581 Phil. 146
TINGA, J,:
Simple and uncomplicated is the central issue involved, yet whopping is the amount at stake in this case.
CAG.R. SP No. 80675The Commissioner appealed the aforesaid decisions of the CTA. The petition questioning the grant of refund in the amount of P680,387,025.00 was docketed as CA-G.R. SP No. 80675, whereas that assailing the grant of refund in the amount of P355,385,920.00 was docketed as CA-G.R. SP No. 83165. The petitions were consolidated and eventually denied by the Court of Appeals. The appellate court also denied reconsideration in its Resolution[5] dated 1 March 2005.
x x x x
Petitioner[2] is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal address at Fortune Avenue, Parang, Marikina City.
Petitioner is the manufacturer/producer of, among others, the following cigarette brands, with tax rate classification based on net retail price prescribed by Annex "D" to R.A. No. 4280, to wit:Immediately prior to January 1, 1997, the above-mentioned cigarette brands were subject to ad valorem tax pursuant to then Section 142 of the Tax Code of 1977, as amended. However, on January 1, 1997, R.A. No. 8240 took effect whereby a shift from the ad valorem tax (AVT) system to the specific tax system was made and subjecting the aforesaid cigarette brands to specific tax under [S]ection 142 thereof, now renumbered as Sec. 145 of the Tax Code of 1997, pertinent provisions of which are quoted thus:
Brand Tax Rate Champion M 100 P1.00 Salem M 100 P1.00 Salem M King P1.00 Camel F King P1.00 Camel Lights Box 20's P1.00 Camel Filters Box 20's P1.00 Winston F Kings P5.00 Winston Lights P5.00 Section 145. Cigars and Cigarettes-
(A) Cigars. - There shall be levied, assessed and collected on cigars a tax of One peso (P1.00) per cigar.
"(B) Cigarettes packed by hand. - There shall be levied, assessesed and collected on cigarettes packed by hand a tax of Forty centavos (P0.40) per pack.
(C) Cigarettes packed by machine. - There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos (P10.00) per pack, the tax shall be Twelve (P12.00) per pack;
(2) If the net retail price (excluding the excise tax and the value added tax) exceeds Six pesos and Fifty centavos (P6.50) but does not exceed Ten pesos (P10.00) per pack, the tax shall be Eight Pesos (P8.00) per pack.
(3) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but does not exceed Six Pesos and fifty centavos (P6.50) per pack, the tax shall be Five pesos (P5.00) per pack;
(4) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos (P5.00) per pack, the tax shall be One peso (P1.00) per pack;
"Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity of R.A. No. 8240 shall be taxed under the highest classification of any variant of that brand.
The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than the tax, which is due from each brand on October 1, 1996. Provided, however, that in cases were (sic) the excise tax rate imposed in paragraphs (1), (2), (3) and (4) hereinabove will result in an increase in excise tax of more than seventy percent (70%), for a brand of cigarette, the increase shall take effect in two tranches: fifty percent (50%) of the increase shall be effective in 1997 and one hundred percent (100%) of the increase shall be effective in 1998.
Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only be packed in twenties.
The rates of excise tax on cigars and cigarettes under paragraphs (1), (2) (3) and (4) hereof, shall be increased by twelve percent (12%) on January 1, 2000. (Emphasis supplied)
New brands shall be classified according to their current net retail price.
For the above purpose, `net retail price' shall mean the price at which the cigarette is sold on retail in twenty (20) major supermarkets in Metro Manila (for brands of cigarettes marketed nationally), excluding the amount intended to cover the applicable excise tax and value-added tax. For brands which are marketed only outside Metro [M]anila, the `net retail price' shall mean the price at which the cigarette is sold in five (5) major supermarkets in the region excluding the amount intended to cover the applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its average retail price as of October 1, 1996, as set forth in Annex "D," shall remain in force until revised by Congress.
Variant of a brand shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand and/or a different brand which carries the same logo or design of the existing brand.
