Comissioner of Internal Revenue v. Pilipinas Shell Petroleum Corp.

NINTH (9th) DIVISION [CA-G.R. SP No. 55329. March 21, 2012.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . PILIPINAS SHELL PETROLEUM CORPORATION , respondent . [CA-G.R. SP No. 55330. March 21, 2012.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . PETRON CORPORATION , respondent . DECISION CRUZ, R.A. , J p : THE CASE Before this Court are consolidated Petitions for Review under Rule 43 of the Rules of Court, 1 assailing the July 23, 1999 Decisions and September 7, 1999 Resolutions of the Court of Tax Appeals ["CTA"] in CTA Case Nos. 5728 and 5657. In CTA Case No. 5728, the CTA ruled against petitioner, deemed its collection letter withdrawn, and enjoined it from further attempts to collect on the purported deficiency tax liabilities. The CTA agreed with the August 6, 1998 Board of Investments ["BOI"] Opinion, noting the BOI's sole authority to interpret the pertinent law and implementing rules. The CTA also found that petitioner's attempts to collect the supposed tax liabilities constituted a denial of due process. The CTA decided similarly in CTA Case No. 5657, canceling the disputed assessment and prohibiting petitioner from collecting on the supposed tax liabilities. The CTA likewise upheld the BOI's ratiocinations in its May 15, 1998 letter and also admonished petitioner for failing to follow the proper procedure for assessment and collection of deficiency taxes. THE ANTECEDENTS Both respondents are domestic corporations registered with the BOI under EO 226, or the Omnibus Investments Code of 1987. Both respondents applied Tax Credit Certificates ["TCCs"] toward the payment of their excise tax liabilities across several years. Although at first these TCCs were accepted, petitioner has since sought to invalidate the TCCs and the corresponding payments and to collect on the respondent's respective tax liabilities. CaEIST From 1992 to 1997, certain BOI-registered entities transferred TCCs to respondent Pilipinas Shell Petroleum Corporation ["PilShell"], the transfers having been approved by the Department of Finance's One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center ["DOF Center"]. This approval was evidenced by the issuance of Tax Debit Memoranda ["TDMs"] addressed to the Collection Program Division of the BIR National Office. PilShell then applied these TCCs toward certain of its specific tax liabilities. In accepting these TCCs as valid payment of PilShell's excise tax liabilities, the BIR issued its own TDMs, signed by the Assistant Commissioner for Collection Service of the BIR. However, Revenue District Officer Ruperto P. Somera of the BIR Revenue District of South Makati addressed an April 22, 1998 letter to PilShell, to wit: Our records show that for the years 1992, 1994-1997, you have been paying part of your excise tax liabilities in the form of Tax Credit Certificate (TCC) which bear the name of a company other than yours in violation of Rule IX of the Rules and Regulations issued by the Board of Investments to implement P.D. No. 1789 and B.P. 391. Accordingly, your payment through the aforesaid TCC's are considered invalid and therefore, you are hereby requested to pay the amount of P1,705,028,008.06, inclusive of delinquency for late payments as of even date, covering the years heretofore mentioned within thirty days (30) from receipt hereof, lest we will be constrained to resort to administrative and legal remedies available in accordance with law. 2 PilShell and petitioner would later agree in their Joint Stipulation of Facts before the CTA that this April 22, 1998 letter was a collection letter and not an assessment. 3 PilShell disputed the BIR's demand in a April 29, 1998 response letter. BIR Regional Director for Revenue Region No. 8 Antonio I. Ortega then refuted PilShell's contentions and reiterated the demand for payment of supposedly unpaid specific taxes in a June 16, 1998 letter. 4 On July 9, 1998, PilShell filed with petitioner a request for reconsideration/appeal of the June 16, 1998 letter. 