People vs. Sandiganbayan

A judgment of acquittal rendered by a competent court on a valid information after the accused has entered a plea bars an appeal by the prosecution; only a clear showing of grave abuse of discretion amounting to lack or excess of jurisdiction, or denial of due process to the State, can justify review via certiorari. The Court further held that a BIR Commissioner acts within lawful discretion in abating an excessive and erroneous tax assessment, and that a tax should not be imposed upon another tax.

The petitioner is the People of the Philippines, acting through the Office of the Special Prosecutor, which charged private respondent Bienvenido A. Tan Jr. — former Commissioner of the Bureau of Internal Revenue — with violation of Section 3(e) of Republic Act No. 3019 (the Anti-Graft and Corrupt Practices Act) before the Sandiganbayan. The charge stemmed from Tan's approval of a compromise settlement of San Miguel Corporation's deficiency specific and ad valorem tax liabilities covering January 1, 1985 to March 31, 1986, which the prosecution characterized as causing undue injury to the government. The case required the Court to examine the interplay between the National Internal Revenue Code provisions on protesting assessments, the Commissioner's power to abate or compromise tax liabilities, and the constitutional guarantee against double jeopardy.

Pursuant to Letter of Authority No. ATD-035-STO dated January 2, 1986 and a Memorandum of Authority dated March 3, 1986, BIR examiners investigated the ad valorem and specific tax liabilities of San Miguel Corporation covering the period from January 1, 1985 to March 31, 1986. The investigation revealed a deficiency in specific and ad valorem taxes totaling ₱342,616,217.88, broken down into specific tax of ₱33,817,613.21 and ad valorem tax of ₱308,798,604.67. On the basis of these findings, the BIR sent a letter dated July 13, 1987 to SMC demanding payment of the deficiency tax.

SMC protested the assessment in a letter dated August 10, 1987, asserting two points: first, that the alleged specific tax deficiency had already been paid when the BIR approved SMC's request that its excess ad valorem payments be applied to its specific tax balance; and second, that the computation of the ad valorem tax deficiency was erroneous because the BIR examiners disallowed the deduction of the price differential (cost of freight from brewery to warehouse) and the ad valorem tax itself from the gross selling price. The protest was denied by the BIR through a letter dated October 8, 1987 signed by Commissioner Bienvenido Tan Jr., but the original assessment was reduced to ₱302,051,048.93 due to the crediting of the taxpayer's excess ad valorem tax deposit of ₱21,805,409.10. Notwithstanding the phrase "finally decided" in the letter, Tan appended a handwritten note extending the tender of payment for another fifteen days from October 27, 1987, because of a referral of the assessment to the BIR's Legal Service.

On October 27, 1987, Tan referred the matter to Assistant BIR Commissioner Jaime M. Maza of the Legal Service Division, and thereafter various BIR officials reviewed SMC's case and rendered differing legal opinions. Alicia P. Clemeno, Chief of the Legislative Ruling and Research Division, recommended reducing SMC's tax liability first to ₱21,856,985.29 and later to ₱22,000,000.00. Balbino E. Gatdula Jr., Assistant Revenue Service Chief for Legal Service, supported the demand for ad valorem tax deficiency. Meanwhile, SMC through a certain Avendano offered ₱10,000,000.00 in a letter dated August 31, 1988 for settlement of the assessment. Juanito Urbi, Chief of the Prosecutor Division, concurred in a Memorandum dated December 20, 1988, and Assistant Commissioner Maza likewise gave his concurrence to the recommendation that the ₱10,000,000.00 offer be accepted. Tan approved the recommendation, and SMC was informed by letter dated December 20, 1988 that its offer to compromise had been accepted.

