Title
Commissioner of Internal Revenue vs. Court of Tax Appeals, 1st Division
Case
G.R. No. 210501
Decision Date
Mar 15, 2021
PSPC challenged BOC's P1.99B excise tax demand on alkylate imports, alleging invalid BIR ruling. CTA ruled jurisdiction, deemed Document M-059-2012 a BIR Ruling, and found forum shopping by CIR/BOC.

Case Summary (G.R. No. 210501)

Background and Factual Matrix

PSPC, engaged in petroleum product manufacturing and compliance with environmental regulations (RA 8749, Clean Air Act), imported alkylate as a blending component. Initially, the BIR issued twenty-one Authorities to Release Imported Goods (ATRIGs) from May 2010 to August 2011 indicating that alkylate imports were not subject to excise tax under the NIRC. Independent third-party testing by SGS and legal opinions from the Department of Energy supported that alkylate was an intermediate blending component, not finished gasoline, which should be exempt from excise tax.

Despite these findings, starting September 2011, the BIR inserted disclaimers (colatillas) into ATRIGs warning that excise tax might still be collected depending on final rulings. The Collector of Customs sought legal opinion from the CIR, which, in Document No. M-059-2012 issued on June 29, 2012, ruled that alkylate importations were subject to excise tax at the rate of P4.35 per liter under Section 148(e) of the NIRC, classifying alkylate akin to naphtha, a taxable distillation product. Following this, Customs Memorandum Circular No. 164-2012 mandated the collection of excise tax from PSPC’s alkylate imports.

PSPC challenged the validity of Document No. M-059-2012 before the CTA, alleging it was an invalid BIR ruling lacking factual basis and issued without due process. Despite ongoing appeals and motions for suspension of taxes being levied on subsequent alkylate imports, the Collector issued a Demand Letter on October 1, 2012 for P1.99 billion in deficiency excise taxes covering importations from January 2010 to June 2012.

Issues Presented Before the Supreme Court

  1. Whether the CIR, BOC, and Collector engaged in forum shopping.
  2. Whether the CTA has jurisdiction over CTA Case No. 8535 concerning:
    a. Classification of Document No. M-059-2012 as a BIR Ruling;
    b. The validity of the CTA’s jurisdiction to hear challenges against the document;
    c. The applicability of the doctrine on exhaustion of administrative remedies;
    d. Jurisdiction over the October 1, 2012 Demand Letter assessing excise taxes.
  3. The CTA’s jurisdiction to issue suspension orders and injunctive relief against collection of excise taxes on subsequent and future alkylate importations.
  4. The jurisdiction of the CTA En Banc over appeals from interlocutory orders.

Ruling on Forum Shopping

The Court found that the CIR, BOC, and the Collector were guilty of forum shopping because they filed multiple petitions in different courts raising substantially the same issues founded on the same material facts, aiming for dismissal of CTA Case No. 8535. The overlap of parties’ interests—considering the BOC acts as the BIR’s agent for the collection of internal revenue taxes on imports—and identical reliefs demonstrate forum shopping. Though administrative functions and strategies differed, the shared government interest and the similarity of claims demonstrate willful forum shopping.

Jurisdiction of the CTA over Document No. M-059-2012 and Demand Letter

  • Document No. M-059-2012 as a BIR Ruling: The Court held that Document No. M-059-2012 qualifies as a BIR Ruling because it was the Commissioner of Internal Revenue’s official interpretation of the taxability of PSPC’s alkylate importation based on a particular taxpayer’s facts, effectively imposing an excise tax liability. Despite originating from an inter-governmental letter, it applies directly to PSPC and materially affects its tax obligations.

  • CTA Jurisdiction over BIR Rulings: The Court reaffirmed the CTA’s exclusive jurisdiction over challenges to tax assessments, refunds, and “other matters” arising under the National Internal Revenue Code (NIRC), as held in Banco De Oro v. Republic, overturning the earlier doctrine in British American Tobacco v. Camacho. The CTA can review validity and constitutionality of tax administrative issuances, including BIR Rulings, by exercising its appellate and certiorari jurisdiction, subject to prior review by the Secretary of Finance (SOF).

