As to Exported Articles

TARIFF AND CUSTOMS LAWS

Certain articles like specific types of
wood, mineral plant, vegetable and animal
products are subject to tariff and premium
Substantive Aspect of Tariff and Customs Laws duties.

Meaning and Scope Note: Articles: When used with reference to

Section 3514 (TCC)
Provides that Tariff and Customs Laws
include not only the provisions of the code itself
and regulations pursuant thereto but all other
laws and regulation which are subject to
enforcement by the Bureau of Customs or
otherwise within its jurisdiction. It extend not
only to the provisions of the Tariff Customs
Code but to all other laws as well; like Central
Bank Circulars, the enforcement of which is
entrusted to the Bureau of Customs.
Nature of Customs Duties and Tariff
1. Custom duties:
Are duties which are one charged upon
commodities on their being imported
into or exported out of a country.
2. Tariff:
Means a book of rates, a table or
catalogue drawn usually in alphabetical
order containing the names of several
kinds of merchandise with the duties to
be paid for the same as settled or
agreed upon between several states
that holds commerce together.
importation or exportation includes goods,
wares and merchandise and, in general anything
that maybe made the subject of exportation
and importation.
Pertinent Case:
4 US dollars, having ceased to be legal
tender in the Philippines, fall within the
meaning of the term “merchandise” (Bastida vs.
Acting Commissioner of Customs, et al, L-24011,
Oct. 24, 1970)
Articles / Goods Covered under the Tariff and
Customs Code:
1. Articles subject to duty
General Rule: All articles when
imported from a foreign country
including those previously exported
from the Philippines one subject to
duty unless otherwise specifically
provided for in the Tariff and Customs
Code or other laws. (Sec. 100, TCS)
1. Prohibited Importations
Classifications:
A. Articles which are absolutely
prohibited:

1. weapons of war
Concept of Goods for Customs duty purposes:
2. gambling devices
As to Imported Articles:
3. narcotics or prohibited
drugs
All articles when imported from any
foreign country into the Philippines shall be
4. immoral, obscene or
subject to duty upon each importation even
insidious articles
thought previously exported from the
Philippines. Except as otherwise specifically
5. those prohibited under
provided for in the code or other laws:
special laws
 with agreement with
B. Articles Qualifiedly Prohibited: foreign countries;

Refers to those which maybe 3. Those given to

imported but subject to, and after international institutions,
compliance with, certain entitled to exemption by
conditions. agreement or special laws;
and
Pertinent Cases:
4. Those that maybe
1. Where such conditions as granted by the President
to warrant lawful importation upon NEDA’s
neither do nor exist, the legal recommendation.
effects of the importation of
qualifiedly prohibited articles Liability for Custom Duties
are the same as those of
absolutely prohibited General Rule: All importations /
articles. (Auyong Hian vs CTA, exportation of articles / goods are subject to
59 SCRA 110) customs duties.

2. Prohibited importations Exceptions:

one subject to forfeiture
whether the shipper and the 1. Exempt under the TCC.
consignee are one and the
same person. (UTE PATEROR 1. Exemption granted to government
vs. Bureau of Customs, 193 S agencies, instrumentalities with
132) existing contracts, commitment,
agreements or obligations with foreign
countries.
3. Conditionally-free
importations: 1. Exempt international organizations
pursuant to agreements or special laws;
These are articles which are
and
exempt from import duties
upon compliance with the
1. Exempt by the President upon
formalities prescribed with
recommendation of NEDA.
regulations promulgated by
the Commission of Customs
with the approval of the
Liability of Importer for Custom Duties:
Secretary of Finance. (Sec. 105,
TCC)
1. A personal debt which can be
discharged only by payment in full
This article includes:
thereof;
1. Those prohibited for in
Sec. 105 of the Tariff and 1. A lien upon the imported article while
Customs Code; they are in custody or subject to the
control of the government.
2. Those granted to
government agencies, Valuation of the Goods:
government-owned or
controlled corporations Invoice value of the goods plus:

1. freight
 It is the bringing out of goods from the
2. insurance Philippines territorial jurisdiction.

3. cost 3. Under Executive Order # 26, Series

of 1986, Export taxes, except on logs,
4. expenses, and have been suspended

5. other necessary expenses. Kinds of Custom Duties

Note: Imported goods must be entered into a 1. Regular / Ordinary Duties

custom house at their port of entry otherwise
they shall be considered as contraband and the
importer is liable for smuggling.
Import entry
It is a declaration in the Bureau of
Customs showing particulars of the imported
article that will enable the customs authorities
to determine the correct duties.
These are duties imposed on imported
articles that enter the country of the
Philippines in avoidance with the
schedules and classifications provided
under the Tariff and Customs Code.
Classification:
1. Advalorem Duty

1. When importation does begin? Duty based on the value of the

imported article.
Importation begins when the carrying
vessel or aircraft enters the jurisdiction 2. Specific Duty
of the Philippines with the intention to
unlade therein. Duty based on the dutiable weight
of goods number or measurement.
1. When is it terminated / ended?
1. Special Duties
Importation is deemed terminated
upon payment of duties, taxes and Imposed in addition to regular or
other charges due upon the articles pr ordinary duties principally in order to
secured to be paid at a port of entry protect local industries against unfair
and the legal permit for withdrawal competition from foreign
shall gave been granted or in case said manufacturers or procedures;
articles are free of duties, taxes and consumer against possible deceptions;
other charges, until they have legally and national interest.
left the jurisdiction of the customs (Sec.
1202, TCC) Classifications:

Note: All imported articles into the Philippines, 1. Dumping Duty

whether subject to duty or not, shall be entered
through a customs house at a port of entry. Imposed by the secretary of
Finance upon the
1. Port of Entry recommendation of the Tariff
Commission when:
Means a domestic open to both foreign
and continuous trade including airport a. The price of the imported
of entry. article is deliberately or
continually fixed at less than
2. Exportation the fair market value or cost
of production; and

