BIR Ruling

April 22, 1997 MEMORANDUM FOR: The Commissioner This refers to the protested tax cases of FORTUNE TOBACCO CORPORATION (FORTUNE for brevity) involving the aggregate amount of P8,036,611,790.15, as deficiency ad valorem taxes for the years 1993, 1994, 1995 and 1996, inclusive of surcharges and interests, graphically detailed, to wit; DATE OF ASSESSMENT PERIOD COVERED AMOUNT December 8, 1993 November 1993 P188,084,229.80 April 14, 1994 March 1994 132,920,361.70 June 17, 1994 May 1994 148,959,646.28 September 6, 1994 August 1994 227,134,749.37 October 10, 1994 September 1994 237,075,475.66 November 8, 1994 October 1994 242,722,329.97 December 9, 1994 November 1994 249,677,119.29 January 9, 1995 December 1994 278,172,427.95 February 7, 1995 January 1995 306,745,601.16 March 7, 1994 [5] February 1995 256,860,721.86 April 10, 1995 March 1995 302,678,272.15 May 11, 1995 April 1995 269,971,931.69 June 13, 1995 May 1995 362,000,152.48 August 8, 1995 July 1995 336,213,505.76 September 11, 1995 August 1995 299,779,363.42 October 13, 1995 September 1995 358,042,874.93 November 10, 1995 October 1995 363,286,845.84 December 14, 1995 November 1995 377,039,137.00 January 11, 1996 December 1995 432,043,561.27 February 9, 1996 January 1996 333,329,707.14 March, 14, 1996 February 1996 304,244,311.13 April 16, 1996 March 1996 337,566,901.56 May 13, 1996 April 1996 315,608,917.78 June 13, 1996 May 1996 303,076,103.79 July 10, 1996 June 1996 370,955,760.03 August 13, 1996 July 1996 347,021,064.26 September 9, 1996 August 1996 355,400,716.88 TOTAL P8,036,611,790.15 ============== STATEMENT OF FACTS The above assessments were all timely protested and became the subject matter of C.T.A. Case No. 5015 entitled "Fortune Tobacco Corporation vs. Commissioner of Internal Revenue" wherein the Court of Tax Appeals (CTA) rendered a decision dated August 10, 1994, the dispositive portion of which reads as follows: LibLex "WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands of cigarettes, viz: 'HOPE', 'MORE', and 'CHAMPION' being manufactured by Fortune Tobacco Corporation as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes is found to be defective, invalid and unenforceable, such that when R.A. No. 7654 took effect on July 3, 1993, the brands in question were not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to Section 142(c)(1) of the Tax Code, as amended by R.A. No. 7654 and were therefore still classified as other locally manufactured cigarettes and taxed at 45% or 20% as the case may be." (page 45). On appeal to the Court of Appeals docketed as CA-G.R. SP No. 35512 entitled "Commissioner of Internal Revenue vs. Court of Tax Appeals and Fortune Tobacco Corporation" the said Court in a decision dated March 31, 1995 affirmed the above-referred decision of the CTA. This decision of the CA was in turn appealed to the Supreme Court and docketed as G.R. No. 119761 entitled "Commissioner of Internal Revenue vs. Court of Appeals, Court of Tax Appeals and Fortune Tobacco Corporation." On August 29, 1996, the Supreme Court affirmed the decision of the CA sustaining the earlier decision of the CTA. A motion for reconsideration of the decision dated August 29, 1996 was filed , and the Supreme Court in a Resolution dated October 7, 1996 denied with finality said motion. With the denial of the motion for reconsideration, the decision of the Supreme Court affirming the decision of the CA, the decision of the CA sustaining the decision of the CTA and the decision of the CTA which was upheld by both upper Courts are now final and executory. CONCLUSION/RECOMMENDATION In view of all the foregoing and by way of complying with the decision of the Supreme Court, the Appellate Division hereby recommends that all the above-enumerated assessments be withdrawn and cancelled and these cases considered closed and terminated. Respectfully submitted: (SGD.) RODULFO L. SALAZAR Chief, Appellate Division I CONCUR: (SGD.) SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner (Legal Service) Recommendation-APPROVED: (SGD . ) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue