REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

THIRD DIVISION

CHEVRON SERVICES PHILS., INC., CTA CASE NO. 9571

Petitioner,
Members:

UY, Chairperson,
-versus -
RINGPIS-LIBAN, and
MODESTO-SAN PEDRO,JJ.

COMMISSIONE R O F INTERNAL Promulgated:

REVEN UE,
--
RESOLUTION

RINGPIS-LIBAN, L:

Submitted before this Court is respondent's Motion for

Reconsideration (of the D ecision d ated 15 July 2020) filed through
registered mail on August 28, 2020 and received by the Court on September 7,
2020, with petitioner's Comment (Re: Motion for Reconsideration d ated
Au gust 28, 2020) filed on November 16, 2020.

On July 15, 2020, the Court promulgated a Decision cancelling

respondent's deficiency tax assessments for failing to issue a Letter of
Authority (LOA) and violating petitioner's right to due process of law, the
dispositive portion of which reads as follows:

"WHE REFORE, in light o f the foregoing considerations,

the instant Petition for Review is GRANTE D .

Accordingly, the Final Denial Letter dated March 1, 2017

issued by Regional Director Glen A. Geraldina against petitioner
is hereby REVERSE D and SE T ASIDE . Furthermore, the
FAN, assessing petitioner of the deficiency income tax and VAT,
in the aggregate amount of P 52,292,668.88, inclusive of interest
and surcharges, for the CY 2011 , is CANCE LLE D and SET
ASIDY
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CT,\ Case No. 9571
Page 2 of 10

SO ORDERED."

In his Motion, respondent prays that the above Decision be

reconsidered, raising the following grounds as his main arguments, viz.:

1. The Formal Assessment Notice (FAN) was received by the

petitioner on December 22, 2016, and not January 3, 2017;

2. This Court has no jurisdiction over the instant Petition;

3. Respondent fully complied with the due process requirement

under Section 228 of the National Internal Revenue Code, as amended,
by Revenue Regulations (RR) No. 12-1999 and RR No. 18-2013;

4. The principle of estoppel prevents a person from maintaining a

position inconsistent with one in which he has acquiesced; and,

5. Administrative authorities should be allowed the pnor

opportunity to decide controversies within its competence, and in much
the same way that, on the judicial level, issues not raised in the lower
court cannot be raised for the first time on appeal.

As to the first ground, respondent insists that the FAN was received by
petitioner on December 22, 2016 and the person who received the same, Mr.
Richard Intalan, was indeed duly authorized to receive for and in behalf of
petitioner. Respondent argues that there is nothing on record, other than the
Certification dated September 20, 2017, which would show that petitioner
presented concrete evidence to prove that it did not really receive the said FAN
on December 22, 2016. He continues that petitioner in fact failed to present
Mr. Intalan as witness to testify that he was not authorized or given permission
to receive the said FAN or had no instances in the past that he received
notices/documents on behalf of petitioner. Respondent cites the cases of
1
Scenarios, Im:, et aL v. Jei!J Vinluan (''Scenarios case") and Land Bank of the
Philippines v. Heirs of Fernando A/sua, et aL, 2 ('Land bank case") to bolster its claim.

With regard to the second ground, respondent claims that perusal of the
Bureau of Internal Revenue (BIR) Records would show that the subject FAN
dated December 20, 2016 was personally served to and received by petitioner
on December 22, 2016. As such, it has thirty (30) days from receipt of the said
FAN, or until January 21, 2017, within which to flle an administrative protest
with the BIR, pursuant to Section 228 of the National Internal Revenue Code
(NIRC) of 1997 and Section 3.1.5, paragraph 4 of RR No. 12-99, as amended.
However, petitioner's Letter of Protest against the FAN was only filed on
February 2, 2017, which was beyond the said 30-day period. In the same vein,
respondent further continues that the filing of the present Petition was likewise
/V
1
G.R. No. 173283, September 17, 2008.
2
G.R. No. 167361, April 2, 2007.
RESOLUTION
CT.\ Case No. 9571
Page 3 of 10

belatedly filed on April10, 2017. As such, the deficiency income tax and value-
added tax assessments have already become final, executory and demandable,
thereby precluding petitioner from disputing the correctness of the subject
assessments, and barring petitioner from filing any judicial appeal before this
Court.