5 The BOI also wrote petitioner on August 6, 1998 to confirm the validity of the transfers of the TCCs to PilShell, among other recipients. PilShell filed a supplement to its request for reconsideration/appeal on January 4, 1999. 6 Following petitioner's apparent inaction on the request for reconsideration/appeal, PilShell filed on February 2, 1999 a Petition for Review (With Motion to Suspend Collection of Specific Taxes and Surcharges and Interest Subject of this Petition) with the CTA. The Petition was docketed as C.T.A. Case No. 5728. 7 The CTA eventually promulgated a July 23, 1999 Decision, disposing of the case as follows: DcIHSa IN THE LIGHT OF ALL THE FOREGOING, the instant petition for review is GRANTED. The collection letter issued by the Respondent dated April 22, 1998 is considered withdrawn and he is ENJOINED from any attempts to collect from petitioner the specific tax, surcharge and interest subject of this petition. SO ORDERED. 8 Petitioner filed a Motion for Reconsideration, but the CTA denied this for lack of merit in its September 7, 1999 Resolution. Hence, the petition now before Us as CA-G.R. SP No. 55329. While this petition was pending, the DOF Center sent several letters to PilShell from August to October 1999, requiring the submission of various documents and information regarding the TCCs, purportedly in connection with an ongoing post-audit. 9 PilShell contested these requirements to no avail. The DOF Center soon canceled the first batch of TCCs transferred to PilShell and their corresponding assignments, as well as its TDM covering PilShell's use of the same TCCs, the latter allegedly having been fraudulently issued. These canceled TCCs are among those subject of this case. On November 15, 1999, the BIR assessed PilShell deficiency excise taxes, surcharges, and interest. When PilShell's protest was denied, it filed another petition for review before the CTA, docketed as CTA Case No. 6003. 10 On August 2, 2004, the CTA Division granted PilShell's petition for review. Petitioner's motion for reconsideration was denied in a decision dated January 20, 2005. Upon review, however, the CTA en banc reversed its Division and reiterated the demand for payment of PilShell's excise tax deficiencies, as well as surcharge and interest. 11 PilShell then filed a petition for review on certiorari with the Supreme Court ["the PilShell ruling"]. The Court held in favor of PilShell, disposing of the petition as follows: WHEREFORE, the petition is GRANTED. The April 28, 2006 CTA En Banc Decision in CTA EB No. 64 is hereby REVERSED and SET ASIDE, and the August 2, 2004 CTA Decision in CTA Case No. 6003 disallowing the assessment is hereby REINSTATED. The assessment of respondent for deficiency excise taxes against petitioner for 1992 and 1994 to 1997 inclusive contained in the April 22, 1998 letter of respondent is canceled and declared without force and effect for lack of legal basis. No pronouncement as to costs. SO ORDERED. 12 For its part, respondent Petron Corporation ["Petron"] also received TCCs from various BOI-registered export producers as payment for their purchases of bunker oil and other fuel products. The transfers of the TCCs in favor of Petron were approved by the DOF Center, which likewise issued corresponding TDMs. Petron, in turn, used the approved TCCs and applied them as payment for its excise tax liabilities for the years 1993 to 1997. The BIR Collection Program Division then approved this use of the TCCs by issuing TDMs, also signed by the Assistant Commissioner for Collection Service of the BIR. acHETI On April 24, 1998, however, Petron received a letter from the same Revenue District Officer Ruperto P. Somera, informing Petron that their payment made by virtue of the TCCs was invalid and that Petron therefore remained liable for a total of P1,107,542,547.08, Philippine currency, inclusive of surcharges and interests. 