember $), $45", a demand b( letter as made on Patricio Ponferrada

b( the Bureau of nternal Revenue$for the pa(ment of P",)%5.)), coverin'

forest char'es for the period from November *, $4# to :anuar( *4,

$4#4.*Ponferrada made a partial pa(ment of P**."+,"leavin' a balance ofP",5#".5$.

Ponferrada died on November *5, $45+. n the 0estate Estate

proceedin's,#:oa=uin Cordero as named Administrator.

n :ul( *4, $454, the BR, thru respondent :ose 7onda, filed in the

proceedin's 9ust mentioned a claim for the said sum of P",5#".5$. 0heAdministrator opposed. 7round1 Prescription.5

pon a stipulation of facts, the probate court, on Au'ust *), $4", declared

that said claim of P",5#".5$ had prescribed.

BR no appeals direct to this Court.+

$. ur 0a6 Code)provides for to main periods of prescription. 0he firstrefers to assessment,4the second to the remedies of collection.$%Not

concerned ith the first, e are ith the second.0hat an assessment has here been, made, e do not doubt. B( the ver( fact

that, on 3eptember $), $45", a formal demand as made b( the 'overnment

upon the deceased Patricio Ponferrada for the pa(ment of forest char'es ina definite amount J P",)%5.)) J assessment is deemed to have been made.$$

3eptember $), $45" then is a safestartin' point for the statutor( limitation to

commence collection suit. Dere, the court claim as filed on :ul( *4, $454.

From 3eptember $), $45" to :ul( *4, $454, a period of 5 (ears, $% months and

$$ da(s has passed. 0he five-(ear prescriptive period had thus elapsed.3ection ""* !c& of the 0a6 Code reads1

!c& here the assessment of an( internal-revenue ta6 has been

made ithin the period of limitation above prescribed such

ta6 #ay ,e collectedb( distraint or lev( or ,y a proceedin' in

court, but onl( if be'un !$&within fi%e years after the assess#ent ofthe ta*, or !*&prior to the e*piration of any period for collection

a'reed upon in writin'b( the Commissioner of nternal Revenue

and the ta6pa(er before the e6piration of such five-(ear. 0heperiod so a'reed upon ma( be e6tended b( subse=uent

a'reements in writin' made before the e6piration of the periodpreviousl( a'reed upon.$*

e note the narrol(-confined restriction of time ithin hich a proceedin'

in court ma( be brou'ht1 ,ut only if ,e'un !$& ithin five (ears after the

assessment of the ta6. mplicit in the ords but onl( is that, unless otherise

authori2ed b( statute, the 5-(ear period is absolute.0he Code itself reco'ni2es but one e6ception1 f suit is started prior to the

e6piration of an( period for collectiona'reed upon in writin'b( the

Commissioner of nternal Revenue and the ta6pa(er before the e6piration of

such five-(ear period J hich ma( be e6tended b( subse=uent ritten

a'reements made before the e6piration of the period previousl( a'reedupon. n $ollector of )nternal +e%enue %s. ineda, etc., /-$#5**, Ma( "$,

$4$, this Court$"said in terms e=uall( pertinent here, that1 the onl(

a'reement that could have suspended the runnin' of the prescriptive period

for the collection of the ta6 in =uestion is, . . . a written a'reement beteen

3olano !the ta6pa(er& and the Collector, entered into before the e6piration ofthe five-(ear prescriptive period, e6tendin' the period of limitation prescribed

b( la !3ec. ""* KcL, N..R.C.&. No such ritten a'reement e6ists here. 0he

ori'inal five-(ear limit 'overns.

*. Appellant?s brief dras our attention to 9urisprudence here a ta6pa(er ma(

not avail of the limitations statute. $#0hese cases are inapposite. nArcache,dela( in ta6 collection as e6cused because of his Kta6pa(er?sL on repeated

re=uests for re-investi'ation and similarl( repeated re=uests of e6tension of

time to pa(. n 3ison, the ta6pa(er?s petition for reconsideration or

reinvesti'ation had stopped the runnin' of the five-(ear limitation period. n

Capitol 3ubdivision, the pendenc( of a ta6pa(er?s petition for clarificationinterrupted said period. None of these situations obtains here.

0he 'overnment also ur'es that partial pa(ment is ac@noled'ment of the

ta6 obli'ation, hence, a aiver of the defense of prescription. But partial

pa(ment ould not prevent the 'overnment from suin' the ta6pa(er. Because,b( such act of pa(ment, the 'overnment is not thereb( persuaded to postpone

collection to ma@e him feel that the demand as not unreasonable or that no

harrassment or in9ustice is meant. hich, as stated in $ollector %s. Suyoc

$onsolidated inin' $o./ et al., /-$$5*+, November *5, $45), is theunderl(in' reason behind the rule that prescriptive period is arrested b( the

ta6pa(er?s re=uest for ree6amination or reinvesti'ation J even if he has not

previousl( aived it KprescriptionL in ritin'. And, partial pa(ment is no

aiver in ritin'. Particularl( is this true here here, out of the claim of

P",)%5.)), but P**.*+ ere paid; and in reference to the other claim ofP,**%.5,$5appellee made a substantial pa(ment of P,%%%.%%

and ac0nowled'ed liabilit( of P**%.5.

". 0he 'overnment leans heavil( upon the Barretto case$to stren'then its

claim that the action had not (et prescribed. Because, this Court there said1

. . . Moreover, as alread( stated in the decision, forest char'es andsurchar'es arepay#ents for ti#,er ta0en fro# pu,lic forests, and

the( are considered as internal revenue ta6es onl( in the sense that

the( are to be collected b( the Collector of nternal Revenue and

the re'ulations for their collection are contained in the National

nternal Revenue Code. Forest products are obtained underlicenses issued b( the 7overnment and forest char'es are in a

sense contractual in ori'in.o prescripti%e period ha%in' ,een

prescri,ed ,y law for this case, 3ec. #" of the Code of Civil

Procedure should appl( . . . . $+

0his opinion as planted on the vies of the 0a6 Commission !$4"4&, asfollos1

Forest char'es, hich are not propert( ta6es but rather the price

paid for e6ploitin' national resources, need to be revised$)to ma@e

them more in harmon( ith present-da( conditions in the industr(

and ith public policies.Forest char'es are to be distin'uished from ta6es. 0he( are, strictl(

spea@in', the price hich the 7overnment char'es for the privile'e'ranted to concessionaires to e6ploit the public domain, rather than

a ta6 imposed to support the 'eneral services of the

'overnment . . . .$4

Compellin' reasons there are hich constrain us to revise the vies e6pressed

in the!arretto case.

B( la, forest char'es have alwaysbeen cate'ori2ed as internal revenue ta6es

for J all purposes. ur statute boo@s sa( so.

e start ith the 0a6 Code. Forest char'es appear belo the headin' 00/EH J M3CE//ANE3 0AE3, under Chapter H, alon' ith such

others as ta6 on ban@s !Chapter &, ta6es on receipts of insurance companies

!Chapter &, franchise ta6 !Chapter &, and amusement ta6es !Chapter H&.

And 3ection $) of the same Code, includes char'es on forest products in the

list of those that are deemed to be national internal revenue ta6es, thus13EC. $). Sources of re%enue.J0he folloin' ta6es, fees and

char'es are deemed to be national internal revenue ta6es1

!a& ncome ta6;!b& Estate, inheritance and 'ift ta6es;

!c& 3pecific ta6es on certain articles;!d& Privile'e ta6es on business or occupation;

!e& >ocumentar( stamp ta6es;

!f& Minin' ta6es;

!'& Miscellaneous ta6es, fees and char'es, namel(, ta6es on ban@s

and insurance companies, franchise ta6es, ta6es onamusements, char'es on forest products, fees for sealin' ei'hts

and measures, firearms license fees, tobacco inspection fees, and

ater rentals. !As amended b( Rep. Act No. $#+, approved :une

$5, $45.&*%

ith the e6ception of radio re'istration fees, hich ere eliminated, thefore'oin' is a reproduction in toto of the ori'inal 3ection $) of the 0a6 Code

approved on :une $5, $4"4.

3ection $#"), Administrative Code of $4$+, the la hich 3ection $) of the

0a6 Code of $4"4 replaced, states in part1

3EC. $#"). Sources of ta*es.J0he folloin' ta6es, fees, andchar'es in the nature of ta6 are deemed to be internal revenue

ta6es1

666 666 666

!f& Char'es for forest products.

666 666 6663ection $#") of the Administrative Code, in turn, proceeded from 3ection *$,

Act *""4 of the Philippine /e'islature @non as the nternal Revenue /a of

$4$#, hich provides1

AR0C/E . J 3ources of internal revenue.

3EC. *$. Sources of ta*es.J0he folloin' ta6es, fees, and char'esin the nature of ta6 are deemed to be internal-revenue ta6es1

666 666 666

!f& Char'es for forest products;

666 666 666

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Predecessor of this provision is 3ection *5 of Act $$)4, @non as the nternal

Revenue /a of $4%#, hich reads1

3EC. *5. 0he folloin' sources of revenue shall be included in theinternal revenue for the Philippine slands, and the ta6es imposed

shall be collected b( the Collector of nternal Revenue . . . and the

revenue obtained therefrom shall be devoted to the support of the

several provinces and of the nsular and municipal 'overnments in

the manner in this Act provided1666 666 666

$. 0a6 on forestr( products.