As to the third ground, respondent claims that peuuoner was never

deprived of its right to due process as it was fully apprised of the legal and
factual bases of the assessments issued against it. He asserts that petitioner was
in fact afforded sufficient opportunity to contradict the findings in the said
assessments - which it did -through its letter of protest to the Preliminary
Assessment Notice (PAN) dated December 9, 2016 and letter of protest to the
FAN dated February 2, 2017. Respondent continues that so long as the parties
are given the opportunity to explain their side, the requirements of due process
are satisfactorily complied with. Also, respondent avers that the issuance of
PAN is not indispensable and failure on the part of the taxpayer to file its
protest thereon would not result in the finality of the assessment.

Anent the fourth ground, respondent argues that peuuoner, in the

present Petition or in any of its protest letters filed with the BIR, never
questioned the validity of LOA and the supposed lack of authority of the
individual to receive the FAN on its behalf. Thus, respondent submits that this
Court should deem petitioner estopped from questioning the absence of an
LOA and the alleged lack of authority of Mr. Intalan to receive the FAN at the
administrative level.

Lastly, with regard to the fifth ground, respondent invokes the principle
of prior exhaustion of administrative remedies, whereby questions or issues not
raised in the administrative level cannot be raised for the first time on appeal in
the judicial level. To allow a litigant to assume a different posture when he
comes before the court and challenge the position he had accepted at the
administrative level, would be to sanction a procedure whereby the Court -
which is supposed to review administrative determinations - would not
review, but determine and decide for the first time, a question not raised at the
administrative forum.

On the oilier hand, in its Comment, peutmner cites the case of

Commissioner of Internal Revenue v. GJM Philippines Manufacturing, Inc./ wherein it
was held by the Supreme Court iliat the burden of proof to show that
substituted service was validly made lies with the sender to prove that ilie
mailed letter was, in fact, received by the addressee. More so, petitioner
reiterates the findings of the Court that the subject FAN was not validly served
upon petitioner as the recipient thereof, Mr. Intalan, is neither petitioner's clerk
nor a person having charge of petitioner's registered or known address.
/)./

3
G.R. No. 202695, February 29, 2016.
RESOLUTION
CT.\ Case No. 9571
Page 4 of 10

Petitioner further submits that the cited cases of Scenarios and Land bank
are inapplicable herein since the Scenarios case refers to summons and notices
served by the Labor Arbiter in a labor case, and the Land bank case refers to
service of the order of dismissal made by the National Labor Relations
Commission. Also the mode of service resorted to in the Land bank case was
registered mail not substituted service, as in the present case.

Furthermore, petitioner claims that respondent's letter dated December

28, 2016 states that he merely acknowledged the receipt of petitioner's Reply to
the PAN, and that the same will only form part of the docket because the FAN
dated December 20, 2016 had already been issued against petitioner. For this
reason, the Court ruled that respondent violated its right to due process when
he failed to consider petitioner's Reply to the PAN before issuing the subject
FAN. Petitioner likewise insists that the service of the PAN to a taxpayer is a
substantive (not merely a formal) requirement pursuant to Section 228 of the
NIRC of 1997, as amended.

Lastly, petitioner asserts that this Court may rule on issues not previously
raised by the parties in their pleadings or memoranda, pursuant to Section 1,
Rule 14 of the Revised Rules of the Court of Tax Appeals (RRCTA),4 and such
legal authority was even affirmed by the High Court in the cases of Commissioner
of Internal Revenue v. Lancaster Philippines, Inc. 5 and Commissioner of Internal Revenue v.
Eastern Telecommunications Philippines, Inc. 6

This Court finds respondent's Motion for Reconsideration bereft of

merit.

At the outset, the instant Motion was filed out of time. Perusal of the
records of the present case will readily show that the Decision dated July 15,
2020 was received by respondent on July 29, 2020. From there, respondent has
fifteen (15) days, or until August 13, 2020, within which to file a motion for
reconsideration. However, the instant Motion was only filed on August 28,
2020.

