Duty Free Philippines Corporation vs. Bureau of Internal Revenue, et al.

DECISION

MINDARO-GRULLA, J.:

Submitted for decision on October 24, 2018, is the Petition for Review for the Court En Bane under Section 4(b), Rule 8 1 of the 2005 Revised Rules of the Court of Tax Appeals (RRCTA), as amended, of the Decision, in the case entitled Duty Free Philippines Corporation vs. Bureau of Internal Revenue represented by Kim 5. Jacinto-Henares, 1 SEC. 4 . Where to appeal; mode of appeal. -

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(b) An appea l from a decision or resolution of the Court in Division on a motion for reconsideration or new trial shall be taken to the Court by petition for review as provided in Rule 43 of the Rules of Court. The Court en bane shall act on the appea l.

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Duty Free Philippines Corporation vs. Bureau of Internal Revenue represented by Kim S. Jacinto-Henares, and/or Nestor S. Valeroso, OIC -Assistant Commissioner, Large Taxpayers Service

CTA EB No. 1911 (CTA Case No. 9355) and/or Nestor 5. Valeroso, OIC-Assistant Commissioner, Large Taxpayers Service, docketed as CTA Case No. 9355, dated May 8, 2018,2 and the Resolution dated July 26, 2018, 2018, 3 both rendered by the Former Second Division of this Court, the dispositive portions of which read as follows: CTA Case No. 9355:

Decision dated May 8. 2018:

"WHEREFORE, in light of the foregoing, the Petition for Review is hereby DISMISSED due to lack of jurisdiction. Let a copy of this decision be furnished to the Secretary of Justice.

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In 2012,

RA

No.

10351 entitled "An

Act

Restructuring the Excise Tax on Alcohol and Tobacco

Products by Amending Sections 141, 142, 143, 144, 145, 8, 131 and 288 of Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997, as amended by Republic Act No. 9334, and for other purposes" took effect which, among others restructured excise taxes on alcohol and tobacco products.

Thereafter, BIR assessed and collected value-added tax (VAT) on DFPC's importation of alcohol and tobacco merchandise for sale in 2014. On November 16, 2015, petitioner filed its administrative claim for refund on the alleged erroneously or illegally assessed and collected VAT for the period January 1 to December 31, 2014 on its importation of alcohol and tobacco merchandise that were up for sale xxx.

On

May

5, 2016, petitioner received respondent's letter dated April 26, 2016, wherein the latter denied said claim for refund citing Section 7 of RA No.

10351, amending Section 131(A) of the National Internal Revenue Code of 1997 (NIRC), as amended, that DFPC's importation of tobacco and alcohol products for sale is exempt only as far as the applicable duties are concerned but not from payment of VAT.

On May 20, 2016, petitioner filed the instant petition asking this Court to reverse and set-aside respondent's denial of its claim for refund and order the refund xxx representing the VAT erroneously or illegally assessed and collected from January 1, to December 31, 2014. xxx" (Citations omitted.)

Duty Free Philippines Corporation vs. Bureau of Internal Revenue represented by Kim S. Jacinto-Henares, and/or Nestor S. Valeroso, OIC -Assistant Commissioner, Large Taxpayers Service CTA EB No. 1911 (CTA Case No. 9355)

The former Second Division dismissed the Petition for Review for lack of jurisdiction, citing the Supreme Court En

Bane

case of

Power

Sector

Assets

and

Liabilities

Management Corporation vs.

Commissioner of Internal

Revenue (the "PSALM Case''), 4 which ruled that under Presidential Decree (PD) No. 242, disputes and claims solely between the BIR and another government entity, which in this case, is Duty Free Philippines Corporation (DFPC), shall be administratively settled or adjudicated by the Secretary of Justice, the Solicitor General,

or the Government

Corporate Counsel, depending on the issues and government agencies involved. Thus, the jurisdiction belongs to the Secretary of Justice and the disputes should be resolved pursuant to PD 242.

DFPC filed its Motion for Reconsideration, 5 assailing that the Court has jurisdiction over its petition, which the Former Second Division denied in the assailed Resolution. Hence, DFPC filed its Petition for Review6 on August 31, 2018. In its Petition for Review, DFPC reiterates its notion that the Court has jurisdiction over its petition, it is entitled to refund and the facts in the PSALM Case are different from the instant case considering that in the PSALM Case, the collection of the assessed amount pertains to the execution and implementation of the Memorandum of Agreement (MOA) between the Bureau of Internal Revenue (BIR), PSALM, and National Power Corporation (NPC), and not to a valid assessment.

On the other hand, the Commissioner of Internal Revenue (CIR), in his Comment/ reiterates his argument that the Court has no jurisdiction over the matter. The Court of Tax Appeals (CTA) is a court of special jurisdiction and can only take cognizance of such matters as 4 G.R. No. 198146 dated August 8, 2017. 5 Division Docket, Vol. II, pp. 498-518. 6 En Bane Docket, pp. 7-36.

