GR 260912; (August, 2022) (Digest)
G.R. No. 260912, August 17, 2022
THE DEPARTMENT OF ENERGY, PETITIONER, VS. COURT OF TAX APPEALS, RESPONDENT.
FACTS
The Bureau of Internal Revenue (BIR) issued a Preliminary Assessment Notice (PAN) to the Department of Energy (DOE) for deficiency excise taxes amounting to over ₱18 billion related to condensates. The DOE protested, arguing it is not the liable entity under the Tax Code and that condensates, as liquefied natural gas, are exempt. The BIR subsequently issued a Formal Letter of Demand (FLD/FAN). The DOE claimed it never received this FLD/FAN, and thus could not file a formal protest within the 30-day period. The BIR declared the assessment final and issued Warrants of Distraint and/or Levy.
The DOE filed a Petition for Review with the Court of Tax Appeals (CTA) to assail the warrants. The CTA Second Division dismissed the petition for lack of jurisdiction, applying the precedent in Power Sector Assets and Liabilities Management Corp. v. CIR (PSALM). It characterized the dispute between the DOE and the BIR as a purely intra-governmental conflict. The CTA En Banc affirmed this dismissal. The DOE elevated the case to the Supreme Court.
ISSUE
Whether the Court of Tax Appeals correctly dismissed the DOE’s petition for lack of jurisdiction on the ground that the dispute is a purely intra-governmental controversy between two national government agencies.
RULING
No. The Supreme Court reversed the CTA’s dismissal and remanded the case for further proceedings. The Court clarified that the doctrine in PSALM is not an absolute jurisdictional bar. PSALM established that disputes solely between government agencies should generally be resolved administratively under Presidential Decree No. 242 to avoid unnecessary litigation where the government essentially sues itself. However, this rule admits of exceptions.
The Court held that the present case falls under recognized exceptions to the PSALM doctrine. First, the dispute involves the interpretation and application of tax laws, specifically provisions of the National Internal Revenue Code on excise tax liability and exemptions. The CTA, as a specialized court, has exclusive appellate jurisdiction over such matters. Second, the case raises a constitutional issue of due process, as the DOE asserts it was deprived of the right to protest the assessment due to alleged non-receipt of the formal demand. When a case involves substantive legal questions beyond mere accounting or administrative adjustment, judicial intervention is warranted. The Court concluded that the CTA has jurisdiction to resolve the core issues of tax liability and due process, and its dismissal based solely on the intra-governmental nature of the parties was erroneous.