13 Petron submitted letters of protest dated May 14, May 21, and June 18, 1998. The BIR Region 8 Regional Director of Makati refuted Petron's arguments in a letter dated June 17, 1998. Perceiving no further action on its protest, Petron filed with the CTA on July 7, 1998 a Petition for Review with Motion for Temporary Restraining Order and after due notice and hearing for Issuance of Writ of Injunction. This was docketed as C.T.A. Case No. 5657. In due course, the parties submitted their Pre-Trial Briefs and arrived at a Joint Stipulation of Facts and Issues. They then opted to file their respective Memoranda, there being no other evidence for them to present. Thereafter, the CTA promulgated a Decision also on July 23, 1999, with the following dispositive portion: WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby GRANTED. The collection of the alleged delinquent excise taxes in the amount of P1,107,542,547.08 is hereby CANCELLED AND SET ASIDE for being contrary to law. Accordingly, Respondents are ENJOINED from collecting the said amount of taxes against the Petitioner. SO ORDERED. Petitioner's subsequent Motion for Reconsideration was denied for lack of merit in a Resolution dated September 7, 1999. This petition was then filed in October 1999 and docketed as CA-G.R. SP No. 55330. Upon petitioner's motion, Petron's pending petition was consolidated with that of PilShell. 14 In the meantime, the DOF Center also conducted a post-audit and consequently canceled some of the TCCs for allegedly having been fraudulently procured and transferred. The BIR then assessed Petron a total amount of P651,334,263.92, Philippine currency, in deficiency excise taxes, surcharges, and interests. 15 Petron again challenged this assessment. Upon the inaction of the BIR, Petron filed anew a Petition for Review with the CTA. On August 23, 2006, the CTA Second Division issued its Decision denying Petron's Petition for lack of merit. On November 23, 2006, the CTA likewise denied Petron's motion for reconsideration. The CTA en banc then affirmed its Second Division's Decision on October 30, 2007. 16 ACDIcS Petron then filed a petition for review on certiorari before the Supreme Court, docketed as G.R. No. 180385 ["the Petron ruling"]. On July 28, 2010, the Supreme Court granted Petron's petition in this wise: WHEREFORE, premises considered, the petition is GRANTED and the October 30, 2007 CTA En Banc Decision in CTA EB No. 238 is, accordingly, REVERSED and SET ASIDE. In lieu thereof, another is entered invalidating respondent's Assessment of petitioner's deficiency excise taxes for the years 1995 to 1997 for lack of legal bases. No pronouncement as to costs. SO ORDERED. 17 We proceed then to the Petitions before Us. THE ISSUES In CA-G.R. SP No. 55329, petitioner raised issues as follows: I WHETHER OR NOT THE TRANSFERS TO AND UTILIZATION BY (PILSHELL) OF THE TCCS IN QUESTION ARE VALID AND LEGAL; II WHETHER OR NOT THE BIR'S ACTUATIONS, AMONG THEM ITS FAILURE TO SERVE (PILSHELL) A PRE-ASSESSMENT AND/OR ASSESSMENT NOTICE, CONSTITUTE A DENIAL OF DUE PROCESS; III WHETHER OR NOT THE BIR IS ESTOPPED FROM NOW INVALIDATING TRANSFER AND UTILIZATION BY (PILSHELL) OF THE SUBJECT TCCS, WHICH TRANSFER AND UTILIZATION THE DOF AND THE BIR HAD ALL FOR SEVERAL YEARS PREVIOUSLY APPROVED; IV WHETHER OR NOT THE PERIOD TO COLLECT TAXES FOR TAX YEARS 1992, 1994 AND 1995 HAS ALREADY LAPSED; V WHETHER OR NOT (UNDER) THE CIRCUMSTANCES, THE BIR MAY IMPOSE SURCHARGE, INTEREST, AND COMPROMISE PENALTY; AND ASDCaI VI WHETHER OR NOT THE BIR'S ATTEMPTS TO NULLIFY THE TRANSFER AND USE OF THE TCCS IN QUESTION (ARE) TANTAMOUNT TO A REVERSAL OF A PREVIOUS RULING WHICH CANNOT BE GIVEN RETROACTIVE EFFECT. The controversy at bar surrounds the correct interpretation of Articles 21 and 39 (K) of the Omnibus Investments Code, the latter of which provides as follows: Tax Credit for Taxes and Duties on Raw Materials. Every registered enterprise shall enjoy a tax credit equivalent to the National Internal Revenue Taxes and Customs duties paid on the supplies, raw materials and semi-manufactured products used in the manufacture, processing or production of its export products