Facts:

• H. Tambunting Pawnshop, Inc. (Tambunting) is the petitioner in this case.
• The Commissioner of Internal Revenue (CIR) is the respondent.
• On August 29, 2003, Tambunting received an assessment notice from the Bureau of Internal Revenue (BIR) demanding payment of a deficiency Value-Added Tax (VAT) of P5,212,404.52 and a compromise penalty of P25,000 for the taxable year 2000.
• Tambunting protested the assessment on September 15, 2003, claiming its pawnshop business was not subject to VAT or the penalty.
• Due to the CIR's inaction, Tambunting filed a petition for review with the Court of Tax Appeals (CTA) on April 2, 2004.
• The CTA Second Division partially granted the petition on April 11, 2005, ordering Tambunting to pay the deficiency VAT but removing the compromise penalty.
• Tambunting filed a motion for partial reconsideration on April 29, 2005, and later indicated payment of P828,809.67 for the years 2000 to 2002 under a settlement agreement with the BIR.
• The CTA Second Division denied the motion for reconsideration on July 14, 2005.
• Tambunting appealed to the CTA en banc on August 22, 2005.
• On March 21, 2006, the CTA en banc affirmed the earlier decision, prompting Tambunting to appeal to the Supreme Court.

Issue:

• (Unlock)

Ruling:

• The Supreme Court ruled in favor of H. Tambunting Pawnshop, Inc., stating that the petitioner was not liable for the Value-Added Tax for the taxable year 2000.
• The Court ordered the Commissioner of Internal Revenue to ref...(Unlock)

Ratio:

• The Supreme Court's decision was based on the legal interpretation of VAT liability for pawnshops as non-bank financial intermediaries.
• The Court noted that VAT on non-bank financial intermediaries, including pawnshops, had been deferred by law.
• The VAT was first levied under R.A. No. 7716, which was amended multiple times, deferring its effectivity until January 1, 2003.
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