People v. Armel Plastic Co., Inc.

FIRST DIVISION [C.T.A. CRIM. CASE NO. O-725. December 7, 2022.] (NPS Docket No. XVI-INV-17F-00164) For: Violation of Section 255, in relation to Sections 253 and 256 of the NIRC of 1997, as amended. PEOPLE OF THE PHILIPPINES , plaintiff , vs. ARMEL PLASTIC CO., INC./DENIS LAWRENCE V. LIPIO, and ELIZAH ANNE M. LIPIO , accused . [C.T.A. CRIM. CASE NO. O-727. December 7, 2022.] (NPS Docket No. XVI-INV-17F-00164) For: Violation of Section 255, in relation to Sections 253 and 256 of the NIRC of 1997, as amended. PEOPLE OF THE PHILIPPINES , plaintiff , vs. ARMEL PLASTIC CO., INC./DENIS LAWRENCE V. LIPIO, and ELIZAH ANNE M. LIPIO , accused . DECISION MANAHAN , J p : Accused Armel Plastic Co., Inc., Denis Lawrence V. Lipio, and Elizah Anne M. Lipio (collectively, accused) are charged for violations of Section 255 of the 1997 National Internal Revenue Code, as amended (NIRC), for alleged failure to pay deficiency income tax and VAT for taxable year 2010, in the two Informations quoted below: CTA Crim. Case No. O-725 "The undersigned Assistant State Prosecutor of the Department of Justice, hereby accuses ARMEL PLASTIC CO., INC. and its responsible corporate officers, DENIS LAWRENCE V. LIPIO and ELIZAH ANNE M. LIPIO, as President and Treasurer, respectively of said corporation; of Violation for Section 255, in relation to Sections 253 and 256, of the National Internal Revenue Code (NIRC) of 1997, as amended, committed as follows: "That sometime in June 2015 and thereafter, in Makati City and within the jurisdiction of this Honorable Court, the above-named accused DENIS LAWRENCE V. LIPIO and ELIZAH ANNE M. LIPIO, being the President and Treasurer, respectively responsible corporate officers of Armel Plastic Co., Inc., did then and there willfully and unlawfully fail to pay deficiency in Value-Added Tax for taxable year 2010, in the amount of P6,034,988.25, exclusive of interest and surcharges, despite final assessment notice, including prior and post notices and final notice before seizure issued by the BIR on June 22, 2015, to the damage and prejudice of the government." CONTRARY TO LAW ." 1 CTA Crim. Case No. O-727 "The undersigned Assistant State Prosecutor of the Department of Justice, hereby accuses ARMEL PLASTIC CO., INC. and its responsible corporate officers, DENIS LAWRENCE V. LIPIO and ELIZAH ANNE M. LIPIO as President and Treasurer, respectively of said corporation; of Violation for Section 255, in relation to Sections 253 and 256, of the National Internal Revenue Code (NIRC) of 1997, as amended, committed as follows: AScHCD "That sometime in April 2011, and thereafter, in Makati City and within the jurisdiction of this Honorable Court, the above-named accused DENIS LAWRENCE V. LIPIO and ELIZAH ANNE M. LIPIO, being the President and Treasurer, respectively, and responsible corporate officers of Armel Plastic Co., Inc., did then and there willfully and unlawfully fail to pay deficiency income tax for taxable year 2010, in the amount of P18,206,711.10, exclusive of interest and surcharges, despite final assessment notice, including prior and post notices and final notice before seizure issued by the BIR on June 22, 2015, to the damage and prejudice of the government." CONTRARY TO LAW ." 2 Antecedents The above-quoted Informations were filed with the Court of Tax Appeals (CTA) on June 6, 2019, and were raffled to the First and Third Divisions, respectively. Both Divisions found probable cause for the issuance of the warrants of arrest, setting the bail bond at Php60,000.00 for each accused for each case. 3 On September 20, 2019, accused Denis Lawrence V. Lipio and Elizah Anne M. Lipio voluntarily and personally appeared before the CTA First Division in CTA Crim. Case No. O-725. 4 Accused also posted their bonds for said case. The accused's arraignment was set on October 30, 2019. 5 On September 24, 2019, accused Denis Lawrence V. Lipio and Elizah Anne M. Lipio voluntarily and personally appeared before the CTA Third Division in CTA Crim. Case No. O-727, and posted their bonds for the said case. 6 The accused's arraignment was set on October 16, 2019. 7 On October 16, 2019, accused Denis Lawrence V. Lipio and Elizah Anne M. Lipio were arraigned in CTA Crim. Case No. O-727, wherein both accused pleaded not guilty. 8 On November 13, 2019, the CTA Third Division granted plaintiff's Motion to Consolidate , subject to the conformity of the CTA First Division. 9 On November 27, 2019, the CTA First Division also granted plaintiff's Motion to Consolidate , thereby consolidating CTA Crim. Case No. O-727 with CTA Crim. Case No. O-725, the case bearing the lower docket number. 10 The parties were also ordered to file their respective consolidated pre-trial briefs. 11 Furthermore, the arraignment of the accused in CTA Crim. Case No. O-725 was reset to January 22, 2020. 12 13 On January 3, 2020, the Court received Plaintiff's Consolidated Pre-Trial Brief , 14 which was posted on December 19, 2019. However, the arraignment on January 22, 2020 was reset to February 26, 2020, because counsel for the accused was affected by the Taal Volcano eruption. 15 On February 26, 2020, the accused were arraigned in CTA Crim. Case No. O-725, with the assistance of counsel de officio , wherein the accused pleaded not guilty. 16 In light of the absence of the accused's counsel de parte , the pre-trial conference was reset to March 11, 2020. 