and forming part thereof , exported directly or indirectly by the registered enterprise . . . (Emphasis added) Insisting that PilShell was not a qualified transferee of the TCCs, petitioner points to Rule VII, entitled "Transferability of Tax Credit Certificate", of the BOI Rules and Regulations implementing Article 21 of the Omnibus Investments Code, 18 particularly the following provision: Said certificate may be transferred in accordance with the memorandum of agreement between the Department of Finance and the Board of Investments dated October 5, 1982. . . . Petitioner then contends that the Memorandum of Agreement ["MOA"] referred to in the above-quoted portion was amended pertinently as follows, by virtue of another MOA dated August 29, 1989: Sec. 2. The first three (3) paragraphs of the guidelines contained in the aforementioned Memorandum of Agreement are hereby reworded to read as follows: xxx xxx xxx 2) The transferee should be a BOI-registered firm which is a domestic capital equipment supplier or a raw material and/or component supplier of the transferor . (Emphasis added). 19 Petitioner also quoted a May 15, 1998 BOI letter reading as follows: During the BOI Board of Governors' meetings of July 27, August 17 and 29, 1990, the following issues regarding transferability of tax credits were clarified and approved: ITScHa 1. Assignee should be a BOI-registered company and at the same time a domestic producer of the raw materials and components being supplied. However, its registration need not be the product that it supplies. The condition that the assignee should be a BOI-registered company shall only apply to tax credits issued after January 30, 1990. 2. Hydraulic oil and penetrating oil shall be classified as supplies in the same manner as diesel fuel oil and industrial gases have been classified and suppliers of the same should be considered as qualified transferees of tax credits. 20 Petitioner further cited BIR Ruling No. 181-94 dated December 14, 1994, which reads pertinently thus: The tax credit certificate issued by the Board of Investments is limited to one transfer by the grantee to its domestic suppliers of raw materials and/or components who are likewise BOI-registered; thus, while you can be the transferee and user of such certificate, you are not allowed to transfer the same to your own supplier, much less to Petron for your purchases of bunker fuel which is neither a raw material nor component of your finished product. Accordingly, your request for a ruling on the unrestricted transferability and use of BOI-issued Tax Credit Certificate and, in effect, to allow Petron to use the same as payment of its tax liability is hereby denied for lack of legal basis. 21 Petitioner concludes that PilShell does not qualify as lawful and valid transferee of the TCCs since the bunker fuel and other fuel products it supplied to its transferors do not constitute either domestic capital equipment or a "raw material and/or component" of the transferors' finished products. 22 Petitioner also takes exception to the CTA's ruling that its actuations violated PilShell's right to due process. Petitioner claims that pre-assessment and assessment notices were not required and that those requirements pertain only to findings of deficiency taxes made upon audit and investigation. By contrast, the deficiency tax liabilities it assessed against PilShell in the instant case were purportedly based on the latter's own Excise Tax Return, "wherein the payments made therein were considered by the respondent (PilShell) null and void". 23 Petitioner also pointed out, as the record reflects, that PilShell has nevertheless been accorded, and availed of, ample opportunity to dispute the assessment in question and this goes against any finding of denial of due process. 