b. Importation would cause or
likely cause and injury to local
industries engaged in the
manufacture or production of
the same or similar articles or
prevent their establishment.
Amount of special duty:
extent of the under pricing.
2. Countervailing duty
Special duty imposed on imported
articles which are granted any kind
or form of subsidy by the
government in the country or
origin or exportation, the
importation of which has caused
or threatens to cause material
injury to a domestic industry or
has materially relaided the growth
or, prevents the establishment of a
domestic industry. (RA #8751)
Requisites:
1. The levy of an excise tax or
inland tax or local goods of
the same or similar class as
the article imported or the
grant of subsidy to the foreign
exporter by his government;
and
2. The importation is likely to
insure materially established
local industries or prevent
their establishments.
Amount of special
duty: Equal to the bounty or
subsidy or subvention.
3. Marking Duty
Special duty of five percent (5%)
advalorem imposed or articles
properly marked, collected by the
commissioner, except when such
article is exported or destroyed
under the customs supervision and
prior to final liquidation of the
corresponding entry.
Purpose: To prevent possible
deception of the consumers.
4. Discriminatory/Retaliatory
duty
Imposed on imported goods
whenever it is found as a fact that
the country of origin discriminates
against the commerce of the
Philippines in such a manner as to
place the commerce of the
Philippines at a disadvantage
compared with the commerce of
any foreign country.
5. Duties imposed under the
Flexible Tariff Clause (Sec. 401,
TCC)
Import duties which are modified
by the President upon
investigation of the Tariff
Commissions and
recommendation of the National
Economic Development Authority
in the interest of national
economy, general welfare and
national security.
The President is given by the Tariff and Customs
Code ample powers to adjust tariff rates Sec.
401 of TCC; empowers the president to:
1. Increase, reduce, or remove existing
protective rates of import duty;
2. Establish import quota or to ban
imports of any commodity;
3. Impose and additional duty on all
imports not exceeding 10% advalorem
whenever necessary.
Limitations imposed regarding the Flexible
Tariff Clause:
 1. Conduct by the Tariff Commission of an
investigation in which a public hearing
shall be hold wherein interested
parties shall be afforded reasonable
opportunity to be present, produce
evidence and to be heard;
1. The commission shall also hear the
views and recommendations of any
government office, agency or
instrumentality concerned;
1. The commission shall submit their
findings and recommendations to the
NEDA within 30 days after the
termination of the public
hearings. The NEDA thereafter,
submits its recommendation to the
President.
Administrative Aspect of
Tariff and Customs Laws
Agencies directly concerned with Tariff
and Customs Administration:
TARIFF COMMISSION
Officials of the Tariff Commission are
the chairman and 2 member Commissioners, all
appointed by the President.
Functions:
4. All questions relative to the
arrangement of schedules and
classification of articles in several
sections of the tariff law;
5. Tariff relations between the
Philippines and the Foreign
countries, commercial treaties,
preferential provisions, economic
alliances, the effect of export
bounties and preferential
transportation rate;
6. Volume of importations
compared with domestic
production and consumption;
7. Conditions, causes and effects
relating to completion of foreign
industries with those of the
Philippines, including dumping and
cost of production;
8. In general, to investigate the
operation of customs and tariff
laws, including their relations to
the national revenues, their effect
upon the industries or labor of the
country and to submit reports
of its investigation;
9. Nature and composition and
the classification and heading
number for customs revenue and
other related purposes.

1. Investigative Powers: 1. Administrative Assistance to the

President and Congress
1. Administration and the fiscal
and industrial effect of the Tariff 1. Ascertain conversion costs and
and Customs laws of this country costs of production:
now in force or when hereafter be
enacted; a. In the principal growing,
producing or manufacturing:
2. Relations between the rates of
duty on raw materials and the 1. Centers in the
finished or partly finished Philippines whenever
products; possible;

3. Effects of ad valorem and 2. Centers in foreign

specific duties and of compound, countries; whenever
specific and ad valorem duties; necessary;
 1. Supervise and control all import and
b. Including effects of tariff export cargos for the protection of the
modifications or import government revenue.
restriction or prices.
1. Exclusive original jurisdiction over
2. Select and describe seizure and forfeiture cases under the
representative articles imported to tariff and customs laws.
the Philippines similar to or
comparable with those locally Other Powers:
produced
1. Supervision of collection districts and
3. Ascertain imposts costs of such
ports of entry, coast ruse trade, vessels
representative articles so selected.
an aircrafts used in foreign trade;
4. Ascertain the grower’s
producers or manufacturer’s
1. Ascertainment, collection and recovery
of import duty;
selling prices.

5. Submit annual reports of these

to the President of the Philippines,
copies of which shall be furnished
1. Warehousing of imported articles; and
to the NEDA, BSP, Dept. of Finance
and the Bureau of Investments. 1. Administrative proceedings like
search , seizure and arrest, including
BUREAU OF CUSTOMS forfeitures.

Composed of one chief and 2

assistant chiefs known as commissioner of Commissioner of Customs is vested
customs, appointed by the President with authority to:
respectively.
A. Assess
Functions of the Bureau of Customs (CASE)
B. Collect
1. Control smuggling and related frauds.
1. All lawful revenues from
1. Assessment and collection of Revenues imported articles;
from imported articles and all other
impositions under the tariff and 2. All other dues, fees, charges,
customs laws. fines and penalties.

1. Supervision and control over due

entrance and clearance of vessels and
aircraft engaged in foreign commerce.

1. Enforcement of Tariff and Custom

Code and related laws. Procedural Aspect of
the Tariff and Customs Laws
1. Supervision on control over the
handling of foreign mails arriving in the
Nature of Customs Protest; Seizures and
Philippines.
Forfeiture cases
 There are two kinds of proceedings in
the Bureau of Customs, these are:
1. Customs protest cases- deal safely with
liability for customs, duties, fees and
other charges.
1. Seizure and forfeiture cases- refer to
matters involving smuggling or the act
of any person who fraudulently
imports or brings into the Philippines,
or assists in so doing, any article
contrary to law, or shall receive,
conceal, buy, sell or in any manner
facilitate the importation, concealment,
or sale of such auricles after
importation, knowing the same to have
been imported contrary to law
smuggling includes the exportation act
of articles in a manner contrary to law.
(Sec. 3154, TCC).
Procedure in Custom Protest Cases
These are the steps:
1. The collector of customs shall cause
all the articles entering the jurisdiction
of his district and destined for
importation through his port to be
entered at the customs house. He shall
appraise and classify such articles, and
shall assess and collect the duties,
taxes and other charges thereon. He
shall also hold possession of all
imported articles upon which duties,
taxes, and other charges have not been
paid of secured to be paid.
2. The importer / owner makes the
payment after the final liquidation.
3. The importer / owner adversely
affected by the collector’s ruling may
file a written protest with the Collector
of custom at the time of payment or
within 15 days thereafter.
4. The Collector of Customs issues an
order for hearing within 15 days from
receipt of the protest and renders his
decision within 30 days from the
termination of hearing.
5. In case an adverse decision is
rendered within the 30-day period
from the termination, the
importer/owner may appeal to the
Commissioner of Customs within 15
days after notification of decision or
lapse of the 30-day period to decide.
The importer/ owner may give written
notice to the collector and one copy
furnished to the Commissioner of his
desire to have the matter reviewed by
the Commissioner. The Collector shall
forthwith transmit all the seconds of
the proceedings to the Commissioner.
6. In case an adverse decision is
rendered, the importer/ owner may
appeal to the Court of Tax Appeals
within 30 days from receipt of the
decision; and
7. In case an adverse decision is still
rendered, the importer/ owner may
appeal to the Court of Appeals and the
Supreme Court.
Automatic Review in Customs Proceedings
Whenever the decision of the
Collector is adverse to the Government,
said decision is automatically elevated to
the Commissioner for review, and if such
decision is affirmed by the commissioner,
the same shall be automatically elevated to
and finally received by the Secretary of
Finance.
Rationale: It is intended to protect
the interest of the Government in the
collection of taxes and custom duties in
seizures and protest cases. Moreover, a
favorable decision will no be appealed by
the taxpayer and certainly a collector will
not appeal his own decision (See Yaokasin
vs. Commissioner of Customs, et al. G.R. No.
84111; Dec. 22, 1989.)
Automatic Review Applies to:
1) Custom Protest Cases
2) Seizures and Forfeiture Cases