17 During the pre-trial on March 11, 2020, counsels for both parties appeared, however, accused's counsel failed to file the pre-trial brief. Accused's counsel was given until March 21, 2020 within which to file the pre-trial brief. The pre-trial was reset to April 15, 2020. 18 AcICHD Beginning March 15, 2020, Metro Manila was placed under "community quarantine" due to the COVID-19 pandemic, 19 thus, the pre-trial conference was reset to August 5, 2020. 20 In the meantime, the Accused's Consolidated Pre-Trial Brief 21 was filed on July 3, 2020. Due to the ongoing COVID pandemic, the August 5, 2020 setting for the pre-trial conference was again reset to October 7, 2020. 22 The setting on October 7, 2020, was again reset to October 21, 2020. 23 The pre-trial conference proceeded on October 21, 2020 wherein the parties agreed to submit a Joint Stipulation of Facts and Issues (JSFI) until November 5, 2020. 24 However, the parties failed to file their JSFI and the same was deemed waived. 25 The Court issued the Pre-Trial Order (PTO), 26 which contained the following summary of admitted facts: 1. Accused ARMEL PLASTIC CO., INC., is a corporation duly organized and existing under and by virtue of Philippine law, it is the accused in both CTA Case Nos. O-725 and O-727. 2. Accused DENIS LAWRENCE V. LIPIO and ELIZAH ANNE M. LIPIO are the President AND Treasurer respectively of accused ARMEL PLASTIC CO., INC. 3. The filing of the INFORMATION in CTA Crim. Case No. O-725 which charges "accused DENIS LAWRENCE V. LIPIO and ELIZAH ANNE M. LIPIO, being the President and Treasurer, respectively, responsible officers of Armel Plastic Co., Inc., did then and there wilfully and unlawfully fail to pay deficiency Value-Added Tax for taxable year 2010 in the amount of Php6,034,988.24 x x x." 4. The filing of the INFORMATION in CTA Crim. No. O-727 which charges "accused DENIS LAWRENCE V. LIPIO and ELIZAH ANNE M. LIPIO, being the President and Treasurer, respectively, and responsible corporate officers of Armel Plastic Co., Inc., did then and there wilfully and unlawfully fail to pay deficiency income tax for taxable year 2010 in the amount of Php18,206,711.10 x x x." 5. The due execution and authenticity of the following original documents were stipulated: Exhibits Description P-27 CERTIFICATE OF BIR REGISTRATION of ARMEL PLASTIC CO., INC., Registration dated 07/15/2009 TIN No. 007-327-870-00 P-28 CERTIFICATE OF INCORPORATION of ARMEL PLASTIC CO., INC. Company Registration No. CS200910434 Company TIN 007-327-870 P-29 Amended Annual Income Tax Return BIR Form No. 1702 of ARMEL PLASTIC CO., INC. Taxable Year 2010 P-29-1 Stamped August 26, 2011 by Revenue District Office No. 48 West Makati City P-30 Quarterly Value-Added Tax Return BIR Form No. 2550Q of ARMEL PLASTIC CO., INC. for the period January 1, 2010 to March 31, 2010 P-31 Quarterly Value-Added Tax Return BIR Form No. 2550Q of ARMEL PLASTIC CO., INC. for the period July 30, 2010 to September 30, 2010 P-32 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for January 2010 P-33 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for February 2010 P-34 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for March 2010 P-35 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for April 2010 P-36 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for May 2010 P-37 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for June 2010 P-38 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for July 2010 P-39 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for August 2010 P-40 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for September 2010 P-41 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for October 2010 P-42 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for November 2010 P-43 ARMEL PLASTIC CO., INC.'s BIR FORM No. 1601-C Monthly Remittance of Income Taxes Withheld on Compensation Return for December 2010 P-44 ARMEL PLASTIC CO., INC.'s BIR Form 1604-E Annual Information Return of Creditable Income Taxes Withheld (Expanded)/Income Payments Exempt from Withholding Tax filed with Revenue District Office No. 48 West Makati City on June 1, 2011 On February 10, 2021, plaintiff presented Revenue Officer Zenaida E. Reyes (RO Reyes) as the sole witness, whose direct testimony was by way of Judicial Affidavit 27 dated November 25, 2019. The testimony of RO Reyes was offered for the following purposes: to prove the truth, due execution, authenticity and existence of the supporting documents mentioned; to prove the factual and legal basis of the tax deficiency of the accused for taxable year 2010 contained in the Preliminary Assessment Notice (PAN) and Final Assessment Notice (FAN); to identify documents relevant to the foregoing; to support the allegations contained in the plaintiff's complaint; to prove that the accused are criminally liable for violating Section 255, in relation to Sections 253 and 256 of the 1997 National Internal Revenue Code (NIRC), as amended; to prove that the accused are civilly liable for violating Section 255, in relation to Sections 253 and 256 of the 1997 NIRC, as amended; and, to prove other facts which may be deemed acceptable. Plaintiff's Formal Offer of Evidence, 28 filed on February 24, 2021, with accused's Comment/Objections to Plaintiff's Formal Offer of Evidence, 29 was resolved in the Court's Resolution 30 dated May 27, 2021, which admitted some and denied some of plaintiff's exhibits. On March 19, 2021, the Court was informed of the demise of accused Denis Lawrence V. Lipio on March 18, 2021. 