Interprovincial Autobus Co., Inc. vs. Collector of Internal Revenue

The Supreme Court has exclusive appellate jurisdiction over cases involving the legality or validity of a tax, assessment, or toll; freight receipts issued by common carriers are bills of lading or receipts subject to the documentary stamp tax; and the regulation providing that the tax is due unless the receipt states the goods are worth P5 or less is valid as a rebuttable administrative presumption.

Interprovincial Autobus Co., Inc., a common carrier operating TPU buses in Misamis Occidental and Northern Zamboanga, was subject to the documentary stamp tax on bills of lading or receipts under Section 1449 of the Revised Administrative Code of 1917 and Section 227 of the National Internal Revenue Code. The Department of Finance had promulgated Revised Documentary Stamp Tax Regulations on September 16, 1924, including Sections 121 and 127, which addressed the tax on bills of lading and on chits or receipts used by common carriers. The dispute required the Supreme Court to consider the jurisdiction of the Court of Appeals over tax-legality cases and the validity of those regulations.

Interprovincial Autobus Co., Inc. was a common carrier engaged in transporting passengers and freight by means of TPU buses in Misamis Occidental and Northern Zamboanga. In 1941, the provincial revenue agent for Misamis Occidental examined the stubs of freight receipts issued by the company. He found that the stubs for 1936 to 1938 were not preserved, while those for 1939 to 1940 were available. By referring to the conductors’ daily reports for 1936 to 1938, he ascertained the number of receipts for those years; together with the receipts for 1939 to 1940, these gave a total of 194,406 freight receipts issued during the five-year period from 1936 to 1940. Both the conductors’ daily reports and the available stubs did not state the value of the goods transported.

Pursuant to Sections 121 and 127 of the Revised Documentary Stamp Tax Regulations of the Department of Finance promulgated on September 16, 1924, the revenue agent assumed that the value of the goods covered by each of the freight receipts amounted to more than P5. He assessed a documentary stamp tax of P0.04 on each of the 194,406 receipts, for a total tax of P7,776.24. The amount was collected from the company’s deposit in the Misamis Occidental branch of the Philippine National Bank.

The company demanded a refund, and upon the refusal of Bibiano L. Meer as Collector of Internal Revenue, it filed an action. The Court of First Instance of Misamis Occidental rendered judgment in favor of the company. The Collector appealed to the Court of Appeals, which reversed the CFI decision and absolved the Collector from the complaint. The company then appealed to the Supreme Court by certiorari.

In the proceedings below, the trial court permitted evidence to be introduced to show that the company was not subject to the tax on the receipts. The Court of Appeals did not state that the receipts were actually issued for shipments the value of which was not more than P5 each; its decision stated that the company “merely tried to establish through his witnesses” that the receipts covered shipments of merchandise worth not more than P5.

• Jurisdiction: Petitioner-Appellant argued that the judgment of the Court of Appeals was null and void because it had no jurisdiction over the case, which involved the validity of an assessment.
• Freight Receipts Not Bills of Lading: Petitioner-Appellant argued that freight receipts are not bills of lading within the meaning of Section 1449, sub-paragraph (r), of the Revised Administrative Code of 1917.
• Invalidity of Regulation: Petitioner-Appellant argued that Section 121 of the Revised Documentary Stamp Tax Regulations, providing that if the bill of lading fails to state the value of the goods shipped, the tax is due, is illegal.
• Taxpayer Liability: Petitioner-Appellant contended that the documentary stamp tax on freight receipts should be paid by the shipper of the merchandise, not by the carrier.
• Prescription: Petitioner-Appellant contended that the collection of the tax was illegal because it was done beyond the period of limitation fixed by law for its collection.