666 666 666

#. No, the la on prescription in the 0a6 Code does not ma@e an( distinction

at all as to the sources of ta6es to hich it is made applicable. ts broad seepis articulated in the terms internal-revenue ta6es*$and an( internal-revenue

ta6.**3ince char'es on forest products are internal-revenue ta6es, the(

are ithin the covera'e of the la on prescription of actions to collect

internal-revenue ta6es or an( internal-revenue ta6. Dad the 0a6 Code

intended that forest char'es be outside the operational rule on prescription,that statute should have so provided. e cannot insert therein an( such

e6ception no. Clearl(, that is intrusion into the le'islative domain in

violation of a definite proscription in the Constitution.

5. Authorities are not antin' to brin' home the point that forest char'es are

in realit( internal revenue ta6es, as such sub9ect to the other provisions ofinternal revenue la. As earl( as $4$),*"this Court held that forest char'es are

in the nature of an internal revenue ta6 on propert( Kforest products removed

from the public forestL and a distress arrant ma( be issued thereon.

ne month before the!arretto decision came the /acson case.*#0here, this

Court made mention of the observations of the 0a6 Commission Kheretoforete6tuall( copiedL, hich recommended the enactment of the $4"4 nternal

Revenue Code. Doever, this Courtsustained the %iews of the dissentin'9ud'e of the Court of 0a6 Appeals, thus1

. . . 0here appears to be no le'al basis for not considerin' forest

char'es as ta6es hen respondent considers them as ta6es underRepublic Act No. "%#, as amended, thus enablin' holders of

bac@pa( certificates to pa( forest char'es out of their bac@pa(

!B..R. rulin', November **, $455, E6. B&, and as internal revenue

ta6 under Chapter , 0itle , of the Revenue Code, so as to

authori2e collection of said char'es b( distraint and lev( !p. Att(.7en., ct. *+, $4**&. 0he ar'ument that forest char'es are not

ta6es because the( are theprice paid for the saleb( the

7overnment of forest products o%erloo0s the fact that some forest

char'es are impose on forest products cut and removed from

unre'istered private lands. !3ee 3ec. *, Revenue Code&. 0he7overnment cannot sell forest products hich it does not on.

From this it ma( be inferred that forest char'es are not in

reality the price paid for the sale b( the 7overnment of forestproducts; they are essentially ta*es for thepri%ile'e of cuttin' and

removin' forest products . . .They stand on the sa#e footin' as the#inin' ta*es imposed under 0itle H of the Revenue Code . . . .*5

Even the Chairman of the $4"4 0a6 Commission later on !November *%,

$4"4&, in a decision he rendered as 3ecretar( of Finance, in the case of the

>ulaI'an Minin' nterests Co., nc., coverin'forest char'es, adverted to the

rulin' in the Don'@on' and 3han'hai Ban@in' Corporation case,supra. Deapplied 3ection $5)) of the Administrative Code and declared that ever(

internal revenue ta6 J hich includesforest char'es 2is a lien on the

propert( for hich that ta6 is imposed.*

5$ Am. :ur. p. $%+* is authorit( for the statement that1

Ta*es hich, althou'h imposed under statutes containin' man(variations as to their precise phraseolo'(, are directed 'enerall(

a'ainst theproduction, orse%erance from the soil, of such natural

resources asti#,er, oil, natural 'as, ores, or the li@e, and are

normall( measured accordin' to the =uantit( or value of the

articles produced or severed, are usuall(, althou'h not invariabl(,re'arded as e6cise rather than propert( ta6es.*+

0he vie that forest char'es are much li@e ad %alore# ta6es in minin', finds

9urisprudential support. n $e,u ortland $e#ent $o#pany %s. $o##issioner

of )nternal +e%enue, /-$)#4, Februar( *+, $45, e said that thisad

%alore# ta6 !on minerals used for cement& is a ta6 not on the minerals, ,utupon the pri%ile'e of se%erin' or e*tractin' the sa#e fro# the earth, the

'overnment?s ri'ht to e6act the said impost sprin'in' from the+e'alian

theory of State ownership of its natural resources.*)3o sa(in', this Court

there applied 3ection "%,*4under the Administrative Provisions Kof the 0a6

CodeL hich include prescription of actions for ta6 collection.n another case,"%upon the premise that forest char'es are in the coffers of

the 'overnment as ta6es collected, the pronouncement as that internal

revenue ta6es cannot be the sub9ect of compensation1 Reason1 'overnment and

ta6pa(er are not mutuall( creditors and debtors of each other under Article$*+) of the Civil Code and a claim for ta6es is not such a de,t,

demand, contract or 9ud'ment as is alloed to be set-off. 0his decision

inferentiall( ta@es forest char'es out of the!arretto rule, because the( are

ta6es Jnot in a sense contractual in ori'in.0he thou'hts e6pressed in the authorities 9ust cited funnel don to one idea1

forest char'es are internal revenue ta6es, hether one labels them ta6es on

propert(, or e6cise ta6es, i.e., ta6es upon the privile'e of cuttin' and cartin'

aa( timber and forest products. And the( fall under the philosoph( of

ta6ation J to support the 'eneral services of 'overnment. 0he( 'o into the'eneral fund."$

. 0he provisions on prescription fall under 0itle , entitled 7eneral

Administrative Provisions. 0his title applies to all ta6es, fees,

and char'es collected under the Code. n this title?s first provision !3ection

"%5&, in9unction is unavailin' to a forest concessionaire to restrain thecollection of an( national internal-revenue ta6, fee, or char'eimposed b( this

Code. B( 3ection "%, the concessionaire, ma( onl( sue for ta6 refunds

ithin to (ears from the date of pa(ment."*3ection "$ defines the civil

remedies for the collection of internal revenue ta6es, fees, orchar'es to be

distraint and lev(, and 9udicial action.""

n 3ection ""+, the forest concessionaire"#J li@e all other ta6pa(ers J is

obli'ated to preserve his boo@s of account for a period of five (ears from the

date of the last entr( in each boo@. h(< Because the 'overnment is 'iven a

li@e period of five (ears ithin hich to ma@e assessment. f forest char'es

ere in a sense contractual in ori'in, then the concessionaire should bere=uired to @eep his accountin' records not for five (ears onl(, but for ten

(ears, to 9ibe ith the $%-(ear prescriptive period in the Civil Code."5

n sum, here is the situation of a man called upon to pa( forest char'es.

Applicable to him are the 0a6 Code provisions on distraint and lev(; the to-

(ear period for refund; the prohibition a'ainst in9unction; the dut( to @eep hisboo@s for five (ears. But, if e ere to adhere to the!arretto decision, then

the la on prescription in the Code of Civil Procedure Kno Art. $$##, CivilCodeL"must have to be scissored and pasted over 3ections ""$ and ""* of the

0a6 Code. niformit( in the application of the 0a6 Code provisions ould

su''est that e veer aa( from this vie.+. ur stand is even fortified b( the facts set forth in the!arretto case.

Assessment as not there based on a return. 0he 9ud'ment on prescription

therein as 'rounded on fraud. Because, from an e6amination of the boo@s, it

as found that man( purchases of lo's ere ithout invoices and sales under

declared. 0he deficiencies amountin' to fraud ere discovered in $45".And appl(in' the provisions of the Code of Civil Procedure, it as there

declared that the period for prescription should be rec@oned from $45". But

the situation presented in said case is precisel( covered b( 3ection ""*!a& of

the 0a6 Code, hich reads1

!a& n the case of a false orfraudulent "+return ith intent to evadeta6 or of afailure to file a return, the ta6 ma( be assessed, or

aproceedin' in court for the collection of such ta6 ma( be be'un

ithout assessment, at an( time within ten years after thediscover( of the falsit(, fraud, or omission.")

ur conclusion, therefore, is that the overhelmin' implication from the te6tof the 0a6 Code leaves no other reasonable construction e6cept that1 Forest

char'es come ithin the compass of the prescriptive periods set forth therein.

0he net result still is1 From 3eptember $), $45" !hen demand for pa(ment

as made& to :ul( *4, $45" !hen court claim as filed&, more than five !5&

(ears have elapsed. B( the terms of Article ""*!c& of the 0a6 Code,supra,action to collect has prescribed.

pon the premises, the 9ud'ment appealed from is affirmed. No costs. 3o

ordered.

8/12/2019 full case 2

7/19

Republic of the PhilippinesSUPREME COURT

ManilaEN BANC

G.R. No. L-25299 &u/y 29, 1969

COMM!SS!ONER OF !NTERN#L RE;ENUE,petitioner,vs.!TOGON-SU$OC M!NES, !NC., a' T"E COURT OF T# >H3N

G.R. No. L-676%9 &u'e 28, 1988

ENGR#C!O FR#NC!#,petitioner,

vs.

!NTERME)!#TE #PPELL#TE COURT a' "O

FERN#N)E, respondents.