31 After several postponements, accused Elizah Anne M. Lipio was presented on October 27, 2021, whose direct testimony was by way of Judicial Affidavit 32 dated September 23, 2020. The testimony of accused was offered to prove the following: that Armel Plastic Co., Inc. is a family corporation with the Board of Directors controlled by her father, Denis Lawrence V. Lipio and his two (2) full blood brothers, Alan Michael V. Lipio and Ronald Leslie V. Lipio; that Armel Plastic Co., Inc. since 2011 and thereafter encountered problems with operating capital which was necessary to keep the company afloat; that the President of Armel Plastic Co., Inc., a corporation duly organized and existing under and by virtue of Philippine law was accused's father, Denis Lawrence V. Lipio; that accused is the treasurer of Armel Plastic Co., Inc., and sometime in April 11, 2011 and thereafter, the Board of Directors was busy trying to figure out how the due and demandable obligations with companies and/or its employees had to be settled, relating to its employees' salaries and benefits, the big loan which was due, claim of the Social Security System (SSS) for unpaid premiums of the employees, as well as cases with the Department of Labor and Employment (DOLE); that due to financial difficulties that affect the business operations of Armel Plastic Co., Inc., specifically in the years starting 2010 up to present, working capital was tremendously depleted, resulting to the company's inability to pay its obligations to its employees, the bank, the SSS and the BIR; that notwithstanding the fact that the company ceased to operate its main business of manufacturing plastic bottles and of the like, herein accused has been burdened with cases filed against her as treasurer and/or as a director, in name only, and against other officers of the company; that as treasurer in taxable year 2010 and in the subsequent years, she was not in the position to pay the alleged VAT for taxable year 2010 in the amount of Php6,034,988.25, exclusive of interest and surcharges; that as treasurer who depended on the available cash position of the company in taxable year 2010, she could not possible pay the alleged VAT for taxable year 2010 in the amount of Php6,034,988.25, and that her failure to pay it was due to lack of funds on the part of the company, and that her failure to do so could not be deemed wilful and unlawful; that likewise, the financial condition of the company did not improve and became worse that it could not pay the alleged deficiency income tax for taxable year 2010 in the amount of Php18,206,711.10, exclusive of interest and surcharges; and, that as treasurer of an almost bankrupt company, she could not be deemed to willfully and unlawfully fail to pay said alleged deficiency income tax for taxable year 2010. ICHDca On December 1, 2021, accused filed their Formal Offer of Evidence, 33 however, the Court found that the markings of the exhibits do not comply with CTA Circular No. 01-2013 which requires that all exhibits of the accused must carry the letter "A" before the respective numbering. 34 On April 25, 2022, accused filed their Amended Formal Offer of Evidence. 35 On June 14, 2022, the Court resolved accused's Amended Formal Offer of Evidence admitting all the accused's exhibits. In the same Resolution, the Court noted the submission of the original Philippine Statistics Authority (PSA) Certificate of Death of accused Denis Lawrence V. Lipio and dismissed the instant cases only with respect to Denis Lawrence V. Lipio, by reason of his death. 36 On June 28, 2022, plaintiff filed a Tender of Excluded Evidence. On July 22, 2022, Plaintiffs Memorandum was also filed. On September 13, 2022, plaintiff's Tender of Excluded Evidence was noted, and the instant cases were submitted for decision. Issues Whether or not the accused is guilty for violation of Section 255, in relation to Sections 253 and 256 of the 1997 NIRC, as amended. 37 Ruling of the Court At the outset, it is reiterated than the instant cases have been dismissed with respect to Denis Lawrence V. Lipio, by reason of his death, and the instant ruling pertains only to accused Armel Plastic Co., Inc. and Elizah Anne M. Lipio. In the Informations, accused are charged with violation of Section 255, in relation to Sections 253 and 256 of the 1997 NIRC, as amended, for alleged failure to pay deficiency income tax in the amount of Php18,206,711.10, exclusive of interest and surcharges, and deficiency VAT in the amount of Php6,034,988.28, exclusive of interest and surcharges, despite final assessment notice, including prior and post notices and final notice before seizure. Section 255 of the 1997 NIRC, as amended, provides: SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax, Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation . Any person required under this Code or by rules and regulations promulgated thereunder to pay any tax, make a return, keep any record, or supply correct and accurate information, who willfully fails to pay such tax, make such return, keep such record, or supply such correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a fine of not less than Ten thousand pesos (P10,000) and suffer imprisonment of not less than one (1) year but not more than ten (10) years. xxx xxx xxx Based