Treasurer of Manila v. Philippine Beverage Partners
REITERATIONFacts
The Antecedents: On January 17, 2007, the City Treasurer of Manila issued a Statement of Account (SOA) to Philippine Beverage Partners, Inc. (respondent) for local business taxes and regulatory fees for the first quarter of 2007, amounting to P2,930,239.82. Respondent protested the assessment on January 19, 2007, arguing that certain tax ordinances were declared null and void and that the collection constituted double taxation. Respondent paid P506,080.89 as a formal tender of payment. On February 2, 2007, the City Treasurer denied the protest. Respondent paid the full amount of P2,930,239.82 on February 13, 2007. On March 2, 2007, respondent filed a written claim for refund of P2,424,158.93. On March 8, 2007, respondent filed a Complaint for Revision of SOA and Refund/Credit of taxes with the Regional Trial Court (RTC). Procedural History: The RTC ordered the refund of P2,424,158.93, holding that respondent was already taxed under Section 14 of the Revenue Code of Manila (RCM) and should not be subjected to tax under Section 21. The RTC found that respondent had exhausted administrative remedies and filed the case within the two-year period from payment. The RTC denied the City Treasurer's motion for reconsideration. The City Treasurer appealed to the Court of Tax Appeals (CTA) Second Division, which affirmed the RTC ruling. The CTA Second Division denied the City Treasurer's motion for reconsideration. The City Treasurer then filed a Petition for Review with the CTA En Banc, which also affirmed the ruling, holding that respondent complied with the requisites for refund and that the City Treasurer waived additional defenses by not raising them in the Answer. The CTA En Banc denied the motion for reconsideration. The Petition: The City Treasurer filed a Petition for Review on Certiorari with the Supreme Court, raising two issues: (I) whether a taxpayer who protested an assessment may later institute a judicial action for refund; and (II) whether alleged deficiency taxes of the respondent could be used to offset its claim for refund.
Issue(s)
Whether a taxpayer who protested an assessment may later institute a judicial action for refund. Whether the alleged deficiency taxes of the respondent may be used to offset its claim for refund.
Ruling
The petition is denied for lack of merit. The December 22, 2016 Decision and the June 13, 2017 Resolution of the Court of Tax Appeals En Banc in CTA EB No. 1342 are affirmed.
Ratio Decidendi
On Issue I: Whether a taxpayer who protested an assessment may later institute a judicial action for refund: The Supreme Court held that a taxpayer who protests an assessment is not precluded from later instituting an action for refund. The Court clarified that a taxpayer facing an assessment may protest it and alternatively (1) appeal the assessment in court, or (2) pay the tax and thereafter seek a refund. This procedure is supported by Sections 195 and 196 of the Local Government Code (LGC). Section 195 outlines the protest of an assessment, requiring a written protest within sixty (60) days from receipt of the notice of assessment, and a subsequent appeal to the court within thirty (30) days from the denial or inaction by the local treasurer. Section 196 provides for the claim for refund, requiring a written claim with the local treasurer before filing a judicial action within two (2) years from payment. The Court emphasized that when an assessment is issued and paid, the taxpayer may file a written claim for refund within sixty (60) days from receipt of the notice of assessment, and thereafter bring suit in court within thirty (30) days from the decision or inaction by the local treasurer. In this case, the respondent protested the assessment, paid the tax, filed a written claim for refund, and filed the judicial action within thirty (30) days from the denial of its protest, thus complying with the procedural requirements. On Issue II: Whether the alleged deficiency taxes of the respondent may be used to offset its claim for refund: The Supreme Court ruled that the alleged deficiency taxes of the respondent for 2006 and 2007 could not be used to offset its claim for refund. The Court reiterated that Section 195 of the LGC mandates the issuance of a notice of assessment before the local treasurer may collect deficiency taxes. The notice of assessment serves as the first instance the taxpayer is officially made aware of the pending tax liability and is a requirement of due process. The local treasurer cannot unilaterally collect deficiency taxes for a different taxing period by raising it as a defense in an action for refund of erroneously or illegally collected taxes. The respondent had fully satisfied the twin conditions for prosecuting an action for refund, having protested and paid the assessed tax, and the City Treasurer failed to issue a proper notice of assessment for the alleged deficiency taxes.
Main Doctrine
A taxpayer who protests an assessment and pays the assessed tax may subsequently file a claim for refund. The judicial action for refund must be filed within thirty (30) days from the denial of or inaction on the protest by the local treasurer, even if this falls within the two-year prescriptive period for refund claims under Section 196 of the Local Government Code, as the assessment becomes conclusive and unappealable after the lapse of the 30-day period.