FACTS:

The case involves a petition for certiorari seeking to nullify and set aside the resolution of the Sandiganbayan (SB) in Criminal Case No. 20685, which acquitted the accused. The facts are as follows: An investigation was conducted by the Bureau of Internal Revenue (BIR) on the tax liabilities of San Miguel Corporation (SMC) for the period from January 1, 1985, to March 31, 1986. The investigation found that SMC had a deficiency in specific and ad valorem taxes amounting to P342,616,217.88. SMC protested the assessment, claiming that the specific tax deficiency was already paid when the BIR approved the application of its excess ad valorem payments to the specific tax balance. The protest was denied, and the assessment was reduced to P302,516,048.93. Various BIR officials had differing legal opinions on the issue. SMC made an offer of compromise settlement amounting to P10,000,000.00, which was accepted. The SB initially convicted the accused, Commissioner Bienvenido A. Tan Jr., for violation of the Anti-Graft and Corrupt Practices Act. However, the SB later reversed its decision and acquitted the accused.

The case involves the acquittal of the accused, who was a government official, on charges of violation of the Anti-Graft and Corrupt Practices Act (RA 3019) for allegedly approving the compromise of San Miguel Corporation's (SMC) tax liability. The Sandiganbayan (SB), in acquitting the accused, gave several reasons for its decision.

It was argued by the accused that the assessment contained in SMC's letter dated October 8, 1987, was not final and executory, which was supported by a meeting between the Commissioner and SMC's representatives on October 27, 1987, where the assessment was referred for further review and study by the Commissioner's subordinates.

The prosecution, on the other hand, asserted that the assessment in SMC's letter was indeed final and executory and that there was no request for reconsideration from SMC. They also argued that SMC's total tax liability has not been settled.

The SB also considered the fact that the accused approved SMC's application of its excess ad valorem deposit to complete the payment of its specific tax deficiency, despite the prosecution's objection to the inclusion of the water component of beer in the assessment.

Furthermore, the SB held that the abatement of SMC's ad valorem taxes is proper because the tax base should not include the ad valorem tax itself and the price differential. They relied on Executive Order No. 273 and the BIR's practice and policy not to impose a tax on a tax.

The SB also found no reason to conclude that the accused acted contrary to law or with any improper motive in entering into a compromise regarding SMC's tax liability. They declared that the compromise did not result in any injury to the government.

Hence, the petitioner filed a petition questioning the SB's decision, raising various issues for consideration by the higher court.

ISSUES:

1. Viability of SMC's Motion for Reconsideration

2. • Whether the "Motion for Reconsideration" filed by SMC was properly ruled upon by the private respondent
3. • Whether the October 8, 1987 letter constituted a final assessment

4. Whether there was legal impediment to the referral of the protest and the subsequent action taken by the subordinates of the Commissioner of Internal Revenue.

5. Whether the approval of the application of excess ad valorem tax deposits to the specific tax deficiency was correct.

6. Whether the acceptance of the compromise offer of P10 million was proper.

7. Whether the ad valorem tax on fermented liquors should be based on the price at the brewery or the price charged to the consumer.

8. Whether the ad valorem tax should be deducted from the tax base for purposes of computing the tax.

9. Whether the ad valorem tax should be excluded from the tax base.

10. Whether the offer of abatement or cancellation of the tax liability is valid.

11. Whether there was a violation of Section 3(e) of RA 3019.

RULING:

1. The Court ruled that the Petition has no merit.

2. • The October 8, 1987 letter did not constitute a final assessment as the phrase "finally decided" referred to the reduction of the assessment, not the total amount of deficiency taxes.
3. • The finality of the assessment was suspended by the handwritten note of the private respondent extending the tender of payment and referral of the assessment to the BIR's Legal Service.
4. • SMC's timely request for reinvestigation was a proper administrative protest, done within 30 days from receipt of the assessment, which prevented the assessment from becoming final.
5. • The request for reinvestigation had the effect of suspending the 30-day period for appeal.
6. • No other decision or action was made by the BIR after SMC's request for reinvestigation, which prevented any appeal to the Tax Court.
7. • The Tax Court exercises exclusive appellate jurisdiction to review decisions involving disputed assessments arising under the NIRC.