Believing that his Motion for Reconsideration was timely flied,

respondent argues that since the said period fell on the suspension of the
reglementary period for the filing of, among others, motions pursuant to
Supreme Court (SC) Administrative Circular No. 43A-2020 dated August 3,
2020, he therefore has until August 28, 2020 within which to flle his motion. In
effect, respondent claims that he has a fresh period of fifteen (15) days from
August 13, 2020 within which to file his Motion for Reconsideration/ V

4
A.M. No. 05-11-07-CTA, November 22, 2005.
5
G.R. No. 183408, July 12, 2017.
6
G.R. No. 163835, July 7, 2010.
RESOLUTION
CT.\ Case No. 9571
Page 5 of 10

Unfortunately, respondent's interpretation of the SC circular is

erroneous.

To recapitulate, due to the rising cases affected by the 2019 Coronavirus

Disease (COVID-19), the Supreme Court issued Administrative Circular No.
43-2020 on August 2, 2020, declaring the physical closure of courts in areas
under Enhanced Community Quarantine or Modified Enhanced Community
Quarantine from August 3 to 14, 2020, but the court operations however shall
continue to receive petitions and pleadings electronically and shall continue to
resolve and decide cases pending before them, the relevant portion of which is
quoted hereafter as follows:

"Due to the reported surge in Covid-19 cases, the Court en

bane has provided the following guidelines in the operation of the
courts from 3-14 August 2020:

1. Unless here provided, ALL the courts in the National

Capital Judicial Region, and those in areas under Enhanced
Community Quarantine or Modified Enhanced
Community Quarantine, SHALL BE PHYSICALLY
CLOSED to all court users, and shall only be reached
through their respective hodine numbers, email addresses
and/or Facebook accounts as posted on the website of the
Supreme Court. x x x
-X X X-

5. The Court of Appeals, Sandiganbayan, and Court of Tax

Appeals shall continue to receive petitions and
pleadings electronically, and in accordance with
Paragraph 1 herein, and process the same pursuant to their
respective internal rules.

6. The Court of Appeals, Sandiganbayan, and Court of Tax

Appeals shall continue to resolve and decide cases
pending before them. Regular hearings shall be
conducted through videoconferencing." (Emphases
supplied)

On the next day, an addendum to the above mentioned circular,

Administrative Circular No. 43A-2020, was issued by the Supreme Court
modifying the suspension of the reglementary periods for the filing of petitions,
appeals, complaints, motions, pleadings and other court submissions before
the courts from August 4 to 18, 2020, and shall resume on August 19, 2020, to
wit:

"In view of the imposition of Modified Enhance

Community Quarantine (MECQ) in Metro Manila, Cavite, Rizal,
/
RESOLUTION
CT,\ Case No. 9571
Page 6 of 10

Bulacan and Laguna from 4 to 18 August 2020, and in addition to

the proVIsions of Administrative Circular No. 43-2020
[inadvertently numbered as A.C. No. 42-2020] dated 2 August
2020, the court in the said areas during the period of 4 to 18
August 2020, shall also observe, as follows:

1. The reglementary periods for the filing of petitions,

appeals, complaints, motions, pleadings and other court
submissions before the courts shall be suspended from 4
to 18 August 2020, and shall resume on 19 August 2020,
without prejudice to those who have already filed such
pleadings and documents within the reglementary periods.
In the same manner, the periods for court actions with
prescribed periods are likewise suspended, and shall resume
on 19 August 2020.

2. Administrative Circular No. 43-2020 [inadvertent!J numbered

as A.C. No. 42-2020} shall be extended until 18 August
2020.

All previously issued circulars and their respective

provisions which are not inconsistent herewith shall remain
valid and in effect." (Empham supplied)

From the foregoing circulars, it is clear that while the Court of Tax
Appeals (CTA) was physically closed to court users from August 3 to 18, 2020,
it shall nonetheless continue to receive petitions and pleadings electronically
and will continue to resolve and decide cases pending before them during the
said period, including hearings conducted through videoconferencing.

