G.R. No. 251270 - People vs. Court of Tax Appeals, 3rd Division

Case Summary (G.R. No. 251270)

Factual Background: The Amended Informations and Tax Periods

The prosecution initiated multiple Amended Informations filed before the CTA against L.M. Camus and its responsible corporate officers. The charges covered both income tax and VAT deficiencies for taxable years 1997, 1998, and 1999, and were anchored on Sections 254 and 255 of the NIRC. The informations alleged that, within the CTA’s territorial jurisdiction in Quezon City, the accused either (a) willfully failed to supply correct and accurate information in the relevant tax returns, or (b) attempted to evade or defeat tax by under-declaring or failing to declare income or sales/exchange of services, thereby causing basic tax deficiencies in specified amounts.

As to coverage, CTA Crim. Case Nos. O-395 to O-402 involved VAT and income tax for 1998 and 1999, while CTA Crim. Case Nos. O-403 to O-406 involved income tax and VAT for 1997 and 1998. The Informations also reflected the prosecution’s theory of repeated tax non-compliance spanning three consecutive years.

Issuance of Warrants, Consolidation, and Pre-Trial Events

After the CTA found probable cause, it issued warrants of arrest against the respondents. Both Camus and Mendoza voluntarily appeared and posted the required bail bonds for provisional liberty. The CTA thereafter consolidated the criminal cases.

Respondents then filed separate motions to dismiss and/or motions to quash, which the CTA denied in a resolution dated 18 December 2015. Their motion for reconsideration likewise failed, as the CTA denied it in a resolution dated 28 April 2016. Respondents later elevated these rulings to the Supreme Court via petitions for certiorari, which the Supreme Court dismissed by resolution dated 4 July 2016 for the wrong remedy and for failure to show reversible error. That resolution became final and executory on 6 September 2016.

During arraignment, Mendoza pleaded not guilty. Camus sought exclusion or dropping as co-accused through a motion, which the CTA denied on 19 September 2017, but later deferred Camus’s arraignment due to medical indisposition. The CTA proceeded with preliminary conference and then accepted the parties’ joint limited stipulations of facts and issues. On 23 May 2018, it terminated pre-trial through a pre-trial order, and the case went to trial.

Trial Proceedings and the Prosecution’s Evidence

At trial, the prosecution presented a single witness, Atty. Sixto C. Dy, Jr. (Atty. Dy), who testified through a Judicial Affidavit and was cross-examined by the respondents. The prosecution asserted that Atty. Dy’s testimony established that L.M. Camus was liable for income tax and VAT for taxable years 1997 to 1999 but evaded payment by willfully supplying incorrect information in the company’s ITRs and VAT returns.

After the prosecution filed its Formal Offer of Evidence (FOE), the CTA, in a resolution dated 30 July 2018, denied admission of several exhibits. The denied exhibits included L.M. Camus’s quarterly VAT return for taxable year 1999 and its annual ITRs for taxable years 1997 and 1998. In response, the prosecution moved for partial reconsideration to have these exhibits admitted as secondary evidence, but the CTA denied the motion in its resolution dated 16 November 2018.

Instead of presenting evidence, respondents filed a Demurrer to Evidence on 20 August 2018.

The Parties’ Contentions on the Demurrer

Respondents argued that the prosecution failed to establish guilt beyond reasonable doubt for both charged offenses under Sections 254 and 255 of the NIRC. They emphasized that the prosecution did not present legally sufficient proof of the tax deficiencies in a way that would establish the charged elements—particularly the alleged under-declarations and the supposed factual fraud or cheating required for conviction. Respondents faulted the prosecution for not presenting the company’s actual ITRs and VAT returns for the relevant years. They also maintained that the prosecution’s reliance on documents such as Statement of Accounts, Progress Payment Invoices, and BIR Forms 2307 did not sufficiently establish the circumstances showing fraudulent concealment or omission, and that the CTA could not safely infer the intent to evade from the presented records. They further argued that the prosecution did not present the BIR examiners who conducted the investigation of L.M. Camus’s books and accounting records, which respondents considered necessary to explain how the alleged fraud occurred. In addition, respondents contended that some of the documents were outside the charged periods and that contracts offered by the prosecution were not admitted for failure to present originals.

For its part, the prosecution insisted that the denied exhibits could still be weighed as secondary evidence and argued that Atty. Dy was competent to identify the third-party documents because his functions included reviewing investigation-related materials and recommending criminal violations of the NIRC. The prosecution also urged that Mendoza, as comptroller, occupied a senior corporate position responsible for accounting and financial reporting, and that the pattern of alleged tax evasion over consecutive years supported inference of his direct participation. Finally, the prosecution pointed to a prior Supreme Court ruling in Commissioner of Internal Revenue v. Hon. Raul M. Gonzales, Secretary of Justice, L.M. Camus Engineering Corporation (docketed as G.R. No. 177279) as authority for including Mendoza among those to be prosecuted.