• Jurisdiction of the Court of Appeals: Whether the Court of Appeals had jurisdiction over an appeal involving the legality or validity of a tax assessment.
• Freight Receipts as Bills of Lading: Whether freight receipts issued by a bus company are “bills of lading or receipts” within the Documentary Stamp Tax Law.
• Validity of Documentary Stamp Tax Regulations: Whether Sections 121 and 127 of the Revised Documentary Stamp Tax Regulations, particularly the provision that the tax is due if the bill of lading does not state the goods are worth P5 or less, are valid.
• Burden of Proof in Tax Refund: Whether petitioner proved that the freight receipts covered goods worth P5 or less, entitling it to exemption or refund.
• Liability for Payment: Whether the documentary stamp tax on freight receipts should be paid by the shipper rather than the carrier.
• Prescription of Assessment and Collection: Whether the assessment and collection of the tax were barred by the period of limitation.

• Jurisdiction of the Court of Appeals: No. The Court of Appeals had no jurisdiction; exclusive appellate jurisdiction over cases involving the legality of any tax, assessment, or toll is vested in the Supreme Court, rendering the CA decision null and void.
• Freight Receipts as Bills of Lading: Yes. Freight receipts are bills of lading or receipts within the Documentary Stamp Tax Law; modern bills of lading comprehend all forms of transportation, including bus receipts for cargo, and Section 227, NIRC, covers receipts for goods shipped from one place to another.
• Validity of Documentary Stamp Tax Regulations: Yes. Sections 121 and 127 are valid; they are administrative directives to tax officers, do not change the law, and merely create a rebuttable presumption of liability when the receipt does not state a value of P5 or less.
• Burden of Proof in Tax Refund: No. Petitioner failed to prove that the goods were worth P5 or less; tax assessments are presumed correct, and the taxpayer bears the burden of proving illegality.
• Liability for Payment: No. The carrier, which made and issued the receipts, is liable under Section 1449, Revised Administrative Code of 1917.
• Prescription of Assessment and Collection: No. The collection was within ten years after discovery in 1941; petitioner failed to prove the date of assessment to invoke the five-year period for collection by distraint or levy, and the issue was not raised in the pleadings.

• Jurisdiction of the Court of Appeals: The first proposition was well founded. Both the Constitution and the Judiciary Act of 1948 grant to the Supreme Court exclusive appellate jurisdiction over all cases involving the legality of any tax, assessment, or toll, or any penalty in relation thereto. The Court of Appeals has no jurisdiction over cases the exclusive appellate jurisdiction of which is granted to the Supreme Court. Because the legality or validity of the tax was involved, the Supreme Court had jurisdiction and the Court of Appeals had none. The decision of the Court of Appeals was therefore null and void.

• Freight Receipts as Bills of Lading: The claim that freight tickets of bus companies are not “bills of lading or receipts” within the meaning of the Documentary Stamp Tax Law is without merit. Bills of lading, in modern jurisprudence, are not those issued by masters of vessels alone; they now comprehend all forms of transportation, whether by sea or land, and include bus receipts for cargo transported. The Court quoted the definition that a bill of lading is a written acknowledgment of the receipt of goods and an agreement to transport and deliver them at a specified place to a person named or on his order; the designation and form are not material, and if the instrument contains an acknowledgment by the carrier of the receipt of goods for transportation, it is in legal effect a bill of lading. Section 227 of the National Internal Revenue Code imposes the tax on receipts for goods or effects shipped from one port or place to another port or place in the Philippines; the use of the word “place” after “port” and of the word “receipt” shows that receipts for goods shipped on land are included.