Evidently, there is no basis for respondent to presume that he had a

fresh period of fifteen (15) days from August 13, 2020, the supposed last day
for him to file his Motion for Reconsideration. Instead, respondent should
have submitted his Motion either via electronic mail or on the date the Court
resumed its operation on August 19, 2020. By filing the instant Motion for
Reconsideration on August 28, 2020, respondent is deemed to have belatedly
flied the said Motion.

At any rate, assuming arguendo that the instant Motion is admitted and
considered, the same would still fail on the merits considering that the
arguments raised therein shows that they are mere rehashes of the same facts
and issues which have already been extensively discussed in the Decision it
assails.

To reiterate, paragraph 3.1.6(iii), Section 3 of RR No. 12-99, as amended

by RR No. 18-2013, provides that substituted service may be resorted to when
the taxpayer is not present at the latter's registered or known address by
?V
RESOLUTION
CT.\ Case No. 9571
Page 7 of 10

leaving the notice to the taxpayer's clerk or with a person having charge
thereof of the place where the business activities of the taxpayer are
conducted.

In the present case, respondent's witness Revenue Officer (RO)

Florentino A. Guarino III, during his cross-examination, testified that he
served the FAN to Mr. Richard Intalan on December 22, 2016, despite having
knowledge that the latter is an employee of Chevron Philippines, Inc., which a
separate and distinct entity from petitioner. 7 This fact was further confirmed by
Mr. Intalan's employer, Facilities Managers, Inc., when it issued a Certification
dated September 20, 2017, 8 attesting that Mr. Intalan is connected to Chevron
Philippines, Inc., and not with petitioner. As such, Mr. Intalan cannot be
considered as a clerk of petitioner or one who has charged of the place of
business of the latter. Consequently, this Court considers January 3, 2017, when
service of the FAN was effected through registered mail, as the date of receipt
of petitioner.

Moreover, this Court likewise does not find the doctrinal

pronouncements in the Scenarios case and Land bank ccm applicable herein as the
facts in the said cases are not on all fours with the present case.

In Scenarios case, summons and notices of hearing were issued and sent via
registered mail at petitioner's registered business address. After denying their
receipt, the Supreme Court ruled "the postal office certifications are prima fade
proof that the said processes had been delivered to and received by petitioners.
The presumption of regularity in the performance of official duty stands."
Notably, the High Court relied on Section 5 of the New National Labor
Relations Commission Rules of Procedure in serving notices and summons,
wherein it states that service by registered mail is complete after five (5) days
from the date of first notice of the postmaster in the event that the addressee
fails to claim his registered mail from the post office. In contrast, the present
case involves a substituted mode of service and not through registered mail,
which is allowed under Section 3.1.6 of RR No. 12-99.

While, in the Land bank case it has been established that the security
guard who received the copy of the order of dismissal via registered mail had
been accustomed to the responsibility of receiving papers on behalf of
petitioner, and such fact was even admitted by the petitioner itself. On the
other hand, in the present case, no proof was presented by respondent showing
that Mr. Intalan had been accustomed to the responsibility of receiving papers
or communication letters for and in behalf of petitioner. Neither was there an
admission on the part of petitioner that it authorized Mr. Intalan to receive any
papers or documents on its behal/

7
TranscriptofStenographicNotesdated October 18,2018, pp. 14 to 16.
8
Exhibit "P-12", Docket- Vol. II, p. 636.
RESOLUTION
CT"\ Case No. 9571
Page 8 of 10

Anent the issue of the PAN, this Court reiterates that it is mandatory for
respondent to furnish the taxpayer with a PAN, to give the taxpayer the
opportunity to file its protest thereon within fifteen (15) days from receipt
thereof, and to consider the taxpayer's explanation in its protest to the PAN
before issuing the FAN. 9 Thus, the premature issuance of the FAN, prior to
the lapse of the 15-day period given to it to file its reply to the PAN, violates
the taxpayer's right to due process. In the case of Commissioner of Internal Revenue
v. Nippo Metal Tech Phils., Im: (former!J Global Metal Tech Corporation), 10 the
Supreme Court emphasized that the PAN is part of due process requirement to
which the CIR must strictly comply, thus:

"Succinctly put, if it was determined that there exists

sufficient basis to assess the taxpayer for deficiency taxes, the CIR
or her duly authorized representative shall issue to the
taxpayer a Preliminary Assessment Notice (PAN), to which
the taxpayer is required to respond. Upon receipt of the PAN,
the taxpayer is granted fifteen (15) days, within which to file a
reply. If he fails to do so within the prescribed period, he shall be
considered in default and only then shall the CIR or her duly
authorized representative issue an FLD /FAN, calling for the
payment of the assessed deficiency tax liability, surcharges and
penalties.

