Sunday, December 11, 2011


xx x x

"Soft law" does not fall into any of the categories of international law set forth in Article 38, Chapter III of the 1946 Statute of the International Court of Justice.32 It is, however, an expression of non-binding norms, principles, and practices that influence state behavior.33 Certain declarations and resolutions of the UN General Assembly fall under this category.34 The most notable is the UN Declaration of Human Rights, which this Court has enforced in various cases, specifically, Government of Hongkong Special Administrative Region v. Olalia,35 Mejoff v. Director of Prisons,36 Mijares v. Rañada37 and Shangri-la International Hotel Management, Ltd. v. Developers Group of Companies, Inc..38

The World Intellectual Property Organization (WIPO), a specialized agency attached to the UN with the mandate to promote and protect intellectual property worldwide, has resorted to soft law as a rapid means of norm creation, in order "to reflect and respond to the changing needs and demands of its constituents."39 Other international organizations which have resorted to soft law include the International Labor Organization and the Food and Agriculture Organization (in the form of the Codex Alimentarius).40

WHO has resorted to soft law. This was most evident at the time of the Severe Acute Respiratory Syndrome (SARS) and Avian flu outbreaks.

Although the IHR Resolution does not create new international law binding on WHO member states, it provides an excellent example of the power of "soft law" in international relations. International lawyers typically distinguish binding rules of international law-"hard law"-from non-binding norms, principles, and practices that influence state behavior-"soft law." WHO has during its existence generated many soft law norms, creating a "soft law regime" in international governance for public health.

The "soft law" SARS and IHR Resolutions represent significant steps in laying the political groundwork for improved international cooperation on infectious diseases. These resolutions clearly define WHO member states' normative duty to cooperate fully with other countries and with WHO in connection with infectious disease surveillance and response to outbreaks.

This duty is neither binding nor enforceable, but, in the wake of the SARS epidemic, the duty is powerful politically for two reasons. First, the SARS outbreak has taught the lesson that participating in, and enhancing, international cooperation on infectious disease controls is in a country's self-interest x x x if this warning is heeded, the "soft law" in the SARS and IHR Resolution could inform the development of general and consistent state practice on infectious disease surveillance and outbreak response, perhaps crystallizing eventually into customary international law on infectious disease prevention and control.41



primacy placed on the worth of the individual person and the sanctity of human rights.

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 153675 April 19, 2007

GOVERNMENT OF HONG KONG SPECIAL ADMINISTRATIVE REGION, represented by the Philippine Department of Justice, Petitioner,
vs.
HON. FELIXBERTO T. OLALIA, JR. and JUAN ANTONIO MUÑOZ, Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, seeking to nullify the two Orders of the Regional Trial Court (RTC), Branch 8, Manila (presided by respondent Judge Felixberto T. Olalia, Jr.) issued in Civil Case No. 99-95773. These are: (1) the Order dated December 20, 2001 allowing Juan Antonio Muñoz, private respondent, to post bail; and (2) the Order dated April 10, 2002 denying the motion to vacate the said Order of December 20, 2001 filed by the Government of Hong Kong Special Administrative Region, represented by the Philippine Department of Justice (DOJ), petitioner. The petition alleges that both Orders were issued by respondent judge with grave abuse of discretion amounting to lack or excess of jurisdiction as there is no provision in the Constitution granting bail to a potential extraditee.

The facts are:

On January 30, 1995, the Republic of the Philippines and the then British Crown Colony of Hong Kong signed an "Agreement for the Surrender of Accused and Convicted Persons." It took effect on June 20, 1997.

On July 1, 1997, Hong Kong reverted back to the People’s Republic of China and became the Hong Kong Special Administrative Region.

Private respondent Muñoz was charged before the Hong Kong Court with three (3) counts of the offense of "accepting an advantage as agent," in violation of Section 9 (1) (a) of the Prevention of Bribery Ordinance, Cap. 201 of Hong Kong. He also faces seven (7) counts of the offense of conspiracy to defraud, penalized by the common law of Hong Kong. On August 23, 1997 and October 25, 1999, warrants of arrest were issued against him. If convicted, he faces a jail term of seven (7) to fourteen (14) years for each charge.

On September 13, 1999, the DOJ received from the Hong Kong Department of Justice a request for the provisional arrest of private respondent. The DOJ then forwarded the request to the National Bureau of Investigation (NBI) which, in turn, filed with the RTC of Manila, Branch 19 an application for the provisional arrest of private respondent.

On September 23, 1999, the RTC, Branch 19, Manila issued an Order of Arrest against private respondent. That same day, the NBI agents arrested and detained him.

On October 14, 1999, private respondent filed with the Court of Appeals a petition for certiorari, prohibition and mandamus with application for preliminary mandatory injunction and/or writ of habeas corpus questioning the validity of the Order of Arrest.

On November 9, 1999, the Court of Appeals rendered its Decision declaring the Order of Arrest void.

On November 12, 1999, the DOJ filed with this Court a petition for review on certiorari, docketed as G.R. No. 140520, praying that the Decision of the Court of Appeals be reversed.

On December 18, 2000, this Court rendered a Decision granting the petition of the DOJ and sustaining the validity of the Order of Arrest against private respondent. The Decision became final and executory on April 10, 2001.

Meanwhile, as early as November 22, 1999, petitioner Hong Kong Special Administrative Region filed with the RTC of Manila a petition for the extradition of private respondent, docketed as Civil Case No. 99-95733, raffled off to Branch 10, presided by Judge Ricardo Bernardo, Jr. For his part, private respondent filed, in the same case,- a petition for bail which was opposed by petitioner.

After hearing, or on October 8, 2001, Judge Bernardo, Jr. issued an Order denying the petition for bail, holding that there is no Philippine law granting bail in extradition cases and that private respondent is a high "flight risk."

On October 22, 2001, Judge Bernardo, Jr. inhibited himself from further hearing Civil Case No. 99-95733. It was then raffled off to Branch 8 presided by respondent judge.

On October 30, 2001, private respondent filed a motion for reconsideration of the Order denying his application for bail. This was granted by respondent judge in an Order dated December 20, 2001 allowing private respondent to post bail, thus:

In conclusion, this Court will not contribute to accused’s further erosion of civil liberties. The petition for bail is granted subject to the following conditions:

1. Bail is set at Php750,000.00 in cash with the condition that accused hereby undertakes that he will appear and answer the issues raised in these proceedings and will at all times hold himself amenable to orders and processes of this Court, will further appear for judgment. If accused fails in this undertaking, the cash bond will be forfeited in favor of the government;

2. Accused must surrender his valid passport to this Court;

3. The Department of Justice is given immediate notice and discretion of filing its own motion for hold departure order before this Court even in extradition proceeding; and

4. Accused is required to report to the government prosecutors handling this case or if they so desire to the nearest office, at any time and day of the week; and if they further desire, manifest before this Court to require that all the assets of accused, real and personal, be filed with this Court soonest, with the condition that if the accused flees from his undertaking, said assets be forfeited in favor of the government and that the corresponding lien/annotation be noted therein accordingly.

SO ORDERED.

On December 21, 2001, petitioner filed an urgent motion to vacate the above Order, but it was denied by respondent judge in his Order dated April 10, 2002.

Hence, the instant petition. Petitioner alleged that the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in admitting private respondent to bail; that there is nothing in the Constitution or statutory law providing that a potential extraditee has a right to bail, the right being limited solely to criminal proceedings.

In his comment on the petition, private respondent maintained that the right to bail guaranteed under the Bill of Rights extends to a prospective extraditee; and that extradition is a harsh process resulting in a prolonged deprivation of one’s liberty.

Section 13, Article III of the Constitution provides that the right to bail shall not be impaired, thus:

Sec. 13. All persons, except those charged with offenses punishable by reclusion perpetua when evidence of guilt is strong, shall, before conviction, be bailable by sufficient sureties, or be released on recognizance as may be provided by law. The right to bail shall not be impaired even when the privilege of the writ of habeas corpus is suspended. Excessive bail shall not be required.

Jurisprudence on extradition is but in its infancy in this jurisdiction. Nonetheless, this is not the first time that this Court has an occasion to resolve the question of whether a prospective extraditee may be granted bail.

In Government of United States of America v. Hon. Guillermo G. Purganan, Presiding Judge, RTC of Manila, Branch 42, and Mark B. Jimenez, a.k.a. Mario Batacan Crespo,1 this Court, speaking through then Associate Justice Artemio V. Panganiban, later Chief Justice, held that the constitutional provision on bail does not apply to extradition proceedings. It is "available only in criminal proceedings," thus:

x x x. As suggested by the use of the word "conviction," the constitutional provision on bail quoted above, as well as Section 4, Rule 114 of the Rules of Court, applies only when a person has been arrested and detained for violation of Philippine criminal laws. It does not apply to extradition proceedings because extradition courts do not render judgments of conviction or acquittal.

Moreover, the constitutional right to bail "flows from the presumption of innocence in favor of every accused who should not be subjected to the loss of freedom as thereafter he would be entitled to acquittal, unless his guilt be proved beyond reasonable doubt" (De la Camara v. Enage, 41 SCRA 1, 6, September 17, 1971, per Fernando, J., later CJ). It follows that the constitutional provision on bail will not apply to a case like extradition, where the presumption of innocence is not at issue.

