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Tax Case Digest: CIR v. San Miguel Corporation G.R. No. 180740/G.R. No. 180910, November 11, 2019

CIR v. San Miguel Corporation
G.R. No. 180740/G.R. No. 180910, November 11, 2019

SC Second Division
Hernando, J.:

Lessons Applicable: unauthorized administrative legislation, prescription period for refund
Laws Applicable: 

  • January 1, 1997: Republic Act (RA) No. 8240 took effect adopting a specific tax system instead of the ad valorem tax system imposed on, among others, fermented liquor.  As a result, fermented liquors were specifically subjected to excise taxes in accordance to the schedule in Section 140 of RA 8240 (renumbered to Section 143 under RA 8424)
  • December 16, 1999: Secretary of Finance, upon recommendation of the CIR, issued RR No. 17-99 to implement 12% increase on excise tax, among others, fermented liquors by January 1, 2000.
  • January 10, 2003: SMC filed a claim for tax refund or credit of excise tax it paid on its Red Horse Beer product from January 11, 2001 to December 31, 2000 in the amount of 94,494,801.96 php equivalent to the difference before the effectivity of RA 8240 and the new rate imposed under Section 145 of RA 8424 .  
  • Without waiting for the CIR to act on its administrative claim for tax refund or credit, SMC filed a Petition for Review before the CTA
  • CTA 1st Division: Approved SMC’s claim for tax refund or credit for its excess excise tax payment from March 1, 2001 to December 31, 2002 in the amount of 88,090,531.56 (excluded prescribed claim for January to February 2001).
  • SMC filed a Motion for Reconsideration (MR) for the prescribed claim for January to February 2001 arguing that under the Advance Payment or Deposit scheme authorized by Section 11.1(2)(b) of RR No. 2-97, the filing of the returns and supporting documents may be submitted even a week after the actual removals.
  • CTA 1st Division denied MR: Though due date of tax payment is not always the reckoning point for purposes of prescription, SMC failed to present its excise tax returns for January 1, 2001 to February 28, 2001 to prove the dates they were actually filed.
  • CIR and SMC filed a Petition for Review with the CTA En Banc
  • CTA en Banc: Denied since SMC claim is barred by prescription based on Section 229 and 130(A)(2) of the Tax Reform Act of 1997 since it failed to present the proof of the exact amount it paid for the period February 1 to 23, 2001.
  • CIR filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court with the CTA En Banc
1.    W/N Section 1 of RR 17-99 is valid
2.    W/N SMC is entitled claim has prescribed

HELD: Petitions are denied.

1.    NO. 
  • As  correctly contended by SMC, CIR v. Fortune Tobacco Corporation (G.R. Nos. 167274-75,  July 21, 2008) declaring Section 1 of RR No. 17-99 as unauthorized administrative legislation applies.  In this case, the provision is not supported by the plain wording of Section 143 of the Tax Code on fermented liquor just like Section 145 of the same Code on cigars and cigarettes in the above-mentioned case.
  • Moreover, in CIR v. San Miguel Corporation (G.R. No. 184428, November 23, 2011) which involved the same parties herein and similar claim for refund of SMC for excess excise tax payments on its Red Horse beer product paid from May 22 to December 31, 2004.

2.    Yes. 
  • In CIR v. Meralco (G.R. No. 181459, June 9, 2014), the court ruled that the two (2)-year prescriptive period under Section 229 of the Tax Reform Act of 1997 applies and that the six (6)-year period for actions based on solutio indebiti under Art. 1145 of the Civil Code.  The first element of solution indebiti where payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment is lacking.  Moreover, it is inapplicable since the Tax Code is a special law which explicitly provides for a mandatory period for claiming a refund for taxes erroneously paid.  Generalia specialibus non derogant.
  • Neither can the claim be excepted from the two (2)-year prescription period based on equity considerations when there is clear statutory law governing the matter.
  • It is a basic rule of evidence that each party must prove its affirmative allegation.  The burden rests upon SMC to present evidence that its prescribed returns for the excise taxes on its Red Horse beer product for February 2001 were actually filed after the removal of the said products from the place of production or later than February 24, 2001.   Yet, it failed to present a definitive computation of the excise taxes on its Red Horse Beer product which it had paid from February 24 to 28, 2001 and which would still have been within the prescriptive period.  
  • Only questions of law may be raised under Rule 45 of the Rules of Court.  The sufficiency of a claimant’s evidence and the determination of the amount of refund are questions of fact which are for the judicious determination by the CTA of the evidence on record.  Rule finds greater significance with respect to the findings of specialized courts such as the CTA because of the very nature of its functions, which is dedicated exclusively to the resolution of tax problems and has accordingly developed an expertise on the subject, and consequently its conclusions are not lightly set aside unless there has been an abuse or improvident exercise of authority.