Clearly, due process demands that the taxpayer receives the

PAN and that he is given the opportunity to respond thereto.
Moreover, in CIR v. Avon Products Manufacturing, Im:, the Court
even went beyond 'opportunity to be heard' as an aspect of due
process. In said case, the Court, reiterating Ang Tibay v. The Court
of Industrial Relations, held that '[n]ot only must the party be
given an opportunity to present his case and to adduce
evidence tending to establish the rights which he asserts but
the [CIR] must consider the evidence presented" (Emphases
supplied)

Also, this Court further emphasizes that Section 1, Rule 14 of the

RRCTA, explicitly states that in deciding cases, the CTA may not limit itself to
the issues stipulated by the parties, but may also rule upon related issues
necessary to achieve an orderly disposition of the case. It is for such reason that
the Supreme Court in Commissioner of Internal Revenue v. Lancaster Philippines, Im:, 11
categorically ruled that the CTA can resolve the issue involving the authority of
the RO to conduct the audit, although the same was not raised by the parties in
their pleadings or memoranda, to wi~

9
See Commissioner of Internal Revenue v. Avon Products Manufacturing, Inc., G.R. Nos.
201398-99, October 3, 2018.
10
G.R. No. 227616, June 19, 2019.
11
G.R. No. 183408, July 12, 2017.
RESOLUTION
CTA Case No. 9571
Page 9 of 10

"On whether the CTA can resolve an issue which was not
raised by the parties, we rule in the affirmative.

Under Section 1, Rule 14 of A.M. No. 05-11-07-CTA, or

the Revised Rules of the Court of Tax Appeals, the CTA is not
bound by the issues specifically raised by the parties but may also
rule upon related issues necessary to achieve an orderly
disposition of the case. The text of the provision reads:

SECTION 1. Rendition of judgment. - xxx

In deciding the case, the Court may not limit

itself to the issues stipulated by the parties but may
also rule upon related issues necessary to achieve an
orderly disposition of the case.

The above section is clearly worded. On the basis thereof,

the CTA Division was, therefore, well within its authority to
consider in its decision the question on the scope of authority of
the revenue officers who were named in the LOA even though
the parties had not raised the same in their pleadings or
memoranda. The CTA En Bane was likewise correct in sustaining
the CTA Division's view concerning such matter."

Apparently, the Court in Division can validly consider, in its Decision,

issues that were not raised by any of the parties. It also equally bears noting that
the authority of the Revenue Officers to conduct audit investigation goes into
the issue of the validity of the assessment itself. As such, any assessment arising
from the examination of a taxpayer's books of accounts by a Revenue Officer
who is not duly authorized to do so, is inescapably void, following the oft-
repeated rule that "a void assessment bears no valid fruit." 12

Accordingly, it is of no consequence that the issue on the alleged want of

authority of the Revenue Officer was never raised in any pleadings filed before
this Court. The same rationale holds true to respondent's last argument that
administrative authorities should be allowed the prior opportunity to decide
controversies within its competence since it has been settled that this Court can
also rule upon related issues necessary to achieve an orderly disposition of a
case.

Based on the foregoing disquisitions, the Court finds no justifiable

reason to change or modify the assailed Decision~

12
Commissioner of Internal Revenue v. Azucena T. Reyes, et seq., G.R. Nos. 159694 and
163581, January 27, 2006.
RESOLUTION
CTA Case No. 9571
Page 10 of 10

WHEREFORE, premises considered, respondent's Motion for

Reconsideration (of the Decision dated 15 July 2020) is DENIED for lack of
merit.

SO ORDERED.

~.~~
MA. BELEN M. RINGPIS-LIBAN
Associate Justice

We Concur:

ERL~P.UY
Associate Justice