Case Summary (G.R. No. 136975)
Petitioner and Respondent
Petitioner: Commissioner of Internal Revenue (CIR)
Respondent: Hantex Trading Co., Inc., a plastic-products importer and manufacturer
Key Dates
• October–November 1989: EIIB receives tip and issues Mission Order for audit
• March–April 1991: BIR issues conference letter and deficiency assessments
• December 11, 1997: CTA decision denying CIR’s petition
• March 31, 2005: Supreme Court decision
Applicable Law
• 1987 Philippine Constitution – Due process guarantee
• 1977 National Internal Revenue Code (as amended) – Sections 7, 16(b), 235, 249, 283(c)(3)
• Tariff and Customs Code – Section 1301 (Consumption Entry), Section 1306 (Entry copies)
• Rules of Court, Rule 132 – Public-document authentication (Sections 19, 24, 25)
Factual Background
Hantex imports synthetic resin and calcium carbonate, files Consumption Entries with the Bureau of Customs and annual returns with the SEC. Confidential informers allege that 1987 imports worth ₱115.6 million were declared as only ₱45.5 million. EIIB initiates audit under EO No. 127, sec. 26-A.
EIIB Investigation
EIIB’s Internal Inquiry and Prosecution Office issues subpoenas for Hantex’s 1987 books, import records, and tax returns. Hantex refuses, citing prior BIR exams. EIIB secures SEC filings and machine copies of 77 Consumption Entries from informers.
Bureau of Customs Document Authentication
Customs collection chiefs report originals were destroyed by termites and certify only that listed entry numbers were processed and released upon duty payment. No entry valuations or tax particulars appear in their certifications.
EIIB and BIR Findings
Based on machine copies and SEC Profit & Loss Statements, EIIB calculates unreported sales of ₱63 million and recommends BIR deficiency income and sales tax assessments totaling approximately ₱28 million. BIR examiners corroborate prima facie fraud and forward computations to CIR.
Tax Deficiency Assessment Process
CIR issues preliminary conference letters (Mar 1991) and assessment notices (Apr 1991) for ₱13.4 million income tax and ₱14.8 million sales tax, including surcharge and interest. Demand letters and warrant of distraint follow in early 1992.
Administrative Protest and Hearing
Hantex protests procedural defects and evidentiary basis, invoking NIRC sec. 235 (prohibition on repeated investigations). During BIR hearing, EIIB presents uncertified Xerox copies and Customs certifications; Hantex insists on originals or certified copies under Rule 132.
CTA Decision
On Dec 11, 1997, CTA upholds assessments. It deems Hantex failed to prove correct tax liabilities and holds the presumption of assessment regularity unrebutted. It orders Hantex to pay deficiency taxes with interest.
CA Decision
Court of Appeals grants Hantex’s petition, ruling assessments unlawful:
- Entry copies lacked proper authentication under Rule 132.
- Hearsay evidence deprived Hantex of due process.
- Assessments computed without using Hantex’s filed tax returns.
Issues on Review
(a) Procedural propriety of CIR’s Rule 45 petition under Rules of Court, Rule 7
(b) Validity of final deficiency assessments based on “best evidence obtainable”
(c) If assessments valid, correct amount due
Supreme Court Analysis: Procedural Compliance
The petition meets Rule 7’s verification/forum-shopping requirements—signed by Regional Director under delegated authority. No prior CA motion for reconsideration is mandatory before certiorari under Rule 45.
Supreme Court Analysis: Best Evidence Obtainable Rule
Under NIRC sec. 16(b), CIR may assess on “best evidence obtainable,” including hearsay or secondary data not admissible in court. However, mere Xerox copies without proper authentication have no probative weight in fixing tax deficiencies. Orig
...continue readingCase Syllabus (G.R. No. 136975)
I. Title and Procedural Posture
- G.R. No. 136975, decided March 31, 2005 by the Second Division of the Supreme Court.
- Petitioner: Commissioner of Internal Revenue (CIR); Respondent: Hantex Trading Co., Inc.
- Petition for review under Rule 45 of the Rules of Court seeking reversal of the Court of Appeals’ decision which had granted respondent’s petition and set aside deficiency tax assessments affirmed by the Court of Tax Appeals (CTA).
II. Antecedents and Corporate Profile
- Hantex Trading Co., Inc. is a Philippine corporation engaged in sale and manufacture of plastic products, importing synthetic resin and related chemicals.
- Under Section 1301 of the Tariff and Customs Code, it filed Import Entry and Internal Revenue (Consumption) Declarations with the Bureau of Customs (BOC).
- In October 1989, EIIB Acting Chief Lt. Vicente Amoto received confidential information that Hantex understated its 1987 synthetic resin importations: declared ₱45,538,694.57 but allegedly imported ₱115,599,018.00.
III. EIIB Investigation and Subpoenas
- EIIB Commissioner Jose T. Almonte issued Mission Order No. 398-89 (Nov. 14, 1989) directing IIPO audit of Hantex’s 1987 importations.
- Subpoena duces tecum and ad testificandum issued for Hantex’s president/GM to produce 1987 books of account, importation records, income tax returns, attachments, and tax payment records.
- Respondent refused to comply, citing prior BIR investigations; IIPO nonetheless secured SEC-certified copies of Hantex’s 1987 Profit & Loss Statements but failed to obtain original Consumption Entries from BOC (claimed destroyed by termites).
IV. BO C Certifications and Machine Copies
- June 28, 1990: IIPO requested authentication of machine copies of 77 import entries from BOC’s Collection Divisions at Manila International Container Port and Port of Manila.
- Both Collection Chiefs (Merlita D. Tomas and Augusto S. Danganan) certified that listed entries were duly processed and released upon payment of duties/taxes, but could not authenticate xerox copies or state amounts.
- IIPO and later BIR investigators relied on uncertified machine copies and these certifications to calculate actual import costs.
V. EIIB and BIR Initial Tax Assessments
- EIIB investigation (Bienvenido G. Flores et al.) concluded 1987 importations totaled ₱105,716,527.00; compared to declared sales, respondent underreported ₱63,032,989.17, yielding income tax liability of ₱41,916,937.78 (penalty and interest inclusive).
- EIIB transmitted docket to BIR recommending collection of assessed deficiency.
- BIR Deputy Commissioner issued memorandum (Feb. 12, 1991) directing Special Operations Service to advise Hantex of deficiency.
VI. Revenue Enforcement Officers’ Report
- RDOs Saturnino D. Torres and Wilson Filamor, per March 6, 1991 report, found prima facie fraud in Hantex’s 1987 Consumption Entry reports based on EIIB records and machine copies.
- They determined unrecorded importations of ₱70,661