on the foregoing, to sustain a conviction for willfully failing to pay the correct tax during the period required under Section 255 of the 1997 NIRC, as amended, the following elements must be established beyond reasonable doubt: 1. Accused are required under the 1997 NIRC, as amended, or its rules and regulations to pay any tax; 2. Accused failed to pay the required tax at the time required by law or rules and regulations; and 3. Accused's failure to pay the required tax at the time required by law or rules and regulations is willful. The Court will now determine if the foregoing elements have been sufficiently proven by the prosecution. TCAScE 1st element: Acquired to pay the correct tax The requirement for the filing of income tax returns and VAT are provided in Sections 52 (a) and 114 of the 1997 NIRC, as follows: SEC. 52. Corporation Returns . (A) Requirements . Every corporation subject to the tax herein imposed, except foreign corporations not engaged in trade or business in the Philippines, shall render, in duplicate, a true and accurate quarterly income tax return and final or adjustment return in accordance with the provisions of Chapter XII of this Title. The return shall be filed by the president, vice-president or other principal officer, and shall be sworn to by such officer and by the treasurer or assistant treasurer. xxx xxx xxx SEC. 114. Return and Payment of Value-Added Tax . (A) In General . Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however , That VAT-registered persons shall pay the value-added tax on a monthly basis. xxx xxx xxx Sections 253 (d) and 256 of the 1997 NIRC, as amended, provide as follows: SEC. 253. General Provisions . xxx xxx xxx (d) In the case of associations, partnerships, or corporations, the penalty shall be imposed on the partner, president, general manager, branch manager, treasurer , officer-in-charge, and the employees responsible for the violation. xxx xxx xxx SEC. 256. Penal Liability of Corporations . Any corporation, association or general co-partnership liable for any of the acts or omissions penalized under this Code, in addition to the penalties imposed herein upon the responsible corporate officers, partners, or employees, shall, upon conviction for each act or omission, be punished by a fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000). It is undisputed that Armel Plastic Co., Inc. is a domestic corporation duly organized and existing under and by virtue of Philippine law. 38 Thus, it is liable for and required to pay income tax. Based on its BIR Certificate of Registration, Armel Plastic Co., Inc. is also liable for VAT. 39 As to the responsible officer, it is likewise undisputed that accused Elizah Anne M. Lipio is the treasurer of Armel Plastic Co., Inc. 40 The General Information Sheets (GIS) of Armel Plastic Co., Inc. for years 2010 and 2017 also show that accused Elizah Anne M. Lipio was the treasurer for the said years. 41 2nd element: Failure to pay the correct tax at the time required by law The alleged failure to pay the correct tax arose from the assessment of deficiency income tax and VAT for taxable year 2010. In relation thereto, plaintiff presented the following evidence with respect to the assessments for deficiency income tax and VAT for taxable year 2010 against accused Armel Plastic Co., Inc.: Preliminary Assessment Notice (PAN) dated November 24, 2014, 42 received by a Michelle Robis on November 26, 2014, 43 with details of discrepancies; 44 Formal Assessment Notice dated December 16, 2014 45 with details of discrepancies; 46 Assessment Notice No. IT-ELA53187-10-14-1150 dated December 16, 2014 for basic deficiency income tax of Php18,206,711.10, 47 received by Zaldy Lavapie on December 17, 2014; 48 and, Assessment Notice No. VT-ELA53187-10-14-1150 dated December 16, 2014 for basic deficiency VAT of Php6,034,988.25, 49 with stamp received. 50 Plaintiff also presented the Letter dated March 6, 2015 51 from Armel Plastic Co., Inc., signed by accused Elizah Anne M. Lipio, asking for a conference meeting to clarify the findings and asking for more time to sort their files and supporting documents, as well as the BIR Letter dated April 27, 2015 52 stating that the assessments against Armel Plastic Co., Inc. have become final, executory and demandable for failure of the accused to file a protest within thirty (30) days from receipt of the assessment. As to the collection efforts, plaintiff presented the following: Preliminary Collection Letter (PCL) dated May 19, 2015; 53 Final Notice Before Seizure (FNBS) dated June 22, 2015; 54 Warrant of Distraint and/or Levy (WDL) No. WDL-RR8-2016-02-0116; 55 Letter dated July 22, 2016 from Armel Plastic Co., Inc. signed by accused Elizah Anne M. Lipio, proposing a compromise settlement in the amount of Php2,584,036.67; 56 BIR Letter to Armel Plastic Co., Inc. dated September 15, 2016, requesting that Armel Plastic pay the offered amount within ten (10) days from receipt of the letter; 57 and, Letter dated October 28, 2016 from Armel Plastic Co., Inc. signed by accused Elizah Anne M. Lipio, asking that it be allowed to pay the compromise settlement in installment, with the first installment to be paid on or before December 21, 2016. 