The Sandiganbayan originally convicted Tan on March 2, 2001 for violation of Section 3(e) of RA 3019, finding that the compromise agreement had been entered into illegally and ordering the BIR to collect ₱292,951,048.93 from SMC. Tan moved for reconsideration on March 12, 2001, raising six grounds challenging the finality of the October 8, 1987 assessment, the propriety of the referral for further study, the payment of the specific tax through application of excess ad valorem deposits, the correctness of abating the ad valorem tax assessment, the lawfulness of his exercise of authority under Section 204 of the NIRC, and the finding that the compromise resulted in undue injury to the government. After a careful review, the Sandiganbayan reversed itself on January 23, 2002 and acquitted Tan, finding that the assessment had not become final and executory, that the abatement was proper, and that no injury to the government resulted from the compromise.

• Finality of Assessment: Petitioner argued that Tan's October 8, 1987 letter constituted a final decision on SMC's tax liability totaling ₱302,051,048.93, and since SMC did not appeal to the Court of Tax Appeals, the decision became final and could no longer be compromised.
• Improper Compromise: Petitioner contended that the Sandiganbayan disregarded Sections 124 and 228 of the NIRC in upholding Tan's acceptance of SMC's offer of ₱10,000,000.00 for a tax liability of ₱302,051,048.93.
• Improper Application of Excess Ad Valorem Deposits: Petitioner maintained that Tan's approval of SMC's application of its excess ad valorem tax deposits to its specific tax deficiency was contrary to law.
• Acquittal Despite Overwhelming Evidence: Petitioner asserted that the Sandiganbayan acted with grave abuse of discretion in acquitting Tan despite what petitioner characterized as overwhelming evidence proving his guilt beyond reasonable doubt for violation of Section 3(e) of RA 3019.

• Non-Finality of Assessment: Respondent argued that the October 8, 1987 letter did not constitute a final assessment, as the phrase "finally decided" referred only to the reduction of the assessment, not to the total amount; and that SMC timely filed a request for reinvestigation on November 2, 1987, well within the 30-day period under Section 229 of the NIRC.
• Propriety of Abatement: Respondent maintained that the abatement of SMC's ad valorem taxes was proper because the tax base should not include the ad valorem tax itself (tax pyramiding) or the price differential, and that reliance on EO 273 was proper as it merely formalized long-standing BIR practice.
• Good Faith and Regularity: Respondent argued that he acted fairly, honestly, and in good faith, relying upon the concurrence of top BIR officials, and that the compromise did not result in undue injury to the government because the initial assessment was excessive and erroneous.
• Double Jeopardy: Respondent contended that error in the exercise of jurisdiction is not the same as error in judgment, and that the latter is not reviewable by certiorari, the Sandiganbayan having duly considered and passed upon the evidence.

• Finality of Assessment: Whether the Sandiganbayan gravely abused its discretion in upholding Tan's ruling on SMC's Motion for Reconsideration, allegedly disregarding Section 228 (previously Section 246) of the NIRC.
• Application of Excess Ad Valorem Deposits: Whether the Sandiganbayan gravely abused its discretion in declaring valid Tan's approval of SMC's application of excess ad valorem deposits to its specific tax deficiency, allegedly contrary to law.
• Validity of the Compromise: Whether the Sandiganbayan gravely abused its discretion in upholding Tan's acceptance of SMC's offer of ₱10,000,000.00 for a tax liability of ₱302,051,048.93, allegedly disregarding Sections 124 and 228 of the NIRC.
• Acquittal and Double Jeopardy: Whether the Sandiganbayan gravely abused its discretion in acquitting Tan for violation of Section 3(e) of RA 3019 despite allegedly overwhelming evidence of his guilt.

• Finality of Assessment: No. The October 8, 1987 letter did not constitute a final assessment; SMC timely filed a request for reinvestigation within the 30-day period under Section 229 of the NIRC, and the referral to BIR officials for further review suspended finality.
• Application of Excess Ad Valorem Deposits: No. The approval was proper because both ad valorem and specific taxes are excise taxes on alcohol products, and no law or regulation prevented the application of advance deposits on one type of excise tax to another type.
• Validity of the Compromise: No. The transaction was actually an abatement, not a compromise; the assessment was excessive and erroneous because the tax base should exclude both the price differential and the ad valorem tax itself, and the Commissioner's power to abate under Section 204(2) of the NIRC was properly exercised.
• Acquittal and Double Jeopardy: No. The Sandiganbayan did not commit grave abuse of discretion in acquitting Tan; the constitutional bar against double jeopardy precludes reopening a judgment of acquittal absent grave abuse of discretion amounting to lack or excess of jurisdiction, which the prosecution failed to demonstrate.

