[THE IMPROPER SERVICE OF A TAX ASSESSMENT RENDERS IT VOID FOR VIOLATING THE TAXPAYER’S RIGHT TO DUE PROCESS] [CIVIL LIABILITY FOR UNPAID TAXES IS INDEPENDENT OF A CRIMINAL TAX CASE, BUT IT MUST BE SIMULTANEOUSLY DETERMINED IN THE CRIMINAL PROCEEDINGS] [TAX COLLECTION MUST GENERALLY BE PRECEDED BY A VALID ASSESSMENT, EXCEPT WHEN NON-PAYMENT IS DUE TO FALSITY, FRAUD, OR WILLFUL OMISSION; IN SUCH CASES, COLLECTION MAY PROCEED WITHOUT PRIOR ASSESSMENT]

The Plaintiff, the People of the Philippines, challenged the Decision and Resolution of the Regional Trial Court (RTC)-Branch 47, Manila, which granted the Demurrer to Evidence filed by the Accused, Ronald Punay Robin, and denied their Motion for Reconsideration on the Civil Aspect of the case. The Plaintiff argues that the RTC erred in granting the Demurrer to Evidence, stating that the underdeclared importation was based on a valid tax assessment which had already become final, executory and demandable, due to the Accused’s failure to avail of administrative and judicial remedies within the prescribed period, even if the assessment is contrary to law. The Plaintiff also maintains that the assessment notices were properly served through valid substituted service. On the other hand, the Accused asserts that the BIR’s reliance on the finality of the tax assessment is an implicit confirmation that the undeclared importation is unsubstantiated. He further argues that the person who received the notices has no authority to accept them. In ruling, the Court held that the assessment was void due to improper service of the notices. It emphasized that due process requires proper service and receipt of both the Preliminary Assessment Notice (PAN) and the Formal Assessment Notice/Final Letter of Demand (FAN/FLD) by the taxpayer to enable the filing of a protest. Absence of such proper service and receipt renders the assessment void. In this case, while the BIR resorted to substituted service, it failed to show that Donald Reyes has the authority to receive the notices, and that personal service was not practicable, allowing resort to substituted service. Additionally, the Court held that civil liability for unpaid tax is independent of a criminal tax case, but it must be simultaneously declared in the criminal proceedings. It also held that the collection of deficiency taxes must be preceded by a valid assessment, except when the non-payment is based on falsity, fraud, or willful omission. It maintains that if the Accused is convicted, it is immaterial that no prior assessment was made or the assessment was void, and the collection may proceed. However, if the Accused is acquitted, the nature of the acquittal will determine the BIR’s right to collect. If the acquittal was based on reasonable doubt on the guilt of the Accused, collection may proceed without an assessment pursuant to Section 222 of the Tax Code. On the other hand, if the acquittal is based on lack of falsity, fraud, or willful omission, the collection of taxes must flow from a valid assessment. Since the assessment in this case was not based on falsity or fraud and was declared void due to improper service, the Plaintiff’s Appeal is DENIED for lack of merit. [PEOPLE OF THE PHILIPPINES VS RONALD PUNAY ROBIN, CTA CRIMINAL CASE NO. A-19, AUGUST 13, 2025]