58 Accused did not present any evidence to refute the said assessments. During questioning by the Court, accused Elizah Anne M. Lipio testified that she did not recall receiving any notice personally, however, she did not deny receipt of the assessments by Armel Plastic Co., Inc., nor did she refute the manner of service nor authority of the person who received the same, as follows: JUSTICE MANAHAN: The Question No. 6 states, although it's not a question, "please tell us your experience in taxable year 2010 insofar as these two (2) cases are concerned involving the alleged value-added tax deficiency and the alleged deficiency of income tax." So, as Treasurer do you recall having received any Letter or Notice from the Bureau of Internal Revenue that embodies these deficiency VAT and income tax assessments? MS. LIPIO: A. Yes, your Honors, but it was in a latter part, I remember. JUSTICE MANAHAN: So, were you the one who personally received those letters or notices from the BIR? ITAaHc MS. LIPIO: A. No, your Honors, I don't recall any. JUSTICE MANAHAN: So, how did you get to know that you are being assessed if there, ah, personally you did not receive any of these letters but how did you know, how did the company know about these tax deficiency assessments? MS. LIPIO: A. I remember, when we received already the paper from CTA. xxx xxx xxx JUSTICE MANAHAN: Okay. So, you only learned that you have an outstanding assessment, alleged unpaid tax assessment from the BIR when you received the CTA notice? MS. LIPIO: A. Yes, your Honors. JUSTICE MANAHAN: So, before that, at the administrative level or when the case is still at the BIR level, you or your company did not receive any notice at all from the BIR? MS. LIPIO: A. I don't recall any, your Honors. xxx xxx xxx JUSTICE MANAHAN: So, you have no personal knowledge as to when these Letter of Authority, Preliminary Assessment Notice and Final Assessment Notice were served or sent to Armel Plastic? MS. LIPIO: A. Yes, your Honors, and I was just a Treasurer last 2010. It was 2010 when I became the Treasurer of the company, it was only on that year. 59 Accused also did not object to or refute the Letter dated March 6, 2015, 60 signed by accused Elizah Anne M. Lipio, acknowledging the assessment notices and requesting for more time to sort their files and supporting documents. Based on the foregoing, plaintiff has sufficiently proven that there were assessments for deficiency income tax and VAT issued against accused Armel Plastic Co., Inc., for taxable year 2010. The assessments have also become final and executory for failure of the accused to timely file a valid protest. 61 Section 56 (B) of the 1997 NIRC, as amended, provides the period to pay assessed deficiency income tax, as follows: SEC. 56. Payment and Assessment of Income Tax for Individuals and Corporations . xxx xxx xxx (B) Assessment and payment of Deficiency Tax . After the return is filed, the Commissioner shall examine it and assess the correct amount of the tax. The tax or deficiency income tax so discovered shall be paid upon notice and demand from the Commissioner . (Underscoring supplied) There is no specific provision for the period of payment of VAT deficiency taxes, thus, the above rule stated in Section 56 (B) shall also be applied. In the instant cases, the Assessment Notices 62 dated December 16, 2014 stated that the due date for payment of the deficiency income tax and VAT for taxable year 2010 is on January 16, 2015. However, there is no showing that the said deficiency income tax and VAT for taxable year 2010 have been paid. CHTAIc Plaintiff presented the PCL dated May 19, 2015; 63 FNBS dated June 22, 2015; 64 and WDL No. WDL-RR8-2016-02-0116; 65 to show the collection efforts of the BIR. However, there was still no payment of the said deficiency taxes by the accused. Plaintiff likewise presented the letters from accused Armel Plastic, signed by accused Elizah Anne M. Lipio, offering a compromise settlement, 66 and subsequently, asking for time to pay the compromise settlement. 67 However, no payment has been made. Clearly, accused failed and continues to fail to pay the deficiency income tax and VAT at the time required by law. 3rd element: Failure to pay the correct tax was willful Under the 3rd element, the act of failing to pay the correct amount of tax must be "willful." The term "willful" is defined as voluntary and intentional, and which must be fully established as a positive act or state of mind; it cannot be presumed nor attributed to mere inadvertent or negligent acts. 68 As to how willfulness is proven, the CTA explained in People v. Bienvenido S. Dimson , 69 as follows: . . . And although "willfulness" is a state of mind that may be inferred from the circumstances of the case, and proof of willfulness may be, and usually is, shown by circumstantial evidence alone, in this case, we have direct admissions by the accused . (Citations omitted, underscoring supplied) Plaintiff presented the letters from accused Armel Plastic, signed by accused Elizah Anne M. Lipio, offering a compromise settlement, 70 and subsequently, asking for time to pay the compromise settlement, 71 to prove that accused was aware that the assessments have become final and executory. Plaintiff also presented a Memorandum dated March 13, 2017, stating therein the various collection efforts against Armel Plastic Co., Inc. and that despite the considerable length of time given, the accused still did not settle their tax liability. 72 This was again reiterated in a Memorandum dated June 5, 2017. 