In some instances even the most seasoned lawyers commit mistakes. If procedural laws or rules on appeal are not strictly observed, the Supreme Court, to unclog its dockets, dismisses the case. The court rationalizes that appeal is not a matter of right but only a privilege. Lawyers must strictly follow the provisions of pertinent law on appeal or the rules of court, as the case maybe. Lawyers beware! 

Judicial Statemanship.

     In a case, the Supreme Court exercised judicial statesmanship and ignored the provisions of R.A. 9238 on appeal, under this law “a party affected by a resolution of a division of the CTA on motion for reconsideration or new trial, may file a petition for review with the CTA en banc.” This law took effect on April 23, 2004.

     Briefly the facts of the case follows:

     TFS, Incorporated is a domestic corporation engaged in pawnshop business. On January 25, 2002, the Commissioner of Internal Revenue (CIR) after complying with procedural requirements issued final assessment notice (FAN) to TFS for 1998 deficiency value added tax (VAT), expanded withholding tax (EWT) and compromise penalty in the amounts of P11,764,108.74, P183,898.02 and P25,000.00, respectively. TFS protested the FAN and due to the inaction of the CIR filed Petition for Review with the CTA on September 11, 2002 (CTA Case No. 6535).

     During the trial, petitioner offered to compromise and settle deficiency EWT assessment with CIR, hence only the issue of VAT on pawnshops remained to be resolved by the CTA.

     On April 29, 2004, the CTA rendered a decision upholding the assessment issued against TFS in the amount of P11,905,696.32, representing 1998 deficiency VAT, inclusive of 25% surcharge and 20% deficiency interest plus 20% delinquency interest from February 25, 2002 until full payment pursuant to Sections 248 and 249 (B) of NIRC. TFS moved for reconsideration but the motion was denied on July 20, 2004 (received by TFS on July 30, 2004).

     After moving for extension of time TFS eventually filed Petition for Review with the Court of Appeals (CA) on August 24, 2004, after moving for extension of time to appeal file same. On August 31, 2004, the CA dismissed the Petition for Review for lack of jurisdiction because the jurisdiction of the CA regarding appeals on tax cases was transferred to the CTA en banc upon the effectivity of RA 9282 on April 23, 2004.

     Realizing its mistake, TFS filed Petition for Review with the CTA en banc on September 16, 2004. CTA en banc readily dismissed the petition on November 18, 2004 for having been filed out of time. TFS filed motion for reconsideration but was denied in a resolution dated January 24, 2005.

     Hence, it filed Petition for Review with the Supreme Court raising the following issues:

“WHETHER THE HONORABLE COURT OF TAX APPEALS EN BANC SHOULD HAVE GIVEN DUE COURSE TO THE PETITION FOR REVIEW AND NOT STRICTLY APPLIED THE TECHNICAL RULES OF PROCEDURE TO THE DETRIMENT OF JUSTICE.

WHETHER OR NOT PETITIONER IS SUBJECT TO THE 10% VAT.”

     The Supreme Court, inspite of TFS’s procedural mistake gave due course to the petition and said:

“In the instance case, RA 9282 took effect on April 23, 2004, while petitioner filed its Petition for Review on Certiorari with the CA on August 24, 2004, or four months after the effectivity of the law. By then, petitioner’s counsel should have been aware of and familiar with the changes introduced by RA 9282. Thus, we find petitioner’s argument on the newness of RA 9282 a bit of a stretch.

Petitioner likewise cannot validly claim that its erroneous filing of the petition with the CA was justified by the absence of the CTA rules and regulations and the incomplete membership of the CTA En Banc as these did not defer the effectivity and implementation of RA 9282. In fact, under Section 2 of RA 9282, the presence of four justices already constitutes a quorum for En Banc sessions and the affirmative votes of four members of the CTA En Banc are sufficient to render judgment. Thus, to us, the petitioner’s excuse of “inadvertence or honest oversight of counsel” deserves scant consideration.

However, we will overlook this procedural lapse in the interest of substantial justice. Although a client is bound by the acts of his counsel, including the latter’s mistakes and negligence, a departure from this rule may thus be relaxed for persuasive reasons to relieve a litigant of an in justice not commensurate with his failure to comply with the prescribed procedure. Such is the situation in this case.”

     On whether TFS is subject to 10% VAT in 1998, the Supreme Court said the 10% VAT during the years 1996 to 2002 for non-bank financial intermediary was deferred by law hence TFS is not liable for VAT during those years.

     The Supreme Court further said:

"In fine, although strict compliance with the rules for perfecting an appeal is indispensable for the prevention of needless delays and for the orderly and expeditious dispatch of judicial business, strong compelling reasons such as serving the ends of justice and preventing a grave miscarriage may nevertheless warrant the suspension of the rules.  In the instant case, we are constrained to disregard procedural rules because we cannot in conscience allow the government to collect deficiency VAT from petitioner considering that the government has no right at all to collect or to receive the same.  Besides, dismissing this case on a mere technically would lead to the unjust enrichment of the government at the expense of petitioner, which we cannot permit.  Technicalities should never be used as a shield to perpetrate or commit an injustice."

COMMENT:

     There is no doubt that the Supreme Court exercised judicial statesmanship in this case.
     It is fervently hoped that the Supreme Court will do the same in similar cases.