7 Ibid., pp. 60-66.

Duty Free Philippines Corporation vs. Bureau of Internal Revenue represented by Kim S. Jacinto-Henares, and/or Nestor S. Valeroso, OIC -Assistant Commissioner, Large Taxpayers Service CTA EB No. 1911 (CTA Case No. 9355) are clearly within its jurisdiction. 8 Section 7 (a)(1) and (2) of Republic Act (RA) No. 1125, as amended by R.A. Nos. 9282 and 9503, provides:

"SEC. 7. Jurisdiction.- The CTA shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal, as herein provided: (1)

Decisions

Commissioner

of of the

Internal

Revenue in cases involving xxx refunds of internal revenue taxes, xxx;

(2)

Inaction

by the

Commissioner

of

Internal

Revenue in cases involving xxx refunds of internal revenue taxes xxx" Similarly, Section 3(a)(1) and (2) of Rule 4 of the Revised Rules of the CTA states:

"SEC. 3. Cases within the jurisdiction of the Court in Division.- The Court in Division shall exercise:

(a) Exclusive original jurisdiction to review by following:

(1)

Decisions

Commissioner

of or appellate appeal the of the

Internal

Revenue in cases involving xxx refunds of internal revenue taxes xxx;

(2)

Inaction

by the

Commissioner

of

Internal

8 Commissioner of Internal Revenue vs. Silicon Philippines, Inc. (formerly Intel Philippines Manufacturing, Inc.), G.R. No. 169778, March 12, 2014.

Duty Free Philippines Corporation vs. Bureau of Internal Revenue represented by Kim S. Jacinto-Henares, and/or Nestor S. Valeroso, ore -Assistant Commissioner, Large Taxpayers Service CTA EB No. 1911 (CTA Case No. 9355)

DECISION

Revenue in cases involving xxx refunds of internal revenue taxes xxx"

Page 6 of 8

Based on the foregoing, the Court in Division shall exercise exclusive original jurisdiction to review by appeal decisions of the CIR in cases involving refund of internal revenue taxes. However, it is crystal clear in the Supreme Court En Bane's PSALM Case that in disputes and claims solely between government agencies and offices, including GOCCs, the administrative procedure in Sections 2 and 3 of PO 242 should be followed. In the instant case, DFPC, is an agency attached to DOT, which is a national government agency, while respondent represents the Bureau of Internal Revenue, which is a government agency. Clearly, the petition involves a dispute solely between a government corporation and another government agency and as such, this Court is bereft of jurisdiction to take cognizance of the case.

As to DFPC's argument that the instant case has a different factual setting, a scrutiny of the factual antecedents of the PSALM Case reveals that the case was the result of the letter dated 14 August 2007 from the BIR, signed by the OIC Commissioner of Internal Revenue, demanding immediate payment of P3,813,080,472 deficiency value-added tax (VAT) for the sale of the Pantabangan-Masiway and Magat power plants. The actual issue in PSALM Case was the demand for payment of deficiency value-added tax (VAT) on the sale of NPC properties while in the instant case, the refund stems from the demand for payment of VAT made by the CIR against DFPC. Thus, the facts are substantially the same which belies DFPC's argument.

More

importantly, the

Supreme

Court

is very categorical in its ruling in the PSALM Case, that: "The law is clear and covers "all disputes, claims and controversies solely between or among the departments, bureaus, offices, Duty Free Philippines Corporation vs. Bureau of Internal Revenue represented by Kim S. Jacinto-Henares, and/or Nestor S. Valeroso, ore -Assistant Commissioner, Large Taxpayers Service CTA EB No. 1911 (CTA Case No. 9355) agencies and instrumentalities of the National Government, including constitutional offices or agencies arising from the interpretation and application of statutes, contracts or agreements." When the law says "all disputes, claims and controversies solely" among government agencies, the law means all, without exception. Only those cases already pending in court at the time of the effectivity of PD 242 are not covered by the law." (Emphases and italics in the original; underlining supplied.)

This Court merely applies the doctrine laid down by the Supreme Court in the said PSALM Case and the ruling enunciated therein precludes this Court from acquiring jurisdiction over the petition for review.

WHEREFORE, premises considered, the Petition for Review filed by Duty Free Philippines Corporation is hereby DENIED. The assailed Decision and Resolution dated May 8, 2018 and July 26, 2018, respectively, in CTA Case No. 9355 are hereby AFFIRMED.

WE CONCUR:

r.;vt:- 1\. M~~- b'~ CIELiTO ·~. MINDARO-GRULLA

Associate Justice

Presiding Justice

(On Official Business)

JUANITO C. CASTANEDA, JR.

ER~P.UY

AssoCiate Justice

Associate Justice

Duty Free Philippines Corporation vs. Bureau of Internal Revenue represented by Kim S. Jacinto-Henares, and/or Nestor S. Valeroso, ore -Assistant Commissioner, Large Taxpayers Service CTA EB No. 1911 (CTA Case No. 9355)

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Y""-'

ciate Justice MA. BELEN M. RINGPIS-LIBAN

Associate Justice

~-(7~ CATHERINE T. MANAHAN

Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court En Bane.

Presiding Justice