People vs. Tuyay

A taxpayer who avails of tax amnesty under RA 9480 is disqualified only if there is a pending criminal case in court for tax evasion or other criminal offenses under the NIRC; a pending criminal complaint before the DOJ does not disqualify, and an IRR provision expanding the statutory exception to include complaints pending before the DOJ is invalid for going beyond the law it implements.

Respondent Gloria F. Tuyay is the registered owner of Glo Herbal Trading and Manufacturing, a single proprietorship engaged in manufacturing, selling, and distributing the herbal concoction "Glo-Herbal." The Bureau of Internal Revenue examined her books of accounts for taxable years 2000 to 2002 pursuant to a Letter of Authority, and upon her failure to submit her books, used the expenditure method to reconstruct her undeclared income and determine deficiency taxes. RA 9480, the Tax Amnesty Act, lapsed into law on May 24, 2007, granting amnesty on all unpaid internal revenue taxes for taxable year 2005 and prior years, subject to enumerated exceptions. The interplay between the statutory exceptions in Section 8(e) of RA 9480 and the expanded exceptions in Section 5.5 of its IRR — specifically whether a pending criminal complaint before the DOJ disqualifies a taxpayer from availing of the amnesty — forms the central legal dispute.

Respondent Gloria F. Tuyay is the registered owner of Glo Herbal Trading and Manufacturing, a single proprietorship engaged in the business of manufacturing, selling, and distributing the herbal concoction "Glo-Herbal." On June 25, 2003, Assistant Commissioner Percival T. Salazar of the BIR issued a Letter of Authority authorizing revenue officers to examine the books of accounts of Glo Herbal Trading and Manufacturing for taxable years 2000 to 2002, as it allegedly sold millions of its product during those years. Despite receipt of the LOA, Tuyay failed to submit her books of account, prompting the revenue officers to use the expenditure method to reconstruct her undeclared income and determine her deficiency taxes.

On June 10, 2004, the BIR issued assessment notices against Tuyay for deficiency income tax and value-added tax for taxable years 2001 and 2002 in the amounts of ₱110,305,049.69 and ₱4,501,011.03, respectively. On June 3, 2005, the BIR filed with the DOJ a criminal complaint against Tuyay for violations of Sections 254 and 255 of the NIRC. The DOJ, on August 20, 2009, issued a Resolution finding probable cause and recommending the filing of criminal cases against her. On October 23, 2009, Informations were filed with the CTA — CTA Crim. Case No. 0-155 for violation of Section 254 was raffled to the First Division, and CTA Crim. Case No. 0-154 for violation of Section 255 was raffled to the Third Division. Tuyay pleaded "not guilty" during arraignment in Crim. Case No. 0-154.

On June 21, 2011, Tuyay moved to dismiss CTA Crim. Case No. 0-154 on the ground that she was immune from criminal liability by virtue of her availment of tax amnesty under RA 9480. She alleged that on February 21, 2008, she filed with the BIR a Notice of Availment of Tax Amnesty together with her Statement of Assets, Liabilities, and Networth as of December 31, 2005, and on February 26, 2008, she filed her Tax Amnesty Return and Tax Amnesty Payment Form evidencing payment of ₱79,913.90 and ₱35,177.50. The BIR opposed the motion, contending that Tuyay was disqualified under the IRR of RA 9480 because there was already a pending case against her with the DOJ when she availed of the amnesty. The CTA Third Division initially denied the motion on August 9, 2011, but upon reconsideration — citing the CTA First Division's dismissal of CTA Crim. Case No. 0-155 — it dismissed CTA Crim. Case No. 0-154 on October 4, 2011.

The BIR appealed the dismissal to the CTA En Banc via a petition for review under Rule 43, but the CTA En Banc dismissed it on March 5, 2012 because the petition was filed by BIR Special Prosecutors and not by the OSG. The BIR moved for reconsideration, citing deputization orders and RMC No. 25-2010, but failed to attach copies of the required documents despite being given multiple extensions. The CTA En Banc denied the motion for reconsideration on September 10, 2012. The BIR filed a second motion for reconsideration, this time attaching the required documents, but the CTA En Banc denied it on February 14, 2013 as a prohibited pleading. The BIR then filed the instant petition for certiorari under Rule 65 before the Supreme Court.