GUT!ERRE, &R.,J.:

0he petitioner invo@es le'al and e=uitable 'rounds to reverse the =uestioned

decision of the ntermediate Appellate Court, to set aside the auction sale ofhis propert( hich too@ place on >ecember 5, $4++, and to allo him to

recover a *%" s=uare meter lot hich as, sold at public auction to Do

Fernande2 and ordered titled in the latter?s name.

0he antecedent facts are as follos1

En'racio Francia is the re'istered oner of a residential lot and a to-stor(house built upon it situated at Barrio 3an sidro, no >istrict of 3ta. Clara,

Pasa( Cit(, Metro Manila. 0he lot, ith an area of about "*) s=uare meters, is

described and covered b( 0ransfer Certificate of 0itle No. #+"4 !"++45& of the

Re'istr( of >eeds of Pasa( Cit(.

n ctober $5, $4++, a $*5 s=uare meter portion of Francia?s propert( ase6propriated b( the Republic of the Philippines for the sum of P#,$$.%%

representin' the estimated amount e=uivalent to the assessed value of the

aforesaid portion.

3ince $4" up to $4++ inclusive, Francia failed to pa( his real estate ta6es.

0hus, on >ecember 5, $4++, his propert( as sold at public auction b( theCit( 0reasurer of Pasa( Cit( pursuant to 3ection +" of Presidential >ecree No.

## @non as the Real Propert( 0a6 Code in order to satisf( a ta6 delin=uenc(of P*,#%%.%%. Do Fernande2 as the hi'hest bidder for the propert(.

Francia as not present durin' the auction sale since he as in li'an Cit( at

that time helpin' his uncle ship bananas.n March ", $4+4, Francia received a notice of hearin' of /RC Case No.

$54"-P n re1 Petition for Entr( of Ne Certificate of 0itle filed b( Do

Fernande2, see@in' the cancellation of 0C0 No. #+"4 !"++45& and the

issuance in his name of a ne certificate of title. pon verification throu'h his

la(er, Francia discovered that a Final Bill of 3ale had been issued in favor ofDo Fernande2 b( the Cit( 0reasurer on >ecember $$, $4+). 0he auction sale

and the final bill of sale ere both annotated at the bac@ of 0C0 No. #+"4

!"++45& b( the Re'ister of >eeds.

n March *%, $4+4, Francia filed a complaint to annul the auction sale. De

later amended his complaint on :anuar( *#, $4)%.n April *", $4)$, the loer court rendered a decision, the dispositive portion

of hich reads1

DEREFRE, in vie of the fore'oin', 9ud'ment ishereb( rendered dismissin' the amended complaint and

orderin'1!a& 0he Re'ister of >eeds of Pasa( Cit( to issue a ne 0ransfer Certificate of

0itle in favor of the defendant Do Fernande2 over the parcel of land includin'

the improvements thereon, sub9ect to hatever encumbrances appearin' at the

bac@ of 0C0 No. #+"4 !"++45& and orderin' the same 0C0 No. #+"4 !"++45&

cancelled.!b& 0he plaintiff to pa( defendant

Do Fernande2 the sum of

P$,%%%.%% as attorne(?s fees. !p.

"%, Record on Appeal&

0he ntermediate Appellate Court affirmed the decision of the loer courtintoto.

Dence, this petition for revie.

Francia prefaced his ar'uments ith the folloin' assi'nments of 'rave errors

of la1

RE3PN>EN0 N0ERME>A0E APPE//A0E CR0 CMM00E> A

7RAHE ERRR F /A N N0 D/>N7 PE00NER?3

B/7A0N 0 PA P*,#%%.%% FR 3PP3E> 0A >E/NOENC

A3 3E0-FF B 0DE AMN0 F P#,$$.%% DCD 0DE

7HERNMEN0 3 N>EB0E> 0 0DE FRMER.

RE3PN>EN0 N0ERME>A0E APPE//A0E CR0 CMM00E> A

7RAHE AN> 3ER3 ERRR N N0 D/>N7 0DA0 PE00NER

A3 N0 PRPER/ AN> >/ N0FE> 0DA0 AN AC0N

3A/E F D3 PRPER0 A3 0 0AE P/ACE N >ECEMBER 5,$4++ 0 3A03F AN A//E7E> 0A >E/NOENC F P*,#%%.%%.

RE3PN>EN0 N0ERME>A0E APPE//A0E CR0 FR0DER

CMM00E> A 3ER3 ERRR AN> 7RAHE AB3E F>3CRE0N N N0 D/>N7 0DA0 0DE PRCE F P*,#%%.%% PA>

B RE3PN0>EN0 D FERNAN>EG A3 7R33/ NA>EOA0E

A3 0 3DC NE?3 CN3CENCE AMN0N7 0 FRA> AN> A

>EPRHA0N F PRPER0 0D0 >E PRCE33 F /A,AN> CN3EOEN0/, 0DE AC0N 3A/E MA>E 0DEREF 3

H>. !pp. $%, $+, *%-*$, Rollo&

e 'ave due course to the petition for a more thorou'h in=uir( into the

petitioner?s alle'ations that his propert( as sold at public auction ithout

notice to him and that the price paid for the propert( as shoc@in'l(inade=uate, amountin' to fraud and deprivation ithout due process of la.

A careful revie of the case, hoever, discloses that Mr. Francia brou'ht the

problems raised in his petition upon himself. hile e commiserate ith him

at the loss of his propert(, the la and the facts militate a'ainst the 'rant of his

petition. e are constrained to dismiss it.Francia contends that his ta6 delin=uenc( of P*,#%%.%% has been e6tin'uished

b( le'al compensation. De claims that the 'overnment oed him P#,$$.%%

hen a portion of his land as e6propriated on ctober $5, $4++. Dence, his

ta6 obli'ation had been set-off b( operation of la as of ctober $5, $4++.

0here is no le'al basis for the contention. B( le'al compensation, obli'ationsof persons, ho in their on ri'ht are reciprocall( debtors and creditors of

each other, are e6tin'uished !Art. $*+), Civil Code&. 0he circumstances of the

case do not satisf( the re=uirements provided b( Article $*+4, to it1

!$& that each one of the obli'ors be bound principall(

and that he be at the same time a principal creditor ofthe other;

666 666 666

!"& that the to debts be due.

666 666 666

0his principal contention of the petitioner has no merit. e have consistentl(ruled that there can be no off-settin' of ta6es a'ainst the claims that the

ta6pa(er ma( have a'ainst the 'overnment. A person cannot refuse to pa( ata6 on the 'round that the 'overnment oes him an amount e=ual to or 'reater

than the ta6 bein' collected. 0he collection of a ta6 cannot aait the results of

a lasuit a'ainst the 'overnment.n the case of+epu,lic %. a#,ulao 3u#,er $o. !# 3CRA **&, this Court

ruled that nternal Revenue 0a6es can not be the sub9ect of set-off or

compensation. e stated that1

A claim for ta6es is not such a debt, demand, contract

or 9ud'ment as is alloed to be set-off under thestatutes of set-off, hich are construed uniforml(, in the

li'ht of public polic(, to e6clude the remed( in an

action or an( indebtedness of the state or municipalit(

to one ho is liable to the state or municipalit( for

ta6es. Neither are the( a proper sub9ect of recoupmentsince the( do not arise out of the contract or transaction

sued on. ... !)% C.:.3., +"+#&. 0he 'eneral rule based

on 'rounds of public polic( is ell-settled that no set-off admissible a'ainst demands for ta6es levied for

'eneral or local 'overnmental purposes. 0he reason onhich the 'eneral rule is based, is that ta6es are not in

the nature of contracts beteen the part( and part( but

'ro out of dut( to, and are the positive acts of the

'overnment to the ma@in' and enforcin' of hich, the

personal consent of individual ta6pa(ers is not re=uired...

e stated that a ta6pa(er cannot refuse to pa( his ta6 hen called upon b( the

collector because he has a claim a'ainst the 'overnmental bod( not included

in the ta6 lev(.

0his rule as reiterated in the case of $orders %. Gonda!$) 3CRA ""$& heree stated that1 ... internal revenue ta6es can not be the sub9ect of

compensation1 Reason1 'overnment and ta6pa(er are not mutuall( creditors

and debtors of each other? under Article $*+) of the Civil Code and a claim

for ta6es is not such a debt, demand, contract or 9ud'ment as is alloed to be

set-off.0here are other factors hich compel us to rule a'ainst the petitioner. 0he ta6

as due to the cit( 'overnment hile the e6propriation as effected b( the

national 'overnment. Moreover, the amount of P#,$$.%% paid b( the national

'overnment for the $*5 s=uare meter portion of his lot as deposited ith the

Philippine National Ban@ lon' before the sale at public auction of hisremainin' propert(. Notice of the deposit dated 3eptember *), $4++ as

received b( the petitioner on 3eptember "%, $4++. 0he petitioner admitted in

his testimon( that he @ne about the P#,$$.%% deposited ith the ban@ but he

did not ithdra it. t ould have been an eas( matter to ithdra P*,#%%.%%

from the deposit so that he could pa( the ta6 obli'ation thus abortin' the saleat public auction.

Petitioner had one (ear ithin hich to redeem his propert( althou'h, as ell

be shon later, he claimed that he poc@eted the notice of the auction sale

ithout readin' it.

8/12/2019 full case 2

9/19

Petitioner contends that the auction sale in =uestion as made ithout

compl(in' ith the mandator( provisions of the statute 'overnin' ta6 sale. No

evidence, oral or otherise, as presented that the procedure outlined b( laon sales of propert( for ta6 delin=uenc( as folloed. ... Since defendant Ho

(ernande" has the affir#ati%e of this issue/ the ,urden of proof therefore rests

upon hi# to show that plaintiff was duly and properly notified ... .!Petition for

Revie, Rollo p. $); emphasis supplied&

e a'ree ith the petitioner?s claim that Do Fernande2, the purchaser at theauction sale, has the burden of proof to sho that there as compliance ith

all the prescribed re=uisites for a ta6 sale.

0he case of 4alencia %. &i#ene"!$$ Phil. #4*& laid don the doctrine that1

666 666 666

... K>Lue process of la to be folloed in ta6proceedin's must be established b( proof and

the'eneral rule is that the purchaser of a ta* title is

,ound to ta0e upon hi#self the ,urden of showin' the

re'ularity of all proceedin's leadin' up to the

sale. !emphasis supplied&0here is no presumption of the re'ularit( of an( administrative action hich

results in deprivin' a ta6pa(er of his propert( throu'h a ta6 sale. !Camo v.

Riosa Bo(co, *4 Phil. #"+&; >eno'a v. nsular 7overnment, $4 Phil. *$&.

0his is actuall( an e6ception to the rule that administrative proceedin's are

presumed to be re'ular.But even if the burden of proof lies ith the purchaser to sho that all le'al

prere=uisites have been complied ith, the petitioner can not, hoever, den(

that he did receive the notice for the auction sale. 0he records sustain the

loer court?s findin' that1

K0Lhe plaintiff claimed that it as ille'al and irre'ular.De insisted that he as not properl( notified of the

auction sale. 3urprisin'l(, hoever, he admitted in histestimon( that he received the letter dated November

*$, $4++ !E6hibit & as shon b( his si'nature

!E6hibit -A& thereof. De claimed further that he asnot present on >ecember 5, $4++ the date of the auction

sale because he ent to li'an Cit(. As lon' as there

as substantial compliance ith the re=uirements of the

notice, the validit( of the auction sale can not be

assailed ... .e =uote the folloin' testimon( of the petitioner on cross-e6amination, to

it1

O. M( =uestion to (ou is this letter mar@ed as E6hibit for Do Fernande2

notified (ou that the propert( in =uestion shall be sold at public auction to the

hi'hest bidder on >ecember 5, $4++ pursuant to 3ec. +# of P> ##. ill (outell the Court hether (ou received the ori'inal of this lettereput( Commissioner of nternal Revenue to both

3ampa'uita and Hera-Pere2 Corporation. % 0hat letter 'ave the corporations a last $5-da( period ithin hich topa( the said amount of P$,+".5% in cash or certified chec@. A'ain, no acceptable response seems to have been

made b( the corporations. 3o on :une 4, $44, ei'ht !)& (ears to the da( hen the ne'otiable certificates of

indebtedness ere accepted in pa(ment of ta6es b( the Municipal 0reasurer at Bocaue, Bulacan, the 3olicitor

7eneral brou'ht suit in behalf of the Republic of the Philippines in relation thereto. 5 0he case as doc@eted asCivil Case No. O-$"*+% of the Court of First nstance at Oue2on Cit(, and assi'ned to Branch H thereof, then

presided over b( herein respondent, Don. Hicente 7. Ericta. 6

0he 3olicitor 7eneral?s complaint 7 impleaded onl( 3ampa'uita as defendant. h( hee6cluded the other corporation is not disclosed b( the record. n his complaint he alle'ed that 3ampa'uita?s

essa(ed pa(ment as void since it as not the ori'inal holder of the .. certificates .. but .. onl( a mere assi'neethereof, and tinder the la, onl( ori'inal holders of bac@ pa( certificates .. are alloed to use the same in

pa(ment of their on ta6es, invo@in' this Court?s decision to that effect in de !or8a %. Gella8promul'ated on

:ul( "$, $4".

3ampa'uita?s anser admitted the basic facts, but asserted that the

plaintiffs cause of action had alread( prescribed; that the tender of the

certificates in $4$ had been made in absolute 'ood faith, prior tothe promul'ation of the decision .. !in& de !or8a %s. 4icente Gella et

al. on :ul( "$, $4"; that the certificates havin' dul( matured .. inthe (ear $45), !and& plaintiff .. !bein' then& alread( dut( bound to

redeem them and pa( for their value, 3ampa'uita and the Republic

became mutual creditors and debtors of each other for the amount ofP$%,*).#$ ith the result that their obli'ations ere e6tin'uished

b( le'al compensation. 0hese averments ereinter alia reproduced

and set up also as a counterclaim, ith the additional plea that in theremote possibilit( that ..!it K3ampa'uita $& be still re=uired .. to pa(

plaintiff the amount of P$%,*).#$ for alle'ed unpaid ta6es, the

plaintiff be ordered to pa( the defendant the same amount of Pl%,*).#$ representin' the face value of the ne'otiable certificates of

indebtedness.

n >ecember *4, $4+$, 9ud'ment as rendered b( the 0rial :ud'edismissin' both the complaint and the counterclaim ithout

pronouncement as to costs.9 Dis Donor held that deliver( of the bac@ pa( certificates b(3ampa'uita had not produced the effect of pa(ment in vie of the doctrine in !or8a %. Gella1= that the ri'ht touse bac@pa( certificates of indebtedness in the settlement of ta6es is 'iven onl( to ori'inal holders and not to mere

assi'nees thereof; this notithstandin', 3ampa'uita, as assi'nee of the certificates of indebtedness, had

succeeded to the ori'inal ri'hts of the holders thereof, and as therefore authori2ed to demand pa(ment b( the

Republic of the indebtedness thereb( represented; and hile there as opinion that !le'al& compensation cannotta@e place a'ainst the Republic ith respect to ta6es, fees, duties and similar forced contributions due to it !Civil

Code, Holume H, p. "#4, 0olentino; 7asperi *%#; * Hon 0uhr O,li'aciones, p. $5&, there could be no 'ainsa(in'

the proposition that, under the facts, Sa#pa'uita was entitled to 8ud'#ent upon its counterclai# for the pa(ment

b( the Republic of its indebtedness in virtue of the b ac@ pa( certificates in =uestion, ith the ultimate result ..that the claim and counter-claim of the plaintiff and the defendant, respectivel( ill offset each other.

0he 3olicitor 7eneral presented a motion of reconsideration. hen

this as denied, he appealed to this Court b( certiorari positin'reversible le'al error on the part of respondent :ud'e in holdin' that

!$& the Republic?s claim is offset b( 3ampa'uita?s counterclaim, and

!*& the ne'otiable certificates of indebtedness in =uestion ere lon'overdue and redeemable. 0he petitioner?s postulations are untenable.

$. 0he 0rial Court ruled that the ta6es sou'ht tobe collected b( the Republic from 3ampa'uita

ere still unpaid, its tender of the certificates of

indebtedness in =uestion not constitutin'pa(ment; hence, it ou'ht properl( to be sentenced

to pa( the ta6es. t also ruled that even assumin'

the contrar(, le'al compensation as a mode ofe6tin'uishin' an obli'ation to pa( ta6es as

nonetheless unavailin' a'ainst the 'overnment,

conformabl( ith de !or8a %. Gella.n the other hand, accordin' to the 0rial Court, at least as of date of

9ud'ment, more than $% (ears from :une $), $45), the date hen, as

e6pressl( stated in the certificates of indebtedness, the same ereredeemable, the obli'ation thereb( evidenced as un=uestionabl(

alread( due and pa(able; hence, 3ampa'uita as entitled to a9ud'ment a'ainst the Republic for the pa(ment of the face value of

the certificates, the same havin' alread( been presented and

surrendered ithin the said period of ten (ears !on :une 4, $4$& tothe 0reasurer of the Philippines !thru the Municipal 0reasurer of

Bocaue, Bulacan & 11 0his is correct. n other ords, even if as the 3olicitor 7eneral points out,there is no certainty when the certificates are actually redee#a,le because the la sa( that the( are

redeemable .. ithin ten (ears from the date of issuance 12 there can be no =uestion that after the lapse of ten

!$%& (ears from the declared date o f redeemabilit(, pa(ment of the indebtedness as alread( e6i'ible 0he 0rialCourt as sa(in' in effect that hile 9ud'ment should be rendered in favor of the Republic a'ainst 3ampa'uita

for unpaid ta6es in the amount of P$%,*).#$, 9ud'ment ou'ht at the same time to issue for 3ampa'uita

commandin' pa(ment to it b( the Republic of the same sum, representin' the face value of the certificates of

indebtedness assi'ned to it and for recover( of hich it had specificall( pra(ed in its counterclaim.