Custom Seizures and Forfeiture Cases
Basic Concepts:
a) Jurisdiction of Customs in Seizures
and Forfeiture
Related Provisions:
The territorial jurisdiction of the
Bureau of Customs embraces “all seas
within the jurisdiction of the
Philippines, and over all coasts, ports,
harbors, bays, rivers and inland waters
whether navigable or not from the
sea.” (Sec. 603, TCC)
Extra-Territorial jurisdiction
(Right of Hot Pursuit):
“Whether a vessel becomes a subject
to a seizure by reason of an act done in
the Philippine waters, in violation of
the Tariff and Customs Laws, a pursuit
of such vessel, begins with the
jurisdictional waters may contain
beyond the maritime zone, and the
vessel may be seized in the high seas.
(Sec. 603, TCC).
“Imported articles which Maybe the
subject to seizures for violation of the
Tariff and Customs laws maybe
pursued in their transportation in the
Philippines by land, water or air, and
such jurisdiction exerted over them at
any place therein as may be necessary
for the due enforcement of the law.
(Sec. 603, TCC)
Pertinent Case:
The Supreme Court upheld the seizure
and forfeiture as valid despite the fact
that the importation had not yet begun
and that the seizure was affected
outside the Philippine waters. The
Supreme Court held that the authority
of a nation within its own territory is
absolute and exclusive. The power to
secure itself from injury may certainly
be exercised beyond the limits of its
territory. (Qiluh Asaali, et al. vs.
Commissioner of Customs, L- 24170,
Feb. 28, 1969).
b) Place where Searchers and Seizures
may be conducted
1) Right of the Police \ officers to
Enter Enclosure
Any person exercising police
power conferred under such code
may at any time enter, pass
through, or search any land or
enclosure, or any warehouse,
store or other building, not being a
dwelling house.
A warehouse, store or
other building or enclosure used
for the keeping or storage of
article does not become a dwelling
house within the meaning hereof
merely by reason of the fact that a
person employed as a watchman
lives in the place, nor will the fact
that his family stays there with him
alter the case.
2) Search of Dwelling House
A Dwelling house may be
entered and searched only upon
warrant issued by a judged.
Note: Except in the case of the
search of a dwelling house,
persons exercising police authority
under the customs may effect
search and seizure without a
search warrant in the enforcement
of custom laws.
3) Right to search vessels or Aircraft
and Persons or Articles Conveyed
therein
It is lawful for any person
exercising police authority under
the TCC to go aboard any vessel or
 aircraft within the limits of any
Collection district and to inspect,
search and examine said vessel or
aircraft and any other trunk,
package, box as envelope on board,
and to search any person on board
the said vessel or aircraft if
underway, to use all necessary
force to compel compliance; and if
it shall appear that any breach or
violation of the customs and tariff
laws of the Philippines has been
committed, whereby or in
consequence of which such vessel
or aircraft, or the article, or any
part thereof on, on board of or
imported by such vessel or aircraft
is liable to forfeiture, to make
seizure of the same.
Note: 1) Such power shall extend
to the removal of any false bottom,
partition, bulkhead or other
obstruction. 2) No proceeding
herein shall give rise to any claim
fro the damage caused to the
article or vessel or
aircraft.
1) Right to Search Vehicles, Beast
and Persons
It shall also be lawful for a person
exercising authority to open and
examine any box, trunk, envelope
or other container, wherever
found when he has reasonable
cause to suspect the presence of
dutiable or prohibited article or
article introduced into the
Philippines contrary to law and
likewise to stop, search ad
examine any vehicle, beast or
person reasonably suspected of
holding or conveying such article.
2) Search of Persons Arriving from
Foreign Countries
All persons coming in the
Philippines from the foreign
countries shall be liable to
detention and search by the
Customs Authorities under such
regulations as may be prescribed
relative thereto. (Sec. 603, TCC)
Non-necessity of Search Warrant
General Rule: Persons exercising police
authority under the customs laws may effect
search and seizures without a search warrant in
the enforcement of customs laws. (See Sec.
2208, TCC)
Exception: In the case of a dwelling house
(Pacis etc. vs. Pamaran, March 15, 1974).
Reason: On grounds of practicality.
Pertinent Cases on Searches and Seizures
1) The legality of a search can be
contested only by the party whose
rights have been impaired thereby and
that the objection to an unlawful
search and seizure is purely personal
and cannot be availed of by third
parties. (Nasiad, et al. vs. CTA, Nov. 29,
1994)
2) Warrants of seizure and detention
issued by the Collector of C covering
the seizure of imported goods are not
general warrants issued in violation of
Section 3 (now section 4), rule 126 of
the Rules of Court. Upon effecting the
seizure of the goods, the Bureau of
Customs acquired exclusive jurisdiction
not only over the case but also over
the goods seized for the purpose of
enforcing the tariff and Customs laws.
(Chia vs. Acting Collector of Customs,
Sept. 26, 1989)
3) The proceedings upon search
warrants must be absolutely legal, “for
there is not a description of process
known to the law, the execution of
which is more distressing to the citizen.
Perhaps there is none which excites
such intense feeling in the
consequence of its humiliating and
degrading effect.” The warrants will
always be constured strictly without
 however, going the full length of
requiring technical accuracy. No
presumptions of regularity are to be
invoked in aid of process when an
officer undertakes to justify under it.
(Uy vs. BIR, Oct. 20, 2000)
Customs Forfeiture Actions
1. What kind of Actions are Customs
Forfeiture?
An action for the forfeiture of seized
goods in the Bureau of Customs is an
action in rem, or action taken against
the Imported goods themselves
independently arising from any criminal
action or action in personam that may
result as a consequence of a violation of
an existing law. Lack of knowledge by
the owner does not generally render
the vessel immune from forfeiture.
However, the forfeiture of a private
carrier used in the conveyance of
illegally imported or exported articles
requires knowledge on the part of the
carrier-owner or his agent of the
unlawful act. A prima facie presumption
shall exist against the vessel, vehicle or
aircraft under any of the following
circumstances:
1. If the conveyance has been
used for smuggling at least twice
before;
2. If the owner is not in the
business for which the conveyance
is generally used; and,
3. If the owner is not financially in
a position to own such
conveyance.
Pertinent Cases:
Acting Commissioner of Customs
vs. CTA
The dismissal of the criminal charge in
the Fiscal’s office against respondent
Andrulis does not constitute re judicata
in the forfeiture proceedings. Forfeiture
is in rem, whereas a criminal action is in
personam. Conviction in the criminal
action is not a bar to forfeiture. Results
of a criminal proceeding being
dependent on the evidence therein will
not necessarily influence judgment in
the forfeiture proceedings.
Llamado vs. Commissioner of Customs
123 SCRA 118
A Cessna plane carrying persons
engaged in the smuggling of untaxed
“blue seal” cigarettes, landed at an
airstrip in Alabat, Quezon Province. The
plane was also used to bring in “de gaza”
kerosene lanterns and kerosene used to
light the airstrip to facilitate the loading
of the cigarettes. The plane was subject
to forfeiture pursuant to Sec. 2530 (a) of
the Tariff and Customs Code. It is not
necessary that the vessel or aircraft
must carry the contraband. It is not
likewise essential that the vessel or
aircraft must come from a foreign
country.
Commissioner of Customs vs.
CTA and Jose Pascual
138 SCRA 581
The Supreme Court ruled that the
forfeiture of Pascual’s vessel used in
the illegal importation of untaxed
cigarettes is justified.
Forfeiture, according to the Citing the
case of Vierneya vs. Commissioner of
Customs (July 30, 1968), is in the
nature of proceedings in rem and is
directed against the res. The fact that
the owner of the vessel had no actual
knowledge that the vessel was illegally
used does not render the vessel
immune from forfeiture. This is so
because the forfeiture action is against
the vessel itself.

