SECOND DIVISION
[G.R. No. 202098. January 7, 2013.]
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. INTERNATIONAL PHARMACEUTICALS, INC., respondent.
NOTICE
Sirs/Mesdames:
Please take notice that the Court, Second Division, issued a Resolution dated 07 January 2013 which reads as follows: CTaIHE
G.R. No. 202098 (Commissioner of Internal Revenue v. International Pharmaceuticals, Inc.). — We resolve the Motion for Reconsideration 1 dated October 15, 2012 filed by the Commissioner of Internal Revenue (CIR) to set aside our Resolution 2 of September 3, 2012, denying its petition. The CIR's petition sought the reversal of the resolution 3 dated May 29, 2012 of the Court of Tax Appeals (CTA) en banc. We denied the petition for failure to show any reversible error in the assailed CTA en banc resolution to warrant the exercise of this Court's discretionary appellate jurisdiction.
In its motion for reconsideration, the CIR reiterates the grounds that it raised before the CTA First Division and the CTA en banc, as well as in its petition for review before us: (1) the inventory verification which the Bureau of Internal Revenue (BIR) conducted within the respondent International Pharmaceuticals, Inc.'s premises was valid, even if there had been no Letter of Authority or a Mission Order authorizing the revenue officers who conducted the inventory verification to do so and even if the respondent had not previously been informed of the intended stock taking; and (2) the sale of denatured alcohol to non-permitees is subject to excise tax. 4
We deny the motion for reconsideration.
The grounds raised in the motion for reconsideration had already been passed upon by the CTA First Division, which ruling we again here affirm.
On the procedural issues, Revenue Memorandum Order No. 3-2003 specifically provides that an inventory verification shall be authorized through a Mission Order (BIR Form 0422) and a letter to the subject taxpayer. The BIR did not serve the respondent a Mission Order or a letter of authority to conduct the inventory verification. Thus, the inventory verification and the assessment that resulted were void.
At best, what the CIR produced was an Inter-Office Memorandum that was not served on the respondent, authorizing the conduct of a physical count and the reconciliation of the respondent's inventory. Moreover, the revenue officers who took the inventory were not the persons authorized to conduct the inventory verification, as one of them had testified. These provide further reasons for nullifying the inventory verification.
Separately from these procedural defects, the CTA First Division had already resolved the substantive ground for cancelling the CIR's assessment. Section 134 of the National Internal Revenue Code grants the exemption when (1) the domestic alcohol is less than 180 degrees proof; and (2) when it is rendered unfit for oral intake. Both parties agree that the respondent had complied with these. According to the law, this exemption is withdrawn only if the denatured alcohol is later rendered fit for oral intake, in which case the person in possession of such alcohol becomes liable for the excise tax. As the CIR failed to even allege that the respondent's denatured alcohol had been rendered fit for oral intake by the respondent, no tax should then be assessed. The CIR had not controverted the respondent's claim that it had sold the denatured alcohol, which remained unfit for oral intake, for use as solvents and ingredients of cosmetic goods produced in small scale. In addition, had the buyer of these products converted the denatured alcohol to be fit for oral intake, the tax should be assessed against these buyers, not against the respondents. SaDICE
WHEREFORE, premises considered, we hereby DENY the motion for reconsideration for lack of merit.
SO ORDERED.
Very truly yours,
(SGD.) MA. LOURDES C. PERFECTODivision Clerk of Court
Footnotes
1. Rollo, pp. 122-139.
2. Id. at 120-121.
3. Id. at 25-28.
4. Id. at 124-137.