The provision in the Constitution stating that the "right to bail shall not be impaired even when the privilege of the writ of habeas corpus is suspended" does not detract from the rule that the constitutional right to bail is available only in criminal proceedings. It must be noted that the suspension of the privilege of the writ of habeas corpus finds application "only to persons judicially charged for rebellion or offenses inherent in or directly connected with invasion" (Sec. 18, Art. VIII, Constitution). Hence, the second sentence in the constitutional provision on bail merely emphasizes the right to bail in criminal proceedings for the aforementioned offenses. It cannot be taken to mean that the right is available even in extradition proceedings that are not criminal in nature.

At first glance, the above ruling applies squarely to private respondent’s case. However, this Court cannot ignore the following trends in international law: (1) the growing importance of the individual person in public international law who, in the 20th century, has gradually attained global recognition; (2) the higher value now being given to human rights in the international sphere; (3) the corresponding duty of countries to observe these universal human rights in fulfilling their treaty obligations; and (4) the duty of this Court to balance the rights of the individual under our fundamental law, on one hand, and the law on extradition, on the other.

The modern trend in public international law is the primacy placed on the worth of the individual person and the sanctity of human rights. Slowly, the recognition that the individual person may properly be a subject of international law is now taking root. The vulnerable doctrine that the subjects of international law are limited only to states was dramatically eroded towards the second half of the past century. For one, the Nuremberg and Tokyo trials after World War II resulted in the unprecedented spectacle of individual defendants for acts characterized as violations of the laws of war, crimes against peace, and crimes against humanity. Recently, under the Nuremberg principle, Serbian leaders have been persecuted for war crimes and crimes against humanity committed in the former Yugoslavia. These significant events show that the individual person is now a valid subject of international law.

On a more positive note, also after World War II, both international organizations and states gave recognition and importance to human rights. Thus, on December 10, 1948, the United Nations General Assembly adopted the Universal Declaration of Human Rights in which the right to life, liberty and all the other fundamental rights of every person were proclaimed. While not a treaty, the principles contained in the said Declaration are now recognized as customarily binding upon the members of the international community. Thus, in Mejoff v. Director of Prisons,2 this Court, in granting bail to a prospective deportee, held that under the Constitution,3 the principles set forth in that Declaration are part of the law of the land. In 1966, the UN General Assembly also adopted the International Covenant on Civil and Political Rights which the Philippines signed and ratified. Fundamental among the rights enshrined therein are the rights of every person to life, liberty, and due process.

The Philippines, along with the other members of the family of nations, committed to uphold the fundamental human rights as well as value the worth and dignity of every person. This commitment is enshrined in Section II, Article II of our Constitution which provides: "The State values the dignity of every human person and guarantees full respect for human rights." The Philippines, therefore, has the responsibility of protecting and promoting the right of every person to liberty and due process, ensuring that those detained or arrested can participate in the proceedings before a court, to enable it to decide without delay on the legality of the detention and order their release if justified. In other words, the Philippine authorities are under obligation to make available to every person under detention such remedies which safeguard their fundamental right to liberty. These remedies include the right to be admitted to bail. While this Court in Purganan limited the exercise of the right to bail to criminal proceedings, however, in light of the various international treaties giving recognition and protection to human rights, particularly the right to life and liberty, a reexamination of this Court’s ruling in Purganan is in order.

First, we note that the exercise of the State’s power to deprive an individual of his liberty is not necessarily limited to criminal proceedings. Respondents in administrative proceedings, such as deportation and quarantine,4 have likewise been detained.

Second, to limit bail to criminal proceedings would be to close our eyes to our jurisprudential history. Philippine jurisprudence has not limited the exercise of the right to bail to criminal proceedings only. This Court has admitted to bail persons who are not involved in criminal proceedings. In fact, bail has been allowed in this jurisdiction to persons in detention during the pendency of administrative proceedings, taking into cognizance the obligation of the Philippines under international conventions to uphold human rights.

The 1909 case of US v. Go-Sioco5 is illustrative. In this case, a Chinese facing deportation for failure to secure the necessary certificate of registration was granted bail pending his appeal. After noting that the prospective deportee had committed no crime, the Court opined that "To refuse him bail is to treat him as a person who has committed the most serious crime known to law;" and that while deportation is not a criminal proceeding, some of the machinery used "is the machinery of criminal law." Thus, the provisions relating to bail was applied to deportation proceedings.

In Mejoff v. Director of Prisons6 and Chirskoff v. Commission of Immigration,7 this Court ruled that foreign nationals against whom no formal criminal charges have been filed may be released on bail pending the finality of an order of deportation. As previously stated, the Court in Mejoff relied upon the Universal declaration of Human Rights in sustaining the detainee’s right to bail.

If bail can be granted in deportation cases, we see no justification why it should not also be allowed in extradition cases. Likewise, considering that the Universal Declaration of Human Rights applies to deportation cases, there is no reason why it cannot be invoked in extradition cases. After all, both are administrative proceedings where the innocence or guilt of the person detained is not in issue.

Clearly, the right of a prospective extraditee to apply for bail in this jurisdiction must be viewed in the light of the various treaty obligations of the Philippines concerning respect for the promotion and protection of human rights. Under these treaties, the presumption lies in favor of human liberty. Thus, the Philippines should see to it that the right to liberty of every individual is not impaired.

Section 2(a) of Presidential Decree (P.D.) No. 1069 (The Philippine Extradition Law) defines "extradition" as "the removal of an accused from the Philippines with the object of placing him at the disposal of foreign authorities to enable the requesting state or government to hold him in connection with any criminal investigation directed against him or the execution of a penalty imposed on him under the penal or criminal law of the requesting state or government."

Extradition has thus been characterized as the right of a foreign power, created by treaty, to demand the surrender of one accused or convicted of a crime within its territorial jurisdiction, and the correlative duty of the other state to surrender him to the demanding state.8 It is not a criminal proceeding.9 Even if the potential extraditee is a criminal, an extradition proceeding is not by its nature criminal, for it is not punishment for a crime, even though such punishment may follow extradition.10 It is sui generis, tracing its existence wholly to treaty obligations between different nations.11 It is not a trial to determine the guilt or innocence of the potential extraditee.12 Nor is it a full-blown civil action, but one that is merely administrative in character.13 Its object is to prevent the escape of a person accused or convicted of a crime and to secure his return to the state from which he fled, for the purpose of trial or punishment.14

But while extradition is not a criminal proceeding, it is characterized by the following: (a) it entails a deprivation of liberty on the part of the potential extraditee and (b) the means employed to attain the purpose of extradition is also "the machinery of criminal law." This is shown by Section 6 of P.D. No. 1069 (The Philippine Extradition Law) which mandates the "immediate arrest and temporary detention of the accused" if such "will best serve the interest of justice." We further note that Section 20 allows the requesting state "in case of urgency" to ask for the "provisional arrest of the accused, pending receipt of the request for extradition;" and that release from provisional arrest "shall not prejudice re-arrest and extradition of the accused if a request for extradition is received subsequently."

Obviously, an extradition proceeding, while ostensibly administrative, bears all earmarks of a criminal process. A potential extraditee may be subjected to arrest, to a prolonged restraint of liberty, and forced to transfer to the demanding state following the proceedings. "Temporary detention" may be a necessary step in the process of extradition, but the length of time of the detention should be reasonable.

Records show that private respondent was arrested on September 23, 1999, and remained incarcerated until December 20, 2001, when the trial court ordered his admission to bail. In other words, he had been detained for over two (2) years without having been convicted of any crime. By any standard, such an extended period of detention is a serious deprivation of his fundamental right to liberty. In fact, it was this prolonged deprivation of liberty which prompted the extradition court to grant him bail.

While our extradition law does not provide for the grant of bail to an extraditee, however, there is no provision prohibiting him or her from filing a motion for bail, a right to due process under the Constitution.

The applicable standard of due process, however, should not be the same as that in criminal proceedings. In the latter, the standard of due process is premised on the presumption of innocence of the accused. As Purganan correctly points out, it is from this major premise that the ancillary presumption in favor of admitting to bail arises. Bearing in mind the purpose of extradition proceedings, the premise behind the issuance of the arrest warrant and the "temporary detention" is the possibility of flight of the potential extraditee. This is based on the assumption that such extraditee is a fugitive from justice.15 Given the foregoing, the prospective extraditee thus bears the onus probandi of showing that he or she is not a flight risk and should be granted bail.

The time-honored principle of pacta sunt servanda demands that the Philippines honor its obligations under the Extradition Treaty it entered into with the Hong Kong Special Administrative Region. Failure to comply with these obligations is a setback in our foreign relations and defeats the purpose of extradition. However, it does not necessarily mean that in keeping with its treaty obligations, the Philippines should diminish a potential extraditee’s rights to life, liberty, and due process. More so, where these rights are guaranteed, not only by our Constitution, but also by international conventions, to which the Philippines is a party. We should not, therefore, deprive an extraditee of his right to apply for bail, provided that a certain standard for the grant is satisfactorily met.