Note: The said vessel was duly
authorized to engage in coasturse
trade but has no certificate of public
convenience.
Transglobe International Inc.
vs. Court of Appeals
G.R. No. 126634,
January 25, 1999.
Forfeiture of seized goods in the
Bureau of Customs is a proceeding
against the goods and not against the
owner. It is the nature of a proceeding
in rem, i.e. directed against the res or
imported article and entails a
determination of the legality of their
importation. In this proceeding, it is in
legal contemplation the property itself
which commits the violation and is
treated as the offender, without
reference whatsoever to the character
or conduct of the owner.
1. Forfeiture Cases and the Doctrine
Primary Jurisdiction
The Doctrine of primary jurisdiction
provides that the Bureau of Customs
acquired exclusive jurisdiction over
imported goods for the purpose of the
enforcement of the Customs laws from
the moment the goods are actually in
its possession or control even if no
warrant of seizure or detention had
previously been issued by the collector
of the Customs. Primary jurisdiction is
vested in seizures and forfeiture
proceedings in the collector and the
Commissioner or the Customs to the
exclusion of the regular courts.
(Commissioner of Customs vs. Navarro,
L-33146, May 31, 1977)
Rationale of the doctrine: It is
anchored on the policy of placing no
necessary hindrance on the
Government’s drive not only to
prevent smuggling and other frauds
upon Customs but also to render
effective the collection of import and
export duties duet to the State. (Jao, et,
al. vs. Court of Appeals, et al. G.R. Nos.
104604 and 111223, Oct. 6, 1995).
Pertinent Cases:
1. Proceedings for the forfeiture
of goods illegally imported are civil
and administrative not criminal in
nature since they do not result in
the conviction of the wrongdoer
nor in the imposition upon him of
a penalty (Collector vs. Villaluz,
L-34038, June 18, 1976;
Commissioner vs. Navarro, supra;
Republic vs. Bocar, supra).
2. “Proof beyond reasonable
doubt” is not required to warrant
forfeiture (Feeder International vs.
CA, 197 SCRA 842).
3. The Collector of Customs, when
sitting in forfeiture proceedings,
constitutes a tribunal upon which
the law expressly confess
jurisdiction to hear and determine
all questions touching on the
forfeiture and further disposition
of the illegal imported mechanics
(Government of the P.I. vs. Gale,
24 Phil 95; Auyong Hian vs. CTA, 19
SCRA 10).
4. Jurisprudence is replete with
cases which have held that
regional trial courts are devoid of
any competence to pass upon the
validity of seizure and forfeiture
proceedings conducted in the
Bureau of Customs and to enjoin,
or otherwise interfere with these
proceedings. The Collector of
Customs sitting in the seizure and
forfeiture proceedings has
exclusive jurisdiction to hear and
determine all questions touching
on the seizure and forfeiture
proceedings of dutiable goods. The
regional trial courts are preclude
from assuming cognizance over
such even though petition for
 certiorari, prohibition, or
mandamus.
5. Even if a Customs seizure is
illegal, exclusive jurisdiction still
belongs to the Bureau of Customs
(Jao, et. al vs. CA, supra).
6. To seize or not to seize is
discretionary on Customs, so
mandamus does not lie. However,
in case of grave abuse by customs,
petitioner can file certiorari
proceedings (Provident Tree Farms,
Inc. vs. Batario, Jr. etc et. al G.R.
No. 92285, March 28, 1994).
1. Procedure Governing Seizure and
Forfeiture Cases
The steps are the following:
1. The imported articles are seized
and a warrant for the detention
of the property is issued by the
collector of Customs;
2. If the owner or importer desires
to secure the release of the
property for legitimate, the
Collector may surrender it upon
the filing of a sufficient
bond; provided that the articles
the importation of which is
prohibited by law shall not be
released under bond.
3. The Collector of Customs makes
a report of the seizure to the
seizure to the Commissioner on
Audits.
4. The Collector shall give the
owner or importer of property or
his agent a written notice of the
seizure and shall give him an
opportunity to be heard;
5. Notice to an unknown owner
shall be effected by posting for
fifteen days (15) days in the
public corridor of the
custom-house of the district in
which the seizures was made, and,
in the discretion of the
Commissioner by publication in a
newspaper or by other means a he
shall consider desirable;
6. The Collector of Customs
schedules the hearing and renders
his decision after the hearing is
conducted;
7. In case the decision of the
Collector of Customs is adverse to
the importer/ owner, within
fifteen (15) days after notification
in writing by the collector of his
action or decision the importer/
owner may give written notice to
the Collector and one copy
furnished to the Commissioner of
his desire to have the matter
reviewed by the Commissioner.
Thereupon, the collector shall
forthwith transmit all the records
of the proceeding to the
Commissioner;
8. In case the decision of the
collector of Customs is affirmed by
the Commissioner of Customs,
or in case of inaction on the part
of the Commissioner of Customs,
the importer/ owner may appeal
to the court of Appeals within 30
days from notice of the decision;
and
9. In case an adverse decision is
still rendered, the importer/
owner may appeal to the Court of
Appeals and the Supreme Court.
Note: If the Collector renders a
decision adverse to the
Government, such decision shall
automatically, be elevated to and
reviewed by the Commissioner;
and if the Collector’s decision is
affirmed by the Commissioner,
such decision shall be
automatically elevated to, and be
finally be reviewed by the
secretary of Finance.
 1) Redemption of forfeited
If within 30 days from receipt of property is unavailing of three (3)
the record of the case by the instances:
Commissioner or by the Secretary
of Finance, as the case may be, no a) when there is fraud,
decision is rendered by either of
them, the decision under review b) where the importation is
shall become final and executory. absolutely prohibited, or

Settlement of Seizures c) Where the release of the

Subject to the approval of the
commissioner of the district collector may while
the case is still pending except when there is
fraud:
a) Accept the settlement of any seizure
case- provided that the owner,
importer, exporter or consignee or his
agent shall offer to pay a fine; or
b) In case of forfeiture- the owner,
importer, exporter, consignee or his
shall offer to pay for the domestic
market value of the seized article.
property would be contrary to
law. (Transglobe International,
Inc. vs. C.A, supra)
2) The fraud contemplated by law
must be actual and not
constructive. It must
be intentional fraud, consisting of
deception willfully and deliberately
done or resorted to in order to
induce another to give up some
right. (Farolan vs. CTA and Bagong
Buhay Trading, 217 SCRA 298)

Note: The commissioner may accept

the settlement of any seizure case on
appeal in the same manner. Remission of Customs, Duties and Compromise