• Finality of Assessment: Section 229 of the NIRC provides that an assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty days from receipt; otherwise, the assessment becomes final and unappealable. The phrase "finally decided" in Tan's October 8, 1987 letter referred not to the total amount of deficiency taxes but to the reduction resulting from SMC's earlier protests. Even assuming the letter partook of a final assessment, its finality was suspended by Tan's handwritten note extending the tender of payment for fifteen days due to the referral to the BIR's Legal Service. SMC received the assessment on October 26, 1987 and filed a request for reinvestigation on November 2, 1987, received by the BIR on November 10, 1987 — well within the 30-day period. A meeting held on October 27, 1987 between Tan and SMC's representatives partook of the nature of an oral, in-advance-of-the-written request for reinvestigation, which suspended the 30-day period. After the request for reinvestigation, no other issuance from the BIR constituted a decision on the protest; thus, no appeal to the Tax Court could have been made, since appealable is a decision on the protest, not the assessment itself. The intra-office memoranda issued in 1988 by various BIR officials further confirmed that the assessment had not become final. Petitioner's reliance on the 180-day period was misplaced, as that provision did not exist in 1987 or 1988 and appeared only in the later RA 8424.

• Application of Excess Ad Valorem Deposits: Both ad valorem and specific taxes are excise taxes on alcohol products. The payment by installment of a portion of the specific tax deficiency, combined with the application of excess and unused ad valorem tax deposits to the remaining portion, fully covered the total net specific tax shortfall. The BIR committed an oversight in failing to credit the deposits to the specific tax deficiency and an error in crediting the same amount to a subsequent ad valorem tax liability. No law or regulation prevented the approval of such application. The approval had the concurrence of top BIR officials, benefiting from the presumption of regularity in the performance of official functions. The law and revenue regulations allowed pre-payment schemes for excise taxes on alcohol products, so the government lost nothing. The succeeding BIR Commissioner likewise declared the abatement proper in a letter to the Senate Blue Ribbon Committee.

• Validity of the Compromise: In computing its ad valorem tax liabilities, SMC deducted from its brewer's gross selling price the specific tax, the price differential, and the ad valorem tax. The BIR allowed the deduction of the specific tax but disallowed the other two deductions. Regarding the price differential, Section 110 of the NIRC mandates that excise taxes on domestic products be paid before removal from the place of production; the price used as the tax base should be the price at the brewery. The price differential — representing discounts, promotions, rebates, and transportation — cannot be ascertained at the time of removal from the brewery, as it varies from one commercial outlet to another. Requiring its inclusion would make computation of the ad valorem tax impossible before removal, contrary to law. Regarding the ad valorem tax deduction, a tax should not be imposed upon another tax; tax pyramiding has no basis in fact or law. Tan demonstrated mathematically that including the ad valorem tax in the tax base yields a circuitous computation that never ends in a single figure. Tax pyramiding has been rejected since 1922, as reflected in Regulations No. 27 and in jurisprudence such as Commissioner of Internal Revenue vs. American Rubber Co. The transaction was properly characterized as an abatement — a diminution or cancellation of an excessive or erroneous tax — not a compromise requiring mutual concessions. Under Section 204(2) of the NIRC, the BIR may abate or cancel the whole or any unpaid portion of a tax liability if the assessment is excessive or erroneous, or if administration costs do not justify collection. Petitioner failed to prove bad faith on Tan's part, who simply relied upon his subordinates' recommendations. Actual, not presumed, fraud should be the benchmark of liability.