73 In defense, accused Elizah Anne M. Lipio testified that she was a treasurer in name only; that she had no control over the funds of Armel Plastic Co., Inc. which was almost bankrupt already; and, that she did not willfully and unlawfully fail to pay the deficiency income tax and VAT for taxable year 2010. The relevant portions of her testimony are quoted below: Q-5. As Treasurer, what was your official duties and functions? A-5. Since Armel Plastic Co., Inc. is a FAMILY CORPORATION, controlled by the siblings of my father, the BOARD dictated to me what I shall do, and to whom the available funds of the company should be released. Q-6. Please tell us of your personal experience in taxable year of 2010 insofar as these 2 cases are concerned, involving the alleged Value-Added Tax (VAT) in 2010 in the amount of Php6,034,988.25 and the alleged deficiency of income tax also in the same taxable year of 2010 in the amount of Php18,206,711.10, and in both cases, exclusive of interest and surcharges? A-6. As the Treasurer of the company, IN NAME ONLY, I was never allowed [to] do anything without the guidance and orders of the Board of Directors, consists of the siblings of my father who jointly decided on any matter affecting the finances and business operations of the family corporation. Q-7. As far as you know, how was the financial or cash positions of the company from 2010 up to present? A-7. It was going downhill, meaning that the company was BARELY SURVIVING, not enough operating capital to purchase raw materials for manufacturing plastic bottles/containers, encountering problems with paying the salaries and benefits of its employees, as well as the maturing loans from the bank Asia United Bank, resulting to cases filed by employees with the Department of Labor and Employment, and case filed against us by the Social Security System (SSS), which caused the company to partially close down its operations. EATCcI Q-8. Please tell us what are those cases that affected mainly the business operations of the family corporation? A-8. The case filed by Social Security System (SSS), docketed as Crim. Case No. 18-03571-CR, pending before the Regional Trial Court of Makati, Branch 145, wherein the company and us, Directors of the company were sued to pay it the premiums of our employees amounting to Php16,303,645.45 inclusive of penalties. x x x Q-9. What was that criminal complaint filed against all of the Board of Directors, and officers of the company, including you? A-9. The Board of Directors of the company were accused that "during the period from January 2011 to January, 2017, in the City of Makati x x x conspiring and confederating together, did then and there willfully, unlawfully and feloniously fail and refuse to remit the SSS contributions of their employees in the total amount of Php16,303,654.45, inclusive of penalties x x x" xxx xxx xxx Q-15. For emphasis and clarification, as you stated above that you were Treasurer of Armel Plastic Co., Inc. IN NAME ONLY, who decided as to the allocation of whatever funds your family corporation had at the period time relevant to these 2 cases? A-15. My father Denis V. Lipio and his 2 other brothers which control the BOARD OF DIRECTORS, decided how the meager funds of the company should be spend. Q-16. What can you say about the allegations in the 2 Informations filed against you, one docketed as Crim. Case No. O-725 wherein it was alleged that you "did then and there willfully and unlawfully fail to pay deficiency in Value-Added Tax for taxable year (sic) , in the amount of P6,034,988.25 x x x," and the other case docketed as Crim. Case No. O-727 wherein it was alleged that you "did then and there willfully and unlawfully fail to pay deficiency in income tax for taxable year 2010, in the amount of 18,206,711.10"? A-16. Sir in both cases, Armel Plastic Co., Inc. at that time of taxable year 2010 and thereafter, was almost bankrupt already and as I said, being the Treasurer IN NAME ONLY of said company, I was NOT IN ANY POSITION TO CONTROL OR MANAGE the company's funds, and that there was no available fund at that time for the company to pay said claims of BIR. Hence, I COULD NOT and DID NOT WILLFULLY AND UNLAWFULLY FAIL TO PAY DEFICIENCY IN VALUE-ADDED TAX for taxable year 2010 in the amount of P6,034,988.25 and I DID NOT WILLFULLY AND UNLAWFULLY FAIL TO PAY DEFICIENCY IN INCOME TAX for taxable year 2010 in the amount of P18,206,711.10. 74 A close scrutiny of the records reveals that there is nothing therein that would show that accused Elizah Anne M. Lipio was responsible for the violation or that she had any direct and active participation in the non-payment of the assessed deficiency income tax and VAT for taxable year 2010. The mere presentation of the General Information Sheet (GIS) for the years 2010 and 2017, 75 does not suffice to prove beyond reasonable doubt that accused is responsible for the violation charged. In Suarez v. People of the Philippines , 76 the Supreme Court discussed: In ABS-CBN v. Gozon (ABS-CBN) , the Court discussed that although corporate officers may be held liable for a crime committed under the Intellectual Property Code, their criminal liability stems from their active participation in the commission of the wrongful act. Hence, in ABS-CBN , the Court affirmed the finding of probable cause against two of GMA's executives for copyright infringement of ABS-CBN's news footage because of their positions as Head of News Operations and Program