Effect of Settlement: The property The Collector of customs has

shall be forthwith released and all the the discretion
liabilities which may or might attack to
the property by virtue of the offense a) Remit the assessment and collection
which was the occasion of the seizure of customs duties, taxes and
and all the liability which might have other charges where the aggregate
been incurred under any cash deposit amount is less than ten (10) pesos; and
or bond given by the owner or agent in
respect to such property shall be b) He may dispense with the seizure of
deemed to be discharged. article of the less than ten ( 10) pesos
in value except:
Settlement of any seizure case shall not
be allowed:
1) in cases of prohibited
a. where the importation is importation; or,
absolutely prohibited or,
2) habitual or intentional violation
b. Where the release of the of tariff and customs laws.
property could be contrary to the
law. Subject to the approval of the
Secretary of Finance, the
Pertinent Cases: Commissioner of Customs may compromise
cases involving the imposition of fines,
surcharges and forfeitures unless otherwise
specified by law. 1. The penalty of forfeiture is imposed in
the cases enumerated in Section 2530
Administrative Penalties under the Tariff and of the Tariff and Customs Code.
Customs Code
The requisite for forfeiture are:
These include:
1. The wrongful making by the
a. Surcharges owner, importer, ex-porter or
consignee of any
b. Fines declaration or affidavit or the
wrongful making as delivery
c. Forfeitures
by the same persons of any
invoice, letter or paper
a. The code imposes surcharges for:
touching on the importation
or exportation of merchandise;
1. failure to pay liquidated
and
charges;

2. unauthorized withdrawal of 1. That such declaration,

imported articles from bonded affidavit, invoice, letter or
warehouses; paper I false.
3. failure to supply the consular or
invoice when acquired;

4. undervaluation,
misclassification or misdeclaration;
and,

5. failure or refusal to give Remedies under the

evidence or submit documents for Tariff and Customs Code
examination
A. Government Remedies:
b. A fine may be imposed in the
following case: a. Extrajudicial

1. Any dutiable article is found in 1. Enforcement or tax lien

the baggage of an arriving
passenger which is not included in A tax lien attaches on the
the baggage declaration; goods, regardless of the
ownership while still in the
2. breach of bond; custody or control of the
government
3. unlawful boarding as leaving of
vessel or aircraft; Proceeds of sale are applied to
the tax due. Any deficiency or
4. unloading of cargo before excess is for the account or
arrival at ports of destination, or at credit, respectively of the
improper time or place after taxpayer
arrival; and
This is availed of when the
5. failure to supply the requisite importation is neither nor
manifest. improperly made
 provision of this code:
and
2. Seizures
d. Any articles subject to
Generally applied when the a valid lien for customs
penalty is fine or forfeiture duties, taxes or other
which is imposed when the charges collectible by the
importation is unlawful Bureau of Customs, after
and it may be exercised even the expiration of the
where the articles are not or period allowed for the
no longer in Customs Custody, satisfaction of the same.
unless the importation is
merely attempted. Note: Goods in the collector’s
possession or of Customs
In the case of authorities pending payment of
attempted importation, customs duties are beyond the
administrative fine or reach of attachment.
forfeiture may be affected
only; b. Judicial Action

a. while the goods are The tax liability of the importer

still within the customs
jurisdiction, or
b. in the hands or under
the control of the
importer or person who is
aware thereof.
constitutes a personal debt to the
government, enforceable by action
(Sec. 1204, TCC)
This is availed of when the tax lien is
lost by the release of the goods.

3. Sale of Property B. Taxpayer’s Remedies

Property in the customs custody Administrative Recourse

shall be subject to sale under the
following conditions; Claim for refund—a written claim for
refund may be submitted by the
a. abandoned articles; importer:

b. articles entered under

warehousing entry 1. In abatement uses such as:
not withdrawn nor
the duties and taxes paid a. on missing packages;
thereon within the period
provided under Section b. deficiencies in the contents
1908, TCC; of packages or shortage
before arrival of the goods in
c. seized property, other the Philippines;
than contraband, after
liability to sale shall have c. articles lost or destroyed
been established by after such arrival,
proper administrative or
judicial proceedings in d. articles lost or destroyed
conformity with the
 e. dead or injured animals; d) other matters arising under
and the customs Law or other laws
administered by the
f. for manifest classical Revenue of Customs.
errors; (see section 1701-1708,
TCC) Remedies of the Government

2. Judicial relief Enumeration of the Remedies

In drawback cases where the Administrative

goods are re-exported
1. Distraint of Personal Property
a. Protest
2. Levy of Real Property
see the earlier discussions on
“Customs Protest Cases” 3. Tax Lien

b. In seizure cases 4. Compromise

see earlier discussion on 5. Forfeiture

the subject
6. Other Administrative Remedies
c.Settlement of case by the
payment of fine or Judicial
redemption of
forfeited property 7. Civil Action

see earlier discussions on the 8. Criminal Action

subject
Note: The owner or importer may
abandon either expressly or By
importation in favor of the
Government thus relieving himself
of the tax liability but not from the
possible criminal liability.
Distraint of Personal Property
Distraint- Seizure by the government
of personal property, tangible or intangible, to
enforce the payment of faces, to be followed by
its public sale, if the taxes are not voluntarily
paid.

The taxpayer may appeal to the a. Actual – There is taking of

Court of Appeals which has
exclusive jurisdiction to review
decisions of the Commissioner of
Custom in cases involving:
a) liability for customs duties,
fees or other money charges;
b) seizures, detention or
release of property affected;
possession of personal property out of
the taxpayer into that of the
government. In case of intangible
property. Taxpayer is also diverted of
the power of control over the property;
b. Constructive – The owner is merely
prohibited from disposing of his
personal property.

c) fines forfeitures or other Actual Distraint. Constructive Distraint

penalties imposed in relation May be made on the
Made on the property
thereto; and property of any
only of a delinquent
taxpayer whether
taxpayer.
delinquent or not
 Taxpayer is merely
There is actual taking
or possession of the
prohibited from 1. Disposition of proceeds of the sale.
disposing of his
property.
property.
Effected by having a Effected by requiring Amount
Who may effect distraint
list of the distraint the taxpayer to sign a Involved
property or by service receipt of the 1. commissioner or his In excess of
or warrant of distraint property or by leaving due authorized P1,000,000.00
or garnishment. a list of same representative P1,000,000.00
Such immediate step or less
An immediate step for
is not necessary; tax 1. RDO
collection of taxes
due may not be
where amount due is
definite or it is being
definite.
questioned. How Actual Distraint Effected

1. In case of Tangible Property:

Requisites:
1. Copy of an account of the
1. Taxpayer is delinquent in the payment property distrained, signed by
of tax. the officer, left either with the
owner or person from whom
1. Subsequent demand for its payment. property was taken, at the
dwelling or place of business
1. Taxpayer must fail to pay delinquent and with someone of suitable
tax at time required. age and discretion

