The Supreme Court (SC) has ruled that “all disputes, claims, and controversies, solely between or among executive agencies, including disputes on tax assessments, must perforce be submitted to administrative settlement by the Secretary of Justice or the Solicitor General, as the case may be.”

The ruling was issued in the case elevated by the Department of Energy (DOE) before the SC challenging the ruling of the Court of Tax Appeals (CTA) in its petition involving the demand of the Bureau of Internal Revenue (BIR) for the payment of P18.37 billion in deficiency excise taxes.

The taxes sought to be paid by the DOE to the BIR involved transactions on condensates, which the former claimed are classified as liquified natural gas and are thus exempt from excise taxes.

On 17 July 2019, the DOE was notified by the BIR that the assessment has become final, executory, and demandable.

On Sept. 19, 2019, the Commissioner of Internal Revenue (CIR) issued warrants against the DOE. When nothing came out of the talks between the two government agencies, the DOE filed a petition before the CTA.

The CTA’s second division dismissed DOE’s petition with a ruling that it is not the proper forum to resolve purely intra-governmental dispute.

When the CTA’s second division dismissed DOE’s motion for reconsideration on Feb. 21, 2020, the BIR file a money claim for the assessed deficiency excise tax of P18.37 billion with the Commission on Audit (COA).

The DOE elevated the issued before the CTA as a full court. But its appeal was also dismissed on Nov. 4, 2021 prompting it to file a motion for reconsideration which was denied on May 24, 2022.

DOE challenged the CTA’s full court decision before the SC.

“The CTA correctly steered clear of the case as it lacked jurisdiction over this dispute between the DOE and the BIR,” the SC pointed out in its Aug. 17, 2022 decision written by Associate Justice Maria Filomena D. Singh and made public on Nov. 25.

The SC ruled: “WHEREFORE, the Petition is DENIED. The Decision, dated 4 November 2021, and the Resolution, dated 24 May 2022, of the Court of Tax Appeals en bane in CTA EB No. 2241 (CTA Case No. 10198) are AFFIRMED. SO ORDERED.”

The SC also said:

“The President, under the Constitution, enjoys the power of control over the entire Executive Department. Given that the President, as Chief Executive, has control over all the agencies in dispute, it is only proper and logical that he first be given a chance to resolve the dispute before resort to the courts.

“Only after the President has decided or settled the dispute can the court's jurisdiction be invoked. Neither the Judiciary, by prematurely taking cognizance of actions which are otherwise subject to administrative discretion, nor the Legislature, by circumscribing such power through legislation, can curtail such exercise of the President's power of control.

“Veritably, the power to tax is legislative in nature, and under our constitutional framework, the power to execute and administer laws, tax laws included, pertains to the Executive.

“Pursuant to this design, the Legislature, by enacting the NIRC (National Internal Revenue Code), has yielded the power to assess and collect taxes to the BIR and the CIR, under the supervision and control of the Secretary of Finance.

“The Secretary of Finance, in tum, is subject to the control of the President, along with all other executive departments, bureaus, and offices, through which he is expected to faithfully execute all laws.

“By the power of control, we mean the power of an officer to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for that of the latter.

“The following conclusions are, thus, inescapable: the President has the power of control over the BIR and the CIR; such power of control authorizes the President to alter, modify, or nullify decisions of the BIR and the CIR; the President can likewise act in the stead of his or her subordinates, and exercise powers directly conferred by law to the BIR and the CIR.

“Because of such broad power vested in the President over the acts of subordinates in the Executive Department, it is not only constitutionally infirm, but likewise downright impractical, to allow the Judiciary to take cognizance of a matter which can still be undone, modified, or otherwise subjected to the discretion of the Executive.

“It must be clarified that the administrative settlement procedure, as it applies to tax disputes between the BIR and other executive agencies, is not meant to supplant or override the power of Congress to tax.

“Foremost, it is circumscribed by the very duty of the Executive to ‘faithfully execute all laws.’ In deciding such conflicts, the Executive is bound to observe tax laws -- it cannot wantonly disregard them by haphazardly exempting executive agencies or transactions therefrom nor can it proceed with a pre-determined result in mind, as feared by the petitioner (DOE).

“Rather, the process must result in a determination of the most appropriate arrangement or course of action for the agencies involved, after the Executive has taken stock of all applicable laws, rules, and regulations, and how they may be reconciled and adhered to in relation to the dispute.

“It cannot be utilized as a vehicle for circumventing or disregarding existing laws or justifying illegalities, as these will undoubtedly constitute grave abuse of discretion.

“By stepping in to resolve disputes between executive agencies before they are ripe for adjudication, the Chief Executive is not trespassing into the exclusive realm of the Legislature, nor is it arrogating judicial power. He or she is merely positively carrying out his or her mandate to execute laws faithfully.

“The Executive's attempt to reconcile disputes, claims, and controversies stemming from implementation of laws must be viewed as deference to the Legislature, for it is essentially an effort to breathe life and force to laws they have enacted whilst recognizing the complexities attendant to their implementation.

“It likewise guards the Judiciary from actions where there are no actual controversies between parties, as there is ultimately one real party-in-interest. Fealty to constitutional mandate demands no less.

“Clearly, the CTA En Banc committed no error in denying the petition. The foregoing discussions leave this Court with no other recourse but to deny the Petition....”

TAGS: #SC #BIR #DOE