Manager. However, the Court excluded from the filing of Information other GMA corporate officers because: DHITCc Mere membership of the Board or being President per se does not mean knowledge, approval, and participation in the act alleged as criminal. There must be a showing of active participation, not simply a constructive one . This same doctrine was reiterated in SEC v. Price Richardson Corporation where the Court stated that to be criminally liable for the acts of a corporation, there must be a showing that its officers, directors, and shareholders actively participated in or had the power to prevent the wrongful act. In this case, petitioner's position as Executive Vice-President of 21st Century will not per se make her liable for the failure of 21st Century to pay its tax liabilities. In the words of Section 253 of the NIRC, petitioner must have been the employee or officer responsible for the violation. Contrary to the conclusion arrived at by the RTC and CTA, Petitioner's Letter to the BIR asking for an extension of time to pay the tax liabilities of 21st Century, and signifying her intent as representative of 21st Century to settle the tax liabilities of the corporation through compromise, is not enough to pronounce her guilt beyond reasonable doubt. This single Letter does not suffice to prove that petitioner has actively participated in, or has failed to prevent the violation by 21st Century of the provisions of the NIRC. As pointed out by petitioner, the prosecution, which has the burden of proving petitioner's guilt beyond reasonable doubt, failed to introduce any evidence that would show that petitioner's duties and responsibilities as Executive Vice-President of 21st Century allowed her to participate in 21st Century's failure to pay its tax liabilities. The records of the case is bereft of any evidence showing that petitioner's acts and omissions caused 21st Century to violate the provisions of the NIRC. The prosecution neither proved that it is within petitioner's power as Executive Vice-President of 21st Century to prevent any such violation. Absent proof that petitioner had any direct and active participation in the non-payment of 21st Century's tax liabilities, the Court cannot convict her of violation of the provisions of the NIRC. On another note, it cannot be said that petitioner's Letter to the BIR, expressing her willingness to settle 21st Century's tax liabilities through compromise, may be received in evidence as an implied admission of her guilt pursuant to Section 28 of Rule 130 of the 2019 Amendment to the Revised Rules on Evidence. The same Rule provides for exceptions, such that, in criminal cases, an offer of compromise for those involving quasi-offenses (criminal negligence) and those allowed by law to be compromised, cannot be received in evidence as an implied admission of the accused's guilt. (emphasis in the original) Similar to the abovequoted case, the mere fact that accused Elizah Anne M. Lipio is the Treasurer of accused Armel Plastic Co., Inc. is not sufficient to prove that accused Elizah Anne M. Lipio was responsible for the violation of the 1997 NIRC, as amended, without any showing of accused's direct participation in the failure to pay the deficiency income tax and VAT. Plaintiff presented the letters from accused Armel Plastic, signed by accused Elizah Anne M. Lipio, offering a compromise settlement, 77 and subsequently, asking for time to pay the compromise settlement, 78 to show that accused were aware of the final assessments for taxable year 2010. However, the said documents also show the willingness of the accused to pay the said deficiency taxes, and their inability to do so due to accused Armel Plastic Co., Inc.'s distressed financial condition. cEaSHC During the cross-examination of accused Elizah Anne M. Lipio, the plaintiff tried to counter the allegation of bankruptcy, as follows: ATTY. ALFELOR: Q. In relation to Question and Answer No. 16, it was stated therein that Armel Plastic Corporation was almost bankrupt? MS. LIPIO: A. Yes, you're right. ATTY. ALFELOR: Q. Did the company file any bankruptcy proceedings before a Court? Or did you file anything before a Court regarding the bankruptcy of the company? MS. LIPIO: A. No, Sir, we did not file any. But to the Court's mind, the prosecution could have presented the Income Tax Returns and Financial Statements of accused Armel Plastic Co., Inc. for taxable years 2014 and 2015, to prove that accused had the financial capacity to pay the assessed deficiency taxes for taxable year 2010. The accused's offer to compromise the deficiency tax assessments due to its distressed financial condition creates a reasonable doubt as to the indicia of willfulness not to pay the tax. Simply put, accused Armel Plastic Co., Inc. failed to pay the deficiency tax assessments due to its financial incapacity, and not because of willful refusal to pay. The presumption of innocence of an accused in a criminal case is a basic constitutional principle, fleshed out by procedural rules which place on the prosecution the burden of proving that an accused is guilty of the offense charged by proof beyond reasonable doubt. Corollary thereto, conviction must rest on the strength of the prosecution's evidence and not on the weakness of the defense. 