G.R. No. 233556 , September 11, 2019.
City Treasurer of Manila, Petitioner, vs. Philippine Beverage Partners, Inc., substituted by Coca-Cola Bottlers Philippines, Respondent.

FACTS

On January 17, 2007, the City Treasurer of Manila issued a Statement of Account (SOA) to Philippine Beverage Partners, Inc. (respondent) assessing local business taxes and fees for the first quarter of 2007 totaling P2,930,239.82. The respondent protested this assessment on January 19, 2007, arguing that the relevant tax ordinances had been declared void and that the assessment under both Sections 14 and 21 of the Manila Revenue Code constituted double taxation. The respondent also made a formal tender of payment for P506,080.89 on January 22, 2007. The petitioner denied the protest on February 2, 2007, which the respondent received on February 6, 2007. On February 13, 2007, the respondent paid the full assessed amount of P2,930,239.82. Subsequently, on March 2, 2007, the respondent filed a written claim for refund of P2,424,158.93 with the City Treasurer. On March 8, 2007, the respondent filed a Complaint for refund with the Regional Trial Court (RTC). The RTC ordered the refund, a decision affirmed by both the CTA Second Division and the CTA En Banc. The petitioner argued before the Supreme Court that the respondent, having protested the assessment, should have appealed its denial instead of filing a refund suit, and that any refund should be offset by the respondent’s alleged tax deficiencies for 2006 and 2007.

ISSUE

1. Whether a taxpayer who protested an assessment may later institute a judicial action for refund.
2. Whether the alleged deficiency taxes of the respondent may be used to offset its claim for refund.

RULING

1. Yes. The Supreme Court, citing City of Manila v. Cosmos Bottling Corporation, ruled that a taxpayer who has protested and paid an assessment is not precluded from later instituting an action for refund or credit. The remedies of protest (under Section 195 of the Local Government Code) and refund (under Section 196) are distinct. A taxpayer may contest an assessment by filing a written protest and, upon its denial, appeal to court. Alternatively, the taxpayer may pay the tax and then seek a refund by first filing a written claim with the local treasurer and subsequently filing a judicial action within two years from payment. In this case, the respondent timely protested the assessment on January 19, 2007, paid under protest on February 13, 2007, filed its written claim for refund on March 2, 2007, and instituted the judicial action on March 8, 2007, which was within 30 days from receipt of the protest denial and within the two-year prescriptive period for refunds. Thus, the respondent properly availed itself of the refund remedy.
2. No. The Supreme Court held that the alleged deficiency taxes for 2006 and 2007 could not be offset against the refund claim. Under Section 195 of the Local Government Code, the issuance of a notice of assessment is mandatory before the local treasurer may collect deficiency taxes. This notice is a due process requirement that officially informs the taxpayer of the liability. The local treasurer cannot collect deficiency taxes for a different period by merely raising it as a defense in a refund action. Furthermore, the petitioner was deemed to have waived this defense by failing to raise it in its Answer before the trial court.
The petition was DENIED for lack of merit. The CTA En Banc Decision and Resolution were AFFIRMED.