*. hat has 9ust been said confutes thepetitioner?s second ar'ument that redemption of

the certificates of indebtedness as not (et

demandable of it because there is no certaint(hen the certificates are actuall( redeemable,

ithin the meanin' of the la. t is true that, as

the 3olicitor 7eneral contends, the la does notsa( that the( are redeemable from its approval on

:une $), $45) but ?ithin ten (ears from the date

of issuance? of the certificates, 1( the ineludible ineluctablfact is that more than ten !$%& (ears have alread( elapsed since their issuance and

demand for pa(ment had been made ithin said $%-(ear period. t is useless to=uibble about the precise time ithin ten (ears hen an obli'ation becomes

demandable, hen that period of ten (ears has alread( e6pired. hateverine6actitude mi'ht inhere in the phrase, ithin ten (ears, as fi6in' the time of

e6ibilit( of the obli'ation in =uestion, there can be no debate about the

proposition that the obli'ation became due and demandable after ten years. t

ould be absurd and unfair to sanction the theor( subsumed in the Republic?spetition that its obli'ation as not demandable ithin ten (ears because of

ine6actitude (et became time-barred upon the lapse of that self-same period.

DEREFRE, the petition is >ENE>, and the 9ud'ment sub9ect

thereof, bein' in accord ith the facts and the la, is AFFRME> intoto. No costs.

3 R>ERE>.

8/12/2019 full case 2

11/19

Republic of the Philippines

SUPREME COURT

ManilaFR30 >H3N

G.R. No*. L-285=2-=( #4r/ 18, 1989

COMM!SS!ONER OF !NTERN#L RE;ENUE,petitioner,

vs.

ESSO ST#N)#R) E#STERN, !NC. a' T"E COURT OF T#efinition of deficienc(. As used in this Chapter in respect of ta6 imposed b(

this 0itle, the term ?deficienc(? means1!$& 0he amount b( hich the ta6 imposed b( this 0itle e6ceeds the amount shonas the ta6 b( the ta6pa(er upon his return; but the amount so shon on the return

shall first be increased b( the amounts previousl( assessed !or collected ithoutassessment& as a deficienc(, and decreased b( the amount previousl( abated

credited, returned, or otherise in respect of such ta6; ..666 666 666!d& nterest on deficienc(. J nterest upon the amount determined as deficienc(

shall be assessed at the same time as the deficienc( and shall be paid upon noticeand demand from the Commissioner of nternal Revenue; and shall be collected as

a part of the ta6, at the rate of si6 per centum per annum from the date prescribedfor the pa(ment of the ta6 !or, if the ta6 is paid in installments, from the date

prescribed for the pa(ment of the first installment& to the date the deficienc( is

assessed;ro%ided, 0hat the amount that ma( be collected as interest on deficienc(shall in no case e6ceed the amount correspondin' to a period of three (ears, the

present provision re'ardin' prescription to the contrar( notithstandin'.

0he fact is that, as respondent Court of 0a6 Appeals has stressed, as earl( as :ul($5, $4%, the 7overnment alread( had in its hands the sum of P**$,%"".%%

representin' e6cess pa(ment. Davin' been paid and received b( mista@e, aspetitioner Commissioner subse=uentl( ac@noled'ed, that sum un=uestionabl(belon'ed to E33, and the 7overnment had the obli'ation to return it to E33

0hat ac@noled'ment of the erroneous pa(ment came some four !#& (earsafterards in noise ne'ates or detracts from its actualit(. 0he obli'ation to returnmone( mista@enl( paid arises from the moment that pa(ment is made, and not from

the time that the pa(ee admits the obli'ation to reimburse. 0he obli'ation of thepa(ee to reimburse an amount paid to him results from the mista@e, not from the

pa(ee?s confession of the mista@e or reco'nition of the obli'ation to reimburse. nother ords, since the amount of P**$,%"".%% belon'in' to E33 as alread( inthe hands of the 7overnment as of :ul(, $4%, althou'h the latter had no ri'ht

hatever to the amount and indeed as bound to return it to E33, it as neitherle'all( nor lo'icall( possible for E33 thereafter to be considered a debtor of the7overnment in that amount of P**$,%"".%%; and hatever other obli'ation E33

mi'ht subse=uentl( incur in favor of the 7overnment ould have to be reduced b(that sum, in respect of hich no interest could be char'ed. 0o interpret the ords of

the statute in such a manner as to subvert these truisms simpl( can not and shouldnot be countenanced. Nothin' is better settled than that courts are not to 'iveords a meanin' hich ould lead to absurd or unreasonable conse=uences. 0hat

is a principle that 'oes bac@ to)n re Allen!* Phil. "%& decided on ctober *4,$4%", here it as held that a literal interpretation is to be re9ected if it ould beun9ust or lead to absurd results. 63tatutes should receive a sensible construction,

such as ill 'ive effect to the le'islative intention and so as to avoid an un9ust orabsurd conclusion. 7

DEREFRE, the petition for revie is >ENE>, and the >ecision of the Courtof 0a6 Appeals dated ctober *), $4+ sub9ect of the petition is AFFRME>,ithout pronouncement as to costs.

8/12/2019 full case 2

12/19

Republic of the Philippines

SUPREME COURT

ManilaEN BANC

G.R. No. 92585 May 8, 1992

C#LTE< P"!L!PP!NES, !NC.,petitioner,

vs.T"E "ONOR#LE COMM!SS!ON ON #U)!T, "ONOR#LE

COMM!SS!ONER #RTOLOME C. FERN#N)E a' "ONOR#LE

COMM!SS!ONER #LERTO P. CRU, respondents.

)#;!)E, &R.,J.:0his is a petition erroneousl( brou'ht under Rule ## of the Rules of

Court 1=uestionin' the authorit( of the Commission on Audit !CA& in

disalloin' petitioner?s claims for reimbursement from the il Price

3tabili2ation Fund !P3F& and see@in' the reversal of said Commission?s

decision den(in' its claims for recover( of financin' char'es from the Fundand reimbursement of underrecover( arisin' from sales to the National Poer

Corporation, Atlas Consolidated Minin' and >evelopment Corporation

!A0/A3& and Marcopper Minin' Corporation !MAR-CPPER&, preventin' it

from e6ercisin' the ri'ht to offset its remittances a'ainst its

reimbursement %is-a-%is the P3F and disalloin' its claims hich are stillpendin' resolution before the ffice of Ener'( Affairs !EA& and the

>epartment of Finance !>F&.

Pursuant to the $4)+ Constitution, 2an( decision, order or rulin' of the

Constitutional Commissions (ma( be brou'ht to this Court on certiorarib(

the a''rieved part( ithin thirt( !"%& da(s from receipt of a cop( thereof.0he certiorarireferred to is the special civil action for certiorariunder Rule

5 of the Rules of Court. %

Considerin', hoever, that the alle'ations that the CA acted ith1

!a& total lac@ of 9urisdiction in completel( i'norin' and shoin' absolutel( no

respect for the findin's and rulin's of the administrator of the fund itself andin disalloin' a claim hich is still pendin' resolution at the EA level, and

!b& 'rave abuse of discretion and completel( ithout 9urisdiction 5in

declarin' that petitioner cannot avail of the ri'ht to offset an( amount that it

ma( be re=uired under the la to remit to the P3F a'ainst an( amount that it

ma( receive b( a( of reimbursement therefrom are sufficient to brin' thispetition ithin Rule 5 of the Rules of Court, and, considerin' further the

importance of the issues raised, the error in the desi'nation of the remed(

pursued ill, in this instance, be e6cused.

0he issues raised revolve around the P3F created under 3ection ) of

Presidential >ecree !P.>.& No. $45, as amended b( E6ecutive rder !E..&No. $"+. As amended, said 3ection ) reads as follos1

3ec. ) . 0here is hereb( created a 0rust Account in the boo@s of accounts of

the Ministr( of Ener'( to be desi'nated as il Price 3tabili2ation Fund!P3F& for the purpose of minimi2in' fre=uent price chan'es brou'ht about

b( e6chan'e rate ad9ustments andor chan'es in orld mar@et prices of crudeoil and imported petroleum products. 0he il Price 3tabili2ation Fund ma( be

sourced from an( of the folloin'1

a& An( increase in the ta6 collection from ad %alore#ta6 or customs dut(

imposed on petroleum products sub9ect to ta6 under this >ecree arisin' from

e6chan'e rate ad9ustment, as ma( be determined b( the Minister of Finance inconsultation ith the Board of Ener'(;

b& An( increase in the ta6 collection as a result of the liftin' of ta6 e6emptions

of 'overnment corporations, as ma( be determined b( the Minister of Finance

in consultation ith the Board of Ener'(;

c& An( additional amount to be imposed on petroleum products to au'ment theresources of the Fund throu'h an appropriate rder that ma( be issued b( the

Board of Ener'( re=uirin' pa(ment b( persons or companies en'a'ed in the

business of importin', manufacturin' andor mar@etin' petroleum products;

d& An( resultin' peso cost differentials in case the actual peso costs paid b( oil

companies in the importation of crude oil and petroleum products is less thanthe peso costs computed usin' the reference forei'n e6chan'e rate as fi6ed b(

the Board of Ener'(.