24 PilShell meanwhile echoes the ruling of the CTA, affirming the following interpretation by the BOI: HCEaDI The Board has ruled in its meetings of July 27, August 17 and 29, 1990 that hydraulic oil and industrial gases have been classified as supplies in the same manner as diesel fuel oil and industrial gases have been classified and suppliers of the same should be considered as qualified transferees of tax credits. From the ruling, it can be deduced that the bunker fuel purchased from the oil companies are considered as supplies, therefore, a component of production of the final product. Component materials need not strictly and integrally form part of the finished product. . . . In view of the policy of the Board that bunker fuel is a supply, therefore, a component part of the production of the final product, these supplier-companies are eligible as transferees of the TCC's. 25 PilShell disputes the application of BIR Ruling No. 181-94 as an unauthorized encroachment into the BOI's domain and, worse, a decision not on all fours with the facts of the situation, dealing as it did with TCCs based on Net Local Content/Net Value Earned and transferred twice. 26 Indeed, the BOI itself, in its August 6, 1998 letter, cautioned that BIR Ruling No. 181-94 "may not be in accordance with law, inasmuch as the TCC subject of transfer was a TCC on Net Local Content/Net Value Earned". 27 PilShell also observes that the 1989 amendment of the 1982 MOF-BOI MOA was neither explicitly incorporated into the implementing rules of the Omnibus Investment Code, nor filed with the University of the Philippines Law Center or published as mandated by the Administrative Code of 1987. Thus the 1989 amendment cannot be considered valid, much less effective or enforceable. 28 Further, PilShell asserts that its right to due process was violated by petitioner in failing to comply with Sec. 228 of the National Internal Revenue Code ["NIRC"] and with its own Revenue Regulations No. 12-85, which prescribed the relevant procedure and even the form of a proposed assessment. 29 PilShell contests petitioner's ratiocination that PilShell was nevertheless accorded due process through the judicial action the latter initiated. PilShell points out that this judicial action was in fact the only remaining resort left to it, as petitioner precisely left no room for dispute in its collection and demand letters. 30 Finally, PilShell claimed that petitioner's right to collect the purported tax liabilities for the years 1992 and 1994 to 1995 had already lapsed, per Sections 203 and 222 of the NIRC; 31 that under the circumstances, estoppel operated against petitioner's unlawful attempts to collect on the supposed taxes, the transfer and use of the TCCs already having been approved at the time by the relevant authorities and PilShell having relied in good faith upon such approval; and that, considering all the foregoing, petitioner had no legal basis upon which to assess and collect surcharges and interest. 32 IcESDA Meanwhile, in CA-G.R. SP No. 55330, petitioner proposed the following issues for resolution: I WHETHER (PETRON'S) PAYMENT OF ITS EXCISE TAX LIABILITIES FOR THE YEARS 1993 TO 1997 THRU THE USE OF THE (TCCs) ASSIGNED TO IT BY THE EXPORT PRODUCERS IN PAYMENT OF BUNKER OIL AND FUEL PRODUCTS SUPPLIED TO THEM IS VALID; II WHETHER THE BUNKER OIL AND OTHER FUEL PRODUCTS SUPPLIED BY (PETRON) TO THE EXPORT PRODUCERS CONSTITUTE "SUPPLIES" UNDER ART. 21 OF THE OMNIBUS INVESTMENTS CODE AND RULE VII OF THE BOI RULES AND REGULATIONS . . . WHICH MAY BE PAID BY THE EXPORT PRODUCERS THRU ASSIGNMENT (OR) TRANSFER OF (TCCs) . . . III WHETHER (AN) ADVERSE RULING BY THE BIR INVALIDATING THE USE AND APPROVAL OF (TCCs) IN PAYMENT OF (PETRON'S) EXCISE TAX LIABILITIES CAN APPLY RETROACTIVELY TO NULLIFY THE PAYMENTS MADE BY (PETRON) FOR EXCISE TAX LIABILITIES IN THE YEARS 1993 TO 1997; IV WHETHER (PETRON) CAN BE HELD LIABLE FOR SURCHARGES, INTERESTS AND OTHER CHARGES AS A RESULT OF THE INVALIDATION OF THE USE AND APPROVAL OF (TCCs) AS PAYMENT FOR PETRON'S EXCISE TAX LIABILITIES FOR THE YEARS 1993 TO 1997 ASSUMING ARGUENDO THAT THE BIR RULING IS CORRECT; AND V WHETHER THE RIGHT OF THE GOVERNMENT TO COLLECT THE EXCISE TAX LIABILITIES OF (PETRON) HAS PRESCRIBED. Petitioner substantially reiterated the arguments it presented in CA-G.R. SP No. 55329. Petitioner again contended that Rule VII of the Omnibus Investments Code implementing rules was amended by virtue of the amendment of the 1982 MOF-BOI MOA, necessitating therefore that transferees of TCCs be suppliers to the transferor of domestic capital equipment or raw materials and/or components; and that BIR Ruling No. 181-94 and the 15 May 1998 BOI letter affirmed this requirement. 