1. Period with in to assess or collect has 1. Statement of the sum

not yet prescribed. In case of demanded.
constructive distraint, requisite no. 1 is
not essential (see Sec. 206 TC) 1. Time and place of sale.
When remedy not available: 1. In case of intangible property:
Where amount involved does not
1. Stocks and other securities
exceed P100 (Sec. 205 TC). In keeping with the
provision on the abatement of the collection of
Serving a copy of the warrant
tax as the cost of same might even be more
upon taxpayer and upon
than P100.
president, manager, treasurer
or other responsible officer of
Procedure:
the issuing corporation,
company or association.
1. Service of warrant of distraint upon
taxpayer or upon person in possession
1. Debts and credits
of taxpayer’s personal property.
1. Leaving a copy of the
1. Posting of notice is not less than two warrant with the person
places in the municipality or city and owing the debts or having
notice to the taxpayer specifying time in his possession such
and place of sale and the articles credits or his agent.
distrained.
2. Warrant shall be
1. Sale at public auction to highest bidder sufficient authority for
 such person to pay CIR his
credits or debts.
1. Bank Accounts – garnishment
1. Serve warrant upon
taxpayer and president,
manager, treasurer or
responsible officer of the
bank.
2. Bank shall turn over to
CIR so much of the bank
accounts as may be
sufficient.
How constructive Distraint Effected
1. Require taxpayer or person
possession to
a. Sign a receipt covering property
distrained
b. Obligate him to preserve the
same properties.
c. Prohibit him from disposing the
property from disposing the
property in any manner, with out
the authority of the CIR.
1. Where Taxpayer or person
possession refuses to sign:
a. Officer shall prepare list of the
property distrained.
b. In the presence of two
witnesses of sufficient age and
discretion, leave a copy in the
premises where property is
located.
Grounds of Constructive Distraint
1. Taxpayer is retiring from any business
subject to tax.
1. Taxpayer is intending to leave the
Philippines; or
1. To remove his property there from.
1. Taxpayer hides or conceals his
property.
1. Taxpayer acts tending to obstruct
collection proceedings.
Note:
1. Bank accounts may be distrained with
out violating the confidential nature of
bank accounts for no inquiry is
made. BIR simply seizes so much of
the deposit with out having to know
how much the deposits are or where
the money or any part of it came from.
1. If at any time prior to the
in consummation of the sale, all proper
charges are paid to the officer
conducting the same, the goods
distrained shall be restored to the
owner.
1. When the amount of the bid for the
property under distraint is not equal to
the amount of the tax or is very much
less than the actual market value of
articles, the CIR or his deputy may
purchase the distrained property on
behalf of the national government.
in
Levy of Real Property
Levy – Act of seizure of real property in
order to enforce the payment of taxes. The
property may be sold at public sale, if after
seizure; the taxes are not voluntarily paid. The
requisites are the same as that of distraint.
Procedure:
1. International Revenue officer shall
prepare a duly authenticated
certificate showing
1. Name of taxpayer
1. Amount of tax and
1. Penalty due.
 - enforceable through out the
Philippines
1. Officer shall write upon the certificate
a description of the property upon
which levy is made.
1. Service of written notice to:
a. The taxpayer, and
b. RD where property is
located.
1. Advertisement of the time and place of
sale.
1. Sale at public auction to highest bidder.
1. Disposition of proceeds of sale.
The excess shall be turned over to
owner.
Redemption of property sold or forfeited
1. Person entitled: Taxpayer or anyone
for him
1. Time to redeem: one year from date of
sale or forfeiture
- Begins from registration of the
deed of sale or declaration of
forfeiture.
- Cannot be extended by the
courts.
1. Possession pending redemption –
owner not deprived of possession
1. Price: Amount of taxes, penalties and
interest thereon from date of
delinquency to the date of sale
together with interest on said purchase
price at 15% per annum from date of
purchase to date of redemption.
Distraint and Levy compared
1. Both are summary remedies for
collection of taxes.
1. Both cannot be availed of where
amount involved is not more than
P100.
1. Distraint – personal property
Levy – real property
1. Distraint – forfeiture by government,
not provided
Levy – forfeiture by government
authorized where there is no bidder or
the highest bid is not sufficient to pay
the taxes, penalties and costs.
1. Distraint – Taxpayer no given the right
of redemption
Levy – Taxpayer can redeem properties
levied upon and sold/forfeited to the
government.
Note:
1. It is the duty of the Register of Deeds
concerned upon registration of the
declaration of forfeiture, to transfer
the title to the property with out of an
order from a competent court
2. The remedy of distraint or levy may be
repeated if necessary until the full
amount, including all expenses, is
collected.
Enforcement of Tax Lien
Tax Lien—a legal claim or charge on
property, either real or personal, established by
law as a security in default of the payment of
taxes.
1. Nature:
A lien in favor of the government of the
Philippines when a person liable to pay
a tax neglects or fails to do so upon
demand.\
 1. Duration:
Exists from time assessment is made by
the CIR until paid, with interests,
penalties and costs.
1. Extent:
Upon all property and rights to
property belonging to the taxpayer.
1. Effectivity against third persons:
Only when notice of such lien is filed by
the CIR in the Register of Deeds
concerned.
Extinguishment of Tax Lien
1. Payment or remission of the tax
1. Prescription of the right of the
government to assess or collect.
2. Failure to file notice of such lien in the
office of register of Deeds, purchases
or judgment creditor.
1. Destruction of the property subject to
the lien.
In case Nos. 1 and 2, there is no more
tax liability. Under nos. 3 and 4, the
taxpayer is still liable.
Enforcement of Tax Lien vs. Distraint
A tax lien is distinguished from
disttraint in that, in distraint the property seized
must be that of the taxpayer, although it need
not be the property in respect to the tax is
assessed. Tax lien is directed to the property
subject to the tax, regardless of its owner.
Note:
1. This is superior to judgment claim of
private individuals or parties
1. Attaches not only from time the
warrant was served but from the time
the tax was due and demandable.
Compromise
Compromise—a contract whereby the
parties, by reciprocal concessions, avoid
litigation or put an end to one already
commenced.
Requisites:
1. Taxpayer must have a tax liability.
1. There must be an offer by taxpayer or
CIR, of an amount to be paid by
taxpayer.
1. There must be acceptance of the offer
in settlement of the original claim.
When taxes may be compromised:
1. A reasonable doubt as to the validity if
the claim against the taxpayer exists;
1. The financial position of the taxpayer
demonstrates a clear inability to pay
the assessed tax.
1. Criminal violations, except:
a. Those already filed in court
b. Those involving fraud.
Limitations:
1. Minimum compromise rate:
1. 10% of the basic tax assessed
– in case of financial
incapacity.
1. 40% of basic tax assessed –
other cases.
1. Subject to approval of Evaluation Board
a. When basic tax involved
exceeds P1,000,000.00 or
 b. Where settlement offered 1. No bidder for the real
is less than the prescribed property exposed for sale.
minimum rates.
1. If highest bid is for an amount
Delegation of Power to Compromise insufficient to pay the taxes,
penalties and costs.
General Rule: The power to
compromise or abate shall not be delegated by - With in two days thereafter, a
the commissioner. return of the proceeding is duly
made.
Exception: The Regional Evaluation
Board may compromise the assessment issued
1. How enforced:
by the regional offices involving basic taxes of P
500 K or less. a. In case of personal
property – by seizure and sale
Remedy in case of failure to comply:
or destruction of the specific
forfeited property.
The CIR may either:
b. In case of real property –
1. enforce the compromise, or by a judgment of
condemnation and sale in a
1. Regard it as rescinded and insists upon legal action or proceeding,
the original demand. civil or criminal, as the case
may require.
Compromise Penalty