An extradition proceeding being sui generis, the standard of proof required in granting or denying bail can neither be the proof beyond reasonable doubt in criminal cases nor the standard of proof of preponderance of evidence in civil cases. While administrative in character, the standard of substantial evidence used in administrative cases cannot likewise apply given the object of extradition law which is to prevent the prospective extraditee from fleeing our jurisdiction. In his Separate Opinion in Purganan, then Associate Justice, now Chief Justice Reynato S. Puno, proposed that a new standard which he termed "clear and convincing evidence" should be used in granting bail in extradition cases. According to him, this standard should be lower than proof beyond reasonable doubt but higher than preponderance of evidence. The potential extraditee must prove by "clear and convincing evidence" that he is not a flight risk and will abide with all the orders and processes of the extradition court.

In this case, there is no showing that private respondent presented evidence to show that he is not a flight risk. Consequently, this case should be remanded to the trial court to determine whether private respondent may be granted bail on the basis of "clear and convincing evidence."

WHEREFORE, we DISMISS the petition. This case is REMANDED to the trial court to determine whether private respondent is entitled to bail on the basis of "clear and convincing evidence." If not, the trial court should order the cancellation of his bail bond and his immediate detention; and thereafter, conduct the extradition proceedings with dispatch.

SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

LEONARDO A. QUISUMBING
Associate Justice
CONSUELO YNARES-SANTIAGO
Asscociate Justice
ANTONIO T. CARPIO
Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ
Asscociate Justice
RENATO C. CORONA
Associate Justice
CONCHITA CARPIO MORALES
Asscociate Justice
ROMEO J. CALLEJO, SR.
Associate Justice
ADOLFO S. AZCUNA
Asscociate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
DANTE O. TINGA
Asscociate Justice
CANCIO C. GARCIA
Associate Justice
PRESBITERO J. VELASCO, JR.
Asscociate Justice

ANTONIO EDUARDO B. NACHURA
Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNO
Chief Justice


Footnotes

1 G.R. No. 148571, September 24, 2002, 389 SCRA 623, 664.

2 90 Phil. 70 (1951).

3 Sec. 2, Art. II states "The Philippines renounces war as an instrument of national policy, adopts the generally accepted principles of international law as part of the law of the land and adheres to the policy of peace, equality, justice, freedom, cooperation, and amity with all nations."

4 In cases involving quarantine to prevent the spread of communicable diseases, bail is not available. See State v. Hutchinson, 18 So.2d. 723, 246 Ala. 48; Varholy v. Sweat, 15 So.2d. 267, 153 Fla. 571, Baker v. Strautz, 54 NE2d. 441, 386 lll. 360.

5 12 Phil. 490 (1909).

6 Supra, footnote 2.

7 90 Phil. 256 (1951).

8 Factor v. Laubenheimer, 290 US 276, 78 L. Ed. 315, 54 S. Ct. 101; Terlindon v. Ames, 184 US 270, 46 L.Ed. 534, 22 S.Ct. 484; Fong Yue Ting v. US, 149 US 698, 37 L.Ed. 905, 13 S.Ct. 1016; Fitzpatrick v. Williams, 46 F2d. 40; US v. Godwin, 97 F. Supp. 252, affd. 191 F2d. 932; Dominguez v. State, 234 SW 701, 90 Tex. Crim. 92.

9 Secretary of Justice v. Lantion, G.R. No. 139465, October 17, 2000, 343 SCRA 377.

10 US ex rel Oppenheim v. Hecht, 16 F2d. 955, cert den. 273 US 969, 71 L. Ed. 883, 47 S. Ct. 572.

11 State v. Chase, 107 So. 541, 91 Fla. 413; State v. Quigg, 108 So. 409, 91 Fla. 197.

12 Benson v. McMahon, 127 US 457, 32 L. Ed. 234, 8 S. Ct. 1240; Jimenez v. Aristequieta, 311 F2d. 547, stay den. 314 F2d. 649.

13 Spatola v. US, 741 F. Supp. 362, Affd. 925 F2d. 615.

14 Re Henderson, 145 NW 574, 27 ND 155; State ex rel Tresoder v. Remann, 4 P2d. 866, 165 Wash. 92.

15 Beaulieu v. Hartigan, 554 F.2d 1.


The Lawphil Project - Arellano Law Foundation

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 171092 March 15, 2010

EDNA DIAGO LHUILLIER, Petitioner,
vs.
BRITISH AIRWAYS, Respondent.

D E C I S I O N

DEL CASTILLO, J.:

Jurisdictio est potestas de publico introducta cum necessitate juris dicendi. Jurisdiction is a power introduced for the public good, on account of the necessity of dispensing justice.1

Factual Antecedents

On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint2 for damages against respondent British Airways before the Regional Trial Court (RTC) of Makati City. She alleged that on February 28, 2005, she took respondent’s flight 548 from London, United Kingdom to Rome, Italy. Once on board, she allegedly requested Julian Halliday (Halliday), one of the respondent’s flight attendants, to assist her in placing her hand-carried luggage in the overhead bin. However, Halliday allegedly refused to help and assist her, and even sarcastically remarked that "If I were to help all 300 passengers in this flight, I would have a broken back!"

Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight attendant, Nickolas Kerrigan (Kerrigan), singled her out from among all the passengers in the business class section to lecture on plane safety. Allegedly, Kerrigan made her appear to the other passengers to be ignorant, uneducated, stupid, and in need of lecturing on the safety rules and regulations of the plane. Affronted, petitioner assured Kerrigan that she knew the plane’s safety regulations being a frequent traveler. Thereupon, Kerrigan allegedly thrust his face a mere few centimeters away from that of the petitioner and menacingly told her that "We don’t like your attitude."

Upon arrival in Rome, petitioner complained to respondent’s ground manager and demanded an apology. However, the latter declared that the flight stewards were "only doing their job."

Thus, petitioner filed the complaint for damages, praying that respondent be ordered to pay P5 million as moral damages, P2 million as nominal damages, P1 million as exemplary damages, P300,000.00 as attorney’s fees, P200,000.00 as litigation expenses, and cost of the suit.

On May 16, 2005, summons, together with a copy of the complaint, was served on the respondent through Violeta Echevarria, General Manager of Euro-Philippine Airline Services, Inc.3

On May 30, 2005, respondent, by way of special appearance through counsel, filed a Motion to Dismiss4 on grounds of lack of jurisdiction over the case and over the person of the respondent. Respondent alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint for damages pursuant to the Warsaw Convention,5 Article 28(1) of which provides:

An action for damages must be brought at the option of the plaintiff, either before the court of domicile of the carrier or his principal place of business, or where he has a place of business through which the contract has been made, or before the court of the place of destination.

Thus, since a) respondent is domiciled in London; b) respondent’s principal place of business is in London; c) petitioner bought her ticket in Italy (through Jeepney Travel S.A.S, in Rome);6 and d) Rome, Italy is petitioner’s place of destination, then it follows that the complaint should only be filed in the proper courts of London, United Kingdom or Rome, Italy.

Likewise, it was alleged that the case must be dismissed for lack of jurisdiction over the person of the respondent because the summons was erroneously served on Euro-Philippine Airline Services, Inc. which is not its resident agent in the Philippines.

On June 3, 2005, the trial court issued an Order requiring herein petitioner to file her Comment/Opposition on the Motion to Dismiss within 10 days from notice thereof, and for respondent to file a Reply thereon.7 Instead of filing a Comment/Opposition, petitioner filed on June 27, 2005, an Urgent Ex-Parte Motion to Admit Formal Amendment to the Complaint and Issuance of Alias Summons.8 Petitioner alleged that upon verification with the Securities and Exchange Commission, she found out that the resident agent of respondent in the Philippines is Alonzo Q. Ancheta. Subsequently, on September 9, 2005, petitioner filed a Motion to Resolve Pending Incident and Opposition to Motion to Dismiss.9

Ruling of the Regional Trial Court

On October 14, 2005, the RTC of Makati City, Branch 132, issued an Order10 granting respondent’s Motion to Dismiss. It ruled that:

The Court sympathizes with the alleged ill-treatment suffered by the plaintiff. However, our Courts have to apply the principles of international law, and are bound by treaty stipulations entered into by the Philippines which form part of the law of the land. One of this is the Warsaw Convention. Being a signatory thereto, the Philippines adheres to its stipulations and is bound by its provisions including the place where actions involving damages to plaintiff is to be instituted, as provided for under Article 28(1) thereof. The Court finds no justifiable reason to deviate from the indicated limitations as it will only run counter to the provisions of the Warsaw Convention. Said adherence is in consonance with the comity of nations and deviation from it can only be effected through proper denunciation as enunciated in the Santos case (ibid). Since the Philippines is not the place of domicile of the defendant nor is it the principal place of business, our courts are thus divested of jurisdiction over cases for damages. Neither was plaintiff’s ticket issued in this country nor was her destination Manila but Rome in Italy. It bears stressing however, that referral to the court of proper jurisdiction does not constitute constructive denial of plaintiff’s right to have access to our courts since the Warsaw Convention itself provided for jurisdiction over cases arising from international transportation. Said treaty stipulations must be complied with in good faith following the time honored principle of pacta sunt servanda.