CTA Rulings on the Demurrer to Evidence and Motion for Reconsideration

In its first challenged resolution dated 7 August 2019, the CTA granted the Demurrer to Evidence and thus acquitted L.M. Camus and Mendoza. The CTA’s reasoning centered on the prosecution’s evidentiary gaps. It noted that the prosecution did not adduce and properly prove crucial primary records, including the company’s VAT return for 1999 and ITRs for 1997 and 1998, and that it also did not present other returns for relevant years. The CTA held that the absence of those returns prevented it from determining whether L.M. Camus indeed derived income from sales of services other than those declared, and prevented verification of the specific information the corporation allegedly failed to supply correctly or accurately. The CTA also found that it could not rely on the Statement of Accounts, Progress Payment Invoice, and BIR Forms 2307 in view of the stipulation that Atty. Dy lacked personal knowledge of the transactions reflected therein. Moreover, the CTA ruled that the testimony did not sufficiently explain how the respondents evaded taxes or failed to supply correct information. As to Mendoza, the CTA found inadequate proof that he served as comptroller over the entire charged period, and it noted that the prosecution’s contracts were denied for lack of admissible originals. Based on these considerations, the CTA concluded that the prosecution failed to establish the essential elements of violations of Sections 254 and 255 beyond reasonable doubt.

At the same time, the CTA stated that the civil liability was not automatically extinguished by the acquittal on demurrer. It therefore directed respondents to present evidence on the civil aspect of the consolidated cases.

The prosecution filed a motion for reconsideration. The CTA denied it in its second challenged resolution dated 29 November 2019.

BIR’s Petition for Certiorari and the Ground of Grave Abuse of Discretion

Aggrieved, the BIR instituted a Petition for Certiorari before the Supreme Court. It asserted that the CTA committed grave abuse of discretion when it granted the demurrer. The BIR maintained that tax deficiencies were already established and that the CTA’s denial of the prosecution’s exhibits should not negate the existence of deficiencies because the denial appeared to rest only on the lack of originals. It further argued that respondents did not dispute the deficiencies and that their failure to present some returns effectively amounted to admitting a violation. The BIR also claimed that audit reports and assessment notices provided sufficient proof of under-declaration and supported the corpus delicti. Finally, it argued that the grant of the demurrer harmed the government’s interests and that the evidence, taken collectively, established the elements beyond reasonable doubt.

Respondents countered that the CTA acted with due notice and hearing and made factual determinations after weighing the prosecution’s evidence. They emphasized that certiorari does not correct mere errors in the appreciation of evidence and that no grave abuse of discretion had been shown. They also maintained that reliance on presumptions from an assessment could not justify conviction in the absence of competent proof of factual fraud, and that the prosecution failed to discharge its burden beyond reasonable doubt.

Supreme Court’s Resolution: Lack of Grave Abuse and Consequences of Acquittal

The Supreme Court first addressed procedural concerns relating to who filed the petition. The Court noted that the petition was filed by the prosecution arm of the BIR rather than through the Office of the Solicitor General (OSG), and it cautioned both agencies that the doctrine in Orbos vs. Civil Service Commission was not an absolute rule. In the succeeding case Commissioner of Internal Revenue vs. La Suerte Cigar & Cigarette Factory, the Court held that the NIRC did not eliminate the established rule requiring the OSG to represent the Republic’s interests in appellate proceedings before the Supreme Court. The Court anchored this discussion on Book IV, Title III, Chapter 12, Section 35 of the Revised Administrative Code, which provides that the Solicitor General shall represent the Government and its agencies, and on related jurisprudence recognizing the Solicitor General’s discretion but emphasizing the mandatory nature of the duty absent just and valid reason.

The Court

Case Syllabus (G.R. No. 251270)

Parties and Procedural Posture

The Petitioner was the People of the Philippines through the Bureau of Internal Revenue (BIR), and the Respondents were the Court of Tax Appeals Third Division and respondents L.M. Camus Engineering Corporation and Lino D. Mendoza.
The BIR filed a Petition for Certiorari assailing CTA Resolutions dated 7 August 2019 and 29 November 2019 in CTA Criminal Case Nos. O-395 to O-406.
The challenged CTA Resolutions granted a Demurrer to Evidence filed by the respondents, resulting in their acquittal for alleged violations of Sections 254 and 255 of the National Internal Revenue Code (NIRC) involving deficiency income tax and value-added tax (VAT) for taxable years 1997 to 1999.
The CTA’s second assailed Resolution denied the BIR’s motion for partial reconsideration of the acquittal.
The BIR argued that it had no appeal and that double jeopardy did not bar certiorari because the CTA allegedly committed grave abuse of discretion.
In a concurring opinion, Caguioa, J. (Chairperson) emphasized that the Petition was barred by the constitutional right against double jeopardy, given the finality of acquittal after grant of the demurrer.

