MANILA: The Supreme Court has ordered a Manila court to revive the Bureau of Customs’ P10.1-million collection suit against Pilipinas Shell Petroleum Corp., in connection with the tax credit scam of the late 1990s.
In a 19-page decision dated Dec. 9, the SC Third Division reversed the Court of Appeals’ 2013 decision to affirm the Manila Regional Trial Court Branch 49’s grant of summary judgment in favor of Shell in Apr. 28, 2010.
Having reversed the CA decision, the high court remanded the case back to the Manila RTC “for the conduct of trial proceedings in Civil Case No. 02-103191 with utmost deliberate dispatch.”
The decision, penned by recently-retired Associate Justice Martin S. Villarama, Jr., stated the Manila RTC should have heard first the BoC’s allegations of fraud, instead of granting Shell’s motion for summary judgment that deemed resolved the question of the firm’s liability.
The civil suit concerns the BoC’s bid to collect P10,088,912.00 in customs duties and taxes. The BoC considered the amount unpaid because the four tax credit certificates (TCCs) used to settle it was invalidated in 1999 as fraudulently issued. The TCCs were issued to Shell in 1997 by Filipino Way Industries (FWI), the co-defendant not covered by the Apr. 28, 2010 summary judgment in favor of Shell.
The SC held the Manila RTC’s summary judgment was “not proper,” because Shell’s claim of good faith remains in dispute and should be threshed out in a full-blown trial.
Summary judgment is a device to avoid drawn-out litigation, but the high court said Shell could only avail of it if it showed there were no more issues of fact that need to be threshed out via presentation of evidence.
But since its claim of good faith is still in dispute, “proceedings for summary judgment cannot take the place of trial.”
The SC said the Manila RTC based its summary judgment on a misinterpretation of its March 2008 decision quoted as saying “there was no fraud as petitioner [Shell] claimed (and was presumed) to be in good faith [and] respondent does not dispute this.”
The high court said the RTC’s reliance on that statement was “misplaced and erroneous,” because it actually pertained to fraud in the computation of the importation duties-not the TCC transactions subject of the collection suit.
“It would be absurd to interpret such statement… as a judicial declaration of PSPC’s status as a transferee in good faith… when in the same decision we ordered the case remanded to the RTC for proceeding with the pre-trial where issues for trial still have to be determined by the parties,” it pointed out.
The SC also held that the Manila RTC was not barred by the doctrine ofstare decisis (the rule against attempts to relitigate the issue), disagreeing with the lower court’s judgment.
The RTC had cited the high court’s December 2007 decision in a separate case where it disallowed as ineffective the the post-audit cancellation of P285.77-million fraudulent TCCs also used by Shell.
The SC, however, noted it was based on evidence presented before the Court of Tax Appeals in a separate case where no proof was adduced to show Shell’s participation in the fraudulent transactions.
Because of this, it held that “there exists a genuine issue of fact and thatstare decisis finds no application in this case.”
Unlike in the CTA case, Shell has yet to establish or prove at the trial its standing as a transferee in good faith when it comes to the FWI’s TCCs subject of the RTC suit.
Saying the BoC should be “given the opportunity to substantiate its allegations of fraud,” the high court said whether the 2007 decision applies in this case “may be determined only after such trial.”
Associate Justices Presbitero J. Velasco, Jr., Diosdado M. Peralta, Lucas P. Bersamin, and Bienvenido L. Reyes concurred with Mr. Villarama’s ponencia.
Tax credits are granted to Bureau of Investment-registered entities representing tariff duties and internal revenue taxes paid on raw materials and supplies used for export products. In lieu of a cash refund, TCCs may be used to offset internal revenue tax liabilities.
The Department of Finance first discovered in July 1998 the anomalies in the issuance of TCCs. To facilitate the illicit issuance of TCCs, fraudulent or spurious documents were allegedly submitted to the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, established in 1992 to help expedite tax credit claims. This ended up defrauding the government of up to P2.5 billion in revenues.
Various DoF officials, oil firm executives, and textile company executives were eventually implicated in various plunder and graft cases, while the companies were tied up in tax cases with the Court of Tax Appeals.
FWI, the transferor of Shell’s TCCs in this case, was found to have claimed one of the largest amounts of allegedly fraudulent tax credits. The alleged scam also involved another oil giant, Petron Corp.