• Authority of BIR Special Prosecutors: Petitioner argued that the CTA En Banc committed grave abuse of discretion in failing to recognize the deputized authority of the BIR to appeal the case, admitting the inadvertent omission of proof but claiming it was cured by attachment in the second motion for reconsideration. Petitioner insisted that the CTA En Banc could not feign ignorance of the memorandum of agreement dated March 17, 2010, authorizing BIR Special Prosecutors to appear before the CTA En Banc.
• Validity of IRR Expansion: Petitioner ascribed grave abuse of discretion to the CTA Third Division in disregarding the IRR of RA 9480 promulgated by the DOF, contending that there is no inconsistency between RA 9480 and its IRR because criminal cases are deemed pending once commenced by filing a complaint or information, including a complaint before the DOJ for preliminary investigation. Petitioner asserted that in case of apparent conflict, the CTA should have reconciled the same, as the DOF's interpretation is afforded great weight and respect.

• Lack of Authority of BIR Special Prosecutors: Respondent argued that BIR Special Prosecutors have no authority to appeal because it is the Solicitor General who has the primary responsibility to appear for the government in criminal proceedings.
• Eligibility for Tax Amnesty: Respondent maintained that she was not disqualified because the law clearly states that only those with pending criminal cases in court are excluded, and the IRR's inclusion of criminal complaints pending before the DOJ is inconsistent with the law and departs from legislative intent. Respondent pointed out that under prevailing jurisprudence, it is the filing of the complaint or information in court — not the filing of a complaint for preliminary investigation — that initiates criminal prosecution.
• Res Judicata: Respondent claimed the petition should be dismissed under the principle of res judicata, citing the Court's September 30, 2013 and January 15, 2014 Minute Resolutions in G.R. No. 208435, which found no grave abuse of discretion on the part of the CTA En Banc in ruling she was eligible to avail of the tax amnesty.

• Propriety of Remedy: Whether the petition for certiorari under Rule 65 is the proper remedy, given the availability of a petition for review on certiorari under Rule 45.
• Authority of BIR Special Prosecutors: Whether the CTA En Banc committed grave abuse of discretion in dismissing the petition for review filed by BIR Special Prosecutors who were not yet deputized by the OSG at the time of filing.
• Scope of Tax Amnesty Exceptions: Whether a taxpayer with a pending criminal complaint before the DOJ — but not yet in court — at the time of availing of tax amnesty under RA 9480 is disqualified, and whether Section 5.5 of the IRR validly expanded the exceptions under Section 8(e) of RA 9480.

• Propriety of Remedy: No. The petition was filed under Rule 65 instead of Rule 45, and none of the circumstances permitting the Court to treat a Rule 65 petition as a Rule 45 petition were present, warranting outright dismissal.
• Authority of BIR Special Prosecutors: No. The CTA En Banc committed no grave abuse of discretion in dismissing the petition for review, as the BIR Special Prosecutors were not yet deputized by the OSG at the time of filing and failed to submit proof of deputization despite ample opportunity.
• Scope of Tax Amnesty Exceptions: No. Tuyay was not disqualified from availing of the tax amnesty because at the time of her availment, there was no pending criminal case against her in court; Section 5.5 of the IRR impermissibly expanded the statutory exceptions in Section 8(e) of RA 9480.

• Propriety of Remedy: A special civil action for certiorari under Rule 65 lies only in the absence of an appeal or any plain, speedy, and adequate remedy in the ordinary course of law. Section 1, Rule 16 of the 2005 Revised Rules of the CTA expressly provides that a party adversely affected by a decision or ruling of the CTA En Banc may appeal to the Supreme Court by filing a verified petition for review on certiorari under Rule 45 within fifteen days from receipt of the resolution. The remedy of appeal was thus available, and certiorari under Rule 65 cannot substitute for a lost appeal. While the Court has discretion to treat a Rule 65 petition as a Rule 45 petition under certain circumstances — if filed within the reglementary period, when errors of judgment are averred, and when there is justifiable reason for relaxation — none of these circumstances were present. The petition merited outright dismissal for being the wrong remedy.