0he Fund herein created shall be used for the folloin'1

$& 0o reimburse the oil companies for cost increases in crude oil and imported

petroleum products resultin' from e6chan'e rate ad9ustment andor increase inorld mar@et prices of crude oil;

*& 0o reimburse the oil companies for possible cost under-recover( incurred as

a result of the reduction of domestic prices of petroleum products. 0he

ma'nitude of the underrecover(, if an(, shall be determined b( the Ministr( of

Finance. Cost underrecover( shall include the folloin'1i. Reduction in oil compan( ta@e as directed b( the Board of Ener'( ithout

the correspondin' reduction in the landed cost of oil inventories in the

possession of the oil companies at the time of the price chan'e;

ii. Reduction in internal ad %alore#ta6es as a result of fore'oin' 'overnmentmandated price reductions;

iii. ther factors as ma( be determined b( the Ministr( of Finance to result in

cost underrecover(.

0he il Price 3tabili2ation Fund !P3F& shall be administered b( the Ministr(of Ener'(.

0he material operative facts of this case, as 'athered from the pleadin's of the

parties, are not disputed.

n * Februar( $4)4, the CA sent a letter to Calte6 Philippines, nc. !CP&,

hereinafter referred to as Petitioner, directin' the latter to remit to the P3Fits collection, e6cludin' that unremitted for the (ears $4) and $4)), of the

additional ta6 on petroleum products authori2ed under the aforesaid 3ection )

of P.>. No. $45 hich, as of "$ >ecember $4)+, amounted to

P""5,%"+,#4.%% and informin' it that, pendin' such remittance, all of its

claims for reimbursement from the P3F shall be held in abe(ance.6

n 4 March $4)4, the CA sent another letter to petitioner informin' it that

partial verification ith the EA shoed that the 'rand total of its unremitted

collections of the above ta6 is P$,*)+,),)*%.%%, bro@en don as follos1

$4) J P*"",$4%,4$.%%

$4)+ J ""5,%5,5%.%%$4)) J +$4,#$*,*5#.%%;

directin' it to remit the same, ith interest and surchar'es thereon, ithin

si6t( !%& da(s from receipt of the letter; advisin' it that the CA ill hold in

abe(ance the audit of all its claims for reimbursement from the P3F; and

directin' it to desist from further offsettin' the ta6es collected a'ainstoutstandin' claims in $4)4 and subse=uent periods. 7

n its letter of " Ma( $4)4, petitioner re=uested the CA for an earl( release

of its reimbursement certificates from the P3F coverin' claims ith the

ffice of Ener'( Affairs since :une $4)+ up to March $4)4, invo@in' in

support thereof CA Circular No. )4-*44 on the liftin' of pre-audit of'overnment transactions of national 'overnment a'encies and 'overnment-

oned or controlled corporations. 8n its Anser dated ) Ma( $4)4, the CA denied petitioner?s re=uest for the

earl( release of the reimbursement certificates from the P3F and repeated its

earlier directive to petitioner to forard pa(ment of the latter?s unremittedcollections to the P3F to facilitate CA?s audit action on the reimbursement

claims. 9

B( a( of a repl(, petitioner, in a letter dated "$ Ma( $4)4, submitted to the

CA a proposal for the pa(ment of the collections and the recover( of claims,

since the outri'ht pa(ment of the sum of P$.*)+ billion to the EA as aprere=uisite for the processin' of said claims a'ainst the P3F ill cause a

ver( serious impairment of its cash position. 1=0he proposal reads1

e, therefore, ver( respectfull( propose the folloin'1

!$& An( procedural arran'ement acceptable to CA to facilitate monitorin' of

pa(ments and reimbursements ill be administered b( the ERBFinance>ept.EA, as a'encies desi'nated b( la to administerre'ulate P3F.

!*& For the retroactive period, Calte6 ill deliver to EA, P$.*)+ billion as

pa(ment to P3F, similarl( EA ill deliver to Calte6 the same amount incash reimbursement from P3F.

!"& 0he CA audit ill commence immediatel( and ill be conductede6peditiousl(.

!#& 0he revie of current claims !$4)4& ill be conducted e6peditiousl( to

preclude further accumulation of reimbursement from P3F.

n + :une $4)4, the CA, ith the Chairman ta@in' no part, handed don

>ecision No. 4*$ acceptin' the above-stated proposal but prohibitin'petitioner from further offsettin' remittances and reimbursements for the

current and ensuin' (ears. 11>ecision No. 4*$ reads1

0his pertains to the ithin separate re=uests of Mr. Manuel A. Estrella,

President, Petron Corporation, and Mr. Francis Ablan, President and

Mana'in' >irector, Calte6 !Philippines& nc., for reconsideration of thisCommission?s adverse action embodied in its letters dated Februar( *, $4)4

and March 4, $4)4, the former directin' immediate remittance to the il Price

3tabili2ation Fund of collections made b( the firms pursuant to P.>. $45, as

amended b( E.. No. $"+, 3. $4)+, and the latter reiteratin' the same

directive but further advisin' the firms to desist from offsettin' collectionsa'ainst their claims ith the notice that this Commission ill hold in

abe(ance the audit of all . . . claims for reimbursement from the P3F.

t appears that under letters of authorit( issued b( the Chairman, Ener'(

Re'ulator( Board, the aforenamed oil companies ere alloed to offset the

amounts due to the il Price 3tabili2ation Fund a'ainst their outstandin'claims from the said Fund for the calendar (ears $4)+ and $4)), pendin' ith

the then Ministr( of Ener'(, the 'overnment entit( char'ed ith administerin'

the P3F. 0his Commission, hoever, e6pressin' serious doubts as to the

propriet( of the offsettin' of all t(pes of reimbursements from the P3F

a'ainst all cate'ories of remittances, advised these oil companies that suchoffsettin' as bereft of le'al basis. A''rieved thereb(, these companies no

see@ reconsideration and in support thereof clearl( manifest their intent to

ma@e arran'ements for the remittance to the ffice of Ener'( Affairs of the

amount of collections e=uivalent to hat has been previousl(offset,providedthat this Commission authori2es the ffice of Ener'( Affairs

8/12/2019 full case 2

13/19

to prepare the correspondin' chec@s representin' reimbursement from the

P3F. t is alle'ed that the implementation of such an arran'ement, hereb(

the remittance of collections due to the P3F and the reimbursement ofclaims from the Fund shall be made ithin a period of not more than one

ee@ from each other, ill benefit the Fund and not undul( 9eopardi2e the

continuin' dail( cash re=uirements of these firms.

pon a circumspect evaluation of the circumstances herein obtainin', this

Commission perceives no further ob9ectionable feature in the proposedarran'ement, provided that $5 of hatever amount is due from the Fund is

retained b( the ffice of Ener'( Affairs, the same to be anserable for

suspensions or disalloances, errors or discrepancies hich ma( be noted in

the course of audit and surchar'es for late remittances ithout pre9udice to

similar future retentions to anser for an( deficienc( in such surchar'es, andprovided further that no offsettin' of remittances and reimbursements for the

current and ensuin' (ears shall be alloed.

Pursuant to this decision, the CA, on $) Au'ust $4)4, sent the folloin'

letter to E6ecutive >irector enceslao R. >e la Pa2 of the ffice of Ener'(

Affairs1 12

>ear Att(. dela Pa21

Pursuant to the Commission on Audit >ecision No. 4*$ dated :une +, $4)4,

and based on our initial verification of documents submitted to us b( (our

ffice in support of Calte6 !Philippines&, nc. offsets !sic& for the (ear $4) to

Ma( "$, $4)4, as ell as its outstandin' claims a'ainst the il Price3tabili2ation Fund !P3F& as of Ma( "$, $4)4, e are pleased to inform (our

ffice that Calte6 !Philippines&, nc. shall be re=uired to remit to P3F an

amount of P$,5%5,),4%, representin' remittances to the P3F hich ere

offset a'ainst its claims reimbursements !net of unsubmitted claims&. n

addition, the Commission hereb( authori2e !sic& the ffice of Ener'( Affairs!EA& to cause pa(ment of P$,454,$)*,$* to Calte6, representin' claims

initiall( alloed in audit, the details of hich are presented hereunder1 . . .As presented in the fore'oin' computation the disalloances totalled

P")+,)",5"5, hich included P$"%,#*%,*"5 representin' those claims

disalloed b( EA, details of hich is !sic& shon in 3chedule $ assummari2ed as follos1

6isallowance of $OA

articularsA#ount

Recover( of financin' char'es P$*,+*),#+5 a

Product sales #),#%*,"4) bnventor( losses

Borro loan arran'ement $#,%"#,+) c

3ales to AtlasMarcopper "*,%4+,%)" d

3ales to NPC 55)

JJJJJJP*5+,*","%%

>isalloances of EA $"%,#*%,*"5

JJJJJJJJJ JJJJJJ0otal P")+,)",5"5

0he reasons for the disalloances are discussed hereunder1a.+eco%ery of (inancin' $har'es

