Philippine Associated Smelting and Refining Corp. v. Commissioner of Internal Revenue

SECOND DIVISION [CA-G.R. SP No. 55152. January 12, 2006.] PHILIPPINE ASSOCIATED SMELTING AND REFINING CORPORATION , petitioner , vs . THE HONORABLE COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N JACINTO , J p : This is an appeal, by Petition for Review, from the March 24, 1999 Decision of the Court of Tax Appeals (CTA), which dismissed the Petition for Tax Refund filed by the Philippine Associated Smelting and Refining Corporation (PASRC for short), the June 22, 1999 Resolution which denied PASRC's Motion for New Trial, and the September 9, 1999 Resolution, which denied PASRC's Motion for Reconsideration of the June 22, 1999 Resolution in CTA Case No. 5377, entitled "Philippine Associated Smelting and Refining Corporation, Petitioner, versus, The Honorable Commissioner of Internal Revenue, Respondent". On February 20, 1996, PASRC filed with the Bureau of Internal Revenue (BIR) an Application for Tax Credit/Refund of Value-Added Tax paid for the period January to December 1994. When the two-year period of prescription for the filing of its tax refund was about to expire, PASRC filed with the CTA a Petition for Tax Refund or Tax Credit involving the amount of Php11,733,331.99. The CIR opposed the petition. At the trial, PASRC presented various exhibits consisting of its VAT registration certificate, EPZA and BOI certificates of registration, its letter-claim for refund with the BIR, and invoices of purchases of raw materials from VAT suppliers. These exhibits were all identified and testified to by its witness Conrado Robles and Emerita Garcia. (pp. 16-17, Rollo ) However, no formal offer of these exhibits was filed by PASRC. (p. 17, Rollo ) Thus, in its March 24, 1999 Decision, the CTA dismissed the petition of PASRC on the following grounds: Under Section 35 of the Rules of Court, "Section 35. Offer of Evidence The Court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified. It is very clear from the aforequoted provision that Petitioner's presentation of exhibits on several occasions was rendered futile by its non-filing of a formal offer of evidence. This being a claim for refund, petitioner ought to convince this Court by clear and convincing proof of his entitlement to the refund sought. A claim for refund partakes of the nature of an exemption which cannot be allowed unless granted in the most explicit and categorical language. Being in the nature of an exemption from taxation, a claim for refund is strictly construed against the claimant and the failure to discharge said burden is fatal to the claim . . . . Petitioner, by its failure to make a formal offer of its exhibits, utterly failed to prove its case as its claim for refund has nothing to stand on. (pp. 17-18, Rollo ) aIHSEc PASRC received a copy of the decision on March 31, 1999. It then filed a Motion for New Trial on the ground that the CTA, in disregarding its evidence, had deprived it of property without due process of law. The omission to file the formal offer of evidence was due to the mistake of its counsel, Atty. Pericles Consunji, which the CTA should excuse for the latter acted in good faith and with due diligence. Said counsel had already prepared a formal offer of evidence with attachments, but this and the July 7, 1998 CTA Order and the note taken by the docket personnel of the scheduled hearing were all misfiled in a box intended for terminated cases. The erroneous filing occurred at the time counsel's law office's docket section was undergoing changes in its personnel and system. (pp. 25-26, Rollo ) Counsel thought all along that the formal offer of evidence had already been filed with the CTA, and it was only when copy of the decision was received that counsel realized that said pleading had not been submitted. It was only after a diligent search that they found the pleading misfiled in a box for terminated cases. PASRC then prayed that its formal offer of evidence be admitted by the CTA, together with copies of its exhibits and an affidavit of merit. (p. 27, Rollo ) The CTA denied the motion for new trial of PASRC. It held in its June 22, 1999 Resolution that the mistake committed by counsel was not excusable in view of the following circumstances: First, in its July 7, 1998 order, the CTA declared that ". . . petitioner had failed to file its formal offer of evidence within the time given by the Court . . ." and set the presentation of the evidence of the BIR on July 23, 1998. PASRC must have been aware of this order for, on July 23, 1998, it filed an Urgent Motion to Reset Hearing. It follows that it also knew that its formal offer