• Acquittal and Double Jeopardy: The Sandiganbayan did not commit grave abuse of discretion in acquitting Tan. The constitutional guarantee against double jeopardy, reiterated in Section 7 of Rule 117 of the Rules of Court, bars an appeal from a judgment of acquittal. The requisites for double jeopardy were present: a valid information was filed before a competent court, the accused pleaded to the charge, and he was acquitted. To overturn an acquittal via certiorari, the prosecution must prove grave — not merely ordinary — abuse of discretion amounting to lack or excess of jurisdiction. The Sandiganbayan's Resolution assessed the facts, applied governing laws and jurisprudence, analyzed the arguments of both sides, and concluded that the elements of the crime charged had not been sufficiently proven. Error in the exercise of jurisdiction is not the same as error in judgment; the latter is not reviewable by certiorari. Tan acted fairly, honestly, and in good faith; the initial assessment of over ₱300 million was correctly found to be excessive and erroneous, and the abatement was within his discretion and just to all concerned.

• Double Jeopardy Bar on Appeal from Acquittal — A judgment of acquittal rendered by a competent court on a valid information after the accused has entered a plea cannot be reopened, absent a clear showing of grave abuse of discretion amounting to lack or excess of jurisdiction, or denial of due process to the State. The requisites are: (1) a valid complaint or information was filed; (2) before a competent court; (3) the defendant pleaded to the charge; and (4) the accused was acquitted. The prosecution's burden is heavy: it must show grave — not just ordinary — abuse of discretion. Error in judgment is not the same as error in the exercise of jurisdiction; the former is not reviewable by certiorari.

• Prohibition Against Tax Pyramiding — A tax should not be imposed upon another tax. Tax pyramiding has no basis in fact or law and has been rejected by the Court, the legislature, and tax authorities since 1922. The ad valorem tax must be excluded from the tax base upon which it is computed; otherwise, the computation becomes circuitous and never ends in a single ad valorem tax figure. This principle is reflected in Regulations No. 27 (1923), EOs 22 and 273, and their implementing rules.

• Abatement vs. Compromise of Tax Liability — Abatement is the diminution or decrease in the amount of tax imposed; it refers to the act of eliminating, nullifying, or reducing in value or amount. Under Section 204(2) of the NIRC, the BIR may abate or cancel the whole or any unpaid portion of a tax liability, inclusive of increments, if the assessment is excessive or erroneous, or if administration costs do not justify collection. No mutual concessions need be made, because an excessive or erroneous tax is not compromised; it is abated or canceled. Only correct taxes should be paid.

• Finality of Tax Assessments and Administrative Protest — Under Section 229 of the NIRC, an assessment becomes final and unappealable if the taxpayer fails to protest within thirty days from receipt. A request for reinvestigation is a proper administrative protest that suspends the 30-day period. What is appealable to the Court of Tax Appeals is not the assessment itself but a decision on the protest against such assessment. The Commissioner's action in response to a taxpayer's request for reconsideration or reinvestigation constitutes the decision, receipt of which starts the 30-day period for appeal.

• Presumption of Regularity in Official Functions — There is a presumption of regularity in the performance of official functions (Section 3(m), Rule 131 of the Rules of Court). When top tax officials within the Bureau concur in a recommendation, their collective conclusion is controlling. Actual, not presumed, fraud should be the benchmark of liability.

• "A judgment of acquittal made by a competent court on a valid information after the accused has entered a plea bars an appeal by the prosecution. Only a clear showing of grave abuse of discretion or denial of due process to the State can justify a review (through a petition for certiorari) of such decision by this Court." — This is the opening pronouncement of the decision, establishing the controlling legal framework for the entire case: the narrow grounds upon which an acquittal may be reviewed via certiorari.

• "A tax should not be imposed upon another tax. This is tax pyramiding, which has no basis either in fact or in law." — This passage articulates the canonical formulation of the prohibition against tax pyramiding, which the Court applied to hold that the ad valorem tax must be excluded from the tax base upon which it is computed.

• "No mutual concessions need be made, because an excessive or erroneous tax is not compromised; it is abated or canceled. Only correct taxes should be paid." — This defines the distinction between abatement and compromise, clarifying that the Commissioner's acceptance of a reduced amount was not an illegal compromise but a lawful abatement of an excessive assessment.