Revie of the provisions of P.>. $54 as amended b( E.. $"+ seems to

indicate that recover( of financin' char'es b( oil companies is not amon' the

items for hich the P3F ma( be utili2ed. 0herefore, it is our vie that

recover( of financin' char'es has no le'al basis. 0he mechanism for suchclaims isprovided in >F Circular $-)+.

b.roduct Sales 99 Sales to )nternational 4essels:Airlines

BE Resolution No. )+-%$ dated Februar( +, $4)+ as implemented b( EA

rder No. )+-%"-%45 indicatin' that !sic& Februar( +, $4)+ as the effectivit(

date that !sic& oil companies should pa( P3F impost on e6port sales ofpetroleum products. Effective Februar( +, $4)+ sales to international

vesselsairlines should not be included as part of its domestic sales. Chan'in'

the effectivit( date of the resolution from Februar( +, $4)+ to ctober *%,

$4)+ as covered b( subse=uent ERB Resolution No. ))-$* dated November

$), $4)) has alloed Calte6 to include in their domestic sales volumes tointernational vesselsairlines and claim the correspondin' reimbursements

from P3F durin' the period. t is our opinion that the effectivit( of the said

resolution should be Februar( +, $4)+.

c.)n%entory losses 99 Settle#ent of Ad 4alore#

e revieed the s(stem of handlin' Borro and /oan !B/A& transactionsincludin' the related B/A a'reement, as the( affect the claims for

reimbursements of ad %alore# ta6es. e observed that oil companies

immediatel( settle ad %alore#ta6es for B/A transaction !sic&. /oan balances

therefore are not ta6 paid inventories of Calte6 sub9ect to reimbursements but

those of the borroer. Dence, e recommend reduction of the claim for :ul(,Au'ust, and November, $4)+ amountin' to P$#,%"#,+).

d. Sales to Atlas:arcopper

/ No. $#$ dated :ul( $+, $4)# provides that hereb( order and direct the

suspension of pa(ment of all ta6es, duties, fees, imposts and other char'eshether direct or indirect due and pa(able b( the copper minin' companies in

distress to the national and local 'overnments. t is our opinion that /

$#$ hich implements the e6emption from pa(ment of P3F imposts as

effected b( EA has no le'al basis.Furthermore, e ish to emphasi2e that pa(ment to Calte6 !Phil.& nc., of the

amount as herein authori2ed shall be sub9ect to availabilit( of funds of P3F

as of Ma( "$, $4)4 and applicable auditin' rules and re'ulations. ith re'ard

to the disalloances, it is further informed that the a''rieved part( has "%

da(s ithin hich to appeal the decision of the Commission in accordanceith la.

n ) 3eptember $4)4, petitioner filed an mnibus Re=uest for the

Reconsideration of the decision based on the folloin' 'rounds1 1(

A& CA->3A//E> C/AM3 ARE A0DRGE> N>ER

E30N7 R/E3, R>ER3, RE3/0N3, CRC/AR3 33E> B0DE >EPAR0MEN0 F FNANCE AN> 0DE ENER7 RE7/A0R

BAR> PR3AN0 0 EEC0HE R>ER N. $"+.

666 666 666

B& A>MN30RA0HE N0ERPRE0A0N3 N 0DE CR3E F

EERC3E F EEC0HE PER B >EPAR0MEN0 F FNANCEAN> ENER7 RE7/A0R BAR> ARE /E7A/ AN> 3D/> BE

RE3PEC0E> AN> APP/E> N/E33 >EC/ARE> N// AN> H> B

CR03 R REPEA/E> B /E73/A0N.

666 666 666

C& /E7A/ BA33 FR RE0EN0N F FF3E0 ARRAN7EMEN0, A3A0DRGE> B 0DE EEC0HE BRANCD F 7HERNMEN0,

REMAN3 HA/>.

666 666 666

n November $4)4, petitioner filed ith the CA a 3upplemental mnibus

Re=uest for Reconsideration. 1%

n $ Februar( $44%, the CA, ith Chairman >omin'o ta@in' no part and

ith Commissioner Fernande2 dissentin' in part, handed don >ecision No.$$+$ affirmin' the disalloance for recover( of financin' char'es, inventor(

losses, and sales to MARCPPER and A0/A3, hile alloin' the recover(

of product sales or those arisin' from e6port sales. 15>ecision No. $$+$ readsas follos1

Anent the recover( offinancin' char'es(ou contend that Calte6 Phil. nc. has

the .authorit( to recover financin' char'es from the P3F on the basis of

>epartment of Finance !>F& Circular $-)+, dated Februar( $), $4)+, hich

alloed oil companies to recover cost of financin' or@in' capitalassociated ith crude oil shipments, andprovided a schedule of

reimbursement in terms of peso per barrel. t appears that on November ,

$4)4, the >F issued a memorandum to the President of the Philippines

e6plainin' the nature of these financin' char'es and 9ustif(in' their

reimbursement as follos1As part of (our pro'ram to promote economic recover(, . . . oil companies

!ere authori2ed& to refinance their imports of crude oil and petroleum

products from the normal trade credit of "% da(s up to "% da(s from date ofloadin' . . . Conformabl( . . ., the oil companies deferred their forei'n

e6chan'e remittances for purchases b( refinancin' their import bills from thenormal "%-da( pa(ment term up to the desired "% da(s. 0his refinancin' of

importations carried additional costs !financin' char'es& hich then became,

due to 'overnment mandate, an inherent part of the cost of the purchases of

our countr(?s oil re=uirement.

e be' to disa'ree ith such contention. 0he 9ustification that financin'char'es increased oil costs and the schedule of reimbursement rate in peso per

barrel !E6hibit $& used to support alle'ed increase !sic& ere not validated in

our independent in=uir(. As manifested in E6hibit *, usin' the same formula

hich the >F used in arrivin' at the reimbursement rate but usin'

comparable percenta'es instead of pesos, the ineluctable conclusion is that theoil companies are actuall( 'ainin' rather than losin' from the e6tension of

credit because such e6tension enables them to invest the collections in

mar@etable securities hich have much hi'her rates than those the( incur due

to the e6tension. 0he >ata e used ere obtained from CP !CA/0E&

Mana'ement and can easil( be verified from our records.ith respect toproduct sales or those arisin' fro# sales to international

%essels or airlines, . . ., it is believed that e6port sales !product sales& are

entitled to claim refund from the P3F.

As re'ard (our claim for underreco%ery arisin' fro# in%entory losses, . . . t is

the considered vie of this Commission that the P3F is not liable to refundsuch surta6 on inventor( losses because these are paid to BR and not P3F,

in vie of hich CP !CA/0E& should see@ refund from BR. . . .

Finall(, as re'ards thesales to Atlas and arcopper, it is represented that (ou

are entitled to claim recover( from the P3F pursuant to / $#$ issued on

:ul( $+, $4)#, since these copper minin' companies did not pa( CP!CA/0E& and P3F imposts hich ere added to the sellin' price.

pon a circumspect evaluation, this Commission believes and so holds that

the CP !CA/0E& has no authorit( to claim reimbursement for this

uncollected P3F impost because / $#$ dated :ul( $+, $4)#, hiche6empts distressed minin' companies from all ta6es, duties, import fees and

8/12/2019 full case 2

14/19

other char'es as issued hen P3F as not (et in e6istence and could not

have contemplated P3F imposts at the time of its formulation. Moreover, it

is evident that P3F as not created to aid distressed minin' companies butrather to help the domestic oil industr( b( stabili2in' oil prices.

nsatisfied ith the decision, petitioner filed on *) March $44% the present

petition herein it imputes to the CA the commission of the folloin'

errors1 16

RE3PN>EN0 CMM33N ERRE> N >3A//N7 RECHER

F FNANCN7 CDAR7E3 FRM 0DE P3F.

RE3PN>EN0 CMM33N ERRE> N >3A//N7

CP?s17

C/AM FR REMBR3EMEN0 F N>ERRECHERAR3N7 FRM 3A/E3 0 NPC.

RE3PN>EN0 CMM33N ERRE> N >ENN7 CP?s C/AM3 FR

REMBR3EMEN0 N 3A/E3 0 A0/A3 AN> MARCPPER.

HRE3PN>EN0 CMM33N ERRE> N PREHEN0N7 CP FRM

EERC3N7 03 /E7A/ R7D0 0 FF3E0 03 REM00ANCE3

A7AN30 03 REMBR3EMEN0 4)S-A-4)S 0DE P3F.

H

RE3PN>EN0 CMM33N ERRE> N >3A//N7 CP?sC/AM3 DCD ARE 30// PEN>N7 RE3/0N B !S)$& 0DE

EA AN> 0DE >F.

n the Resolution of 5 April $44%, this Court re=uired the respondents to

comment on the petition ithin ten !$%& da(s from notice. 18

n 3eptember $44%, respondents CA and Commissioners Fernande2 andCru2, assisted b( the ffice of the 3olicitor 7eneral, filed their Comment. 19

0his Court resolved to 'ive due course to this petition on "% Ma( $44$ andre=uired the parties to file their respective Memoranda ithin tent( !*%&

da(s from notice. 2=

n a Manifestation dated $) :ul( $44$, the ffice of the 3olicitor 7eneralpra(s that the Comment filed on 3eptember $44% be considered as the

Memorandum for respondents. 21

pon the other hand, petitioner filed its Memorandum on $# Au'ust $44$.