79 Based on all the foregoing, plaintiff failed to present sufficient evidence to prove beyond reasonable doubt that the accused willfully failed to pay the deficiency income tax and VAT for taxable year 2010. Civil liability of the accused. Considering that the Assessment Notice No. IT-ELA53187-10-14-1150 dated December 16, 2014 for deficiency income tax and Assessment Notice No. VT-ELA53187-10-14-1150 dated December 16, 2014 for deficiency VAT, both for taxable year 2010, were unprotested, the same have become final, demandable and executory. Thus, despite the acquittal, accused Armel Plastic Co., Inc. is civilly liable for the deficiency taxes as stated in the foregoing assessment notices, plus any additional interest that have accrued thereon, less any amounts already collected by garnishment and distraint/levy. WHEREFORE , accused Armel Plastic Co., Inc. and Elizah Anne M. Lipio are ACQUITTED of the violation of Section 255, in relation to Sections 253 and 256 of the 1997 NIRC, as amended. However, accused Armel Plastic Co., Inc. is ORDERED to pay the civil liability as computed in the Assessment Notice No. IT-ELA53187-10-14-1150 dated December 16, 2014 for deficiency income tax and Assessment Notice No. VT-ELA53187-10-14-1150 dated December 16, 2014 for deficiency VAT, plus any additional interest that have accrued thereon, less any amounts already collected by garnishment and distraint/levy. CTIEac SO ORDERED. (SGD.) CATHERINE T. MANAHAN Associate Justice Roman G. del Rosario, P.J. and Marian Ivy F. Reyes-Fajardo, J. , concur. Footnotes 1. Docket, CTA Crim. Case No. O-725, Vol. I, p. 8. 2. Docket, CTA Crim. Case No. O-727, p. 8. 3. Docket, CTA Crim. Case No. O-725, Vol. I, Resolution dated July 15, 2019, pp. 47-49; CTA Crim. Case No. O-727, Resolution dated July 30, 2019, pp. 63-64. 4. Docket, CTA Crim. Case No. O-725, Vol. I, pp. 94-95. 5. Id. 6. Docket, CTA Crim. Case No. O-727, pp. 92-93. 7. Id. 8. Docket, CTA Crim. Case No. O-727, pp. 119-125. 9. Docket, CTA Crim. Case No. O-727, pp. 131-132. 10. Docket, CTA Crim. Case No. O-725, Vol. I, pp. 363-364. 11. Id. 12. Previously reset from October 30, 2019 to November 29, 2019, per Resolution dated October 29, 2019, docket, CTA Crim. Case No. O-725, Vol. I, pp. 166-168. 13. Docket, CTA Crim. Case No. O-725, Vol. I, pp. 363-364. 14. Docket, CTA Crim. Case No. O-725, Vol. I, pp. 385-401. 15. Docket, CTA Crim. Case No. O-725, Vol. I, p. 409. 16. Docket, CTA Crim. Case No. O-725, Vol. I, pp. 521-536. 17. Id. at p. 522. 18. Id. at pp. 542-543. 19. SC Administrative Circular No. 34-2020. 20. Docket, CTA Crim. Case No. O-725, Vol. I, p. 553. 21. Docket, CTA Crim. Case No. O-725, Vol. II, pp. 554-559. 22. Docket, Vol. II, Notice of Resetting, pp. 563-564. 23. Docket, Vol. II, Order, pp. 678-681. 24. Docket, Vol. II, Order, pp. 700-703. 25. Docket, Vol. II, Resolution dated December 21, 2020, p. 725. 26. Docket, Vol. II, pp. 748-779. 27. Docket, Vol. I, pp. 422-453. 28. Docket, Vol. II, pp. 780-799. 29. Docket, Vol. II, pp. 801-803. 30. Docket, Vol. II, pp. 825-828. 31. Docket, Vol. II, pp. 805, 809-811, and 893-896. 32. Docket, Vol. II, pp. 608-616. 33. Docket, Vol. II, pp. 855-857. 34. Docket, Vol. II, Resolution dated March 23, 2022, pp. 887-889. 35. Docket, Vol. II, pp. 912-915. 36. Docket, Vol. II, pp. 950-953. 37. Docket, Vol. II, PTO, p. 764. 38. Summary of Admitted Facts par. 1, PTO, docket, Vol. II, p. 761, in relation to Exhibit "P-28", docket, Vol. I, pp. 294-302. 39. Exhibit "P-27", docket, Vol. I, p. 293. 40. Summary of Admitted Facts par. 2, PTO, docket, Vol. II, p. 761. 41. Exhibits "P-45" and "P-46", docket, Vol. I, pp. 336 and 348. 42. Exhibit "P-7" docket, Vol. I, pp. 203-204. 43. Exhibit "P-7-2", docket, Vol. I, p. 203. 44. Exhibit "P-8", docket, Vol. I, pp. 210-213. 45. Exhibit "P-13", docket, Vol. I, pp. 224-225. 46. Exhibit "P-14", docket, Vol. I, pp. 230-233. 47. Exhibit "P-9", docket, Vol. I, p. 215. 48. Exhibit"P-9-1", docket, Vol. I, p. 214. 49. Exhibit "P-10", docket, Vol. I, p. 217. 50. Exhibit "P-10-1", docket, Vol. I, p. 216. 51. Exhibit "P-15", docket, Vol. I, p. 235. 52. Exhibit "P-16", docket, Vol. I, p. 237. 53. Exhibit "P-17", docket, Vol. I, p. 239. 54. Exhibit "P-18", docket, Vol. I, p. 241. 55. Exhibit "P-19", docket, Vol. I, p. 243. 56. Exhibit "P-20", docket, Vol. I, p. 247. 57. Exhibit "P-21", docket, Vol. I, p. 249. 58. Exhibit "P-22", docket, Vol. I, p. 251. 59. Transcript of Stenographic Notes (TSN) of the Hearing on October 27, 2021, pp. 25-28. 60. Exhibit "P-15", docket, Vol. I, p. 235. 61. Exhibit "P-16", docket, Vol. I, p. 237. 62. Exhibits "P-9" and "P-10", docket, Vol. I, pp. 215 and 217. 63. Exhibit "P-17", docket, Vol. I, p. 239. 64. Exhibit "P-18", docket, Vol. I, p. 241. 65. Exhibit "P-19", docket, Vol. I, p. 243. 66. Exhibit "P-20", docket, Vol. I, p. 247. 67. Exhibit "P-22", docket, Vol. I, p. 251. 68. People of the Philippines v. Judy Anne Santos y Lumagui , CTA Crim. Case No. O-012, January 16, 2013. 69. CTA Crim. Case Nos. O-071 and O-085, July 2, 2014. 70. Exhibit "P-20", docket, Vol. I, p. 247. 71. Exhibit "P-22", docket, Vol. I, p. 251. 72. Exhibit "P-23", docket, Vol. I, pp. 254-255. 73. Exhibit "P-25", docket, Vol. I, pp. 261-262. 74. Judicial Affidavit of Elizah Anne M. Lipio, docket, Vol. I, pp. 611-614. 75. Exhibits "P-45" and "P-46", docket, Vol. I, pp. 336 and 348. 76. G.R. No. 253429, October 6, 2021. 77. Exhibit "P-20", docket, Vol. I, p. 247. 78. Exhibit "P-22", docket, Vol. I, p. 251. 79. People of the Philippines v. Zafra Maraorao , G.R. No. 174369, June 20, 2012.