• Validity of Documentary Stamp Tax Regulations: The next claim involved the validity of Department of Finance Regulation No. 26 dated September 16, 1924. Section 121 provides that bills of lading are exempt from the documentary stamp tax when the value of the goods shipped is P5 or less, and that unless the bill of lading states that the goods are worth P5 or less, it must be held that the tax is due. Section 127 provides that chits, memorandum slips, and other papers not in the usual commercial form of bills of lading, when used by common carriers in the transportation of merchandise or goods for the collection of fees, are considered as bills of lading, and the original should bear the documentary stamp under paragraphs (q) and (r) of Section 1449 of the Administrative Code. These regulations were promulgated under the authority of Section 79(B) of the Administrative Code, originally Section 2 of Act 2803, which authorizes the Department Head to promulgate rules and regulations not contrary to law necessary to regulate the proper working and harmonious and efficient administration of the offices and dependencies of the Department and for the strict enforcement and proper execution of the laws. The Secretary of Finance did not infringe any right of the taxpayer. The regulation is merely a directive to tax officers; it does not purport to change or modify the law and does not create a liability to the stamp tax when the value of the goods does not appear on the face of the receipt. Its practical usefulness is evident because tax officers are in no position to witness the issuance of receipts and check the value of the goods. If tax officers were to assess or collect the tax only when they find that the value of the goods covered by the receipts is more than P5, assessment and collection would be well-nigh impossible. The regulation impliedly required the statement of the value of the goods in the receipts so that collection of the tax can be enforced. Petitioner failed to do so and then claimed the unreasonableness of the provision as a basis for exemption. The regulation is useful, practical, necessary, and reasonable. It falls within the administrative power of the Secretary of Finance and has the force and effect of law. Another reason for sustaining its validity is legislative approval by re-enactment: the regulations were approved on September 16, 1924, and when the National Internal Revenue Code was approved on February 18, 1939, the same provisions on stamp tax, bills of lading, and receipts were re-enacted. There is a presumption that the Legislature re-enacted the law with full knowledge of the regulations then in force and approved or confirmed them because they carry out the legislative purpose. The regulation does not purport to modify or change the law in the sense that when the value of the merchandise does not appear on the receipt the tax shall always be imposed; such a meaning would change the law. The regulation should be considered merely as a directive to internal revenue officers to assess and collect the tax. It only creates a presumption of liability, which is not conclusive upon the taxpayer, who can adduce evidence that the tax is not collectible because the value of the merchandise concerned does not exceed P5. The trial court permitted evidence to be introduced to show that petitioner was not subject to the tax on the receipts.

• Burden of Proof in Tax Refund: Petitioner claimed that the evidence proved that the freight receipts covered shipment of merchandise worth not more than P5. The Court of Appeals’ decision did not state that the receipts were actually issued for shipments the value of which was not more than P5 each; it stated that petitioner “merely tried to establish through his witnesses” those facts. Upon consideration of the claim and the testimonies, the Supreme Court was unable to agree. It is common knowledge that when barrio residents or those living in farms go to town and bring along their daily needs or daily produce, they ordinarily do not secure receipts for these baggages or cargoes but keep these under their seats. The common practice is for a passenger carrying cargoes of small value not to secure receipts therefor; for convenience and economy he keeps them under his seat in the bus so as to make them easily accessible when he goes down and at the same time save the few centavos that the issuance of the receipt entails. On the other hand, receipts for valuable cargo are demanded to insure against their loss. The conclusion was that the receipts must have been issued for shipments or merchandise in excess of P5 in value. The evidence, notwithstanding that it was uncontradicted, failed to prove to the Court’s satisfaction that the merchandise for which receipts were issued was actually worth P5 or less. Furthermore, in actions for the recovery of taxes assessed and collected, the taxpayer has the burden of proving that the assessment is illegal. All presumptions are in favor of the correctness of tax assessments; the good faith of tax assessors and the validity of their actions are presumed. The burden of proof is upon the complaining party to clearly show that the assessment was erroneous. The rule was not complied with, and the action for recovery was denied.

• Liability for Payment: It was also contended that the tax should be collected from the holder of the receipt, and not from the one who collected it, which is the transportation company. There is no merit in this contention because the law expressly provides that the tax should be paid by the one “making, signing, issuing, accepting, or transferring the same” under Section 1449 of the Revised Administrative Code of 1917. The receipts were made and issued by the transportation company; it is therefore liable for the payment of the tax thereon.

• Prescription of Assessment and Collection: The last contention was that the tax could no longer be collectible because it was assessed and collected after seven years, the tax having been due in 1936-1938 and the assessment having been made in 1947. The period within which a tax may be assessed is ten years after the discovery of the falsity, fraud, or omission under Section 332(a) of the National Internal Revenue Code. Petitioner cited paragraph (c) of the same section, which refers to the collection of the tax by distraint or by levy or by a proceeding in court, and the period prescribed is within five years after the assessment of the tax. The discovery, according to the pleadings, took place in 1941, and the warrant of distraint or levy was issued on September 30, 1946. The pleadings and evidence do not show the specific date of the assessment; it was only alleged that the examination of the books took place in 1941. To sustain the claim of invalidity of the levy, it was necessary for the plaintiff to allege and prove that the levy took place after five years from the date of the assessments. The date of the assessment was not proved. This was a material matter that petitioner should have proved to assail the levy. Because of this failure, the exemption from levy may not be invoked. Besides, the question was not raised in the pleadings as a ground to void the collection of the amount. The court cannot assume that the levy and distraint took place beyond the period prescribed by law. This conclusion is supported by the presumption of the regularity of the acts of public officers. In any event, the collection was made in 1947, within ten years after the discovery in 1941, and the liability of petitioner was not thereby affected.

• Exclusive appellate jurisdiction over tax legality cases — The Constitution and the Judiciary Act of 1948 vest in the Supreme Court exclusive appellate jurisdiction over all cases involving the legality of any tax, assessment, or toll, or any penalty in relation thereto. The Court of Appeals has no jurisdiction over such cases. Because the appeal involved the validity of a tax assessment, the CA decision was null and void.
• Modern definition of bill of lading — A bill of lading is not limited to instruments issued by masters of vessels; it comprehends all methods of transportation, whether by sea or land, and includes bus receipts for cargo. A written acknowledgment by a carrier of the receipt of goods for transportation is in legal effect a bill of lading, regardless of designation or form. Freight receipts issued by the bus company therefore fell within the documentary stamp tax law.
• Administrative regulations as having force and effect of law — Rules promulgated by a department head under Section 79(B) of the Revised Administrative Code, when not contrary to law and necessary for the strict enforcement and proper execution of the law, have the force and effect of law. Sections 121 and 127 of the Revised Documentary Stamp Tax Regulations were valid because they implemented the documentary stamp tax on bills of lading and receipts.
• Legislative approval by re-enactment — When a statute is re-enacted after administrative regulations have construed it, the legislature is presumed to have re-enacted the law with full knowledge of the regulations and to have approved or confirmed them, provided the regulations carry out the legislative purpose. The re-enactment of the stamp tax provisions in the National Internal Revenue Code in 1939 confirmed the 1924 regulations.
• Rebuttable presumption under the documentary stamp tax regulation — The regulation providing that the tax is due unless the bill of lading states that the goods are worth P5 or less does not create a conclusive liability or modify the law. It is a directive to internal revenue officers and creates only a presumption of liability, which the taxpayer may rebut by evidence that the value of the merchandise does not exceed P5.
• Presumption of correctness of tax assessments and taxpayer’s burden — All presumptions are in favor of the correctness of tax assessments, and the taxpayer seeking recovery of taxes paid bears the burden of proving that the assessment is illegal. Petitioner failed to discharge this burden because it did not prove that the goods covered by the receipts were worth P5 or less.
• Liability for documentary stamp tax — The documentary stamp tax is payable by the person making, signing, issuing, accepting, or transferring the taxable instrument. Since the transportation company made and issued the freight receipts, it was liable for the tax, not the shipper.
• Prescription of tax assessment and collection — Under Section 332(a) of the National Internal Revenue Code, the tax may be assessed within ten years after discovery of falsity, fraud, or omission. Under Section 332(c), collection by distraint, levy, or court proceeding must be within five years after assessment. Petitioner failed to prove the date of assessment, so it could not invoke the five-year period; the 1947 collection was in any event within ten years after the 1941 discovery.