33 Petitioner further claimed that the prior approval and acceptance of the transfers and use of the TCCs could not estop it from collecting on Petron's alleged tax liabilities, being merely an erroneous application of the law and rules. 34 ADEacC In response, Petron cited Revenue Memorandum Order No. 20-91 and the same 15 May 1998 BOI letter, as well as BIR Ruling No. 061-94, to establish that it was a valid and lawful transferee and user of the TCCs, supplying as it did "supplies" to the transferors. 35 Petron alleged that petitioner's invalidation of its payments for excise taxes by means of the TCCs amounted to a ruling under Sec. 246 of the NIRC which could not lawfully be given retroactive effect, and infringed on the BOI's rightful domain which was interpretation of the Omnibus Investments Code. 36 Petron also contended that Article 39 (K) of the Code was to be liberally construed, in view of the manifest public policy in favor of giving incentives to export producers. 37 Petron further pleaded that collection of any supposedly outstanding tax liabilities had already prescribed under Section 203 of the NIRC, and invoked the exception to the rule of non-application of estoppel against the government, on grounds of justice, equity, and fair play. 38 For the same reasons, Petron disputed any imposition of surcharges, interests, or compromise penalties. 39 OUR RULING We deny the consolidated petitions. The transferee of the TCCs need only be a BOI-registered entity . Petitioner assails the validity of the transfer to and application by the respondent corporations of TCCs toward the payment of their respective excise tax liabilities. The heart of petitioner's argument is the supposed August 29, 1989 amendment of the October 5, 1982 MOA between the BOI and the then-Ministry of Finance, and also of Rule VII of the Rules and Regulations implementing the Omnibus Investments Code. This amendment purportedly required transferees of TCCs to be not only BOI-registered firms, but also suppliers of domestic capital equipment or of raw material and/or components to their transferors. Petitioner seeks to bolster its argument by citing a May 15, 1998 BOI letter 40 and BIR Ruling No. 181-94. 41 The Supreme Court already laid the matter to rest in the PilShell ruling and then affirmed itself in the Petron ruling, to wit: xxx xxx xxx As correctly protested by PSPC but which was completely ignored by the Center, PSPC is not required by law to be a capital equipment provider or a supplier of raw material and/or component supplier to the transferors. What the law requires is that the transferee be a BOI-registered company similar to the BOI-registered transferors. The IRR of EO 226, which incorporated the October 5, 1982 MOA between the MOF and BOI, pertinently provides for the guidelines concerning the transferability of TCCs . . . TCaEIc The above requirement has not been amended or repealed during the unfolding of the instant controversy. Thus, it is clear from the above proviso that it is only required that a TCC transferee be BOI-registered . . . . While the October 5, 1982 MOA appears to have been amended by the August 29, 1989 MOA between the DOF and BOI, such may not operate to prejudice transferees like PSPC. For one, the August 29, 1989 MOA remains only an internal agreement as it has neither been elevated to the level of nor incorporated as an amendment in the IRR of EO 226 . . . . For another, even if the August 29, 1989 MOA has indeed amended the IRR, which it has not, still, it is ineffective and cannot prejudice third parties for lack of publication as mandatorily required under Chapter 2 of Book VII, EO 292, otherwise known as the Administrative Code of 1987 . . . (Emphasis supplied). 