BIR Ruling [DA-092-96]

February 8, 1996 BIR RULING [DA-092-96] 1st Indorsement Returned to the Revenue District Officer, Revenue District No. 57, San Pedro Laguna, the entire papers relative to the case of Honda Cars Philippines, Inc. (Honda) involving the payment of excise tax to a bank ahead of the approval of the ATAPET (Authority to Accept Payment of Excise Tax) by the Revenue District Officer or his/her authorized representative. Records show that with respect to the excise tax payment by Honda covered by ATAPET No. 016701 dated May 9, 1995 in the amount of P6,143,626.00 the following facts appear to be undisputed: that the corresponding ATAPET was stamped "received" on May 5, 1995 (Friday) and the actual deposit of a check for P6,143,626.00 was made the same day at the RCBC-Sta. Rosa, Laguna; that together with the deposit balance of P1,204,849.00 the net deposit was sufficient to answer for the excise tax due on completely-built units removed on late Friday and Saturday (May 5 and 6);that since May 7 is a Sunday while May 8, is Election Day, the first business day after May 5 (Friday) is May 9 (Tuesday) which is the date the ATAPET was actually signed by the Revenue District Officer. It is contended by that Office that the deposit of P6,143,626.00 on May 5 without a covering ATAPET is irregular and should not be considered payment of excise tax until May 9, when the ATAPET (stamped received by RCBC on May 5) was signed by the Revenue District Officer. Such being the case, the excise tax due on removals of vehicles on late Friday and Saturday in excess of the deposit balance of P1,204,849.00 shall be considered unpaid until May 9, hence, the imposition of 25% surcharge and compromise penalty is being proposed. The computations are indicated as follows: aisadc Tax deposit balance May 5, 1995 P1,204,849.00 May 5, 1995 Friday records (2,452,849.00) May 6, 1995 Saturday records 2,366,483.00 Total deficiency tax P3,614,528.00 Add: 25% surcharge 903,632.00 Administrative Penalty 70,000.00 Total: P4,589,360.00 ============ It is understood that this is only one of similar situations involving check deposit on a late Friday while the actual signing of the ATAPET by the District Officer is done on a Monday or first business day after Saturday, Sunday and/or a holiday; thus, this decision will necessarily affect similar transactions in the past. Pursuant to Section 152 of the Tax Code, as amended, producers of excisable articles are subject to supervision by the Bureau of Internal Revenue and the manner of supervision is in premises supervision as indicated in Revenue Memorandum Order 18-86 stating that there shall be detailed on a day-to-day basis revenue enforcement officers to check or supervise the production and removal of finished products from every unit of any establishment producing or manufacturing articles subject to excise tax. Vis-a-vis the procedure that ATAPET shall be signed by the Revenue District Officer or his authorized representative as indicated under RMO Nos. 29-91 and 55-94, if the authorized revenue officer is not available during the removal of excisable articles from factory premises during late Fridays or Saturdays when the taxpayer's premises is still open for business, in order not to lose the opportunity, the taxpayer has the right to take necessary steps to pursue their prospect and if necessary consummate a sale. Such are the realities to survive in business. Such conditions were present in the instant case. Since the taxpayer failed to secure an approved ATAPET, because no revenue officer was present in the premises, it did what was reasonable under the circumstance to consummate a sale. Using an unsigned ATAPET, Honda deposited a check in the amount of P6,143,626.00 corresponding to the excise tax due on the vehicles removed on Friday and Saturday. Even if the check was credited and/or the ATAPET was signed on the first business day following the date of deposit, it was still a valid payment pursuant to Section 127 (a) of the Tax Code, as amended. By depositing the check in the authorized bank, Honda already parted with his money deposited in the bank. Payment by check amounts to cash payment. It extinguishes legal obligation at the time of endorsement and delivery provided that the check is subsequently encashed. Moreover, since under Revenue Regulations No. 15-94, collecting banks are given 5 days to credit their collection to the "Special Account BIR Collections" of the Treasurer of the Philippines, a mere 3-day timing difference is well within the allowable period for the bank to credit their collection to the Government. Pursuant to Section 30 of the Negotiable Instruments Law, "an instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder completed by delivery." On the other hand, Article 1249 of the Civil Code, insofar as pertinent, states that "The delivery of promissory notes payable to order, or bill of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed or when through the fault of the creditor they have been impaired." From these provisions, it can be reasonably ruled that if the obligation sought to be discharged by check is an internal revenue tax, indorsement and delivery of a check on or before the prescribed deadline for the payment of the tax is payment on time: Provided, that the check is subsequently encashed. Accordingly, observing the statutory rule that penalties are strictly construed against its imposition, the 25% surcharge and administrative penalty proposed to be assessed against Honda should not be given due course. casia Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue