| LUCIO
PART II |
| "SEC.
267. Other crimes and Offenses. - (a) Misdeclaration or misrepresentation of manufacturers subject to excise tax - Any manufacturer who, in violation of the provisions of Title VI (on Excise Taxes) of this Code, misdeclares in the sworn statement required therein or in the sales invoice, any pertinent data or information shall be punished by a summary cancellation or withdrawal of the permit to engage in business as a manufacturer of articles subject to excise tax. These provisions of the Tax Code clearly show that the BIR is not bound by the manufacturer's registered wholesale price in imposing the ad valorem excise tax on cigarette products. This is particularly indicated when there is indubitable proof of the Manufacturer's willful intent to evade the tax by selling its products through dummies (corporations and individuals) set up by the Manufacturer to enable it to underdeclare its manufacturer's wholesale price in the Manufacturer's Sworn Statement filed with the BIR. Pursuant to the above Section 267, in addition to the penalty of fine and imprisonment under the Tax Code, the manufacturer would be penalized, upon proof of misdeclaration or misrepresentation of its manufacturer's sworn statements or its sales invoices, by a summary cancellation or withdrawal of the permit to engage in business as a manufacturer of articles subject to excise tax. I believe this is the penalty that Fortune is or should be most afraid of because, once it is established that it misdeclared or misrepresented its manufacturer's sworn statements or its sales invoices, it will lose its permit to engage, not only in cigarette manufacturing, but in all articles subject to excise tax. C. In A Criminal Action Or Proceeding For Collection Of The Tax Evaded, An Assessment Is Not Required In Cases Involving Fraud - However for the 1992 Tax Evasion Case, although this is not a pre-requisite for criminal prosecution, I issued a Deficiency Assessment to Fortune which, for failure of Fortune to elevate to the Court of Tax Appeals in due time, had become Final, Executory and Demandable. Fortune's lawyer keeps harping on the lack of assessment issued for the 1990 and 1991 tax evasion cases. Also, its lawyer insists that, while I issued a Deficiency Assessment against Fortune for its 1992 Tax Evasion Case, because I did not resolve its protest, the assessment has not become final. Thus, its lawyer concludes that, the 1992 assessment not having become final, there is no tax due and therefore no tax evasion. Fortune and its lawyer can harp and carp on this argument but the law and jurisprudence are clear and indisputable. Section 223 (now 222) of the Tax Code, as amended, provides as follows: "SEC.223. Exceptions as to period of limitation of assessment and collection of taxes. - (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court after the collection of such tax may be begun without assessment, at any time within ten years after discovery of the falsity, fraud or omission; Provided, that in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof; " In the case of Ungab vs. Cusi , 97 SCRA 877 [1980], which is the same as these Fortune Tax Evasion Cases and, therefore, squarely applies to and surely demolishes the defense raised by FORTUNE in these tax evasion cases, the Supreme Court has established this precedent: "The petitioner also claims that the filing of the informations was precipitate and premature since the Commissioner of Internal Revenue has not yet resolved his protests against the assessment of the Revenue District Officer; and that he was denied recourse to the Court of Tax Appeals. The contention is without merit. What is involved here is not the collection of taxes where the assessment of the Commissioner of Internal revenue may be reviewed by the Court of Tax Appeals, but a criminal prosecution for violations of the National Internal revenue Code which is within the cognizance of courts of first instance. While there can be no civil action to enforce collection before the assessment procedures provided in the Code have been followed, there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution under the Code. 'The contention is made, and is here rejected, that an assessment of the deficiency tax due is necessary before the taxpayer can be prosecuted criminally for the charges preferred. The crime is complete when the violator has, as in this case, knowingly and willfully filed fraudulent returns with intent to evade and defeat a part or all of the tax.' 'An assessment of a deficiency is not necessary to a criminal prosecution for a willful attempt to defeat and evade the income tax. A crime is complete when the violator has knowingly and willfully filed fraudulent returns with intent to evade and defeat the tax. The perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate return, and the government's failure to discover the error and promptly to assess has no connections with the commission of the crime.' (Underscoring supplied) Republic vs. Lim Tian Teng Sons & Co., 16 SCRA 584 [1966], is also instructive thus: "We will discuss first the taxpayer's appeal. It maintains that the lower court has no jurisdiction to entertain this case on the ground that the Collector of Internal Revenue has not yet issued his final decision on its request for reinvestigation. The taxpayer's stand is that final decision of the Collector of Internal revenue on the disputed assessment is a condition precedent to the filing of an action in the Court of First Instance for the collection of a tax. This argument has no merit. The Collector of Internal Revenue is authorized to collect delinquent internal revenue taxes either by distraint and levy or by judicial action or both simultaneously. The only requisite before he can collect the tax is that he must first assess the same within the time fixed by law. And in the case of a false or fraudulent return with intent to evade the tax or of a failure to file a return, a proceeding in court for the collection of such tax may be begun without assessment. Nowhere in the Tax Code is the Collector of Internal Revenue required to rule first on the taxpayer's request for re-investigation before he can go to court for the purpose of collecting the tax assessed. On the contrary, Section 305 of the same Code withholds from all courts, except the Court of Tax Appeals under Section 11 of Republic Act 1125, the authority to restrain the collection of any national internal revenue tax, fee or charge, thereby indicating the legislative policy to allow the Collector of Internal Revenue much latitude in the speedy and prompt collection of taxes. The reason is obvious. It is upon taxation that the government chiefly relies to obtain the means to carry on its operations, and it is of utmost importance that the modes adapted to enforce collection of taxes levied should be summary and interfered with as little as possible. No government could exist if all litigants were permitted to delay the collection of its taxes." (Underscoring supplied) Jurisprudence is clear that, if the Commissioner does not decide on the request for re-investigation made by the taxpayer and, instead, he goes to a regular court to enforce collection by judicial action, such move on the part of the Commissioner is an adverse decision already appealable to the Court of Tax Appeals where injunctive relief may be prayed for. If the taxpayer fails to comply with such procedure, then the assessment becomes final, executory and demandable. (Yabes vs. Flojo, 115 SCRA 284, [1982]). In recognition of these precedents, the Tax Reform Act of 1997 (effective January 1, 1998) categorically provides in Section 228 on Protesting of Assessment, as follows: "SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: x x x x x Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within one hundred (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180) day period; otherwise, the decision shall become final, executory and demandable." Sec. 228 is very clear and to the point as regards the 1992 Deficiency Assessment I issued dated August 13, 1993 in the total amount of P7,685,942,221.66, representing deficiency ad valorem excise, value-added and income taxes, including penalties, surcharges and interests. On September 17, 1993, Fortune filed a protest in the form of a motion for reconsideration which, according to its lawyer, has not been resolved even when I ceased to be BIR Commissioner. It is sad indeed for Fortune's legal counsel not to know that, because I did not act on its protest, Fortune had only 30 days from lapse of the 180 day period provided for by law within which to bring the case before the Court of Tax Appeals; after which period, because Fortune did not appeal to the Court of Tax Appeals, the assessment had become final, executory and demandable. Under the circumstances, Commissioner Rualo should have issued a warrant of distraint and levy, instead of entering into the compromise through the guise of a reinvestigation of the deficiency assessment I issued. II. COMMISSIONER RUALO'S COMPROMISE/REINVESTIGATION OF THE DEFICIENCY ASSESSMENT FOR THE 1992 TAX EVASION CASE IS ILLEGAL UNDER THE TAX CODE - The dismissal/withdrawal by Commissioner Rualo of the criminal actions involving fraud already filed in court, based merely on an alleged reinvestigation conducted (not by the Evaluation Board mandated under the Tax Reform Act of 1997 but by a mere committee created by the Commissioner) of the 1992 deficiency tax assessment I issued that had already become final, executory and demandable, is illegal under the Tax Code. Section 204 of the Tax Code provides: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may - (A) Compromise the payment of any internal revenue tax, when: (1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or (2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. The compromise settlement of any tax liability shall be subject to the following minimum amounts: For cases of financial incapacity, a minimum compromise rate equivalent to ten (10%) of the basic assessed tax; and For cases of financial incapacity, a minimum compromise rate equivalent to forty percent (40%) of the basic assessed tax. Where the basic tax involved exceeds One Million Pesos (P1,000,000.00) or where the settlement is less than the prescribed minimum rates, the compromise shall be subject to the approval of the Evaluation Board which shall be composed of the Commissioner and the four (4) Deputy Commissioners. x x x x x All criminal violations may be compromised except (a) those already filed in court, or (b) those involving fraud." When Commissioner Rualo, in 1998, allowed the reinvestigation of the 1992 Deficiency Assessment, he had no authority to grant such reinvestigation since the 1992 Deficiency Assessment had long become final, executory and demandable. Under the Tax Code, the Commissioner may compromise such final and executory assessment only if: a) there is a reasonable doubt as to the validity of the claim against the taxpayer; or b) the financial position of the taxpayer demonstrates a clear inability to pay. But even if there are legal grounds for compromise, the Commissioner alone cannot compromise the 1992 deficiency assessment without the approval of the BIR Evaluation Board composed of the Commissioner and the four (4) Deputy Commissioners. Commissioner Rualo did not comply with this requirement. Instead, Commissioner Rualo appointed a Committee which had no authority under the Tax Code to approve or even recommend any compromise involving assessments where the basic tax exceeds one million pesos (P1,000,000.00). This Committee was made up of a mere Section Chief, the Direct Taxes Section of the Appellate Division, Atty. Jose Ric Cabrera, as Chairman, and as a member, the Chief of the Appellate Division. The Direct Taxes Section, of which Atty. Cabrera is the Chief, is not even involved in Excise Taxes because Excise Tax is not a Direct Tax. Obviously, not any one of the Deputy Commissioners, most specially the Deputy Commissioner for Legal and Enforcement Group who is in charge of the Appellate Division, the Prosecution Division, and the Tax Fraud Division (which investigated the Tax Evasion Cases) was ever involved. Neither was the approval of the Evaluation Board obtained. This illegal action by Commissioner Rualo is shown in the face of the Committee Report, an official BIR record that should have been submitted to the Marikina Metropolitan Trial Court, on the alleged "REINVESTIGATION" of these Tax Evasion Cases. Under the aforecited Section 204 of the Tax Code, as amended, the Commissioner is not also allowed to compromise, even with the approval of the Evaluation Board, criminal violations that have already been filed in court or those involving fraud. Commissioner Rualo knowingly and willfully disregarded the legal and procedural requirements in handling Fortune's Tax Evasion Cases, and the 1992 Deficiency Assessment which had already become final, executory and demandable - in patent violation of Section 204 of the Tax Code, as amended. Thus, the action of Commissioner Rualo of withdrawing the criminal action, being improper and illegal, can have no valid and binding effect. No right can emanate or be derived therefrom. Consequently, because it is planted on an illegal act of Commissioner Rualo, Fortune's motion to dismiss in the Metropolitan Trial Court of Marikina has no leg to stand on. It then becomes a matter of utmost urgency and importance that the dismissal by the Court of Appeals of these Tax Evasion Cases be elevated to the Supreme Court, not merely on the technicality of whether the DOJ's Certiotari Petition was timely filed but also, and more significantly, on this very serious issue of the effect of Commissioner Rualo's violations of the Tax Code on the withdrawal/dismissal of these cases. The action of Commissioner Rualo and the members of the Rualo- constituted "Reinvestigation Panel", in conducting the alleged "reinvestigation" of the 1992 Deficiency Assessment, dismissing all the criminal cases for tax evasion for tax years 1990, 1991 and 1992 and in reducing the 1992 Deficiency Assessment that had already become final, executory and demandable from Seven Billion Six Hundred Eighty Five Million Nine Hundred Forty Thousand Two Hundred Twenty One and 66/100 Pesos (P7,685,942,221.66) to a measly Five Million One Hundred Five Thousand Three Hundred Twenty Six and 68/100 Pesos (P5,105,326.68), is a clear violation of the Tax Code, as amended. III. TACTICS RESORTED TO BY FORTUNE AND ITS LAWYER TO DELAY THE FILING AND HEARING OF FORTUNE'S TAX EVASION CASES Fortune's minions and apologists put the blame on me for allegedly not filing these cases during my term of office. To set the records straight, I have exerted all efforts, humanly possible, in getting these cases filed and tried in the courts during my time. I filed the 1992 Tax Evasion Case on September 7, 1993 with the DOJ and the 1990 and 1991 Tax Evasions Cases in January, 1994 with the Quezon City Prosecutor's Office. However, Fortune and its lawyers have managed to delay the filing and trial of these cases in court - on mere technical and procedural issues. 