The resolution of the propriety of service of summons is rendered moot by the Court’s want of jurisdiction over the instant case.

WHEREFORE, premises considered, the present Motion to Dismiss is hereby GRANTED and this case is hereby ordered DISMISSED.

Petitioner filed a Motion for Reconsideration but the motion was denied in an Order11 dated January 4, 2006.

Petitioner now comes directly before us on a Petition for Review on Certiorari on pure questions of law, raising the following issues:

Issues

I. WHETHER X X X PHILIPPINE COURTs HAVE JURISDICTION OVER A TORTIOUS CONDUCT COMMITTED AGAINST A FILIPINO CITIZEN AND RESIDENT BY AIRLINE PERSONNEL OF A FOREIGN CARRIER TRAVELLING BEYOND THE TERRITORIAL LIMIT OF ANY FOREIGN COUNTRY; AND THUS IS OUTSIDE THE AMBIT OF THE WARSAW CONVENTION.

II. WHETHER x x x RESPONDENT AIR CARRIER OF PASSENGERS, IN FILING ITS MOTION TO DISMISS BASED ON LACK OF JURISDICTION OVER THE SUBJECT MATTER OF THE CASE AND OVER ITS PERSON MAY BE DEEMED AS HAVING IN FACT AND IN LAW SUBMITTED ITSELF TO THE JURISDICTION OF THE LOWER COURT, ESPECIALLY SO, WHEN THE VERY LAWYER ARGUING FOR IT IS HIMSELF THE RESIDENT AGENT OF THE CARRIER.

Petitioner’s Arguments

Petitioner argues that her cause of action arose not from the contract of carriage, but from the tortious conduct committed by airline personnel of respondent in violation of the provisions of the Civil Code on Human Relations. Since her cause of action was not predicated on the contract of carriage, petitioner asserts that she has the option to pursue this case in this jurisdiction pursuant to Philippine laws.

Respondent’s Arguments

In contrast, respondent maintains that petitioner’s claim for damages fell within the ambit of Article 28(1) of the Warsaw Convention. As such, the same can only be filed before the courts of London, United Kingdom or Rome, Italy.

Our Ruling

The petition is without merit.

The Warsaw Convention has the force and effect of law in this country.

It is settled that the Warsaw Convention has the force and effect of law in this country. In Santos III v. Northwest Orient Airlines,12 we held that:

The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto, "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof."

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country.13

The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred, was between the United Kingdom and Italy, which are both signatories to the Warsaw Convention.

Article 1 of the Warsaw Convention provides:

1. This Convention applies to all international carriage of persons, luggage or goods performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking.

2. For the purposes of this Convention the expression "international carriage" means any carriage in which, according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the carriage or a transhipment, are situated either within the territories of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, suzerainty, mandate or authority of another Power, even though that Power is not a party to this Convention. A carriage without such an agreed stopping place between territories subject to the sovereignty, suzerainty, mandate or authority of the same High Contracting Party is not deemed to be international for the purposes of this Convention. (Emphasis supplied)

Thus, when the place of departure and the place of destination in a contract of carriage are situated within the territories of two High Contracting Parties, said carriage is deemed an "international carriage". The High Contracting Parties referred to herein were the signatories to the Warsaw Convention and those which subsequently adhered to it.14

In the case at bench, petitioner’s place of departure was London, United Kingdom while her place of destination was Rome, Italy.15 Both the United Kingdom16 and Italy17 signed and ratified the Warsaw Convention. As such, the transport of the petitioner is deemed to be an "international carriage" within the contemplation of the Warsaw Convention.

Since the Warsaw Convention applies in the instant case, then the jurisdiction over the subject matter of the action is governed by the provisions of the Warsaw Convention.

Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before –

1. the court where the carrier is domiciled;

2. the court where the carrier has its principal place of business;

3. the court where the carrier has an establishment by which the contract has been made; or

4. the court of the place of destination.

In this case, it is not disputed that respondent is a British corporation domiciled in London, United Kingdom with London as its principal place of business. Hence, under the first and second jurisdictional rules, the petitioner may bring her case before the courts of London in the United Kingdom. In the passenger ticket and baggage check presented by both the petitioner and respondent, it appears that the ticket was issued in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has the option to bring her case before the courts of Rome in Italy. Finally, both the petitioner and respondent aver that the place of destination is Rome, Italy, which is properly designated given the routing presented in the said passenger ticket and baggage check. Accordingly, petitioner may bring her action before the courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does not have jurisdiction over the case filed by the petitioner.

Santos III v. Northwest Orient Airlines18 applies in this case.

Petitioner contends that Santos III v. Northwest Orient Airlines19 cited by the trial court is inapplicable to the present controversy since the facts thereof are not similar with the instant case.

We are not persuaded.

In Santos III v. Northwest Orient Airlines,20 Augusto Santos III, a resident of the Philippines, purchased a ticket from Northwest Orient Airlines in San Francisco, for transport between San Francisco and Manila via Tokyo and back to San Francisco. He was wait-listed in the Tokyo to Manila segment of his ticket, despite his prior reservation. Contending that Northwest Orient Airlines acted in bad faith and discriminated against him when it canceled his confirmed reservation and gave his seat to someone who had no better right to it, Augusto Santos III sued the carrier for damages before the RTC. Northwest Orient Airlines moved to dismiss the complaint on ground of lack of jurisdiction citing Article 28(1) of the Warsaw Convention. The trial court granted the motion which ruling was affirmed by the Court of Appeals. When the case was brought before us, we denied the petition holding that under Article 28(1) of the Warsaw Convention, Augusto Santos III must prosecute his claim in the United States, that place being the (1) domicile of the Northwest Orient Airlines; (2) principal office of the carrier; (3) place where contract had been made (San Francisco); and (4) place of destination (San Francisco).21

We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character. Thus:

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred.

x x x x

In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in the international sense must be established in accordance with Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant to the applicable domestic law. Only after the question of which court has jurisdiction is determined will the issue of venue be taken up. This second question shall be governed by the law of the court to which the case is submitted.22

Contrary to the contention of petitioner, Santos III v. Northwest Orient Airlines23 is analogous to the instant case because (1) the domicile of respondent is London, United Kingdom;24 (2) the principal office of respondent airline is likewise in London, United Kingdom;25 (3) the ticket was purchased in Rome, Italy;26 and (4) the place of destination is Rome, Italy.27 In addition, petitioner based her complaint on Article 217628 of the Civil Code on quasi-delict and Articles 1929 and 2130 of the Civil Code on Human Relations. In Santos III v. Northwest Orient Airlines,31 Augusto Santos III similarly posited that Article 28 (1) of the Warsaw Convention did not apply if the action is based on tort. Hence, contrary to the contention of the petitioner, the factual setting of Santos III v. Northwest Orient Airlines32 and the instant case are parallel on the material points.

Tortious conduct as ground for the petitioner’s complaint is within the purview of the Warsaw Convention.

Petitioner contends that in Santos III v. Northwest Orient Airlines,33 the cause of action was based on a breach of contract while her cause of action arose from the tortious conduct of the airline personnel and violation of the Civil Code provisions on Human Relations.34 In addition, she claims that our pronouncement in Santos III v. Northwest Orient Airlines35 that "the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention," is more of an obiter dictum rather than the ratio decidendi.36 She maintains that the fact that said acts occurred aboard a plane is merely incidental, if not irrelevant.37

We disagree with the position taken by the petitioner. Black defines obiter dictum as "an opinion entirely unnecessary for the decision of the case" and thus "are not binding as precedent."38 In Santos III v. Northwest Orient Airlines,39 Augusto Santos III categorically put in issue the applicability of Article 28(1) of the Warsaw Convention if the action is based on tort.

In the said case, we held that the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the realm of the Warsaw Convention. In fact, our ruling that a cause of action based on tort did not bring the case outside the sphere of the Warsaw Convention was our ratio decidendi in disposing of the specific issue presented by Augusto Santos III. Clearly, the contention of the herein petitioner that the said ruling is an obiter dictum is without basis.

Relevant to this particular issue is the case of Carey v. United Airlines,40 where the passenger filed an action against the airline arising from an incident involving the former and the airline’s flight attendant during an international flight resulting to a heated exchange which included insults and profanity. The United States Court of Appeals (9th Circuit) held that the "passenger's action against the airline carrier arising from alleged confrontational incident between passenger and flight attendant on international flight was governed exclusively by the Warsaw Convention, even though the incident allegedly involved intentional misconduct by the flight attendant."41

In Bloom v. Alaska Airlines,42 the passenger brought nine causes of action against the airline in the state court, arising from a confrontation with the flight attendant during an international flight to Mexico. The United States Court of Appeals (9th Circuit) held that the "Warsaw Convention governs actions arising from international air travel and provides the exclusive remedy for conduct which falls within its provisions." It further held that the said Convention "created no exception for an injury suffered as a result of intentional conduct" 43 which in that case involved a claim for intentional infliction of emotional distress.

It is thus settled that allegations of tortious conduct committed against an airline passenger during the course of the international carriage do not bring the case outside the ambit of the Warsaw Convention.

