THE Supreme Court (SC) has ordered the Office of the Ombudsman to investigate the Bureau of Internal Revenue (BIR) to uncover those responsible for bungling a tax-refund case filed by a Korean power firm that resulted in the loss of P443.4 million government funds.
In a 12-page unanimous ruling penned by Associate Justice Diosdado M. Peralta, the SC also ordered the BIR to come up with mechanisms and measures that can effectively monitor the progress of cases being handled by its counsels to prevent similar poor handling of tax cases in the future. “The Ombudsman is directed to conduct an in-depth investigation to determine who were responsible for the apparent mishandling of the present case that resulted in the loss of almost half-a-billion pesos, which the government could have used to finance its much-needed infrastructure, livelihood projects and other equally important projects,” the SC pointed out.
The Court was referring to the July 27, 2011, and November 15, 2011, resolutions of the Court of Tax Appeals (CTA) en banc, which denied with finality the bid of the BIR to annul the judgment issued by the CTA First Division on September 11, 2009, granting the petition of Korea Electric Power Corp.(Kepco) Ilijan Corp. for the refund of P443,447,184 representing unutilized input value-added tax (VAT) paid on its domestic purchase and importation of goods for the first and second quarters of 2000.
The CTA affirmed with finality on October 10, 2009, the grant of tax refund to Kepco after the BIR failed to file a motion for reconsideration within the required period of time. The BIR then elevated the case before the SC and sought the reversal of the CTA en banc’s resolutions.
Internal Revenue Commissioner Kim Jacinto-Henares asked the Court to set aside the CTA’s denial of its petition to annul judgment and order the tax court to reopen the case to allow the agency to submit its memoranda detailing its legal defenses.
Henares claimed that she learned only of the adverse decision and the subsequent issuance of the writ of execution on March 7, 2011, when the Office of the Deputy Commissioner for Legal and Inspection Group received a memorandum from the Appellate Division of the National Office recommending the issuance of a tax certificate in favor of Kepco in the amount of P443.4 million.
Kepco, however, opposed the petition saying the BIR is not entitled to the annulment of judgment, as the CTA en banc has no jurisdiction to entertain it on the ground that the Rules of Court, Republic Act 9282 (An Act Expanding the Jurisdiction of the Court of Appeals ) and the Revised Rules of the CTA do not provide such remedy.
In upholding the CTA en banc’s denial of the BIR’s petition to annul judgment, the SC explained that, indeed, the Revised Rules of the CTA and even the Rules of Court do not provide such recourse.
It added that even a direct petition for annulment of judgment of the CTA to the SC is not allowed.
“The petition designated as one for annulment of judgment was legally and procedurally infirm and, thus, could not have treated the petition as an appeal or a continuation of the case before the CTA First Division because the latter’s decision had become final and executory and, thus, no longer subject to an appeal,” the Court explained.
Instead, the Court said what the BIR should have filed was a petition for certiorari assailing the validity of the decision issued by the CTA First Division, which granted Kepco’s tax refund on the ground. But, the Court indicated that it was already too late for the BIR to file the proper petition, considering that the period prescribed for the filing of an appeal had already lapsed. “In any event, petitioner’s failure to avail [itself] of this remedy and mistaken filing of the wrong action are fatal to its case and renders and leaves the CTA First Division’s decision as indeed final and executory,” the SC said.
“By the time the instant petition for review was filed by petitioner with this Court on December 9, 2011, more than 60 days have passed since petitioner’s alleged discovery [March 7, 2011] of its loss in the case as brought about by the alleged negligence or fraud of its counsel,” it noted.