42 We are thus constrained to rule that both respondent corporations herein were qualified transferees of the TCCs in question. Petitioner proposes no other ground for the invalidation of respondent corporations' TCCs and, consequently, their payments of their tax liabilities. We can only conclude, therefore, that the TCCs were validly transferred and used by respondents herein toward the payment of their tax liabilities, and that respondents are not liable for deficiency taxes, surcharges, or interests. This finding is consonant with the PilShell ruling, where PilShell was found to have duly settled its excise tax liabilities for the years 1992 and 1994 to 1997. 1 Similarly, the Court deemed Petron to have already settled its tax liabilities for 1995 to 1997. 43 Even assuming arguendo that petitioner's attempts to invalidate the transfer and use of the TCCs had sufficient legal basis, petitioner was already estopped from doing so. The cases at bar illustrate the exceptions to the general rule of non-estoppel against the government. The following seminal statement in the PilShell ruling is apt: While we agree with respondent that the State in the performance of governmental function is not estopped by the neglect or omission of its agents, and nowhere is this truer than in the field of taxation, yet this principle cannot be applied to work injustice against an innocent party. In the case at bar, PSPC's rights as an innocent transferee for value must be protected. . . . 44 DECcAS Concordantly, in the Petron ruling it was held: xxx xxx xxx Until the Center's cancellation of the TCCs assigned in its favor, Petron was, in fact, never questioned nor assessed for deficiency or delinquency in the payment of its excise taxes thru the use of the same TCCs. . . . Petron had every right to rely on the validity of the subject TCCs, the Center's approval of the deeds of assignment the grantees executed over the same and the BIR's acceptance of its use thereof in payment of its excise taxes. While the Government cannot, concededly, be estopped from collecting taxes by the mistake, negligence, or omission of its agents, the Court's ruling in the Pilipinas Shell case is to the effect that an assignee's status as a transferee in good faith and for value provides ample protection from the adverse findings subsequently made by the Center. . . . Sharing the same factual and legal milieu as the case at bench, more in point is the Pilipinas Shell case which ruled that the rights of a transferee in good faith cannot be prejudiced by the Center's turnaround from its previous approval of the assignments of the TCCs. 45 The fundamental considerations of justice and fairness thus estop petitioner from collecting on respondent corporations' purported deficiency tax liabilities. With this, We find no need to discuss the seeming retroactive effect of petitioner's attempted invalidation of the transfer and use of the subject TCCs. Petitioner's failure to abide by the prescribed procedure violated PilShell's right to due process . As against PilShell, however, petitioner further contests the CTA's finding that it deprived PilShell of due process by attempting to collect supposedly delinquent taxes and penalties without an assessment or pre-assessment notice. Petitioner's arguments must fail. The following disquisition in the PilShell ruling is in point: xxx xxx xxx (I)t would not be amiss to state that PSPC's rights to substantive and procedural due process have indeed been violated. The facts show that PSPC was not accorded due process before the assessment was levied on it. . . . What is applicable is RR 12-99, which superseded RR 12-85, pursuant to Sec. 244 in relation to Sec. 245 of the NIRC implementing Secs. 6, 7, 204, 228, 247, 248, and 249 on the assessment of national internal revenue taxes, fees, and charges. The procedures delineated in the said statutory provisos and RR 12-99 