Haystack: Tuason & Legarda Ltd. vs. Commissioner of Internal Revenue (GR L-18552, 30 September 1965)

Tuason & Legarda Ltd. vs. Commissioner of Internal Revenue (GR L-18552, 30 September 1965)
En Banc, Dizon (J): 6 concur

Facts: Tuason & Legarda Ltd., a duly organized domestic corporation, is the owner of the “La Rosario” distillery, operating since 1910 where it had in store, for many years, a stock of distilled spirits and compounded liquors. On 16 December 1958 the Commissioner of Internal Revenue served on the company an assessment for specific tax in the amount of P3,525.40 and P300.00 as penalty on the stock of distilled spirits aforesaid. In reply thereto the Company informed the Commissioner on 16 January 1959 that the stock had already oxidized and was unfit for human consumption, and asked for authority to destroy it in the presence of and under the supervision of a government representative. On February 13 and 16, 1959, Restituto Magcase and Herminigildo Velasquez, the company’s distillery supervisor and Chief, Specific Tax Branch, respectively, recommended the destruction of said alcohol and compounded liquors, having found them to be unfit for human consumption. However, on April 29 of the same year, Inocencio Gonzales, Jr., Chief, Laboratory Section, after an analysis of the same substances, made a report to the contrary. As a result, the Commissioner denied the company’s request for authority to destroy the stock, but in his letter of 3 July 1959 the Commissioner reduced the original assessment to P2,814.95, plus P300.00 as a penalty, copy of which amended assessment was received by the Company on 12 August 1959. The Commissioner, in his letter dated 30 September 1959 and received by the company about the middle of October of the same year denied the second written request to destroy the stock made by the Company on 15 August 1959, and demanded payment of the assessment and compromise penalty. In its reply letter dated 25 November 1959 the Company reiterated its stand that the stock of distilled spirits and compounded liquors in question was damaged and unfit for human consumption and asked for the withdrawal of the assessment served on it pursuant to Section 131 of the National Internal Revenue Code (NIRC). The Commissioner, instead of replying to this last request, served on petitioner on 20 January 1960 a warrant of distraint and levy for P3,525.40, (the original assessment) plus P300.00 as a penalty, and the latter, in turn, on 23 January 1960 tendered to the former all the stock of grain alcohol and compounded liquors in question in payment of the specific tax and penalty demanded provided that the warrant of distraint and levy be withdrawn and a full release and discharge be issued to it. The Commissioner never replied to this offer.

On 11 February 1960, the Company filed its petition for review with the Court of Tax Appeals. After trial on the merits, the Court of Tax Appeals dismissed the petition for review on the ground that the same was not filed on time. A motion for reconsideration and new trial on the ground of accident, mistake and excusable negligence dated 7 April 1961, was denied by the same Court on 14 June 1961 for lack of merit. The Company appealed.

The Supreme Court affirmed the decision appealed from, with costs.

1. Assessment final when petition for review filed with CTA; Last written request of company did not suspend running of prescriptive period
The letter of the Commissioner dated 3 July 1959 was, in legal contemplation, the ruling or decision from which the Company should have appealed to the Court of Tax Appeals; that from 12 August 1959 — when the Company received said letter — to the 15th of the same month and year — the date when the Company, by way of a motion for reconsideration, reiterated its written request for authority to destroy the distilled spirits and compounded liquors in its possession — the Company consumed three (3) days of the period of appeal that from 15 October 1959 — the date when the Company received the Commissioner’s letter of 30 September 1959 denying his second request for authority to destroy the merchandise taxed — to 11 February 1960 when the petition for review was filed, more than 3 months elapsed. In computing the period of appeal, the company’s last written request for authority to destroy the distilled spirits and compounded liquors in question did not suspend the running of said period, because it was a mere reiteration of two previous petitions already denied by the Commissioner. Consequently, the conclusion is inevitable that when the Company filed its petition for review with the Court of Tax Appeals, the questioned assessment had already become final, executory and incontrovertible.

2. Motion for reconsideration or new trial on ground of accident, mistake and excusable negligence properly denied
The Company’s motion for reconsideration or new trial on the ground of accident, mistake and excusable negligence was correctly denied. Even assuming in this connection that the Commissioner’s letter dated 30 September 1959 was actually received by the Company on 20 November 1959 and not “in the middle of October” 1959 as admitted by one of the Company’s witnesses, the conclusion would still be that the petition for review was filed out of time because from 20 November 1959 to 11 February 1960 when said petition for review was filed, more than 60 days had elapsed.