BUREAU OF INTERNAL REVENUE, REPRESENTED BY THE COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. HON. ERNESTO D. ACOSTA, ET AL. OF THE SPECIAL FIRST DIVISION OF THE COURT OF TAX…

Bureau of Internal Revenue versus Acosta

The Case

This is a petition for certiorari filed by the Bureau of Internal Revenue, represented by the Commissioner of Internal Revenue, against the Special First Division of the Court of Tax Appeals and its presiding justice, arising from a claim for refund of excise taxes paid by Chevron Philippines. The Bureau asks the Supreme Court to strike down two resolutions of the tax court's Special First Division: one that treated the Bureau's motion for reconsideration as a mere scrap of paper, and another that declared the tax court's decision final and executory. The case matters because it is a clean teaching vehicle on two points every tax practitioner must know: the remedy against a division ruling of the Court of Tax Appeals is an appeal to the Court of Tax Appeals En Banc, and certiorari under Rule 65 is not a substitute for a lost appeal.

Procedural History

Chevron filed an administrative claim for refund or credit with the Bureau of Internal Revenue. When the Bureau did not act, Chevron elevated the matter to the Special First Division of the Court of Tax Appeals by petition for review. The Special First Division rendered a decision partly granting the petition and ordering a refund. The Bureau moved for reconsideration. The Special First Division denied that motion in a resolution, holding it a mere scrap of paper and pro forma because it lacked a notice of hearing, so it did not toll the period to appeal. The Bureau moved again for reconsideration, and the Special First Division denied it with finality, declaring its earlier decision final and executory. The tax court later issued an entry of judgment. The Bureau then filed this petition for certiorari before the Supreme Court under Rule 65, alleging grave abuse of discretion.

Facts

On October 7, 2004, Chevron Philippines filed an administrative claim for refund or credit with the Bureau of Internal Revenue. The claim, in the aggregate amount of 131,175,480 pesos and 18 centavos, represented an alleged overpayment of excise taxes on imported finished unleaded premium gasoline and diesel fuel withdrawn from its refinery in San Pascual, Batangas for the month of November 2003.

The Bureau did not act on the claim. Relying on the jurisdiction of the Court of Tax Appeals over inaction by the Commissioner, Chevron elevated the case to the Special First Division by petition for review on October 28, 2005. On July 12, 2010, the Special First Division partly granted the petition and ordered the Bureau to refund the reduced amount of 108,585,162 pesos and 95 centavos.

The Bureau moved for reconsideration on August 3, 2010, but the motion did not set itself for hearing. Chevron opposed it, arguing that the motion was pro forma and a mere scrap of paper. The Special First Division agreed and denied the motion, holding that it did not toll the period to appeal. The Bureau moved again for reconsideration, and the Special First Division denied it with finality, declaring its July 12, 2010 decision final and executory. The Bureau received a copy of that resolution on December 8, 2010, and the tax court later issued an entry of judgment. Instead of appealing to the Court of Tax Appeals En Banc, the Bureau filed this petition for certiorari on February 7, 2011.

Issues

• Whether or not a special civil action for certiorari under Rule 65 of the Rules of Court is available as a remedy to the Bureau of Internal Revenue.
• Whether or not the Special First Division of the Court of Tax Appeals gravely abused its discretion in declaring the Bureau's motion for reconsideration pro forma and in rendering its decision final and executory.

Applicable Provisions

Section 1 of Rule 65 of the Rules of Court, on when certiorari lies, provides:

When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court.

This is the gate the Bureau had to pass, and the Court held it did not, because an appeal was available.

Section 18 of Republic Act Number 1125, as amended by Republic Act Number 9282, on appeals to the Court of Tax Appeals En Banc, provides:

A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial, may file a petition for review with the CTA En Banc.

This is the plain, speedy and adequate remedy the Bureau ignored.

Section 2 of Rule 4 of the Revised Rules of the Court of Tax Appeals, on the exclusive appellate jurisdiction of the Court En Banc, provides:

The Court En Banc shall exercise exclusive appellate jurisdiction to review by appeal the following: (a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive appellate jurisdiction over: (1) Cases arising from administrative agencies - Bureau of Internal Revenue, Bureau of Customs.

This confirms that the route from a division ruling runs to the En Banc, not to the Supreme Court by certiorari.

Section 6 of the Revised Rules of the Court of Tax Appeals, on the contents of a motion for reconsideration and the notice requirement, provides:

A motion for reconsideration or new trial that does not comply with the foregoing provisions shall be deemed pro forma, which shall not toll the reglementary period for appeal.

This is the rule the Bureau violated, and it is the basis for treating its motion as a mere scrap of paper.

Ruling

On the first issue, the Court held that certiorari was not available. A special civil action for certiorari is a limited form of review and a remedy of last recourse, and it may be invoked only when there is no appeal nor any plain, speedy and adequate remedy in the ordinary course of law. A writ of certiorari is not a substitute for a lost appeal. When an appeal is available, certiorari will not prosper, especially if the appeal was lost through one's own negligence or error in the choice of remedy, even if the ground is grave abuse of discretion.

The Court stressed that the resolution of December 3, 2010, which declared the July 12, 2010 decision final and executory, is a final judgment. It disposed of the case on the merits, leaving nothing more to be done except execution. The proper remedy was an ordinary appeal to the Court of Tax Appeals En Banc, which the Bureau had every opportunity to take but chose not to. On this ground alone, the petition could be dismissed.

On the second issue, the Court held that there was no grave abuse of discretion. Grave abuse of discretion must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act in an arbitrary and despotic manner by reason of passion or hostility. The Bureau bore the burden of proving not merely reversible error but grave abuse of discretion, and it failed. The Bureau's motion for reconsideration undisputedly lacked a notice of hearing, and the Special First Division simply applied the applicable rules. Its dismissal of the motion was discretion duly exercised, not misused or abused.

Doctrine

First, a decision or resolution of a division of the Court of Tax Appeals on a motion for reconsideration or new trial is appealable to the Court of Tax Appeals En Banc. Certiorari under Rule 65 is not a substitute for that appeal, and the two remedies are mutually exclusive, not alternative or successive.

Second, certiorari lies only when there is no appeal nor any plain, speedy and adequate remedy in the ordinary course of law. A party who loses an appeal through its own error in the choice of remedy cannot later repair the loss through certiorari, even on a claim of grave abuse of discretion.

Third, a motion for reconsideration that does not comply with the required contents and notice of hearing is deemed pro forma and does not toll the reglementary period to appeal. A final judgment disposes of the subject matter in its entirety and leaves nothing more to be done except to enforce it by execution.

Disposition

The Supreme Court dismissed the petition for certiorari and affirmed in full the resolutions of the Special First Division of the Court of Tax Appeals, so the Bureau of Internal Revenue lost and the refund stood.

Remember This

The one line to memorize: certiorari is not a substitute for a lost appeal, and from a tax court division ruling the road runs to the En Banc, not to the Supreme Court. Examiners use this case to test the hierarchy of remedies before the Court of Tax Appeals and the fatal effect of a motion for reconsideration that lacks a notice of hearing.