  • Exhaustion of Administrative Remedies: While the doctrine of exhaustion requires administrative appeal to the SOF prior to judicial action, exceptions apply notably when: (a) the issue is purely legal; (b) judicial intervention is urgent; and (c) appealing to the SOF would be futile. Here, urgency was substantiated by injunctions issued and the pure legal nature of taxability determinations, thus excusing PSPC from exhausting administrative remedies before the CTA.

  • Jurisdiction over the October 1, 2012 Demand Letter: As it embodies a formal assessment of deficiency excise taxes (including penalties and interest) made by the CIR through the Collector and COC, the CTA has jurisdiction stemming from its appellate power to review disputed final tax assessments. The Demand Letter has the character of an enforceable administrative determination ripe for judicial review.

Suspension Orders and Injunctive Relief Issuance by the CTA

  • Distinction Between Suspension Orders and Injunctive Writs (TRO/WPI): Suspension Orders under Section 11 of RA 1125 require the existence of a “tax liability” based on a disputed tax assessment or final decision and are an ancillary remedy to the CTA’s appellate jurisdiction, aimed at suspending tax collection. Injunctive writs such as Temporary Restraining Orders (TRO) and Writs of Preliminary Injunction (WPI), meanwhile, may enjoin the implementation of tax statutes or administrative issuances themselves and have broader scope, derived from the CTA’s inherent and ancillary powers in judicial review of tax controversies.

  • CTA’s Jurisdiction Bound to Existing Tax Liabilities: The Court ruled that the CTA may issue Suspension Orders only in connection with existing finalized assessments or with controversies presently before the CTA. Suspension Orders cannot be issued preemptively or on the basis of mere preliminary assessments or over subsequent and future importations not yet subject to formal assessments. Administrative remedies for such subsequent shipments lie with the Collector and COC.

  • Jurisdiction over Incidental Matters: The CTA may extend its jurisdiction to incidental matters - such as collection actions or further assessments connected to an ongoing appeal — to prevent document or ruling enforcement from evading judicial scrutiny. However, this is limited to the scope of the subject matter before the CTA.

  • PSPC’s Claim for Suspension Orders on Future Importations: The CTA’s refusal to issue Suspension Orders on future alkylate importations not covered by then-existing assessments or administrative proceedings was upheld. PSPC’s request for general suspension over future tax collections must be pursued in separate proceedings once formal assessments arise.

  • Jeopardy Requirement for Suspension Orders: The Court recognized the significance of demonstrating jeopardy to the taxpayer or government as a condition for issuing Suspension Orders. PSPC had previously shown probable jeopardy in prior motions but failed to prove ongoing jeopardy justifying relief against future collections after extended judicial involvement and provisional relief granted.

The CTA En Banc’s Jurisdiction on Appeals of Interlocutory Orders

The Court affirmed the CTA En Banc’s lack of jurisdiction to review interlocutory orders issued by its Divisions by way of appeal or petition for review. Such orders are subject to challenge only via certiorari before the Supreme Court. The BOC and Collector’s petition before the CTA En Banc was therefore correctly denied due course for being an improper remedy.

Temporary Restraining Order (TRO) Binding Effect and Lifting

The TRO issued on July 7, 2014 enjoining the government agencies from imposing excise taxes on PSPC’s incoming alkylate importations was declared dissolved upon final resolution of the case, as ancillary provisional remedies cease upon termination of the main action. PSPC remains entitled to seek injunctive relief before the CTA in relevant proceedings if warranted.

Legal and Jurisprudential Principles Applied

  • Forum Shopping and Litis Pendentia: The Court applied the rule against forum shopping emphasizing identity of parties, subject matter, and relief sought to bar repetitive pursuit of similar issues.
  • Nature of BIR Rulings: BIR Rulings are quasi-judicial determinations applying tax laws to specific taxpayers and facts, subject to review by the Secretary of Finance and judicial ap

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