1. It is a certain amount of money which 1. When forfeited property to be

the taxpayer pays to compromise a tax destroyed or sold:
violation.
a. To be destroyed – by order
1. It is pain in lieu of a criminal of the CIR when the sale for
prosecution. consumption or use of the
following would be injurious
1. Since it is voluntary in character, the to the public health or
same may be collected only if the prejudicial to the enforcement
taxpayer is willing to pay them. of the law: (at least 20 days
after seizure)
Enforcement of forfeiture
1. distilled spirits
Forfeiture—implies a divestiture of
property with out compensation, in 2. liquors
consequence of a default or offense. It includes
the idea of not only losing but also having the 3. cigars
property transferred to another with out the
consent of the owner and wrongdoer. 4. cigarettes, and other
manufactured products of
1. Effect: Transfer the title to the tobacco
specific thing from the owner to the
government. 5. playing cards

6. All apparatus used in

1. When available:
or about the illicit
 production of such e. Effect of failure to redeem
articles. – forfeiture shall become
absolute.

b. To be sold or destroyed –
depends upon the discretion Note: The Register of Deeds is duty bound to
of CIR transfer the title of property forfeited to the
government with our necessity of an order from
1. All other articles a competent court.
subject to exercise tax,
(wine, automobile, Other Administrative Remedies
mineral products,
manufactured oils, 1. Requiring filing of bonds – in the
miscellaneous products, following instances:
non-essential items a
petroleum products) a. Estate and donor’s tax
manufactured or
removed in violation of b. Excise taxes
the Tax Code.
2. Dies for printing or c. Exporter’s bond
making IR stamps, labels
and tags, in imitation of d. Manufacturer’s and importer’s
or purport to be lawful bond
stamps, labels or tags.
2. Requiring proof of filing income tax
returns
1. Where to be sold:
Before a license to engage in trade,
a. Public sale: provided, business or occupation or to practice a
there is notice of not less than profession can be issued.
20 days.
3. Giving reward to informers – Sum
b. Private sale: provided, it is equivalent to 10% of revenues,
with the approval of the surcharges or fees recovered and/or
fine or penalty imposed and collected
Secretary of Finance.
or P1, 000,000.00 per case, whichever
is lower.
1. Right of Redemption:
4. Imposition of surcharge and
a. Personal entitled –
interest.
taxpayer or anyone for him
5. Making arrest, search and seizure
b. Time to redeem – with in
one (1) year from forfeiture
Limited to violations of any penal law
or regulation administered by the BIR,
c. Amount to be paid – full
committed with in the view of the
amount of the taxes and
Internal Revenue Officer or EE.
penalties, plus interest and
cost of the sale
6. Deportation in case of aliens – on
the following grounds
d. To whom paid –
Commissioner or the Revenue
a. Knowingly and fraudulently
Collection Officer
evades payment of IR taxes.
 b. Willfully refuses to pay such tax
and its accessory penalties, after 2. Conducted by Legal Officer of BIR
decision on his tax liability shall
have become final and executory. 3. Must be with the approval of the
CIR, in case of action, for recovery of
7. Inspection of books taxes, or enforcement of a fine, penalty
or forfeiture.
Books of accounts and other
accounting records of taxpayer must
be preserved, generally within three 1. Civil Action
years after date the tax return was due
or was filed whichever is later. Actions instituted by the government
to collect internal revenue taxes in
8. Use of National Tax Register regular courts (RTC or MTCs,
depending on the amount involved)
9. Obtaining information on tax
liability of any person When assessment made has become
final and executory for failure or
taxpayer to:
10. Inventory – Taking of stock-in-trade
and making surveillance. a. Dispute same by filing protest
with CIR
11. Prescribing presumptive gross sales
or receipt: b. Appeal adverse decision of CIR
to CTA

a. Person failed to issue receipts 1. Criminal Action

and invoices
A direct mode of collection of taxes,
b. Reason to believe that records the judgment of which shall not only
do not correctly reflect declaration impose the penalty but also order
in return.\ payment of taxes.

12. Prescribing real property values An assessment of a tax deficiency is

not necessary to a criminal
13. Inquiring into bank deposit accounts prosecution for tax evasion, provided
of there is a prima facie showing of
willful attempt to evade.
a. A deceased person to
determine gross estate Effect of Acquittal on Tax Liability:

b. Any taxpayer who filed
application for compromise by
reasons of financial incapacity his
tax liability.
14. Registration of Taxpayers.
Does not exonerate taxpayer his civil
liability to pay the tax due. Thus, the
government may still collect the tax in the same
action.
Reason: Tax is an obligation, does not arise
from a criminal act.

