G.R. No. 140230 - Commissioner of Internal Revenue vs. Philippine Long Distance Telephone Co.

The case involves a petition for review on certiorari filed by the Commissioner of Internal Revenue (CIR) against the Philippine Long Distance Telephone Company (PLDT).
The CIR seeks to reverse a decision by the Court of Appeals (CA) that affirmed a ruling by the Court of Tax Appeals (CTA) regarding PLDT's claim for tax refund/credit.
The tax refund claim pertains to taxes paid by PLDT for the importation of equipment, machineries, and spare parts from 1992 to 1994.

PLDT, under a franchise granted by Republic Act No. 7082, paid a total of P164,510,953.00 in various taxes to the Bureau of Internal Revenue (BIR) for its importations.
This amount includes:
- Compensating tax: P126,713,037.00
- Advance sales tax: P12,460,219.00
- Other internal revenue taxes: P25,337,697.00
Additionally, for importations made between March 1994 and May 31, 1994, PLDT paid P116,041,333.00 in value-added tax (VAT).

On March 15, 1994, PLDT sought a confirmatory ruling from the BIR regarding its tax exemption under Section 12 of R.A. 7082.
The BIR issued Ruling No. UN-140-94 on April 19, 1994, stating that PLDT is exempt from VAT on its importation of equipment, machineries, and spare parts necessary for its franchise operations.

Armed with the BIR ruling, PLDT filed a claim for tax credit/refund on December 2, 1994, for various taxes it had paid.
The claim was not acted upon by the BIR, prompting PLDT to file a petition with the CTA for a refund of P280,552,286.00, which included various taxes erroneously paid.

On February 18, 1998, the CTA granted PLDT's petition, determining that PLDT was entitled to a reduced refundable amount of P223,265,276.00 after excluding taxes that were prescribed.
The CTA's decision included a breakdown of refundable amounts for compensating tax, advance sales tax, other BIR taxes, and VAT.

The CTA decision included a dissenting opinion from Associate Judge Amancio Q. Saga, who argued that the "in lieu of all taxes" provision in Section 12 of R.A. 7082 only referred to direct taxes and did not cover indirect taxes like VAT.

The BIR Commissioner filed a petition for review with the CA, which dismissed the petition and effectively affirmed the CTA's ruling.
The CA relied on its previous ruling in a similar case involving the same parties, asserting that PLDT's payment of the 3% franchise tax exempted it from other taxes.

The CA's decision was based on the principle of stare decisis, which mandates that courts follow established precedents in similar cases.
The BIR Commissioner contended that the CA erred in its interpretation of the tax exemption.

The Court discussed the distinction between direct and indirect taxes, noting that direct taxes are paid by the person liable, while indirect taxes can be passed on to another party.
The Court emphasized that PLDT's claim for exemption primarily concerns indirect taxes, such as VAT, advance sales tax, and compensating tax.

The Court noted that VAT is classified as an indirect tax, which can be shifted to the buyer.
The nature of compensating tax and advance sales tax was also discussed, highlighting that these taxes are imposed on the privilege of importing goods.

The Court analyzed the "in lieu of all taxes" clause in Section 12 of R.A. 7082, concluding that it...continue reading