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By: Atty. Mark Anthony Tamayo on September 24,2020.

Through the enactment of Republic Act (RA) 9282, the jurisdiction of the Court of Tax Appeals (CTA) has been expanded to include not only civil tax and customs duties cases, but also cases that are criminal in nature, local tax and property tax cases, and cases pertaining to the collection of internal revenue taxes and customs duties, the assessment of which have become final.

For internal revenue taxes, the appellate jurisdiction of the CTA is not just confined to cases involving the decisions or inaction of the Bureau of Internal Revenue (BIR) commissioner on disputed assessments, refunds, fees or other charges, and penalties. It also covers “others matters arising under the Tax Code” and other laws administered by the BIR.

The abovementioned phrase refers to cases subject to the exclusive appellate jurisdiction of the CTA, i.e., those controversies over which the commissioner of Internal Revenue (CIR) had exercised his power to decide on disputed assessments, refunds or internal revenue taxes, fees or other charges, and penalties imposed in relation thereto (CIR v. CTA and Petron Corporation, G.R. 207843, Feb. 14, 2018).

Typically, in tax assessment or refund cases, the controversy would involve the authority of the CTA in taking cognizance of ancillary issues falling under its appellate jurisdiction, including the constitutionality or validity of tax laws, regulations or administrative issuances.

Notably, though, the law intends for the CTA to have exclusive jurisdiction to resolve all tax problems. Hence, it has the undoubted jurisdiction to take cognizance of cases directly challenging the constitutionality or validity of a tax law, regulation or administrative issuances when raised by a taxpayer as a defense to dispute or contest an assessment or refund (see CIR v. CTA and Petron Corporation, G.R. 207843, Feb.14, 2018; Banco de Oro, et al v. Republic, G.R. 198756, Aug.16, 2016).

In taking cognizance of such matters, the CTA merely exercises the jurisdiction conferred to it by law. For instance, in a judicial refund claim, it can take cognizance of the claim and resolve the issue of the validity of a tax regulation pertinent to the resolution of the case.

What is crucial is that the issue on the constitutionality or validity had been properly raised in the case and that its resolution is necessary in its determination. In other words, this issue must be the very lis mota (the cause of the suit or action) of the case (see Planters Products Inc. v. Fertiphil Corporation, G.R. 166006, March 14, 2008).

This principle was applied by the CTA in resolving issues relating to its appellate jurisdiction on ”other matters.”

In San Miguel Brewery v. CIR, CTA EB 1772 (CTA Case 8955) dated Jan. 24, 2019, the validity and constitutionality of Revenue Memorandum Circular (RMC) 90-2012 was raised as an issue and directly pleaded in connection with the petitioner’s judicial refund case. The petitioner alleged that the excise tax rate specified in the RMC was not valid, as it was directly contradictory to and inconsistent with the expressed provisions of Section 143 of the Tax Code.

In resolving the matter, the CTA en banc reasserted its authority under its appellate jurisdiction to determine the validity or constitutionality of the administrative issuances of the CIR. It was determined that the validity and/or constitutionality of the circular is inextricably linked to the issue of whether the petitioner is entitled to the refund. Thus, the validity and/or constitutionality of RMC 90-2012 is the lis mota of the petitioner’s judicial claim for refund.

In CIR v. Hard Rock Cafe (Makati City) Inc., CTA EB 1960 dated Oct. 1, 2019, the deficiency percentage tax assessment was based on RMC 18-2010, which imposes amusement tax on cabarets and night or day clubs. One of the issues to be resolved is the validity of the RMC 18-2010, which widened the scope and meaning of the terms “cabarets” and “night and day clubs.”

In this case, the CTA en banc ruled that administrative issuances must be interpreted and implemented in a manner consistent with statutes, jurisprudence and other rules. The crux of the controversy is the validity of the assessment and incidental thereto, is the validity of the circular. These are reviewable by the CTA, as they pertain to “other matters” under the Tax Code.

On the other hand, in CIR v. MFFI Logistics Co. Inc., CTA EB 1979 dated Jan. 23, 2020, the petitioner, in a motion for reconsideration, assailed the decision of the CTA division canceling and withdrawing the assessment, as well as invalidating the warrant of distraint and/or levy (WDL) issued against the taxpayer. The petitioner argued that the jurisdiction of the CTA was limited to the collection procedure or post assessment, considering that the assessment had already been final, executory and demandable.

In denying the motion, the CTA en banc ruled that in a petition for review on the action of the CIR in the issuance of the WDL, the court’s jurisdiction is not limited to the collection procedure after the assessment. As tax collections are premised on a valid assessment, the CTA has jurisdiction to determine the validity or invalidity of an assessment to determine whether the right of the government to assess and collect taxes has prescribed. Thus, a WDL can be nullified if the assessment alleged to have been final and executory was proven to have been issued beyond the prescriptive period to assess.

The Tax Court is a centralized regular court vested with the exclusive appellate jurisdiction to resolve all tax cases. Implied in its jurisdiction are necessary incidental powers to realize the smooth administration of justice. Its decisions are presumed valid in every aspect and will not be overturned on appeal, save only on the abuse of the exercise of authority or unsupported evidence.|

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Euney Marie J. Mata-Perez

Mark Anthony P. Tamayo

Gerardo Maximo V. Francisco