• Authority of BIR Special Prosecutors: Section 10, Rule 9 of the 2005 Revised Rules of the CTA provides that the Solicitor General shall represent the people of the Philippines in all cases brought to the CTA in the exercise of its appellate jurisdiction, with authority to deputize legal officers of the BIR, provided such deputized officers remain under the direct control and supervision of the Solicitor General. Jurisprudence consistently holds that the OSG has the primary responsibility to appear for the government in appellate proceedings, with limited exceptions. None of the exceptions applied here. When the petition for review was filed in November 2011, it was represented by BIR Special Prosecutors, not the OSG, and the petition did not even state that the prosecutors were deputized. The deputization orders showed that the request was received and approved by the OSG only in February 2012 — months after the filing. The second motion for reconsideration, in which the required documents were finally attached, was a prohibited pleading under Section 7, Rule 15 of the 2005 Revised Rules of the CTA and did not toll the period to appeal. Given the ample time afforded to petitioner and the absence of any valid reason for belated compliance, the CTA En Banc cannot be faulted for not recognizing the authority of the BIR Special Prosecutors.

• Scope of Tax Amnesty Exceptions: Section 8(e) of RA 9480 excludes from the tax amnesty "those with pending criminal cases for tax evasion and other criminal offenses under Chapter II of Title X of the NIRC." Section 5.5 of the IRR added the phrase "filed in court or in the [DOJ]," thereby expanding the exception to include those with pending criminal complaints before the DOJ. A comparison of the two provisions shows that the DOJ inserted language not found in the law. The deliberations of Congress confirm that the legislature intended only those with pending tax cases in the courts — particularly criminal in nature — to be excluded. Administrative agencies tasked to promulgate IRR cannot supplant, modify, or amend the law by altering, enlarging, or restricting its provisions. Where there is a discrepancy between the law and its IRR, the law prevails. Accordingly, under Section 8(e) of RA 9480, only those with pending criminal cases in court are excluded. Tuyay availed of the tax amnesty on February 21, 2008, when there was no pending criminal case against her in any court — the criminal cases were filed with the CTA only in October 2009. Although a criminal complaint was pending before the DOJ since June 3, 2005, this fact did not disqualify her because it is not included in the exceptions under Section 8 of RA 9480. Having fully complied with all requirements and conditions, Tuyay is entitled to the immunities and privileges conferred by RA 9480, including immunity from criminal liability under the NIRC for taxable year 2005 and prior years.

• Certiorari as not a substitute for appeal — A petition for certiorari under Rule 65 will not prosper when the remedy of appeal is available; certiorari is not a substitute for a lost appeal. The Court may treat a Rule 65 petition as a Rule 45 petition only if (1) filed within the reglementary period for Rule 45, (2) errors of judgment are averred, and (3) there is justifiable reason for relaxation of the rule. None of these circumstances were present, and the petition was dismissed outright.

• Primary responsibility of the OSG in appellate proceedings — The Solicitor General has the primary responsibility to appear for the government in appellate proceedings. Exceptions are limited to: (1) when the government is adversely affected by the OSG's contrary position; (2) when there is express OSG authorization deputizing legal officers to represent the government; and (3) when dismissal of the petition could have lasting effect on government tax revenues. BIR Special Prosecutors must be duly deputized by the OSG and remain under its direct control and supervision; absent proof of deputization at the time of filing, their appearance is unauthorized.

• IRR cannot expand or modify the law — Administrative agencies tasked to promulgate implementing rules and regulations cannot supplant, modify, or amend the law by altering, enlarging, or restricting the provisions of the law it seeks to implement. Where there is a discrepancy between the law and its IRR, the law must prevail because the IRR cannot go beyond the terms and provisions of the law. Section 5.5 of the IRR of RA 9480, which added "filed in court or in the [DOJ]" to the exceptions, was invalid for impermissibly expanding Section 8(e) of RA 9480.

• Tax amnesty exceptions — pending criminal cases in court only — Under Section 8(e) of RA 9480, only those with pending criminal cases in court for tax evasion and other criminal offenses under the NIRC, and the felonies of frauds, illegal exactions and transactions, and malversation of public funds and property under Chapters III and IV of Title VII of the Revised Penal Code, are excluded from the tax amnesty. A pending criminal complaint before the DOJ does not disqualify a taxpayer from availing of the amnesty.

• "A comparison of Section 8 (e) of RA 9480 and Section 5.5 of its IRR readily shows that the DOJ inserted the phrase 'filed in court or in the [DOJ]' in the IRR. By adding the said phrase, the DOJ in effect expanded the law." — This passage identifies the core legal error in the IRR and anchors the Court's ruling that the IRR provision is invalid for going beyond the statute it implements.