Respondent, in seeking remedies from the trial court through special appearance of counsel, is not deemed to have voluntarily submitted itself to the jurisdiction of the trial court.

Petitioner argues that respondent has effectively submitted itself to the jurisdiction of the trial court when the latter stated in its Comment/Opposition to the Motion for Reconsideration that "Defendant [is at a loss] x x x how the plaintiff arrived at her erroneous impression that it is/was Euro-Philippines Airlines Services, Inc. that has been making a special appearance since x x x British Airways x x x has been clearly specifying in all the pleadings that it has filed with this Honorable Court that it is the one making a special appearance."44

In refuting the contention of petitioner, respondent cited La Naval Drug Corporation v. Court of Appeals45 where we held that even if a party "challenges the jurisdiction of the court over his person, as by reason of absence or defective service of summons, and he also invokes other grounds for the dismissal of the action under Rule 16, he is not deemed to be in estoppel or to have waived his objection to the jurisdiction over his person."46

This issue has been squarely passed upon in the recent case of Garcia v. Sandiganbayan,47 where we reiterated our ruling in La Naval Drug Corporation v. Court of Appeals48 and elucidated thus:

Special Appearance to Question a Court’s Jurisdiction Is Not

Voluntary Appearance

The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure clearly provides:

Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance.

Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over his person, together with other grounds raised therein, is not deemed to have appeared voluntarily before the court. What the rule on voluntary appearance – the first sentence of the above-quoted rule – means is that the voluntary appearance of the defendant in court is without qualification, in which case he is deemed to have waived his defense of lack of jurisdiction over his person due to improper service of summons.

The pleadings filed by petitioner in the subject forfeiture cases, however, do not show that she voluntarily appeared without qualification. Petitioner filed the following pleadings in Forfeiture I: (a) motion to dismiss; (b) motion for reconsideration and/or to admit answer; (c) second motion for reconsideration; (d) motion to consolidate forfeiture case with plunder case; and (e) motion to dismiss and/or to quash Forfeiture I. And in Forfeiture II: (a) motion to dismiss and/or to quash Forfeiture II; and (b) motion for partial reconsideration.

The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner solely for special appearance with the purpose of challenging the jurisdiction of the SB over her person and that of her three children. Petitioner asserts therein that SB did not acquire jurisdiction over her person and of her three children for lack of valid service of summons through improvident substituted service of summons in both Forfeiture I and Forfeiture II. This stance the petitioner never abandoned when she filed her motions for reconsideration, even with a prayer to admit their attached Answer Ex Abundante Ad Cautelam dated January 22, 2005 setting forth affirmative defenses with a claim for damages. And the other subsequent pleadings, likewise, did not abandon her stance and defense of lack of jurisdiction due to improper substituted services of summons in the forfeiture cases. Evidently, from the foregoing Sec. 20, Rule 14 of the 1997 Revised Rules on Civil Procedure, petitioner and her sons did not voluntarily appear before the SB constitutive of or equivalent to service of summons.

Moreover, the leading La Naval Drug Corp. v. Court of Appeals applies to the instant case. Said case elucidates the current view in our jurisdiction that a special appearance before the court––challenging its jurisdiction over the person through a motion to dismiss even if the movant invokes other grounds––is not tantamount to estoppel or a waiver by the movant of his objection to jurisdiction over his person; and such is not constitutive of a voluntary submission to the jurisdiction of the court.1avvphi1

Thus, it cannot be said that petitioner and her three children voluntarily appeared before the SB to cure the defective substituted services of summons. They are, therefore, not estopped from questioning the jurisdiction of the SB over their persons nor are they deemed to have waived such defense of lack of jurisdiction. Consequently, there being no valid substituted services of summons made, the SB did not acquire jurisdiction over the persons of petitioner and her children. And perforce, the proceedings in the subject forfeiture cases, insofar as petitioner and her three children are concerned, are null and void for lack of jurisdiction. (Emphasis supplied)

In this case, the special appearance of the counsel of respondent in filing the Motion to Dismiss and other pleadings before the trial court cannot be deemed to be voluntary submission to the jurisdiction of the said trial court. We hence disagree with the contention of the petitioner and rule that there was no voluntary appearance before the trial court that could constitute estoppel or a waiver of respondent’s objection to jurisdiction over its person.

WHEREFORE, the petition is DENIED. The October 14, 2005 Order of the Regional Trial Court of Makati City, Branch 132, dismissing the complaint for lack of jurisdiction, is AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION
Associate Justice
ROBERTO A. ABAD
Associate Justice

JOSE PORTUGAL PEREZ
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice


Footnotes

1 50 C.J.S. 1089.

2 Records, pp. 1-5.

3 Id. at 11.

4 Id. at 12-16.

5 Convention for the Unification of Certain Rules Relating To International Transportation by Air, signed at Warsaw on October 12, 1929.

6 Records, p. 8.

7 Id. at 21

8 Id. at 25-27.

9 Id. at 37-41.

10 Id. at 56-57; penned by Judge Rommel O. Baybay. Emphasis in the original text.

11 Id. at 75.

12 G.R. No. 101538, June 23, 1992, 210 SCRA 256.

13 Id. at 260-261.

14 Mapa v. Court of Appeals, 341 Phil. 281, 295 (1997).

15 Rollo, pp. 155-157.

16 The United Kingdom signed the Warsaw Convention on October 12, 1929 and ratified the same on February 14, 1933. The Convention became effective in the United Kingdom on March 15, 1933.

17 Italy signed the Warsaw Convention on October 12, 1929 and ratified the same on February 14, 1933. The Convention became effective in Italy on May 15, 1933.

18 Supra note 12.

19 Id.

20 Id.

21 In said case, we distinguished between a "destination" and an "agreed stopping place." We held that:

Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the "destination" and not an "agreed stopping place" that controls for purposes of ascertaining jurisdiction under the Convention.

The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination. The use of the singular in the expression indicates the understanding of the parties to the Convention that every contract of carriage has one place of departure and one place of destination. An intermediate place where the carriage may be broken is not regarded as a "place of destination." Id. at 270-271.

22 Id. at 266-267.

23 Id.

24 Rollo, p. 139.

25 Id.

26 Id. at 174.

27 Id. at 155-157.

28 Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by provisions of this Chapter.

29 Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due and observe honesty and good faith.

30 Article 21. Any person, who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.

31 Supra note 12.

32 Id.

33 Id.

34 Rollo, pp. 159 and 162.

35 Supra note 12.

36 Rollo, p. 159.

37 Id. at 162.

38 Black’s Law Dictionary, 6th ed., 1990.

39 Supra note 12.

40 255 F.3d 1044.

41 Id.

42 36 Fed. Appx. 278, 2002 WL 1136727 (C.A. 9).

43 Id.

44 Rollo, p. 169.

45 G.R. No. 103200, August 31, 1994, 236 SCRA 78.

46 Id. at 89.

47 G.R. No. 170122, October 12, 2009.

48 Supra.

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 180909 January 19, 2011

EXXONMOBIL PETROLEUM AND CHEMICAL HOLDINGS, INC. - PHILIPPINE BRANCH, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

D E C I S I O N

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 filed by petitioner Exxonmobil Petroleum and Chemical Holdings, Inc. - Philippine Branch (Exxon) to set aside the September 7, 2007 Decision1 of the Court of Tax Appeals En Banc (CTA-En Banc) in CTA E.B. No. 204, and its November 27, 2007 Resolution2 denying petitioner’s motion for reconsideration.

THE FACTS

Petitioner Exxon is a foreign corporation duly organized and existing under the laws of the State of Delaware, United States of America.3 It is authorized to do business in the Philippines through its Philippine Branch, with principal office address at the 17/F The Orient Square, Emerald Avenue, Ortigas Center, Pasig City.4

Exxon is engaged in the business of selling petroleum products to domestic and international carriers.5 In pursuit of its business, Exxon purchased from Caltex Philippines, Inc. (Caltex) and Petron Corporation (Petron) Jet A-1 fuel and other petroleum products, the excise taxes on which were paid for and remitted by both Caltex and Petron.6 Said taxes, however, were passed on to Exxon which ultimately shouldered the excise taxes on the fuel and petroleum products.7

From November 2001 to June 2002, Exxon sold a total of 28,635,841 liters of Jet A-1 fuel to international carriers, free of excise taxes amounting to Php105,093,536.47.8 On various dates, it filed administrative claims for refund with the Bureau of Internal Revenue (BIR) amounting to Php105,093,536.47.9

On October 30, 2003, Exxon filed a petition for review with the CTA10 claiming a refund or tax credit in the amount of Php105,093,536.47, representing the amount of excise taxes paid on Jet A-1 fuel and other petroleum products it sold to international carriers from November 2001 to June 2002.11

Exxon and the Commissioner of Internal Revenue (CIR) filed their Joint Stipulation of Facts and Issues on June 24, 2004, presenting a total of fourteen (14) issues for resolution.12

During Exxon’s preparation of evidence, the CIR filed a motion dated January 28, 2005 to first resolve the issue of whether or not Exxon was the proper party to ask for a refund.13 Exxon filed its opposition to the motion on March 15, 2005.

