Case Digest (G.R. No. 222239) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Association of International Shipping Lines, Inc. (AISL), APL Co. Pte. Ltd., and Maersk-Filipinas, Inc. vs. Secretary of Finance and Commissioner of Internal Revenue, G.R. No. 222239, decided January 15, 2020, petitioners AISL, APL, and Maersk challenged the validity of Section 4.4 of Revenue Regulations No. 15-2013 (RR 15-2013), which the Secretary of Finance issued to implement Republic Act No. 10378 amending Section 28(A)(3)(a) of the National Internal Revenue Code (NIRC) as previously revised by RA 9337. After the Commissioner of Internal Revenue promulgated Revenue Memorandum Circular No. 31-2008 to clarify VAT and income tax liabilities of sea carriers, petitioners secured a summary judgment from RTC Branch 98, Quezon City on May 18, 2012, declaring portions of RMC 31-2008 invalid. Following the enactment of RA 10378 on March 7, 2013, and the issuance of RR 15-2013 on September 20, 2013, petitioners filed a petition for declaratory relief in December 2013 before RTC Bra... Case Digest (G.R. No. 222239) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Amendments to the NIRC and RMC 31-2008
- Republic Act No. 9337 (July 1, 2005) amended key sections of the 1997 National Internal Revenue Code (NIRC).
- Commissioner of Internal Revenue Lilian Hefti issued Revenue Memorandum Circular No. 31-2008 (January 30, 2008) to clarify VAT, percentage tax, and income tax treatment of international shipping operations, including:
- Exemption of on-line international sea carriers from VAT but liability to 3% percentage tax on outbound receipts (Sec. 118).
- Imposition of regular income tax on demurrage and detention fees as Philippine-sourced income.
- Zero-rating of goods and services sold to international carriers for direct shipments (Sec. 108).
- VAT treatment of local agents’ commissions (Sec. 108(B)(4)).
- First declaratory relief petition (2010–2012)
- On December 6, 2010, AISL, APL Co. Pte. Ltd., and Maersk-Filipinas filed Civil Case No. Q-09-64241 before RTC-Branch 98, Quezon City, seeking to void RMC 31-2008 provisions subjecting:
- Demurrage and detention fees to 30% income tax and 12% VAT.
- Domestic services of international carriers to 12% VAT.
- Agent commissions on inbound freights to 12% VAT.
- By Order dated May 18, 2012, the RTC granted summary judgment, declaring those portions of RMC 31-2008 invalid for being contrary to Sec. 28(A)(1),(3) and Sec. 108(B)(4) of the NIRC. The decision became final and executory on June 16, 2012.
- Enactment of RA 10378 and RR 15-2013
- Republic Act No. 10378 (March 7, 2013) amended Sec. 28(A)(3)(a) of the NIRC to define “Gross Philippine Billings” (GPB) for international carriers and recognize reciprocity in income-tax exemptions.
- Secretary of Finance Cesar Purisima issued Revenue Regulation No. 15-2013 (September 20, 2013) to implement RA 10378, including Section 4.4, which subjects to regular income tax “all items of income derived by international carriers that do not form part of GPB,” explicitly including demurrage and detention fees.
- Second declaratory relief petition (2013–2015)
- On December 4, 2013, petitioners filed Special Civil Action No. R-QZN-13-05590-CV before RTC-Branch 77, challenging RR 15-2013, Sec. 4.4, on grounds of:
- Res judicata (finality of the 2012 RTC Order).
- Lack of statutory authority for taxing demurrage/detention at the regular rate.
- Characterization of these fees as non-income penalties (akin to damages).
- Procedural defects: no public hearing, no UP Law Center filing.
- Respondents (Sec. of Finance and CIR) opposed, arguing distinct issuances and issuers, valid interpretative regulation, and that demurrage/detention are income subject to regular tax. CIR additionally claimed lack of RTC jurisdiction under CA 55.
- RTC ruling and subsequent motions
- RTC-Branch 77, by Order dated September 15, 2015:
- Took judicial notice of RMC 31-2008, the 2012 RTC Order, RA 10378, and RR 15-2013.
- Held it lacked jurisdiction under Commonwealth Act No. 55 to entertain a declaratory relief on tax liabilities.
- Ruled res judicata inapplicable for lack of identity of parties and subject matter.
- Found RR 15-2013 a valid, interpretative tax regulation not requiring public hearing or UP Law Center filing.
- Denied summary judgment and dismissed the petition.
- Petitioners’ partial motion for reconsideration was denied on January 8, 2016.
Issues:
- Does res judicata apply to bar the challenge against RR 15-2013?
- Is a petition for declaratory relief the proper remedy to invalidate RR 15-2013?
- Is RR 15-2013 a valid revenue regulation under existing law?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)