CIR Vs First Express - Case Digest

Submission of Relevant Documents/ 60-day period subscription but affirmed the VAT deficiency
assessment except the imposition of compromise

G.R. Nos. 172045-46 June 16, 2009 penalty in the absence of showing that petitioner
consented thereto and ordered its payment.
COMMISSIONER OF INTERNAL
REVENUE, Petitioner, On Petition for Review, CTA En Banc
vs. promulgated a Decision affirming respondent’s
FIRST EXPRESS PAWNSHOP COMPANY,
liability to pay the VAT and ordering it to pay
INC., Respondent.
DST on its pawnshop tickets. However, the CTA
Facts: En Banc found that respondent’s deposit on
subscription was not subject to DST.
Petitioner issued assessment notices against First
Express Pawnshop Company, Inc. for alleged Aggrieved by the CTA En Banc’s Decision which
deficiency IT, VAT, DST on deposit on ruled that respondent’s deposit on subscription
subscription and DST on pawn tickets. FEPC was not subject to DST, petitioner elevated the
received the assessment notices and consequently case before the Supreme Court where it
filed its written protest on the above assessments. contended that CTA erred in disregarding the
Since petitioner did not act on the protest during rule on the finality of assessments prescribed
the 180-day period, respondent filed a petition under Section 228 of the Tax Code. It averred
before the CTA. among others, that respondent’s failure to submit
supporting documents within 60 days from the
FEPC contended that petitioner did not consider filing of its protest as required under Section 228
the supporting documents on the interest of the Tax Code caused the assessment of
expenses and donations which resulted in the ₱12,328.45 for deposit on subscription to become
deficiency income tax. It maintained that final and unassailable.
pawnshops are not lending investors whose
services are subject to VAT, hence it was not Issue: WON the alleged failure of FEPC to
liable for deficiency VAT. It also alleged that no submit supporting documents within 60 days
deficiency DST was due because Section 180 of from the filing of its protest render the
the National Internal Revenue Code (Tax Code) assessment final and unappealable.
does not cover any document or transaction Ruling:
which relates to respondent. Respondent also
argued that the issuance of a pawn ticket did not No. The Court ruled that respondent cannot be
constitute a pledge under Section 195 of the Tax said to have failed in submitting the required
Code. documents within 60 days that would render the
assessment final because when respondent
On the other side, Petitioner alleged that the submitted its protest, respondent attached the GIS
assessment was valid and correct and the and Balance Sheet.
taxpayer had the burden of proof to impugn its
validity or correctness. Petitioner maintained that As part of ensuring due process is afforded to the
respondent is subject to 10% VAT based on its taxpayer, Section 228 of the Tax Code provides
gross receipts and that pawnshop tickets are the remedy to dispute a tax assessment within a
subject to DST. certain period of time. He is given opportunity to
protest the assessment administratively by filing
On 1 July 2003, respondent paid ₱27,744.88 as a request for reconsideration or reinvestigation
deficiency income tax inclusive of interest. within thirty (30) days from receipt of the
After trial on the merits, the CTA First Division assessment in such form and manner as may be
cancelled the assessments for deficiency DST on prescribed by implementing rules and
both pawnshop tickets and deposits on regulations. Within sixty (60) days from filing of
the protest, all relevant supporting documents
shall have been submitted; otherwise, the
assessment shall become final.
If the protest is denied in whole or in part, or is

not acted upon within one hundred eighty (180)
days from submission of documents, the taxpayer
adversely affected by the decision or inaction may
appeal to the Court of Tax Appeals within thirty
(30) days from receipt of the said decision, or
from the lapse of the one hundred eighty (180)-
day period; otherwise, the decision shall become
final, executory and demandable.
In this case, respondent received the tax

assessment on 3 January 2002 and timely
submitted its protest and attached the GIS and
Balance Sheet as of 31 December 1998. Within 60
days from the filing of protest or until 2 April
2002, respondent should submit relevant
supporting documents. Respondent, having
submitted the supporting documents together
with its protest, did not present additional
documents anymore.
Petitioner subsequently requested respondent to

present proof of payment of DST on subscription.
Respondent replied that it could not produce any
proof of DST payment because it was not
required to pay DST under the law considering
that the deposit on subscription was an advance
made by its stockholders for future subscription,
and no stock certificates were issued.
Above-considered, the Court ruled that it cannot

be said that respondent failed to submit relevant
supporting documents and has complied with the
requisites in disputing an assessment pursuant to
Section 228 of the Tax Code. Hence, the tax
assessment cannot be considered as final,
executory and demandable. Further, respondent’s
deposit on subscription is not subject to the
payment of DST. Consequently, respondent is not
liable to pay the deficiency DST of ₱12,328.45.

CIR Vs First Express - Case Digest

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Submission of Relevant Documents/ 60-day period subscription but affirmed the VAT deficiency

assessment except the imposition of compromise

If the protest is denied in whole or in part, or is

In this case, respondent received the tax

Petitioner subsequently requested respondent to

Above-considered, the Court ruled that it cannot

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