To implement the provisions for a twelve percent (12%) increase of excise tax on, among others, cigars and cigarettes packed by machines by January 1, 2000, the Secretary of Finance, upon recommendation of the respondent Commissioner of Internal Revenue, issued Revenue Regulations No. 17-99, dated December 16, 1999, which provides the increase on the applicable tax rates on cigar and cigarettes as follows:
SECTION DESCRIPTION OF ARTICLES PRESENT SPECIFIC TAX RATES PRIOR TO JAN. 1, 2000 NEW SPECIFIC TAX RATE Effective Jan.. 1, 2000145 (A) Cigars P1.00/cigar P1.12/cigar (B)Cigarettes packed by Machine
(1) Net Retail Price (excluding VAT and Excise) exceeds P10.00 per pack
(2) Net Retail Price (excluding VAT and Excise) is P6.51 up to P10.00 per pack
(3) Net Retail Price (excluding VAT and excise) is P5.00 to P6.50 per pack
(4) Net Retail Price (excluding VAT and excise) is below P5.00 per pack)
P12.00/pack
P8.00/pack
P5.00/pack
P1.00/pack
P13.44/pack
P8.96/pack
P5.60/pack
P1.12/pack
Revenue Regulations No. 17-99 likewise provides in the last paragraph of Section 1 thereof, "(t)hat the new specific tax rate for any existing brand of cigars, cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be lower than the excise tax that is actually being paid prior to January 1, 2000."
For the period covering January 1-31, 2000, petitioner allegedly paid specific taxes on all brands manufactured and removed in the total amounts of P585,705,250.00.
On February 7, 2000, petitioner filed with respondent's Appellate Division a claim for refund or tax credit of its purportedly overpaid excise tax for the month of January 2000 in the amount of P35,651,410.00
On June 21, 2001, petitioner filed with respondent's Legal Service a letter dated June 20, 2001 reiterating all the claims for refund/tax credit of its overpaid excise taxes filed on various dates, including the present claim for the month of January 2000 in the amount of P35,651,410.00.
As there was no action on the part of the respondent, petitioner filed the instant petition for review with this Court on December 11, 2001, in order to comply with the two-year period for filing a claim for refund.
In his answer filed on January 16, 2002, respondent raised the following Special and Affirmative Defenses;CA G.R. SP No. 83165
- Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau;
- The amount of P35,651,410 being claimed by petitioner as alleged overpaid excise tax for the month of January 2000 was not properly documented.
- In an action for tax refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to its claim for refund/credit.
- Petitioner must show that it has complied with the provisions of Section 204(C) in relation [to] Section 229 of the Tax Code on the prescriptive period for claiming tax refund/credit;
- Claims for refund are construed strictly against the claimant for the same partake of tax exemption from taxation; and
- The last paragraph of Section 1 of Revenue Regulation[s] [No.]17-99 is a valid implementing regulation which has the force and effect of law."
The petition contains essentially similar facts, except that the said case questions the CTA's December 4, 2003 decision in CTA Case No. 6612 granting respondent's[3] claim for refund of the amount of P355,385,920.00 representing erroneously or illegally collected specific taxes covering the period January 1, 2002 to December 31, 2002, as well as its March 17, 2004 Resolution denying a reconsideration thereof.
x x x x
In both CTA Case Nos. 6365 & 6383 and CTA No. 6612, the Court of Tax Appeals reduced the issues to be resolved into two as stipulated by the parties, to wit: (1) Whether or not the last paragraph of Section 1 of Revenue Regulation[s] [No.] 17-99 is in accordance with the pertinent provisions of Republic Act [No.] 8240, now incorporated in Section 145 of the Tax Code of 1997; and (2) Whether or not petitioner is entitled to a refund of P35,651,410.00 as alleged overpaid excise tax for the month of January 2000.