. Petitioner dells len'thil( on its first assi'ned error contendin', in support

thereof, that1!$& n vie of the e6panded role of the P3F pursuant to E6ecutive rder No.

$"+, hich added a second purpose, to it1

*& 0o reimburse the oil companies for possible cost underrecover( incurred as

a result of the reduction of domestic prices of petroleum products. 0he

ma'nitude of the underrecover(, if an(, shall be determined b( the Ministr( ofFinance. Cost underrecover( shall include the folloin'1

i. Reduction in oil compan( ta@e as directed b( the Board of Ener'( ithout

the correspondin' reduction in the landed cost of oil inventories in thepossession of the oil companies at the time of the price chan'e;

ii. Reduction in internal ad %alore# ta6es as a result of fore'oin' 'overnmentmandated price reductions;

iii. ther factors as ma( be determined b( the Ministr( of Finance to result in

cost underrecover(.

the other factors mentioned therein that ma( be determined b( the Ministr(

!no >epartment& of Finance ma( include financin' char'es for in essence,financin' char'es constitute unrecovered cost of ac=uisition of crude oil

incurred b( the oil companies, as e6plained in the November $4)4

Memorandum to the President of the >epartment of Finance; the( directl(

translate to cost underrecover( in cases here the mone( mar@et placement

rates decline and at the same time the ta6 on interest income increases. 0herelationship is such that the presence of underrecover( or overrecover( is

directl( dependent on the amount and e6tent of financin' char'es.

!*& 0he claim for recover( of financin' char'es has clear le'al and factual

basis; it as filed on the basis of >epartment of Finance Circular No.

$-)+, dated $) Februar( $4)+, hich provides10o allo oil companies to recover the costs of financin' or@in' capital

associated ith crude oil shipments, the folloin' 'uidelines on the utili2ation

of the il Price 3tabili2ation Fund pertainin' to the pa(ment of the fore'oin'

!sic& e6chan'e ris@ premium and recover( of financin' char'es ill be

implemented1$. 0he P3F forei'n e6chan'e premium shall be reduced to a flat rate of one

!$& percent for the first !& months and $"* of one percent per month

thereafter up to a ma6imum period of one (ear, to be applied on crude oil?

shipments from :anuar( $, $4)+. 3hipments ith outstandin' financin' as of

:anuar( $, $4)+ shall be char'ed on the basis of the fee applicable to theremainin' period of financin'.

*. n addition, for shipments loaded after :anuar( $4)+, oil companies shall be

alloed to recover financin' char'es directl( from the P3F per barrel of

crude oil based on the folloin' schedule1

Financin' Period Reimbursement Rate

Pesos per Barrel

/ess than $)% da(s None$)% da(s to *"4 da(s $.4%

*#$ !sic& da(s to *44 #.%*

"%% da(s to "4 !sic& da(s .$

"% da(s or more ).*)

0he above rates shall be sub9ect to revie ever( si6t(da(s. 22

Pursuant to this circular, the >epartment of Finance, in its letter of $)

Februar( $4)+, advised the ffice of Ener'( Affairs as follos1

DN. HCEN0E 0. PA0ERN

>eput( E6ecutive 3ecretar(For Ener'( Affairs

ffice of the President

Ma@ati, Metro Manila

>ear 3ir1

0his refers to the letters of the il ndustr( dated >ecember #, $4) andFebruar( 5, $4)+ and subse=uent discussions held b( the Price Revie

committee on Februar( , $4)+.

n the basis of the representations made, the >epartment of Finance

reco'ni2es the necessit( to reduce the forei'n e6chan'e ris@ premium

accruin' to the il Price 3tabili2ation Fund !P3F&. 3uch a reduction ouldallo the industr( to recover partl( associated financin' char'es on crude oil

imports. Accordin'l(, the P3F forei'n e6chan'e ris@ fee shall be reduced to

a flat char'e of $ for the first si6 !& months plus $"* of $ per month

thereafter up to a ma6imum period of one (ear, effective :anuar( $, $4)+. n

addition, since the prevailin' compan( ta@e ould still leave unrecoveredfinancin' char'es, reimbursement ma( be secured from the P3F in

accordance ith the provisions of the attached >epartment of Financecircular. 2(

Actin' on this letter, the EA issued on # Ma( $4)+ rder No. )+-%5-%4

hich contains the 'uidelines for the computation of the forei'n e6chan'e ris@fee and the recover( of financin' char'es from the P3F, to it1

B.()A$7 $HA+G7S

$. il companies shall be alloed to recover financin' char'es directl( from

the P3F for both crude and product shipments loaded after :anuar( $, $4)+

based on the folloin' rates1Financin' Period Reimbursement Rate

!PBbl.&

/ess than $)% da(s None

$)% da(s to *"4 da(s $.4%

*#% da(s to **4 !sic& da(s #.%*"%% da(s to "54 da(s .$

"% da(s to more ).*)

*. 0he above rates shall be sub9ect to revie ever( si6t( da(s.

2%

0hen on ** November $4)), the >epartment of Finance issued Circular No.

#-)) imposin' further 'uidelines on the recoverabilit( of financin' char'es, toit1

Folloin' are the supplemental rules to >epartment of Finance Circular No.

$-)+ dated Februar( $), $4)+ hich alloed the recover( of financin'

char'es directl( from the il Price 3tabili2ation Fund. !P3F&1

$. 0he Claim for reimbursement shall be on a per shipment basis.*. 0he claim shall be filed ith the ffice of Ener'( Affairs to'ether ith the

claim on peso cost differential for a particular shipment and dul( certified

supportin' documents providedfor under Ministr( of Finance No. $$-)5.

". 0he reimbursement shall be on the form of reimbursement certificate

!Anne6 A& to be issued b( the ffice of Ener'( Affairs. 0he said certificatema( be used to offset a'ainst amounts pa(able to the P3F. 0he oil

companies ma( also redeem said certificates in cash if not utili2ed, sub9ect to

availabilit( of funds. 25

0he EA disseminated this Circular to all oil companies in its Memorandum

Circular No. ))-$*-%$+. 260he CA can neither i'nore these issuances nor formulate its on

interpretation of the las in the li'ht of the determination of e6ecutive

a'encies. 0he determination b( the >epartment of Finance and the EA that

financin' char'es are recoverable from the P3F is entitled to 'reat ei'ht

and consideration. 270he function of the CA, particularl( in the matter ofalloin' or disalloin' certain e6penditures, is limited to the promul'ation of

accountin' and auditin' rules for, amon' others, the disalloance of irre'ular,

unnecessar(, e6cessive, e6trava'ant, or unconscionable e6penditures, or uses

of 'overnment funds and properties. 28

!"& >enial of petitioner?s claim for reimbursement ould be ine=uitable.Additionall(, CA?s claim that petitioner is 'ainin', instead of losin', from

the e6tension of credit, is belatedl( raised and not supported b( e6pert

anal(sis.

n impeachin' the validit( of petitioner?s assertions, the respondents ar'uethat1

8/12/2019 full case 2

15/19

$. 0he Constitution 'ives the CA discretionar( poer to disapprove irre'ular

or unnecessar( 'overnment e6penditures and as the monetar( claims of

petitioner are not alloed b( la, the CA acted ithin its 9urisdiction inden(in' them;

*. P.>. No. $45 and E.. No. $"+ do not allo reimbursement of financin'

char'es from the P3F;

". nder the principle of e8usde# 'eneris, the other factors mentioned in the

second purpose of the P3F pursuant to E.. No. $"+ can onl( includefactors hich are of the same nature or analo'ous to those enumerated;

#. n alloin' reimbursement of financin' char'es from P3F, Circular No.

$-)+ of the >epartment of Finance violates P.>. No. $45 and E.. No. $"+;

and

5. >epartment of Finance rules and re'ulations implementin' P.>. No. $45do not li@eise allo reimbursement of financin'

char'es. 29

e find no merit in the first assi'ned error.

As to the poer of the CA, hich must first be resolved in vie of its

primac(, e find the theor( of petitioner QQ that such does not e6tend to thedisalloance of irre'ular, unnecessar(, e6cessive, e6trava'ant, or

unconscionable e6penditures, or use of 'overnment funds and properties, but

onl( to the promul'ation of accountin' and auditin' rules for, amon' others,

such disalloance QQ to be untenable in the li'ht of the provisions of the $4)+

Constitution and related las.3ection *, 3ubdivision >, Article of the $4)+ Constitution e6pressl(

provides1

3ec. *!l&. 0he Commission on Audit shall have the poer, authorit(, and dut(

to e6amine, audit, and settle all accounts pertainin' to the revenue and receipts

of, and e6penditures or uses of funds and propert(, oned or held in trust b(,or pertainin' to, the 7overnment, or an( of its subdivisions, a'encies, or

instrumentalities, includin' 'overnment-oned and controlled corporationsith ori'inal charters, and on a post-audit basis1 !a& cons