were not followed by respondent, depriving PSPC of due process in contesting the formal assessment levied against it. Respondent ignored RR 12-99 and did not issue PSPC a notice for informal conference and a preliminary assessment notice, as required. . . . TAIDHa PSPC was merely informed that it is liable for the amount of excise taxes it declared in its excise tax returns for 1992 and 1994 to 1997 covered by the subject TCCs via the formal letter of demand and assessment notice. . . . . . . While PSPC indeed protested the formal assessment, such does not denigrate the fact that it was deprived of statutory and procedural due process to contest the assessment before it was issued. 46 While the above-quoted portion contemplated the November 15, 1999 assessment, its conclusions apply with equal, if not greater, weight to the April 22, 1998 letter that precipitated this case. If the April 22, 1998 letter indeed was not an assessment and was instead a mere collection letter as the parties jointly stipulated, then petitioner all the more gravely violated PilShell's right to due process for attempting to collect on its supposed deficiency tax liabilities without complying with the procedure provided by the law and the rules. The rule enshrined in our Constitution that no person shall be deprived of property without due process of law is no idle prohibition. For this reason, the NIRC sets forth a clear and unambiguous procedure for assessment and collection. The requirements thus laid down are substantive, not merely formal. Failure to abide by these prescriptions renders an assessment null and void. 47 In keeping with the same fundamental right to due process, the law provides prescription periods for the assessment and collection of taxes. These periods must be strictly respected lest the State run rampant over the rights of the individual taxpayer. 48 "Even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure." 49 Not for nothing is the power to tax also sometimes called the power to destroy. 50 Taxes may well be the lifeblood of the government, but We remind petitioner that their assessment and collection "should be made in accordance with law as any arbitrariness will negate the very reason for government itself." 51 WHEREFORE , the consolidated petitions before us are both DISMISSED . SO ORDERED . Asuncion-Vicente and Villamor, JJ., concur. Footnotes 1. Filed on October 13, 1999. 2. CA-G.R. SP No. 55329, Rollo , 71. 3. Id. at 20. 4. Ibid. Id. at 45, 91. 5. Id. at 92-94. 6. Id. at 21. 7. Id. at 43-116. 8. Id. at 39. 9. Pilipinas Shell Petroleum v. CIR , G.R. No. 172598, December 21, 2007, 541 SCRA 316. 10. Ibid. 11. Ibid. 12. Ibid. 13. CA-G.R. SP No. 55330, Rollo , 90. 14. Id. at 189, 193. 15. Petron v. CIR , G.R. No. 180385, July 28, 2010, 626 SCRA 100. 16. Ibid. 17. Ibid. 18. CA-G.R. SP No. 55329, Rollo , 8, 199. 19. Id. at 8-9, 200, 201. 20. Id. at 8-9, 200. 21. Id. at 11-12, 202-203. 22. Id. at 10-12, 201-202. 23. Id. at 13, 204-205. 24. Id. at 13-14, 205. 25. Id. at 144-145, 285-286. 26. Id. at 146, 286-288. 27. Id. at 147, 167-170, 287-291. 28. Id. at 149-150. See Exec. Order No. 292, Secs. 3-5. 29. Id. at 150-154, 291-295. 30. Id. at 155-157, 295-296. 31. Id. at 157-158, 296-298. 32. Id. at 159-161, 298-304. 33. CA-G.R. SP No. 55330, Rollo , 7-12. 34. Id. at 13. 35. Id. at 166-167, 169-173, 174-175. 36. Id. at 167-172. 37. Id. at 173-175. 38. Id. at 175-181. 39. Id. at 181-182. 40. Id. at 9, 200. 41. Id. at 11, 202. 42. Supra note 4 at 344-345. Cited with approval, Supra note 10 at 117-118. 1. Supra note 4. 43. Supra note 10. 44. Supra note 4 at 356. 45. Supra note 10 at 120-121. 46. Supra note 4 at 358-360. 47. See CIR v. Metro Star Superama , G.R. No. 185371, December 08, 2010. 48. See Republic v. Ablaza , No. L-14519, July 26, 1960, 108 Phil. 1105. 49. CIR v. Algue , No. L-28896, February 17, 1988, 158 SCRA 9, 17. 50. See Roxas v. Court of Tax Appeals , G.R. No. L-25043, April 26, 1968, 23 SCRA 276. 51. Marcos v. Court of Appeals , G.R. No. 120880, June 5, 1997, 273 SCRA 47, 57.