1. On January 4, 1994, after the DOJ Panel of Investigators denied Fortune's Motion for Reconsideration, Motion for Suspension of Investigation, Motion to Inhibit the state prosecutors, and Motion to require BIR to submit the Daily Manufacturer's Sworn Statement, Fortune filed a Petition for Certiorari and Prohibition with Preliminary Injunction before the Regional Trial Court (RTC) of Quezon City. 2. On January 25, 1994 and February 14, 1994, respectively, the RTC issued a writ of preliminary injunction to DOJ to suspend the preliminary investigation before the DOJ and a supplemental writ of preliminary injunction likewise enjoining the preliminary investigation before the Quezon City prosecutor's Office. 3. On March 7, 1994, DOJ filed a petition before the Supreme Court (SC) for certiorari and prohibition with preliminary injunction, which the SC remanded to the Court of Appeals. On December 19, 1994 , the Court of Appeals denied the DOJ's petition. 4. On February 23, 1995, the DOJ's motion for reconsideration was denied by the Court of Appeals. From this denial of its Motion, the DOJ filed a petition for review with the Supreme Court. 5. On June 4, 1996, the Supreme Court in a 3 to 2 decision held that there is no selective prosecution but that the RTC did not err in issuing the injunction and that the proper resolution of the prejudicial question on the determination of whether a tax liability , which is an essential element of tax evasion, exists before criminal proceedings may be pursued. Justices Kapunan, Bellosillo and Hermosisima concurred, while Justices Padilla and Vitug dissented. On this same date, the DOJ filed a motion for reconsideration to the Supreme Court en banc. 6. On February 6, 1997, the Supreme Court denied the DOJ's motion for reconsideration BUT resolved as follows: · To remand the case to the RTC but directing Judge Tirso Velasco to dismiss the Civil Case for certiorari and prohibition with preliminary injunction; · to direct the DOJ Secretary to designate a new panel of investigators to investigate the tax evasion cases against Fortune and the other accused; · order the new panel of prosecutors to grant Fortune's motion for the submission by the BIR Commissioner of the documents supporting the complaint and give Fortune reasonable time to examine the documents and to submit their counter-affidavits; and · Order the preliminary investigation to proceed with all reasonable dispatch. 7. The new DOJ Panel of investigators took sometime to finish the preliminary investigation. Thus, on June 30, 1998, when my term of office as BIR Commissioner ended, the preliminary investigation was still pending. It was only with the assumption of office of then DOJ Secretary Serafin Cuevas, under the administration of President Estrada, that these Tax Evasion Cases were eventually filed with the Marikina Metropolitan Trial Court. 8. It was after the filing of the Tax Evasion Cases in court that then Commissioner Rualo ordered an alleged "REINVESITIGATION" of the 1992 Deficiency Assessment and, in violation of the provisions of the Tax Code, moved for the withdrawal of the criminal cases in the Marikina Metropolitan Trial Court. 9. These cases are now awaiting the Government's action on the pending issue before the Court of Appeals: the dismissal of these cases on the procedural technicality that the Petition for Certiorari of the DOJ questioning the Metropolitan Trial Court's Order of Dismissal was filed in the Marikina RTC out of time. THE TAX EVASION CASES HAVE NEVER BEEN HEARD ON THEIR MERITS AND, I BELIEVE, FORTUNE WILL NOT ALLOW THESE CASES TO BE TRIED BEFORE THE COURT FOR FEAR THAT THE EVIDENCE THE BIR HAS OBTAINED DURING MY TERM OF OFFICE AND COPIES OF WHICH ARE NOW WITH THE DOJ WILL ESTABLISH BEYOND REASONABLE DOUBT THE WILLFUL AND FRAUDULENT USE BY FORTUNE AND ITS RESPONSIBLE OFFICERS OF DUMMY CORPORATIONS AND FICTITIOUS INDIVIDUAL DEALERS IN ORDER TO EVADE THE PAYMENT OF THE CORRECT AD-VALOREM, INCOME AND VALUE-ADDED TAXES FOR TAXABLE YEARS 1990, 1991 AND 1992. AN APPEAL In conclusion, I would like to appeal for action on these cases by the Government and for media to publish this letter in full so that the Filipino People may know the truth about these Fortune Tax Evasion Cases. Very truly yours, LIWAYWAY VINZONS-CHATO |