On July 27, 2005, the CTA First Division issued a resolution14 sustaining the CIR’s position and dismissing Exxon’s claim for refund. Exxon filed a motion for reconsideration, but this was denied on July 27, 2006.15

Exxon filed a petition for review16 with the CTA En Banc assailing the July 27, 2005 Resolution of the CTA First Division which dismissed the petition for review, and the July 27, 2006 Resolution17 which affirmed the said ruling.

RULING OF THE COURT OF TAX APPEALS EN BANC

In its Decision dated September 7, 2007, the CTA En Banc dismissed the petition for review and affirmed the two resolutions of the First Division dated July 27, 2005 and July 27, 2006. Exxon filed a motion for reconsideration, but it was denied on November 27, 2007.

Citing Sections 130 (A)(2)18 and 204 (C) in relation to Section 135 (a)19 of the National Internal Revenue Code of 1997 (NIRC), the CTA ruled that in consonance with its ruling in several cases,20 only the taxpayer or the manufacturer of the petroleum products sold has the legal personality to claim the refund of excise taxes paid on petroleum products sold to international carriers.21

The CTA stated that Section 130(A)(2) makes the manufacturer or producer of the petroleum products directly liable for the payment of excise taxes.22 Therefore, it follows that the manufacturer or producer is the taxpayer.23

This determination of the identity of the taxpayer designated by law is pivotal as the NIRC provides that it is only the taxpayer who "has the legal personality to ask for a refund in case of erroneous payment of taxes."24

Further, the excise tax imposed on manufacturers upon the removal of petroleum products by oil companies is an indirect tax, or a tax which is primarily paid by persons who can shift the burden upon someone else.25 The CTA cited the cases of Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue,26 Contex Corporation v. Commissioner of Internal Revenue,27 and Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company,28 and explained that with indirect taxes, "although the burden of an indirect tax can be shifted or passed on to the purchaser of the goods, the liability for the indirect tax remains with the manufacturer."29 Moreover, "the manufacturer has the option whether or not to shift the burden of the tax to the purchaser. When shifted, the amount added by the manufacturer becomes a part of the price, therefore, the purchaser does not really pay the tax per se but only the price of the commodity."30

Going by such logic, the CTA concluded that a refund of erroneously paid or illegally received tax can only be made in favor of the taxpayer, pursuant to Section 204(C) of the NIRC.31 As categorically ruled in the Cebu Portland Cement32 and Contex33 cases, in the case of indirect taxes, it is the manufacturer of the goods who is entitled to claim any refund thereof.34 Therefore, it follows that the indirect taxes paid by the manufacturers or producers of the goods cannot be refunded to the purchasers of the goods because the purchasers are not the taxpayers.35

The CTA also emphasized that tax refunds are in the nature of tax exemptions and are, thus, regarded as in derogation of sovereign authority and construed strictissimi juris against the person or entity claiming the exemption.36

Finally, the CTA disregarded Exxon’s argument that "in effectively holding that only petroleum products purchased directly from the manufacturers or producers are exempt from excise taxes, the First Division of [the CTA] sanctioned a universal amendment of existing bilateral agreements which the Philippines have with other countries, in violation of the basic principle of ‘pacta sunt servanda.’"37 The CTA explained that the findings of fact of the First Division (that when Exxon sold the Jet A-1 fuel to international carriers, it did so free of tax) negated any violation of the exemption from excise tax of the petroleum products sold to international carriers. Second, the right of international carriers to invoke the exemption granted under Section 135(a) of the NIRC was neither affected nor restricted in any way by the ruling of the First Division. At the point of sale, the international carriers were free to invoke the exemption from excise taxes of the petroleum products sold to them. Lastly, the lawmaking body was presumed to have enacted a later law with the knowledge of all other laws involving the same subject matter.38

THE ISSUES

Petitioner now raises the following issues in its petition for review:

I.

WHETHER THE ASSAILED DECISION AND RESOLUTION ERRONEOUSLY PROHIBITED PETITIONER, AS THE DISTRIBUTOR AND VENDOR OF PETROLEUM PRODUCTS TO INTERNATIONAL CARRIERS REGISTERED IN FOREIGN COUNTRIES WHICH HAVE EXISTING BILATERAL AGREEMENTS WITH THE PHILIPPINES, FROM CLAIMING A REFUND OF THE EXCISE TAXES PAID THEREON; AND

II.

WHETHER THE ASSAILED DECISIONS ERRED IN AFFIRMING THE DISMISSAL OF PETITIONER’S CLAIM FOR REFUND BASED ON RESPONDENT’S "MOTION TO RESOLVE FIRST THE ISSUE OF WHETHER OR NOT THE PETITIONER IS THE PROPER PARTY THAT MAY ASK FOR A REFUND," SINCE SAID MOTION IS ESSENTIALLY A MOTION TO DISMISS, WHICH SHOULD HAVE BEEN DENIED OUTRIGHT BY THE COURT OF TAX APPEALS FOR HAVING BEEN FILED OUT OF TIME.

RULING OF THE COURT

I. On respondent’s "motion to resolve first the issue of whether or not the petitioner is the proper party that may ask for a refund."

For a logical resolution of the issues, the court will tackle first the issue of whether or not the CTA erred in granting respondent’s Motion to Resolve First the Issue of Whether or Not the Petitioner is the Proper Party that may Ask for a Refund.39 In said motion, the CIR prayed that the CTA First Division resolve ahead of the other stipulated issues the sole issue of whether petitioner was the proper party to ask for a refund.40

Exxon opines that the CIR’s motion is essentially a motion to dismiss filed out of time,41 as it was filed after petitioner began presenting evidence42 more than a year after the filing of the Answer.43 By praying that Exxon be declared as not the proper party to ask for a refund, the CIR asked for the dismissal of the petition, as the grant of the Motion to Resolve would bring trial to a close.44

Moreover, Exxon states that the motion should have also complied with the three-day notice and ten-day hearing rules provided in Rule 15 of the Rules of Court.45 Since the CIR failed to set its motion for any hearing before the filing of the Answer, the motion should have been considered a mere scrap of paper.46

Finally, citing Maruhom v. Commission on Elections and Dimaporo,47 Exxon argues that a defendant who desires a preliminary hearing on special and affirmative defenses must file a motion to that effect at the time of filing of his answer.48

The CIR, on the other hand, counters that it did not file a motion to dismiss.49 Instead, the grounds for dismissal of the case were pleaded as special and affirmative defenses in its Answer filed on December 15, 2003.50 Therefore, the issue of "whether or not petitioner is the proper party to claim for a tax refund of the excise taxes allegedly passed on by Caltex and Petron" was included as one of the issues in the Joint Stipulation of Facts and Issues dated June 24, 2004 signed by petitioner and respondent.51

The CIR now argues that nothing in the Rules requires the preliminary hearing to be held before the filing of an Answer.52 However, a preliminary hearing cannot be held before the filing of the Answer precisely because any ground raised as an affirmative defense is pleaded in the Answer itself.53

Further, the CIR contends that the case cited by petitioner, Maruhom v. Comelec,54 does not apply here. In the said case, a motion to dismiss was filed after the filing of the answer.55 And, the said motion to dismiss was found to be a frivolous motion designed to prevent the early termination of the proceedings in the election case therein.56 Here, the Motion to Resolve was filed not to delay the disposition of the case, but rather, to expedite proceedings.571avvphi1

Rule 16, Section 6 of the 1997 Rules of Civil Procedure provides:

SEC. 6. Pleading grounds as affirmative defenses. - If no motion to dismiss has been filed, any of the grounds for dismissal provided for in this Rule may be pleaded as an affirmative defense in the answer, and in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed.

The dismissal of the complaint under this section shall be without prejudice to the prosecution in the same or separate action of a counterclaim pleaded in the answer. (Underscoring supplied.)

This case is a clear cut application of the above provision. The CIR did not file a motion to dismiss. Thus, he pleaded the grounds for dismissal as affirmative defenses in its Answer and thereafter prayed for the conduct of a preliminary hearing to determine whether petitioner was the proper party to apply for the refund of excise taxes paid.

The determination of this question was the keystone on which the entire case was leaning. If Exxon was not the proper party to apply for the refund of excise taxes paid, then it would be useless to proceed with the case. It would not make any sense to proceed to try a case when petitioner had no standing to pursue it.

In the case of California and Hawaiian Sugar Company v. Pioneer Insurance and Surety Corporation,58 the Court held that:

Considering that there was only one question, which may even be deemed to be the very touchstone of the whole case, the trial court had no cogent reason to deny the Motion for Preliminary Hearing. Indeed, it committed grave abuse of discretion when it denied a preliminary hearing on a simple issue of fact that could have possibly settled the entire case. Verily, where a preliminary hearing appears to suffice, there is no reason to go on to trial. One reason why dockets of trial courts are clogged is the unreasonable refusal to use a process or procedure, like a motion to dismiss, which is designed to abbreviate the resolution of a case.59 (Underscoring supplied.)