x x x x
Hence, the respondent CTA in its assailed October 21, 2002 [twin] Decisions[s] disposed in CTA Case Nos. 6365 & 6383:WHEREFORE, in view of the foregoing, the court finds the instant petition meritorious and in accordance with law. Accordingly, respondent is hereby ORDERED to REFUND to petitioner the amount of P35,651.410.00 representing erroneously paid excise taxes for the period January 1 to January 31, 2000.Herein petitioner sought reconsideration of the above-quoted decision. In [twin] resolution[s] [both] dated July 15, 2003, the Tax Court, in an apparent change of heart, granted the petitioner's consolidated motions for reconsideration, thereby denying the respondent's claim for refund.
SO ORDERED.
However, on consolidated motions for reconsideration filed by the respondent in CTA Case Nos. 6363 and 6383, the July 15, 2002 resolution was set aside, and the Tax Court ruled, this time with a semblance of finality, that the respondent is entitled to the refund claimed. Hence, in a resolution dated November 4, 2003, the tax court reinstated its December 21, 2002 Decision and disposed as follows:WHEREFORE, our Decisions in CTA Case Nos. 6365 and 6383 are hereby REINSTATED. Accordingly, respondent is hereby ORDERED to REFUND petitioner the total amount of P680,387,025.00 representing erroneously paid excise taxes for the period January 1, 2000 to January 31, 2000 and February 1, 2000 to December 31, 2001.Meanwhile, on December 4, 2003, the Court of Tax Appeals rendered decision in CTA Case No. 6612 granting the prayer for the refund of the amount of P355,385,920.00 representing overpaid excise tax for the period covering January 1, 2002 to December 31, 2002. The tax court disposed of the case as follows:
SO ORDERED.IN VIEW OF THE FOREGOING, the Petition for Review is GRANTED. Accordingly, respondent is hereby ORDERED to REFUND to petitioner the amount of P355,385,920.00 representing overpaid excise tax for the period covering January 1, 2002 to December 31, 2002.Petitioner sought reconsideration of the decision, but the same was denied in a Resolution dated March 17, 2004.[4] (Emphasis supplied) (Citations omitted)
SO ORDERED.
This being so, the interpretation which will give life to the legislative intent to raise revenue should govern, the OSG stresses.
- That by January 1, 2000, the excise tax on cigarettes should be the higher tax imposed under the specific tax system and the tax imposed under the ad valorem tax system plus the 12% increase imposed by par. 5, Sec. 145 of the Tax Code;
- The increase of 12% starting on January 1, 2000 does not apply to the brands of cigarettes listed under Annex "D" referred to in par. 8, Sec. 145 of the Tax Code;
- The 12% increment shall be computed based on the net retail price as indicated in par. C, sub-par. (1)-(4), Sec. 145 of the Tax Code even if the resulting figure will be lower than the amount already being paid at the end of the transition period. This is the interpretation followed by both the CTA and the Court of Appeals.[7]
Revenue Regulation 17-99, which was issued pursuant to the unquestioned authority of the Secretary of Finance to promulgate rules and regulations for the effective implementation of the Tax Code,[12] interprets the above-quoted provision and reflects the 12% increase in excise taxes in the following manner:Section 145. Cigars and Cigarettes-
(A) Cigars.--There shall be levied, assessed and collected on cigars a tax of One peso (P1.00) per cigar.
(B). Cigarettes packed by hand.--There shall be levied, assessed and collected on cigarettes packed by hand a tax of Forty centavos (P0.40) per pack.
(C) Cigarettes packed by machine.--There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos (P10.00) per pack, the tax shall be Twelve pesos (P12.00) per pack;
(2) If the net retail price (excluding the excise tax and the value added tax) exceeds Six pesos and Fifty centavos (P6.50) but does not exceed Ten pesos (P10.00) per pack, the tax shall be Eight Pesos (P8.00) per pack.