had not yet been received by the CTA. (pp. 20 and 42, Rollo ) Second, PASRC claims that its counsel had already prepared a formal offer of evidence long before this became due but that the same was not filed due to some mistake in office procedure. Copy of said formal offer shows that this was prepared only on April 6, 1998. However, the records reveal that PASRC rested its case on May 13, 1997 and asked for 15 days within which to file its formal offer. This period already lapsed on May 30, 1997, or almost one year before PASRC prepared its formal offer on April 6, 1998. (p. 21, Rollo ) PASRC filed a Motion for Reconsideration on July 15, 1999 but the same was denied by the CTA in a Resolution dated September 9, 1999. (p. 23, Rollo ) It received copy of this resolution on September 14, 1999. It then filed the present petition for review on September 29, 1999. It is noted that petitioner PASRC merely asks that we set aside the March 24, 1999 CTA Decision and remand the case to the CTA for admission of its formal offer of evidence and resolution of the case based on all the evidence admitted. (P. 10, Rollo ) Respondent CIR has filed a Comment on the petition. (p. 58, Rollo ) We cannot grant this petition. It is apparent on its face that this petition was filed out of time. Section 4 of Rule 43, which then included appeals from the CTA to this Court, prescribes the following period: SEC 4. Period of appeal. The appeal shall be taken within fifteen (15) days from notice of the award, judgment final order or resolution, or from the date of its last publication, if publication is required by law for its effectivity, or of the denial of petitioner's motion for new trial or reconsideration duly filed in accordance with the governing law of the court or agency a quo. Only one (1) motion for reconsideration shall be allowed . Upon proper motion and the payment of the full amount of the docket fee before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further extension shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days. cDHCAE Petitioner filed the present petition for review on September 29, 1999. Apparently, it reckoned its 15-day period from its receipt on September 14, 1999 of the September 9, 1999 resolution of public respondent. This is erroneous for the motion for reconsideration which was denied under the September 9, 1999 resolution was directed merely at the June 22, 1999 resolution which denied its motion for new trial, and not at the March 24, 1999 decision, which had thereafter become final and executory. The 15-day period to appeal should have been reckoned from the date it received notice of the June 22, 1999 resolution denying its motion for new trial with respect to the March 24, 1999 CTA decision. Even if petitioner failed to state when it received the June 22, 1999 order, which omission is a fatal flaw in itself, by no stretch of reasoning can it claim that its filing of the present petition only on September 29, 1999 still fell within the 15-day period to appeal, reckoned from its received of the June 22, 1999 resolution. More than the technical deficiencies of this petition, however, there is also its utter lack of merit. Mistake or negligence as a ground for new trial under Rule 37 must be excusable. Excusable mistake or negligence is that which could not have been guarded against or avoided, notwithstanding the exercise of ordinary diligence and prudence, and by reason thereof, the rights of the party aggrieved have been prejudiced. ( Viking Industrial Corp. vs. Court of Appeals , G.R. No. 143794, July 13, 2004; Air Phils. Corp. vs. International Business Aviation Services Phils. Inc ., G.R. No. 151963. September 9, 2004) Such observance of ordinary prudence and diligence is required not only of counsel, but also of the party who, as a client, has the duty to keep himself constantly posted about the case by inquiring from counsel as to its status and progress. ( GCP Manny Transport Services, Inc. vs. Principe , G.R. No. 141484, November 11, 2005; Macondray & Co., Inc. vs. Provident Insurance Corp ., G.R. No. 154305, December 9, 2004; Philhouse Development Corp. vs. Consolidated Orix Leasing & Finance Corp ., G.R. No. 135287, April 4, 2001; and Balgami, et al. vs. Court of Appeals , G.R. No. 131287, December 9, 2004) In this case, the circumstances under which counsel for petitioner omitted to file its formal offer of evidence indicate that the slip-up could have been guarded against but that, as neither counsel nor client exercised ordinary diligence and prudence, the omission was not avoided. As pointed out by public respondent, it is unlikely that petitioner was unaware that its formal