BIR TAX ASSESSMENT SHOULD BE CANCELLED FOR LACK OF PROOF OF SERVICE

Petitioner Shirley Tan Festin, doing business as CSR Construction and Supply, was assessed by the Respondent Commissioner of Internal Revenue (CIR) covering the Taxable Year (TY) 2014. Despite her pending administrative protest, the Respondent proceeded to enforce collection by issuing a Warrant of Distraint and/or Levy (WDL) and Warrants of Garnishment (WOG). On appeal before the Court, the Petitioner denied receiving the Formal Letter of Demand/Final Assessment Notice (FLD/FAN), thus, the collection measures should be nullified since this is a clear violation of Section 228 of the Tax Code. She also claimed that the right to assess prescribed under Section 203, that the assessments were based on unreliable third-party data, and that the collection measures were premature. Further, she asserted entitlement to a Tax Credit Certificate (TCC) based on the Supplemental Petition for Review she filed. On the other hand, the Respondent maintained that the Petitioner failed to file a valid protest, making the assessments final. He insisted that the assessments had sufficient factual basis, citing undeclared revenues, unexplained net worth increases, and disallowed credits. Likewise, the FLD/FAN was properly served through registered mail, thus satisfying due process requirements. In ruling, the Court held that the Petitioner could not successfully invoke the prescription since she did not present her 2014 tax returns to establish the prescriptive period. However, the Court found that the Respondent failed to prove valid service of the FLD/FAN, as no registry receipts or return cards were presented. This amounted to a violation of the Petitioner’s right to due process, rendering the assessments void and invalidating the WDL and WOG issued for their collection. Nonetheless, the Court denied the Supplemental Petition for Review, holding that the Petitioner was not entitled to a TCC because she failed to comply with the requirements under Revenue Regulations (RR) No. 1-2016 and applied with the wrong office. Consequently, the Court GRANTED the Petition, NULLIFIED the deficiency tax assessments for 2014 together with the WDL and WOG, but DENIED the prayer for issuance of a TCC. [SHIRLEY TAN FESTIN VS. COMMISSIONER INTERNAL REVENUE, CTA CASE NO. 10264, AUGUST 13, 2025]

FLD/FAN ISSUED BEFORE THE EXPIRATION OF THE 15-DAY PERIOD TO REPLY TO PAN VIOLATED DUE PROCESS

Petitioner GMA Worldwide (Phils.), Inc. filed a Petition for Review questioning the April 3, 2023, Notice of Denial of its application for compromise settlement issued by the Respondent Commissioner of Internal Revenue (CIR) in relation to its deficiency Value-Added Tax (VAT) for Taxable Year (TY) 2011. On March 12, 2015, the Petitioner received a Preliminary Assessment Notice (PAN) giving it until March 27, 2015, to reply. However, on March 26, 2015—one (1) day before the expiration of the 15-day reply period—the Respondent issued the Formal Letter of Demand/Final Assessment Notices (FLD/FANs). The protest was denied as late, and the assessments were considered final and demandable. Petitioner later applied for a compromise settlement on the ground of the doubtful validity of the assessment, but the BIR’s Regional Evaluation Board denied it, claiming the Petitioner failed to substantiate its claim. Petitioner argued that the CTA had jurisdiction because the denial was a decision of the CIR under the Tax Code, and the Petition was timely filed. It maintained that the BIR’s right to collect had prescribed due to inaction from 2015 to 2023, and that the VAT assessment was void for lack of factual basis as it relied merely on presumptions of “unaccounted source of cash.” Petitioner also asserted a violation of its right to due process under Revenue Regulations (RR) No. 12-99 when the FLD/FANs were issued before the lapse of the 15-day period to reply to the PAN. On the other hand, the Respondent countered that the denial was valid, the assessment was based on verified documents like VAT returns and financial statements, tax assessments are presumed correct, and the CTA lacked jurisdiction because the assessment had become final. In ruling, the Court ruled in favor of the Petitioner, holding that it had jurisdiction since the denial involved a matter under the Tax Code and the Petition was filed within the 30-day period. On the merits, the Court found the VAT assessment void for being based on mere presumptions without an actual factual foundation, applying CIR v. Hantex Trading. It also held that issuing the FLD/FANs before the expiration of the 15-day period violated due process under Prime Steel Mill, Inc. v. CIR, rendering the assessment null and incapable of attaining finality. Consequently, the Court annulled the Notice of Denial and CANCELLED the deficiency VAT assessment and the corresponding collection demand. [GMA WORLDWIDE (PHILS.), INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 11158, AUGUST 1, 2025]