(3) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but does not exceed Six Pesos and fifty centavos (P6.50) per pack, the tax shall be Five pesos (P5.00) per pack;
(4) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos (P5.00) per pack, the tax shall be One peso (P1.00) per pack;
Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity of R.A. No. 8240 shall be taxed under the highest classification of any variant of that brand.
The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than the tax, which is due from each brand on October 1, 1996. Provided, however, That in cases where the excise tax rates imposed in paragraphs (1), (2), (3) and (4) hereinabove will result in an increase in excise tax of more than seventy percent (70%), for a brand of cigarette, the increase shall take effect in two tranches: fifty percent (50%) of the increase shall be effective in 1997 and one hundred percent (100%) of the increase shall be effective in 1998.
Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only be packed in twenties.
The rates of excise tax on cigars and cigarettes under paragraphs (1), (2) (3) and (4) hereof, shall be increased by twelve percent (12%) on January 1, 2000.
New brands shall be classified according to their current net retail price.
For the above purpose, `net retail price' shall mean the price at which the cigarette is sold on retail in twenty (20) major supermarkets in Metro Manila (for brands of cigarettes marketed nationally), excluding the amount intended to cover the applicable excise tax and value-added tax. For brands which are marketed only outside Metro Manila, the `net retail price' shall mean the price at which the cigarette is sold in five (5) major intended to cover the applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its average retail price as of October 1, 1996, as set forth in Annex "D," shall remain in force until revised by Congress.
Variant of a brand' shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand and/or a different brand which carries the same logo or design of the existing brand.[11] (Emphasis supplied)
This table reflects Section 145 of the Tax Code insofar as it mandates a 12% increase effective on 1 January 2000 based on the taxes indicated under paragraph C, sub-paragraph (1)-(4). However, Revenue Regulation No. 17-99 went further and added that "[T]he new specific tax rate for any existing brand of cigars, cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be lower than the excise tax that is actually being paid prior to January 1, 2000."[13]
SECTION DESCRIPTION OF ARTICLES PRESENT SPECIFIC TAX RATES PRIOR TO JAN. 1, 2000 NEW SPECIFIC TAX RATE Effective Jan.. 1, 2000145 (A) Cigars P1.00/cigar P1.12/cigar (B)Cigarettes packed by Machine
(1) Net Retail Price (excluding VAT and Excise) exceeds P10.00 per pack
(2) Net Retail Price (excluding VAT and Excise) is P6.51 up to P10.00 per pack
(3) Net Retail Price (excluding VAT and excise) is P5.00 to P6.50 per pack
(4) Net Retail Price (excluding VAT and excise) is below P5.00 per pack)
P12.00/pack
P8.00/pack
P5.00/pack
P1.00/pack
P13.44/pack
P8.96/pack
P5.60/pack
P1.12/pack
It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with, the law they seek to apply and implement.[21]In Commissioner of Internal Revenue v. CA, et al.,[22] the central issue was the validity of RMO 4-87 which had construed the amnesty coverage under E.O. No. 41 (1986) to include only assessments issued by the BIR after the promulgation of the executive order on 22 August 1986 and not assessments made to that date. Resolving the issue in the negative, the Court held:
x x x all such issuances must not override, but must remain consistent and in harmony with, the law they seek to apply and implement. Administrative rules and regulations are intended to carry out, neither to supplant nor to modify, the law.[23]In the case at bar, the OSG's argument that by 1 January 2000, the excise tax on cigarettes should be the higher tax imposed under the specific tax system and the tax imposed under the ad valorem tax system plus the 12% increase imposed by paragraph 5, Section 145 of the Tax Code, is an unsuccessful attempt to justify what is clearly an impermissible incursion into the limits of administrative legislation. Such an interpretation is not supported by the clear language of the law and is obviously only meant to validate the OSG's thesis that Section 145 of the Tax Code is ambiguous and admits of several interpretations.
x x x
If, as the Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a general grant of tax amnesty subject only to the cases specifically excepted by it.[24]