II. On whether petitioner, as the distributor and vendor of petroleum products to international carriers registered in foreign countries which have existing bilateral agreements with the Philippines, can claim a refund of the excise taxes paid thereon

This brings us now to the substantive issue of whether Exxon, as the distributor and vendor of petroleum products to international carriers registered in foreign countries which have existing bilateral agreements with the Philippines, is the proper party to claim a tax refund for the excise taxes paid by the manufacturers, Caltex and Petron, and passed on to it as part of the purchase price.

Exxon argues that having paid the excise taxes on the petroleum products sold to international carriers, it is a real party in interest consistent with the rules and jurisprudence.60

It reasons out that the subject of the exemption is neither the seller nor the buyer of the petroleum products, but the products themselves, so long as they are sold to international carriers for use in international flight operations, or to exempt entities covered by tax treaties, conventions and other international agreements for their use or consumption, among other conditions.61

Thus, as the exemption granted under Section 135 attaches to the petroleum products and not to the seller, the exemption will apply regardless of whether the same were sold by its manufacturer or its distributor for two reasons.62 First, Section 135 does not require that to be exempt from excise tax, the products should be sold by the manufacturer or producer.63 Second, the legislative intent was precisely to make Section 135 independent from Sections 129 and 130 of the NIRC,64 stemming from the fact that unlike other products subject to excise tax, petroleum products of this nature have become subject to preferential tax treatment by virtue of either specific international agreements or simply of international reciprocity.65

Respondent CIR, on the other hand, posits that Exxon is not the proper party to seek a refund of excise taxes paid on the petroleum products.66 In so arguing, the CIR states that excise taxes are indirect taxes, the liability for payment of which falls on one person, but the burden of payment may be shifted to another.67 Here, the sellers of the petroleum products or Jet A-1 fuel subject to excise tax are Petron and Caltex, while Exxon was the buyer to whom the burden of paying excise tax was shifted.68 While the impact or burden of taxation falls on Exxon, as the tax is shifted to it as part of the purchase price, the persons statutorily liable to pay the tax are Petron and Caltex.69 As Exxon is not the taxpayer primarily liable to pay, and not exempted from paying, excise tax, it is not the proper party to claim for the refund of excise taxes paid.70

The excise tax, when passed on to the purchaser, becomes part of the purchase price.

Excise taxes are imposed under Title VI of the NIRC. They apply to specific goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition, and to those that are imported.71 In effect, these taxes are imposed when two conditions concur: first, that the articles subject to tax belong to any of the categories of goods enumerated in Title VI of the NIRC; and second, that said articles are for domestic sale or consumption, excluding those that are actually exported.72

There are, however, certain exemptions to the coverage of excise taxes, such as petroleum products sold to international carriers and exempt entities or agencies. Section 135 of the NIRC provides:

SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax:

(a) International carriers of Philippine or foreign registry on their use or consumption outside the Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner;

(b) Exempt entities or agencies covered by tax treaties, conventions and other international agreements for their use of consumption: Provided, however, That the country of said foreign international carrier or exempt entities or agencies exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies; and

(c) Entities which are by law exempt from direct and indirect taxes. (Underscoring supplied.)

Thus, under Section 135, petroleum products sold to international carriers of foreign registry on their use or consumption outside the Philippines are exempt from excise tax, provided that the petroleum products sold to such international carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner.73

The confusion here stems from the fact that excise taxes are of the nature of indirect taxes, the liability for payment of which may fall on a person other than he who actually bears the burden of the tax.

In Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company,74 the Court discussed the nature of indirect taxes as follows:

[I]ndirect taxes are those that are demanded, in the first instance, from, or are paid by, one person to someone else. Stated elsewise, indirect taxes are taxes wherein the liability for the payment of the tax falls on one person but the burden thereof can be shifted or passed on to another person, such as when the tax is imposed upon goods before reaching the consumer who ultimately pays for it. When the seller passes on the tax to his buyer, he, in effect, shifts the tax burden, not the liability to pay it, to the purchaser, as part of the goods sold or services rendered.

Accordingly, the party liable for the tax can shift the burden to another, as part of the purchase price of the goods or services. Although the manufacturer/seller is the one who is statutorily liable for the tax, it is the buyer who actually shoulders or bears the burden of the tax, albeit not in the nature of a tax, but part of the purchase price or the cost of the goods or services sold.

As petitioner is not the statutory taxpayer, it is not entitled to claim a refund of excise taxes paid.

The question we are faced with now is, if the party statutorily liable for the tax is different from the party who bears the burden of such tax, who is entitled to claim a refund of the tax paid?

Sections 129 and 130 of the NIRC provide:

SEC. 129. Goods subject to Excise Taxes. - Excise taxes apply to goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition and to things imported. The excise tax imposed herein shall be in addition to the value-added tax imposed under Title IV.

For purposes of this Title, excise taxes herein imposed and based on weight or volume capacity or any other physical unit of measurement shall be referred to as 'specific tax' and an excise tax herein imposed and based on selling price or other specified value of the good shall be referred to as 'ad valorem tax.'

SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products. -

(A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. -

(1) Persons Liable to File a Return. - Every person liable to pay excise tax imposed under this Title shall file a separate return for each place of production setting forth, among others the description and quantity or volume of products to be removed, the applicable tax base and the amount of tax due thereon: Provided, however, That in the case of indigenous petroleum, natural gas or liquefied natural gas, the excise tax shall be paid by the first buyer, purchaser or transferee for local sale, barter or transfer, while the excise tax on exported products shall be paid by the owner, lessee, concessionaire or operator of the mining claim.

Should domestic products be removed from the place of production without the payment of the tax, the owner or person having possession thereof shall be liable for the tax due thereon.

(2) Time for Filing of Return and Payment of the Tax. - Unless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production: Provided, That the tax excise on locally manufactured petroleum products and indigenous petroleum/levied under Sections 148 and 151(A)(4), respectively, of this Title shall be paid within ten (10) days from the date of removal of such products for the period from January 1, 1998 to June 30, 1998; within five (5) days from the date of removal of such products for the period from July 1, 1998 to December 31, 1998; and, before removal from the place of production of such products from January 1, 1999 and thereafter: Provided, further, That the excise tax on nonmetallic mineral or mineral products, or quarry resources shall be due and payable upon removal of such products from the locality where mined or extracted, but with respect to the excise tax on locally produced or extracted metallic mineral or mineral products, the person liable shall file a return and pay the tax within fifteen (15) days after the end of the calendar quarter when such products were removed subject to such conditions as may be prescribed by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. For this purpose, the taxpayer shall file a bond in an amount which approximates the amount of excise tax due on the removals for the said quarter. The foregoing rules notwithstanding, for imported mineral or mineral products, whether metallic or nonmetallic, the excise tax due thereon shall be paid before their removal from customs custody.

x x x

(Italics and underscoring supplied.)

As early as the 1960’s, this Court has ruled that the proper party to question, or to seek a refund of, an indirect tax, is the statutory taxpayer, or the person on whom the tax is imposed by law and who paid the same, even if he shifts the burden thereof to another.75

In Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue,76 the Court held that the sales tax is imposed on the manufacturer or producer and not on the purchaser, "except probably in a very remote and inconsequential sense."77 Discussing the "passing on" of the sales tax to the purchaser, the Court therein cited Justice Oliver Wendell Holmes’ opinion in Lash’s Products v. United States78 wherein he said:

"The phrase ‘passed the tax on’ is inaccurate, as obviously the tax is laid and remains on the manufacturer and on him alone. The purchaser does not really pay the tax. He pays or may pay the seller more for the goods because of the seller’s obligation, but that is all. x x x The price is the sum total paid for the goods. The amount added because of the tax is paid to get the goods and for nothing else. Therefore it is part of the price x x x."79

Proceeding from this discussion, the Court went on to state:

It may indeed be that the economic burden of the tax finally falls on the purchaser; when it does the tax becomes a part of the price which the purchaser must pay. It does not matter that an additional amount is billed as tax to the purchaser. x x x The effect is still the same, namely, that the purchaser does not pay the tax. He pays or may pay the seller more for the goods because of the seller’s obligation, but that is all and the amount added because of the tax is paid to get the goods and for nothing else.

But the tax burden may not even be shifted to the purchaser at all. A decision to absorb the burden of the tax is largely a matter of economics. Then it can no longer be contended that a sales tax is a tax on the purchaser.80

The above case was cited in the later case of Cebu Portland Cement Company v. Collector (now Commissioner) of Internal Revenue,81 where the Court ruled that as the sales tax is imposed upon the manufacturer or producer and not on the purchaser, "it is petitioner and not its customers, who may ask for a refund of whatever amount it is entitled for the percentage or sales taxes it paid before the amendment of section 246 of the Tax Code."82

The Philippine Acetylene case was also cited in the first Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue83 case, where the Court held that the proper party to question, or to seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another.84

In the Silkair cases,85 petitioner Silkair (Singapore) Pte, Ltd. (Silkair), filed with the BIR a written application for the refund of excise taxes it claimed to have paid on its purchase of jet fuel from Petron. As the BIR did not act on the application, Silkair filed a Petition for Review before the CTA.

In both cases, the CIR argued that the excise tax on petroleum products is the direct liability of the manufacturer/producer, and when added to the cost of the goods sold to the buyer, it is no longer a tax but part of the price which the buyer has to pay to obtain the article.