[CLAIMS FOR VAT REFUND ARE TO BE FILED WITH & PROCESSED BY THE CONCERNED RDO & SHALL BE SUBJECT TO THE APPROVAL/DISAPPROVAL BY THE REGIONAL DIRECTOR] [THE PARTY CONCERNED MUST BE GIVEN AN OPPORTUNITY TO OBJECT BEFORE THE COURT COULD TAKE JUDICIAL NOTICE OF ANY RECORD PERTAINING TO OTHER CASES PENDING BEFORE IT]

Petitioner Sankyu-ATS Consortium B filed a Petition for Review seeking the reversal of the earlier Decision and Resolution of the Special First Division denying its claim for a Value-Added Tax (VAT) refund for the third quarter of taxable year 2018. Petitioner argues that its sales to Philippine Sinter Corporation (PSC), a PEZA-registered enterprise, were zero-rated, as it operates solely for PSC. It claims the PEZA Certification was properly submitted and should have been given weight, as there is no objection from the Respondent Commissioner of Internal Revenue (CIR). Citing prior cases where the same evidence was accepted, Petitioner seeks procedural leniency due to the counsel’s oversight. In ruling, the Court upheld the denial of the admission of Exhibit “P-2” (PSC’s PEZA Certification), finding that Petitioner failed to establish PSC’s PEZA registration, a critical element to prove its sales were zero-rated. The Special First Division ruled that the Petitioner’s failure to timely move for reconsideration of the denial rendered its objections moot, and judicial notice of the Certification was not proper since it did not meet the requisites for such. The Court emphasized that judicial notice of records from other cases requires notice to the opposing party, which did not occur. Although the Petitioner submitted other documents like sworn certifications, VAT returns, invoices, and receipts, these were deemed insufficient without proof of PSC’s PEZA registration. Furthermore, the Court found that the Petition for Review should have been dismissed for lack of jurisdiction, as the denial letter appealed from was issued by Revenue District Office (RDO) No. 98 and not signed by an authorized official (e.g., the Commissioner or Regional Director), contrary to Revenue Memorandum Circular (RMC) No. 17-2018 and the requirements under the Revised Rules of the Court of Tax Appeals (RRCTA). Consequently, the Petition was DENIED for lack of merit. [SANKYU-ATS CONSORTIUM B VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 10471, JULY 31, 2025]

COMMERCIAL INVOICE IS INSUFFICIENT TO SUPPORT VAT ZERO-RATING SALES TRANSACTIONS CONSIDERING ITS SUPPLEMENTAL NATURE & CANNOT BE TREATED AS EQUIVALENT TO VAT SALES INVOICE AS PROOF OF ZERO-RATED SALES

The Petitioner, MD Davao Agri-Ventures, Inc., filed a Petition for Review seeking to reverse and set aside the Decision of the Respondent, Commissioner of Internal Revenue (CIR), which denied its application for a Value-Added Tax (VAT) refund. The Petitioner argued that it complied with all the requisites for a valid refund and submitted all the required documents to support its application. On the other hand, the Respondent counters that the Petitioner failed to adequately substantiate its claim for refund. In ruling, the Court held that for a claim for tax credit or refund to be successful, the taxpayer must be engaged in zero-rated or effectively zero-rated sales. For export sales to qualify as VAT zero-rated, one of the essential requisites is that a VAT sales invoice‒either a cash or charge sales invoice‒must be issued as proof of the sale of goods. In this case, the Court found that the commercial invoices presented by the Petitioner are insufficient to support its VAT zero-rating sales transactions, since commercial invoices are only supplemental documents, and cannot be treated as equivalent to “VAT sales invoice” or as proof of zero-rated sales. Thus, for Petitioner’s failure to establish zero-rated sales, the Petition is DENIED. [MD DAVAO AGRI-VENTURES, INC. VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10625, JULY 29, 2025]