• "The rule against double jeopardy proscribes an appeal from a judgment of acquittal. If said judgment is assailed in a petition for certiorari under Rule 65 of the Rules of Court, x x x the petitioner must prove that the lower court, in acquitting the accused, committed not merely reversible errors, but grave abuse of discretion amounting to lack or excess of jurisdiction." — This quotation, drawn from People vs. CA, sets forth the exact standard the prosecution must meet to overturn an acquittal, and was central to the Court's refusal to disturb the Sandiganbayan's ruling.

• People vs. CA, 368 Phil. 169 (June 21, 1999) — Cited for the proposition that the rule against double jeopardy proscribes an appeal from a judgment of acquittal, and that certiorari lies only upon a showing of grave abuse of discretion amounting to lack or excess of jurisdiction. This was the controlling standard applied to the Sandiganbayan's acquittal.

• Commissioner of Internal Revenue vs. American Rubber Co., 124 Phil. 1471 (November 29, 1966) — Cited for the principle that a taxpayer cannot be compelled to pay a tax on the tax itself, supporting the prohibition against tax pyramiding and the propriety of deducting the ad valorem tax from the tax base.

• Commissioner of Internal Revenue vs. Villa, 130 Phil. 3 (January 2, 1968) — Cited for the rule that what is appealable to the Court of Tax Appeals is a decision on the protest against an assessment, not the assessment itself.

• St. Stephen's Association vs. Collector of Internal Revenue, 104 Phil. 314 (August 21, 1958) — Cited alongside Villa for the same proposition regarding the distinction between an assessment and a decision on a protest.

• Dy Pac & Co., Inc. vs. CTA, 79 SCRA 442 (October 18, 1977) — Cited for the rule that a taxpayer's request for reconsideration or reinvestigation suspends — not interrupts — the 30-day period for appeal.

• Jopillo Jr. vs. CA, 167 SCRA 247 (November 9, 1988) — Cited for the principle that error in the exercise of jurisdiction is not the same as error in judgment, and that the latter is not reviewable by certiorari.

• Section 3(e), Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — Prohibits a public officer from causing undue injury to any party, including the government, or giving any private party unwarranted benefits through manifest partiality, evident bad faith, or gross inexcusable negligence. Tan was charged with violating this provision; the Court found the elements were not sufficiently proven.

• Section 229, National Internal Revenue Code (NIRC) — Governs the protesting of assessments. Provides that an assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty days from receipt; otherwise, it becomes final and unappealable. Applied to determine that SMC's request for reinvestigation was timely and suspended finality.

• Section 204(2), NIRC of 1977 — Authorizes the BIR Commissioner to abate or cancel the whole or any unpaid portion of a tax liability, inclusive of increments, if the assessment is excessive or erroneous, or if administration costs do not justify collection. Applied to uphold Tan's abatement of SMC's excessive and erroneous ad valorem tax assessment.

• Section 124, NIRC (as renumbered by PD 1994 and amended by EO 22) — Governs the specific and ad valorem taxes on fermented liquors. EO 22 amended the provision to exclude the ad valorem tax from the brewer's wholesale selling price. Applied to support the deduction of the ad valorem tax from the tax base.

• Section 110, NIRC of 1977 (as amended by PD 1994) — Provides that excise taxes on domestic products shall be paid before removal from the place of production. Applied to support the conclusion that the price differential cannot be included in the tax base because it cannot be ascertained at the time of removal from the brewery.

• Section 21, Article III, 1987 Constitution — Guarantees that no person shall be twice put in jeopardy of punishment for the same offense. Applied to bar the prosecution's attempt to overturn the Sandiganbayan's acquittal absent grave abuse of discretion.

• Section 7, Rule 117, Rules of Court — Implements the constitutional guarantee against double jeopardy. Applied in conjunction with the constitutional provision to preclude reopening of the acquittal.

• Section 3(m), Rule 131, Rules of Court — Establishes the presumption of regularity in the performance of official functions. Applied to support the validity of the BIR officials' concurrence in the abatement recommendation.

Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concurred.