G.R. No. 180740 - Commissioner of Internal Revenue vs. San Miguel Corp.

San Miguel Corporation (SMC) is a domestic corporation engaged in manufacturing fermented liquors, notably the "Red Horse" beer brand sold in one-liter and 325 ml. bottles.
The Commissioner of Internal Revenue (CIR) is responsible for assessing and collecting national internal revenue taxes.
This case stems from petitions for review filed by both parties before the Supreme Court, challenging decisions of the Court of Tax Appeals (CTA) En Banc and First Division concerning excise tax payments on SMC’s Red Horse beer.

Republic Act (RA) No. 8240, effective January 1, 1997, shifted the excise taxation on fermented liquors from an ad valorem to a specific tax system, with rates based on net retail price per liter (excluding excise tax and VAT) classified into three brackets:

The law allowed a three-year transition period (January 1, 1997 to December 31, 1999) during which excise tax on any brand shall not be lower than the tax due as of October 1, 1996.
On January 1, 2000, rates under paragraphs (a) to (c) were to increase by 12%.
Revenue Regulations (RR) No. 17-99, issued December 16, 1999, implemented the 12% increase but included a proviso that the new specific tax rate shall not be lower than the excise tax actually paid prior to January 1, 2000.
Prior to the change, SMC was paying an ad valorem tax rate of P7.07 per liter on Red Horse beer, which RR 17-99 retained as a minimum for the specific tax after January 1, 2000.

SMC contended that RR No. 17-99’s proviso unjustly extended the three-year transition period and maintained a higher tax rate than prescribed by RA 8240.
On January 10, 2003, SMC filed a letter claim with the Bureau of Internal Revenue (BIR) for refund or credit of alleged excess excise taxes amounting to P94,494,801.96 covering January 11, 2001 to December 31, 2002.
SMC then filed a Petition for Review with the CTA First Division on February 24, 2003, docketed as C.T.A. Case No. 6607.
The CTA First Division ruled on March 15, 2006 that RR No. 17-99’s proviso was invalid based on precedent (Fortune Tobacco Corporation v. CIR) and granted SMC’s refund claim, less portions barred by prescription.
The CIR and SMC filed motions for reconsideration denying and partially contesting the ruling on prescriptions, which were denied by the CTA First Division in June 2006.
Both parties elevated the case to the CTA En Banc, which, in September 2007, affirmed the rulings, sustaining the disallowance of claims barred by prescription and confirming the invalidity of RR No. 17-99 proviso. Motions for reconsideration denied in November 2007.

Whether the CTA En Banc correctly ruled RR No. 17-99’s proviso as illegal and contrary to the National Internal Revenue Code (NIRC) of 1997.
Whether the CTA En Banc rightly granted refund of P88,090,531.56 representing excess excise taxes paid by SMC from March 1, 2001 to December 31, 2002.
Whether the CTA erred in applying the two-year prescriptive period instead of the six-year period under the principle of solutio indebiti.
Whether prescriptive periods were properly computed considering SMC’s use of the Advance Payment or Deposit scheme.
Whether prescriptive periods are jurisdictional or may be suspended based on equity.

Legality and conformity with the Tax Code of the proviso in Section 1 of RR No. 17-99 requiring that the new specific tax rate not be lower than excise tax actually paid prior to January 1, 2000.

Entitlement of SMC to refund or tax credit of P88,090,531.56 for excess excise taxes paid from March 1, 2001 to December 31, 2002.

Applicability of the two-year prescriptive period under Section 229 of the Tax Reform Act of 1997 versus the six-year prescriptive period under the principle of solutio indebiti (Article 1145 of the Civil Code) for tax refund claims.

Proper reckoning of prescriptive period considering the Advance Payment or Deposit Scheme under RR No. 2-97.

The jurisdictional nature of prescription under tax laws and the possibility of its suspension on equity grounds.