• "The Court need not belabor that administrative agencies, which are tasked to promulgate IRR, cannot supplant, modify, or amend the law by altering, enlarging, or restricting the provisions of the law its seeks to implement." — This is the canonical formulation of the doctrine that IRRs cannot exceed the scope of the law, applied here to strike down Section 5.5 of the IRR of RA 9480.

• "Thus, as between Section 8(e) of RA 9480, and Section 5.5 of the IRR of RA 9480, it is the former that must prevail. Accordingly, under Section 8(e) of RA 9480, only those with pending criminal cases in court for tax evasion and other criminal offenses under the NIRC ... are excluded." — This states the ratio decidendi on the scope of tax amnesty exceptions, establishing that the statutory language controls over the expanded IRR provision.

• Aichi Forging Co. of Asia, Inc. vs. Court of Tax Appeals (En Banc), 817 Phil. 403 (2017) — Cited for the principle that certiorari under Rule 65 lies only in the absence of an appeal or plain, speedy, and adequate remedy in the ordinary course of law.
• Pfleider vs. Court of Appeals-Cebu City, G.R. No. 196058, November 12, 2018 — Cited for the rule that certiorari is not a substitute for a lost appeal.
• Tankeh vs. Development Bank of the Philippines, 720 Phil. 641 (2013) — Cited for the circumstances under which the Court may treat a Rule 65 petition as a Rule 45 petition.
• VMC Rural Electric Service Cooperative, Inc. vs. Court of Appeals, 535 Phil. 345 (2006) — Cited for the definition of grave abuse of discretion amounting to lack or excess of jurisdiction.
• LG Electronics Philippines, Inc. vs. Commissioner of Internal Revenue, 749 Phil. 155 (2014) — Cited for the principle that the OSG has the primary responsibility to appear for the government in appellate proceedings.
• Commissioner of Internal Revenue vs. La Suerte Cigar and Cigarette Factory, 433 Phil. 463 (2002) — Cited as an example of an exception where BIR legal officers may appear without OSG representation, involving lasting effects on government tax revenues.
• Lokin, Jr. vs. Commission on Elections, 635 Phil. 372 (2010) — Cited for the doctrine that administrative agencies cannot supplant, modify, or amend the law through their IRR.
• Navarro vs. Executive Secretary Ermita, 626 Phil. 23 (2010) — Cited for the rule that in case of discrepancy between the law and its IRR, the law must prevail.

• Section 8(e), Republic Act No. 9480 (Tax Amnesty Act) — Provides that the tax amnesty shall not extend to those with pending criminal cases for tax evasion and other criminal offenses under Chapter II of Title X of the NIRC, and the felonies of frauds, illegal exactions and transactions, and malversation of public funds and property under Chapters III and IV of Title VII of the Revised Penal Code. Applied to determine that Tuyay was not disqualified because her pending complaint before the DOJ was not included in this exception.
• Section 5.5, IRR of RA 9480 — Expanded the exception to include those with pending criminal cases "filed in court or in the Department of Justice." Held invalid for impermissibly expanding the statutory exception, as the IRR cannot go beyond the terms of the law.
• Section 1, Rule 16, 2005 Revised Rules of the CTA — Provides that a party adversely affected by a decision or ruling of the CTA En Banc may appeal to the Supreme Court by filing a verified petition for review on certiorari under Rule 45 within fifteen days. Applied to show that the proper remedy was a Rule 45 petition, not a Rule 65 petition.
• Section 10, Rule 9, 2005 Revised Rules of the CTA — Provides that the Solicitor General shall represent the people in all cases brought to the CTA in the exercise of its appellate jurisdiction, with authority to deputize BIR legal officers who remain under OSG control and supervision. Applied to uphold the CTA En Banc's dismissal of the petition for review filed by unauthorized BIR Special Prosecutors.
• Section 7, Rule 15, 2005 Revised Rules of the CTA — Prohibits the filing of a second motion for reconsideration. Applied to hold that petitioner's second motion for reconsideration was a prohibited pleading and did not toll the period to appeal.
• Sections 254 and 255, National Internal Revenue Code — Define the criminal offenses of attempt to evade or defeat tax, and failure to file return, supply correct information, pay tax, withhold and remit tax, respectively. These were the charges filed against Tuyay before the CTA.

Perlas-Bernabe (Chairperson) and Inting, J., concurred. Gaerlan and Dimaampao, JJ., were on official leave.