offer of evidence had not yet been filed. In its July 7, 1998 order, public respondent set the schedule for the reception of the evidence of the prosecution on July 23, 1998. At the same time, it reminded petitioner of its failure to make a formal offer of its evidence. ( supra ) Petitioner received copy of this order and had in fact filed a motion referring to it, specifically an Urgent Motion to Reset Hearing scheduled on July 23, 1998. Public respondent correctly inferred from this fact that petitioner knew of the content of the July 7, 1998 order. Petitioner, however, would insist that even with its receipt of the July 7, 1998 order, it was unaware that it had omitted to file a formal offer of evidence. It explains that on July 23, 1998, Atty. Pericles Consunji, the main counsel of petitioner, had fallen ill and was substituted by Atty. Ramon Guerrero. In his affidavit dated July 9, 1999, Atty. Guerrero explained that he was merely informed by the docket section of the July 23, 1998 hearing schedule but he was not actually shown the July 7, 1998 order setting said hearing schedule. As he had other matters to attend to, Atty. Guerrero was constrained to prepare a motion to reset the hearing. However, in the preparation of said motion ". . . (he) got the case folder of CTA Case No. 5377 . . . (but he) did not see the order of the Court of Tax Appeals stating that petitioner in said case had failed to file its Formal Offer of Evidence . . .". (p. 50, Rollo ) aScIAC The foregoing explanation simply does not ring true. First, while Atty. Guerrero stated in his affidavit that he did not see the July 7, 1998 order when he examined the case folder, he failed to offer any plausible explanation as to why he may have overlooked it. It is noted that Atty. Guerrero did not state in his affidavit that there was no copy of the July 7, 1998 order in the case folder. He merely stated that he did not see it when he prepared the motion to reset hearing. Thus, we cannot deduce from such ambivalent statement that there was no copy of the July 7, 1998 order in the case folder and that it was such lack of copy which prevented Atty. Guerrero from addressing the matter bearing on the failure to make a formal offer of its evidence when he prepared the motion to reset hearing. Second, even if we assume that what he meant by not "seeing" a copy of the July 7, 1998 order is that he found no copy at all in the case folder, we still cannot forgive his oversight. Ordinary prudence would have prompted him to inquire into the whereabouts of the July 7, 1998 order for it was the basis of his Urgent Motion to reset the hearing. Failure to make such inquiry is failure to exercise ordinary prudence. Third, in its motion for new trial petitioner alleged that the formal offer it prepared on April 6, 1998 was filed in a box which was stored along with cases already terminated. Petitioner went on to explain that ". . . (included) in the documents which were misfiled were the Order of the Court stating that petitioner was deemed to have waived its right to file a formal offer of evidence . . ." (pp. 25-26, Rollo ) The order referred to is the July 7, 1998 order where public respondent called the attention of petitioner to its lack of a formal offer of evidence. In effect, petitioner admitted that the April 6, 1998 formal offer and the July 7, 1998 order were found in the same box. The implications of this are two-fold: One, it is evidence that when petitioner received copy of the July 7, 1998 order, it knew where to locate the April 6, 1998 formal offer for it then filed the July 7, 1998 order along with said pleading. As of the time then that the July 7, 1998 order was received, the April 6, 1998 formal offer had not yet been "misfiled" for it could still be easily located. And two it is incredible that when petitioner stored the July 7, 1998 order along with the April 6, 1998 formal offer of evidence, it did not notice that the latter pleading had not yet been filed. These observations lead us to no other conclusion but that petitioner knew that its formal offer of evidence had not yet been filed, and that it had every opportunity and time to correct the omission. Its failure to file its formal offer before the March 24, 1999 decision was rendered was therefore due to a lack of ordinary prudence and diligence. Public respondent therefore correctly held that such oversight was inexcusable and did not justify admission of the evidence of petitioner in a new trial. Its March 24, 1999 decision dismissing the complaint must be upheld. WHEREFORE, under the premises, the petition is hereby DISMISSED. ADCIca SO ORDERED. Enriquez, Jr. and Roxas, JJ., concur.