In the first Silkair case, the Court ruled:

The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC provides that "[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production." Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore.

Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser.86 (Emphasis and underscoring supplied.)

Citing the above case, the second Silkair case was promulgated a few months after the first, and stated:

The issue presented is not novel. In a similar case involving the same parties, this Court has categorically ruled that "the proper party to question, or seek a refund of an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another." The Court added that "even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser."87

The CTA En Banc, thus, held that:

The determination of who is the taxpayer plays a pivotal role in claims for refund because the same law provides that it is only the taxpayer who has the legal personality to ask for a refund in case of erroneous payment of taxes. Section 204 (C) of the 1997 NIRC, [provides] in part, as follows:

SEC. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes. – The Commissioner may –

x x x x x x x x x

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return showing an overpayment shall be considered as a written claim for credit or refund.

x x x x x x x x x

(Emphasis shown supplied by the CTA.)88

Therefore, as Exxon is not the party statutorily liable for payment of excise taxes under Section 130, in relation to Section 129 of the NIRC, it is not the proper party to claim a refund of any taxes erroneously paid.

There is no unilateral amendment of existing bilateral agreements of the Philippines with other countries.

Exxon also argues that in effectively holding that only petroleum products purchased directly from the manufacturers or producers are exempt from excise taxes, the CTA En Banc sanctioned a unilateral amendment of existing bilateral agreements which the Philippines has with other countries, in violation of the basic international law principle of pacta sunt servanda.89 The Court does not agree.

As correctly held by the CTA En Banc:

One final point, petitioner’s argument "that in effectively holding that only petroleum products purchased directly from the manufacturers or producers are exempt from excise taxes, the First Division of this Court sanctioned a unilateral amendment of existing bilateral agreements which the Philippines have (sic) with other countries, in violation of the basic international principle of "pacta sunt servanda" is misplaced. First, the findings of fact of the First Division of this Court that "when petitioner sold the Jet A-1 fuel to international carriers, it did so free of tax" negates any violation of the exemption from excise tax of the petroleum products sold to international carriers insofar as this case is concerned. Secondly, the right of international carriers to invoke the exemption granted under Section 135 (a) of the 1997 NIRC has neither been affected nor restricted in any way by the ruling of the First Division of this Court. At the point of sale, the international carriers are free to invoke the exemption from excise taxes of the petroleum products sold to them. Lastly, the law-making body is presumed to have enacted a later law with the knowledge of all other laws involving the same subject matter."90 (Underscoring supplied.)

WHEREFORE, the petition is DENIED.

SO ORDERED.

JOSE CATRAL MENDOZA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ANTONIO EDUARDO B. NACHURA
Associate Justice
DIOSDADO M. PERALTA
Associate Justice

ROBERTO A. ABAD
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice


Footnotes

1 Rollo, pp. 62-88. Penned by Associate Justice Juanito C. Castañeda Jr., with Associate Justices Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova and Olga Palanca-Enriquez, concurring. Presiding Justice Ernesto D. Acosta issued a separate dissenting opinion.

2 Id. at 89-94.

3 Id. at 73.

4 Id.

5 Id.

6 Id.

7 Id.

8 Id.

9 Id.

10 Docketed as CTA Case No. 6809.

11 Rollo, p. 63.

12 Id.

13 Id. at 64.

14 Id. at 138. Associate Justices Lovell R. Bautista and Caesar A. Casanova, concurring. Presiding Justice Ernesto D. Acosta issued a separate dissenting opinion.

15 Id. at 150.

16 Id. at 95.

17 Id. at 62-63.

18 SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products.

(A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax.

x x x

(2) Time for Filing of Return and Payment of the Tax. – Unless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production: Provided, That the tax excise on locally manufactured petroleum products and indigenous petroleum levied under Sections 148 and 151(A)(4), respectively, of this Title shall be paid within ten (10) days from the date of removal of such products for the period from January 1, 1998 to June 30, 1998; within five (5) days from the date of removal of such products for the period from July 1, 1998 to December 31, 1998; and, before removal from the place of production of such products from January 1, 1999 and thereafter: Provided, further, That the excise tax on nonmetallic mineral or mineral products, or quarry resources shall be due and payable upon removal of such products from the locality where mined or extracted, but with respect to the excise tax on locally produced or extracted metallic mineral or mineral products, the person liable shall file a return and pay the tax within fifteen (15) days after the end of the calendar quarter when such products were removed subject to such conditions as may be prescribed by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. For this purpose, the taxpayer shall file a bond in an amount which approximates the amount of excise tax due on the removals for the said quarter. The foregoing rules notwithstanding, for imported mineral or mineral products, whether metallic or nonmetallic, the excise tax due thereon shall be paid before their removal from customs custody.

x x x

19 SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax:

(a) International carriers of Philippine or foreign registry on their use or consumption outside the Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner;

x x x

20 Koyo Manufacturing (Philippines) Corp. v. Commissioner of Internal Revenue. CTA E.B. No. 194, March 1, 2007; Mobil Philippines, Inc. v. Commissioner of Internal Revenue, CTA E.B. No. 110, July 26, 2006; Dunlop Slazenger Phils., Inc. v. Commissioner of Internal Revenue, CTA E.B. No. 102, May 18, 2006; Commissioner of Internal Revenue v. Silkair (Singapore) Pte. Ltd., CTA E.B. No. 67, January 5, 2006;; Commissioner of Internal Revenue v. Silkair (Singapore) Pte. Ltd., CTA E.B. No. 56, October 20, 2005; and Commissioner of Internal Revenue v. Silkair (Singapore) Pte. Ltd., CTA E.B. No. 25, May 20, 2005.

21 Rollo, p. 74.

22 Id. at 75.

23 Id.

24 Id, citing Section 204(C) of the NIRC of 1997, which reads:

SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may -

x x x

(c) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund.

x x x

25 Id. at 77, citing Maceda v. Macaraig, Jr., et. al., 274 Phil. 1060 (1991).

26 127 Phil. 461 (1967).

27 G.R. No. 151135, July 2, 2004, 433 SCRA 577.

28 G.R. No. 140230, December 15, 2005, 478 SCRA 61, citing Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue, supra note 27 at 470.

29 Rollo, p. 77.

30 Id. at 78.

31 Id. at 80.

32 Cebu Portland Cement Company v. Commissioner of Internal Revenue, 134 Phil. 735 (1968).

33 Contex Corporation v. Commissioner of Internal Revenue, supra note 27.

34 Rollo, p. 79, citing Section 204(C) of the 1997 NIRC and Cebu Portland Cement Company v. Collector of Internal Revenue, 134 Phil. 735 (1968).

35 Id. at 81.

36 Id.

37 Id. at 82.

38 Id.

39 Id. at 204.

40 Id. at 205.

41 Id. at 397.

42 Id. at 396.

43 Id. at 397.

44 Id. at 396.

45 Id. at 397.

46 Id.

47 387 Phil. 491 (2000).

48 Rollo, p. 399.

49 Id. at 279.

50 Id.

51 Id.

52 Id.

53 Id.

54 Supra note 47.

55 Rollo, p. 280.

56 Id.

57 Id.

58 399 Phil. 795 (2000).

59 Id. at 805.

60 Rollo, p. 39.

61 Id. at 31.

62 Id. at 32.

63 Id.

64 Id., citing BIR Ruling DA-038-98.

65 Id. at 34.

66 Id. at 271.

67 Id.

68 Id.

69 Id. at 273.

70 Id. at 277.

71 J.C. Vitug and E.D. Acosta, Tax Law and Jurisprudence, 271 (2006). See also Republic Act No. 8424 (1997), as amended, Sec. 129.

72 Id.

73 Id. at 281.

74 Supra note 28 at 72, citing Commissioner of Internal Revenue v. Tours Specialists, Inc., 262 Phil. 437 (1990).

75 Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue, G.R. No. 173594, February 6, 2008, 544 SCRA 100, 112; J.C. Vitug and E.D. Acosta, Tax Law and Jurisprudence, 317 (2006), citing Commissioner of Internal Revenue v. American Rubber Company and Court of Tax Appeals, 124 Phil. 1471 (1966); Cebu Portland Cement Co. v. Collector of Internal Revenue, 134 Phil. 735 (1968).

76 Supra note 26.

77 Id. at 470.

78 278 U.S. 175 (1928).

79 Supra note 26 at 465-466.

80 Id. at 470, citing 47 Harv. Ld. Rev. 860, 869 (1934).

81 Supra note 32.

82 Id. at 743.

83 Supra note 75. See also Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue, G.R. Nos. 171383 and 172379, November 14, 2008, 571 SCRA 141.

84 Id.

85 Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue, G.R. No. 173594, February 6, 2008, 544 SCRA 100 and Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue, G.R. Nos. 171383 and 172379, November 14, 2008, 571 SCRA 141.

86Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue, supra note 75.

87Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue, G.R. Nos. 171383 and 172379, November 14, 2008, 571 SCRA 141, 153-154.

88 Rollo, pp. 75-76.

89 Id. at 34.

90 Id. at 82.