8. There was no legal impediment to the referral of the protest and the subsequent action taken by the subordinates of the Commissioner of Internal Revenue. The assessment was not yet final, executory, or demandable, therefore no grave abuse of discretion can be attributed to the Senate Blue Ribbon Committee for upholding the reinvestigation upon the request of the taxpayer.

9. The approval of the application of excess ad valorem tax deposits to the specific tax deficiency was correct. The ad valorem taxes and specific taxes are both excise taxes on alcohol products and the payment by installment of the specific tax deficiency, in addition to the application of excess and unused ad valorem tax deposits, covered the total net specific tax shortfall of the taxpayer. The officials of the Bureau of Internal Revenue committed an oversight and error in failing to credit the amount of deposits to the specific tax deficiency. The abatement or cancellation of the specific taxes after the application of the deposits was proper.

10. The acceptance of the compromise offer of P10 million was not gravely abused. The taxpayer deducted the price differential and ad valorem tax from the brewer's gross selling price, which was not allowed by the BIR, thus increasing the ad valorem tax liabilities of the taxpayer. However, the changes made in the NIRC of 1977 allowed the deduction of both the price differential and ad valorem tax from the brewer's gross selling price. Therefore, the acceptance of the compromise offer was proper.

11. The ad valorem tax on fermented liquors should be based on the price at the brewery. The intent of the law is that excise taxes are to be paid before the removal of the products, regardless of their use. The law does not impose taxes on the sale of the property, but on the property itself. Therefore, the tax base for computing the ad valorem tax should be the price charged at the brewery prior to the removal of the fermented liquor.

12. The ad valorem tax should be deducted from the tax base for purposes of computing the tax. Imposing the tax on top of the ad valorem tax would result in tax pyramiding, which has no legal basis. It would also lead to an endless cycle of computation and make it impossible to determine the correct amount of tax to be charged. Therefore, the ad valorem tax should be excluded from the tax base.

13. The ad valorem tax should be excluded from the tax base. The method used by the BIR, deducting the ad valorem tax from the tax base, is the correct method. The taxpayer failed to prove that the ad valorem tax should be included in the tax base.

14. The offer of abatement or cancellation of the tax liability is valid. The BIR has the power to abate or cancel a tax liability if the assessment is excessive or erroneous. The taxpayer is not required to make mutual concessions. In this case, the offer of abatement is reasonable.

15. There was no violation of section 3(e) of RA 3019. The Sandiganbayan did not commit grave abuse of discretion in acquitting the accused. Acquittal cannot be reopened unless there was grave abuse of discretion or denial of due process. The alleged errors in judgment are not reviewable by certiorari.

PRINCIPLES:

• Section 229 of the NIRC provides for the protesting of assessments, allowing taxpayers to file a request for reconsideration or reinvestigation within a specified period.

• The decision made by the Commissioner of Internal Revenue on the taxpayer's request for reconsideration or reinvestigation constitutes the decision that starts the 30-day period for appeal.

• The Tax Court exercises exclusive appellate jurisdiction to review decisions involving disputed assessments arising under the NIRC.

• Assessment is not final, executory, or demandable until it is referred to the Commissioner of Internal Revenue and a decision is made within the 180-day period. (First Issue)

• The application of excess ad valorem tax deposits to specific tax deficiencies is allowed. (Second Issue)

• Changes in tax laws may affect the deduction of taxes from the tax base. (Third Issue)

• Excise taxes are taxes on property, not on the sale of the property.

• Tax pyramiding, or imposing a tax on top of another tax, has no legal basis.

• Tax pyramiding is rejected by the Supreme Court, legislature, and tax authorities. The law is intended to avoid a tax imposed upon another tax.

• The BIR has the power to abate or cancel a tax liability if the assessment is excessive or erroneous.

• A judgment of acquittal cannot be reopened unless there was grave abuse of discretion or denial of due process.

• No person shall be twice put in jeopardy of punishment for the same offense, as guaranteed by the Constitution.

• The double jeopardy principle does not protect the accused if the court gravely abused its discretion in rendering the judgment of acquittal.

• The prosecution has the burden to show grave abuse of discretion equivalent to lack or excess of jurisdiction.

• In assessing whether an action was capricious or arbitrary, the court reviews the judgment and considers the relevant facts and laws.

• The purpose of tax assessment is to collect only what is legally and justly due the government, not to overburden or harass taxpayers.