Judicial Remedies
Effect of Satisfaction of Tax Liability on
Criminal Liability
Civil and Criminal Actions:
Will not operate to extinguish
1. Brought in the name of the
taxpayer’s criminal liability since the duty to pay
Government of the Philippines.
the tax is imposed by statute, independent of
any attempt on past of taxpayers to evade
payment.
This is true in case the criminal action is
based on the act to taxpayer of filing a false and
fraudulent tax return and failure to pay the tax.
Note: The satisfaction of civil liability is not one
of the grounds for the extinction of criminal
action.
Prescriptive Periods /
Statute Of Limitation
Purpose:
For purposes of Taxation, statue of
limitation is primarily designed to protect the
rights of the taxpayer’s against unreasonable
investigation of the taxing authority with
respect to assessment and collection of Internal
Revenue Taxes.
Prescription of Government’s Right to Assess
Taxes:
General Rule: Internal Revenue Taxes shall be
assessed within three (3) years after the last day
prescribed by law for the filing of the return or
from the day the return was filed, in case it is
filed beyond the period prescribed
thereof. (Section 203 of the Tax Code)
Note:
1. A return filed before the last day
prescribed by law for the filing thereof
shall be considered as filed on such last
day.
2. In case a return is substantially
amended, the government right to
assess the tax shall commence from
the filing of the amended return (CIR vs.
Phoenix, May 20, 1965; Kei & Co. vs.
Collector, 4 SCRA 872)
3. In computing the prescriptive period
for assessment, the latter is deemed
made when notice to this effect is
released, mailed or sent by the
Commissioner to the correct address of
the taxpayer. However, the law does
not require that the demand/notice be
received within the prescriptive
period. (Basilan Estates, Inc. vs.
Commissioner 21, SCRA 17; Republic vs.
CA April 30, 1987)
4. An affidavit executed by a revenue
office indicating the tax liabilities of a
taxpayer and attached to a criminal
complaint for tax evasion, cannot be
deemed an assessment. ( CIR
vs. Pascoi Realty Corp. June 29, 1999)
5. A transcript sheets are not returns,
because they do not contain
information necessary and required to
permit the computation and
assessment of taxes (Sinforo Alca vs.
Commissioner, Dec. 29, 1964)
Exceptions: (Sec. 222 ic)
1. Where no return was filed - within ten
(10) years after the date of discovery of
the omission.
1. Where a return was filed but the same
was false or fraudulent – within ten (10)
years from the discovery of falsity or
fraud.
Nature of Fraud:
a. Fraud is never presumed and
the circumstances consisting it
must be alleged and proved to
exist by clear & convincing
evidence (Republic vs. Keir, Sept.
30, 1966)
b. The fraud contemplated by law
is actual and not constructive. It
must amount to intentional
wrongdoing with the sole object of
avoiding the tax. A mere mistake
 is not a fraudulent intent. (Aznar
case, Aug. 23, 1974)
c. A fraud assessment which has
become final and executory, the
fact of fraud shall be judicially
taken cognizance of in the civil or
criminal action for the collection
thereof. (Sec. 222 paragraph (a))
Fraud may be established by the
following : (Badges of Fraud)
a. Intentional and substantial
understatement of tax liability of
the taxpayer.
b. Intentional and substantial
overstatement of deductions of
exemption
c. Recurrence of the foregoing
circumstances.
Instances/Circumstances negating
fraud:
a. When the Commissioner fails
impute fraud in the assessment
notice/demand for payment.
b. When the Commissioner failed
to allege in his answer to the
taxpayer’s petition for review
when the case is appealed to the
CTA.
c. When the Commissioner raised
the question of fraud only for the
first time in his memorandum
which was filed the CTA after he
had rested his case.
d. Where the BIR itself appeared,
“not sure” as to the real amount of
the taxpayer’s net income.
e. A mere understatement of
income does not prove fraud,
unless there is a sufficient
evidence shaving fraudulent
intent.
1. Where the commissioner and the
taxpayer, before the expiration of the
three (3) year period of limitation have
agreed in writing to the extension of
said period.
Note: Limitations:
a. The agreement extending the
period of prescription should be in
writing and duly signed by the
taxpayer and the commissioner.
b. The agreement to extend the
same should be mode before the
expiration of the period previously
agreed upon.
1. Where there is a written waiver or
renunciation of the original 3-year
limitation signed by the taxpayer.
Note: Limitations:
a. The waiver to be valid must be
executed by the parties before the
lapse of the prescriptive period.
b. A waiver is inefficient I it is
executed beyond the original three
year.
c. The commissioner can not valid
agree to reduce the prescriptive
period to less than that granted by
law.
Imprescriptible Assessments:
1. Where the law does not provide for
any particular period of assessment,
the tax sought to be assessed becomes
imprescriptible.
1. Where no return is required by law,
the tax is imprescriptible.
1. Assessment of unpaid taxes, where the
bases of which is not required by law
to be reported in a return such as
 excise taxes. (Carmen vs. Ayala
Securities Corp., Nov. 21, 1980)
1. Assessment of compensating and
documentary stamp tax.
Prescription of Government’s
Right to Collect Taxes
1. General Rule:
1. Where an assessment was
made – Any internal revenue tax
which has been assessed within
the period of limitation may be
collected by distraint or levy or by
proceeding in court within 5 years
following the date of assessment.
2. Where no assessment was
made and a return was filed and
the same is not fraudulent or false-
the tax should be collected within
3 years after the return was due or
was filed, whichever is later.
1. Exceptions:
1. Where a fraudulent/false return
with intent to evade taxes was
filed a proceeding in court for the
collection of the tax may be filed
without assessment, at anytime
within ten years after the
discovery of the falsity or fraud.
Note: The 10-year prescriptive
period for collector thru action
does not apply if it appears that
there was an assessment. In such
case, the ordinary 5-year period
(now 3 years) would apply (Rep. vs.
Ret., March 31, 1962)
2. When the taxpayer omits to file
a return – a court proceeding for
the collection of such tax may be
filed without assessment, at
anytime within 10 years after the
discovery of the omission.
3. Waiver of statute of limitations
– any internal revenue tax, which
has been assessed within the
period agreed upon, may be
collected be distinct or levy of by a
proceeding in court within the
period agreed upon in writing
before the expiration of 5-year
period.
4. Where the government makes
another assessment on the basis
of reinvestigation requested by the
taxpayer – the prescriptive period
for collection should be counted
from the last assessment. (Rep. vs.
Lopez, March 30, 1963)
5. Where the assessment is
revised because of an amended
return – the period for collection is
counted from the last revised
assessment.
6. Where a tax obligation is
secured by a surety bond – the
government may proceed thru a
court action to forfeit a bond and
enforce such contractual
obligation within a period of ten
years.
7. Where the action is brought to
enforce a compromise entered
into between the commission and
the taxpayer – the prescriptive
period is ten years.
1. When tax is deemed collected for
purposes of the prescriptive period.
1. Collection by summary
remedies – It is effected by
summary methods when the
government avail of distraint and
levy procedure.
2. Collection by judicial action –
The collection begins by filing the
 complaint with the proper b. In criminal case – It can be raised
court. (RTC) even if the case has been decided by
the lower court but pending decision
3. Where assessment of the on appeal.
commissioner is protected &
appealed to the CTA – the
collection begin when the Interruption of the Prescriptive Period
government file its answer to
taxpayer’s petition for review. 1. Where before the expiration of the
time prescribed for the assessment of
the tax, both the commissioner and the
taxpayer have consented in writing to
Rules of Prescription in Criminal Cases its assessment after such time, the tax
may be assessed prior to the expiration
Rule: All violations of any provision of of the period agreed upon.
the tax code shall prescribe after five (5) years.
2. The running of statute of limitations
Note: on making an assessment and the
beginning of distraint/levy or a
When it should commence? proceeding in court for collection shall
be suspended for the period.
The five (5) year prescriptive period
shall begin to run from the: During which the Commissioner is
prohibited from making the
a. Day of the commission of the assessment or beginning distraint/levy
violation, if know. or a proceeding in court and for 60
days thereafter; e.g.
b. If not known, from the time of
discovery and the institution of judicial a. Filing a petition for review in
proceeding for its investigation and the CTA from the decision of the
punishment. Commissioner. The commissioner
is prevented from filing an
When it is interrupted: ordinary action to collect the tax.

a. When a proceeding is instituted b. When CTA suspends the

against the guilty person collection of tax liability of the
taxpayer pursuant to Section 11 of
b. When the offender is absent from RA 1125 upon proof that its
the Philippines. collection may jeopardizes the
government and /or the taxpayer.

When it should run again:

c. When the taxpayer
requests for reinvestigation
When the proceeding is dismissed for
which is granted by
reason not Constituting jeopardy.
commissioner.
When does the defense of
Note: A mere request for
prescription may be raised:
reinvestigation without any
action or the part of the
a. In civil case – If not raised in the
Commissioner does not
lower court, it is bailed permanently; if
interrupt the running of the
can not be raised for the first time on
prescriptive period. The
appeal.
request must not be a mere
 pro-former. Substantial
issues must be raised.
d. When the taxpayer cannot
be located in the address
given by him in the return.
Note: If the taxpayer informs
the Commissioner of any
change in address the statute
will not be suspended.
e. When the warrant of
distraint or levy is duly served
upon any of the following
person:
1. taxpayer
2. The question of prescription is not
jurisdictional, and as defense it must
be raised reasonably otherwise it is
deemed waived.
1. The prescriptive provided in the tax
code over ride the statute of
non-claims in the settlement of the
deceased’s estate.
1. In the event that the collection of the
tax has already prescribed, the
government cannot invoke the
principle of Equitable recumbent by
setting- off the prescribed tax against a
tax refused to which the taxpayer is
entitled.

2. his authorized
\
representative

3. Member of his
household with sufficient
discretion and no
property could be
located.

f. When the taxpayer is out

of the Philippines.

g. In criminal cases for

violation of tax code – the
period shall not run when the
offender is absent from the
Philippines.

Note: A petition for reconsideration

of a tax assessment does not
suspend the criminal action.
Reason: No requirement for
assessment of the tax before the
criminal action may be instituted.

Nota Bene:

1. The law on prescription remedial

measure should be interpreted liberally
in order to protect the taxpayer.

1. The defense of prescription must be

raised by the taxpayer on time,
otherwise it is deemed waived.