Key Factual Allegations

The Amended Informations charged L.M. Camus Engineering Corporation and its responsible corporate officers, including Luis M. Camus and Lino D. Mendoza, with tax offenses linked to under-declaration or failure to declare income and sales/exchange of services.
The Informations for taxable year 1997 alleged:
- In CTA Crim. Case Nos. O-406 and O-406 (as laid out in the text): alleged VAT-related conduct under Section 255 and related factual framing for omission of sales/exchange of services.
- In CTA Crim. Case No. O-404: alleged failure to supply correct and accurate information for VAT under Section 254, with an alleged VAT deficiency of P28,419,736.81 (exclusive of surcharges and interest).
- In CTA Crim. Case No. O-405: alleged failure to supply correct and accurate information for income tax under Section 255, with an alleged deficiency income tax of P65,370,760.29 (exclusive of surcharges and interest).
- In CTA Crim. Case No. O-406: alleged an attempt to evade or defeat tax by under-declaring VAT by not declaring sales/exchange of services, with the same VAT deficiency amount P28,419,736.81.
The Informations for taxable year 1998 alleged:
- In CTA Crim. Case Nos. O-399 and O-403: income tax offenses under Sections 254 and 255, with an alleged deficiency income tax of P51,023,570.10 (exclusive of surcharges and interest).
- In CTA Crim. Case Nos. O-395 and O-400: VAT-related offenses under Sections 254 and 255, with an alleged VAT deficiency of P23,595,813.95 (exclusive of surcharges and interest).
The Informations for taxable year 1999 alleged:
- In CTA Crim. Case Nos. O-397 and O-398: income tax offenses under Sections 254 and 255, with an alleged deficiency income tax of P53,862,636.67 (exclusive of surcharges and interest).
- In CTA Crim. Case Nos. O-401 and O-402: VAT-related offenses under Sections 254 and 255, with an alleged VAT deficiency of P24,609,643.49 (exclusive of surcharges and interest).
The CTA later consolidated the “various criminal cases” for joint disposition.
During the filing and progression of the criminal proceedings, Mendoza pleaded not guilty, while Camus’s arraignment was deferred due to medical indisposition.
The Petition for certiorari erroneously impleaded Luis M. Camus, as he had not yet been arraigned at the time noted in the text.

Prosecution Evidence Presented

The prosecution presented a lone witness, Atty. Sixto C. Dy, Jr. (Atty. Dy), who testified by Judicial Affidavit and was cross-examined by the respondents.
The prosecution presented Atty. Dy’s testimony to prove that L.M. Camus was liable for income tax and VAT for 1997 to 1999 and that it allegedly evaded payment by willfully supplying incorrect information in its ITRs and VAT returns.
The BIR later filed its Formal Offer of Evidence (FOE) after Atty. Dy’s testimony.
The CTA denied admission of several prosecution exhibits, including L.M. Camus’s quarterly VAT returns for 1999 and its annual ITRs for 1997 and 1998.
The prosecution sought admission of denied exhibits as secondary evidence, but the CTA denied that request upon partial reconsideration.
A key aspect of the prosecution’s evidentiary reliance was on documents used to show payments and under-declaration, specifically:
- Statement of Accounts, Progress Payment Invoices, and BIR Forms 2307.
- Contracts were also presented, but the exhibits were denied for failure to present originals.
The CTA found that Atty. Dy did not establish personal knowledge of the transactions reflected in the documents and found the testimony did not adequately explain the specific factual mechanics of the alleged evasion and omissions.
The CTA also pointed out that some of the Statement of Accounts were dated for the year 2000, outside the covered taxable years in the Informations as framed.

Demurrer to Evidence

After the prosecution’s FOE and the CTA’s denial of admission of certain exhibits, the respondents filed a Demurrer to Evidence.
The respondents’ demurrer argued that the prosecution failed to prove beyond reasonable doubt the elements of both:
- “Tax Evasion” under Section 254 of the NIRC, and
- “Failure to File Return, Supply Correct and Accurate Information” under Section 255 of the NIRC.
The respondents insisted that the prosecution failed to establish the amounts of taxes paid, the alleged under-declared amounts, and the computation and imputation of supposed tax fraud.
The respondents further argued that because the prosecution did not present L.M. Camus’s ITRs and VAT returns for the covered years, the “corpus delicti” for Section 255 could not exist.
The respondents contended that the prosecution failed to present the BIR examiners who conducted the tax investigation and that there were no verifiable, legally permissible supporting documents to validate the deficiency tax assessments.
In reply, the prosecution maintained that even if some exhibits were not originals, they should be admitted as secondary evidence.
The