• "Both the Constitution and the Judiciary Act of 1948 grant to the Supreme Court exclusive appellate jurisdiction over all cases involving the legality of any tax, assessment, or toll, or any penalty in relation thereto." — This states the jurisdictional ratio: the Court of Appeals had no authority over the tax-legality appeal, and its judgment was void.
• "If it contains an acknowledgment by the carrier of the receipt of goods for transportation, it is, in legal effect, a bill of lading." — This is the canonical formulation used to bring freight receipts issued by a bus company within the documentary stamp tax on bills of lading.
• "The regulation should be considered merely as a directive to internal revenue officers to assess the tax and collect the same. As already adverted to, it only creates a presumption of the liability of the taxpayer, which presumption, however, is not conclusive upon the taxpayer who can adduce evidence that the tax is not collectible because the value of the merchandise concerned does not exceed the amount of P5." — This defines the nature of the challenged regulation as a rebuttable administrative presumption rather than an invalid conclusive liability.
• "Furthermore, the rule is that in actions for the recovery of taxes assessed and collected, the taxpayer has the burden of proving that the assessment is illegal." — This states the burden-of-proof rule that defeated petitioner’s refund claim.

• United States vs. Tupasi Molina, 29 Phil. 119, 125 — Quoted for the principle that administrative regulations, once established and found in conformity with the general purposes of the law, are as binding as if written in the original law itself.
• Helvering vs. Hallock, 309 U.S. 106, 119-121 — Cited for the qualification that legislative approval by re-enactment does not freeze a meaning in evident conflict with the clearly expressed legislative intent.
• Mead Corporation vs. Commissioner of Internal Revenue, 116 F.2d 187, 194 — Cited for the rule that where a statute is susceptible of the meaning placed upon it by a Treasury ruling and Congress thereafter re-enacts the provision without substantial change, the re-enactment is confirmatory that the ruling carries out the legislative purpose.
• Compañia General de Tabacos vs. Collector of Int. Rev., 73 L. ed. 704, 706 — Cited for the presumption that taxes paid are rightly collected upon assessments correctly made, and that the burden rests upon the taxpayer to prove the illegality of the collection.
• United States vs. Anderson, 269 U.S. 422, 428 — Cited for the rule that the burden is on him who seeks recovery of a tax already paid to establish the facts showing its invalidity.

• Section 1449, sub-paragraph (r), Revised Administrative Code of 1917 — Imposes the documentary stamp tax on bills of lading or receipts; the Court held that freight receipts issued by the bus company fall within this provision.
• Section 1449, Revised Administrative Code of 1917 — Provides that the tax is paid by the person making, signing, issuing, accepting, or transferring the taxable instrument; the carrier that made and issued the receipts was held liable.
• Section 227, National Internal Revenue Code — Imposes the tax on receipts for goods or effects shipped from one port or place to another port or place in the Philippines; the use of “place” and “receipt” includes receipts for goods shipped on land.
• Section 121, Revised Documentary Stamp Tax Regulations (September 16, 1924) — Provides that bills of lading are exempt when the value of the goods shipped is P5 or less, and that unless the bill of lading states the goods are worth P5 or less, the tax is due; upheld as a valid directive creating a rebuttable presumption.
• Section 127, Revised Documentary Stamp Tax Regulations (September 16, 1924) — Provides that chits, memorandum slips, and other papers not in the usual commercial form of bills of lading, when used by common carriers in the transportation of merchandise for the collection of fees, are considered bills of lading and should bear the documentary stamp under Section 1449(q) and (r).
• Section 79(B), Revised Administrative Code (originally Section 2, Act 2803) — Authorizes the Department Head to promulgate rules and regulations not contrary to law necessary for the proper working and strict enforcement of the laws under the Department’s jurisdiction; this was the basis for the challenged regulations.
• Section 332(a), National Internal Revenue Code — Provides that the period within which a tax may be assessed is ten years after the discovery of falsity, fraud, or omission; the 1947 collection was within ten years after the 1941 discovery.
• Section 332(c), National Internal Revenue Code — Provides that collection by distraint, levy, or court proceeding must be within five years after assessment; petitioner failed to prove the date of assessment and could not invoke this period.
• Constitution and Judiciary Act of 1948 (provisions not specified in the text) — Grant the Supreme Court exclusive appellate jurisdiction over cases involving the legality of any tax, assessment, or toll, or any penalty in relation thereto; the Court of Appeals therefore lacked jurisdiction.

Paras, C.J.; Padilla; Montemayor; Reyes, A.; Bautista Angelo; Concepcion; Reyes, J.B.L.; and Endencia, JJ.