SECOND DIVISION

January 25, 2017

G.R. No. 205045

COMMISSIONER OF INTERNAL REVENUE, Petitioner

vs.
SAN MIGUEL CORPORATION, Respondent,

x-----------------------x

G.R. No. 205723

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
SAN MIGUEL CORPORATION, Respondent.

DECISION

LEONEN, J.:

These consolidated cases consider whether "San Mig Light" is a new brand or a variant of one of San Miguel
Corporation's existing beer brands, and whether the Bureau of Internal Revenue may issue notices of discrepancy
that effectively changes "San Mig Light"'s classification from new brand to variant. The issues involve an application
of Section 143 of the 1997 National Internal Revenue Code (Tax Code), as amended, on the definition of a variant,
which is subject to a higher excise tax rate than a new brand. This case also applies the requirement in Rep. Act No.
9334 that reclassification of certain fermented liquor products introduced between January 1, 1997 and December
31, 2003 can only be done by an act of Congress.

The Petition1 docketed as G.R. No. 205045 assails the Court of Tax Appeals En Bane's September 20, 2012
Decision2 affirming the Third Division's grant of San Miguel Corporation's refund claim in CTA Case No. 7708, and
the December 11, 2012 Resolution3 denying reconsideration. The Commissioner of Internal Revenue prays for the
reversal and setting aside of the assailed Decision and Resolution, as well as the issuance of a new one denying San
Miguel Corporation's claim for tax refund or credit.4

On the other hand, the Petition5 docketed as G.R. No. 205723 and consolidated with G.R. No. 205045 assails the
Court of Tax Appeals En Bane's October 24, 2012 Decision6 dismissing the Commissioner of Internal Revenue's
appeal, and the February 4, 2013 Resolution7 denying reconsideration. The Commissioner of Internal Revenue prays
for the reversal and setting aside of the assailed Decision and Resolution, the issuance of a new one remanding the
case to the Court of Tax Appeals for the production of evidence in San Miguel Corporation's possession, or, in the
alternative, the dismissal of the Petitions in CTA Case Nos. 7052, 7053, and 7405.8

On October 19, 1999, Virgilio S. De Guzman (De Guzman), San Miguel Corporation's Former Assistant Vice
President for Finance, wrote the Bureau of Internal Revenue Excise Tax Services Assistant Commissioner Leonardo
B. Albar (Assistant Commissioner Albar) to request the registration of and authority to manufacture "San Mig Light,"
to be taxed at ₱12.15 per liter.9 The letter dated October 27, 1999 granted this request. 10
On November 3, 1999, De Guzman advised Assistant Commissioner Albar that "San Mig Light" would be sold at a
suggested net retail price of ₱21.15 per liter or ₱6.98 per bottle, less value-added tax and specific tax. "San Mig
Light" would also be classified under "Medium Priced Brand" to be taxed at ₱9.15 per liter. 11

On January 28, 2002, Alfredo R. Villacorte (Villacorte), San Miguel Corporation's Vice President and Manager of the
Group Tax Services, wrote the Bureau of Internal Revenue Chief of the Large Taxpayers Assistance Division II
(LTAD II) to request information on the tax rate and classification of "San Mig Light" and another beer product named
"Gold Eagle King." 12

On February 7, 2002, LTAD II Acting Chief Conrado P. Item replied to Villacorte's letter. 13 He confirmed that based
on the submitted documents, San Miguel Corporation was allowed to register, manufacture, and sell "San Mig Light"
as a new brand, had been paying its excise tax for a considerable length of time, and that the tax classification and
rate of "San Mig Light" as a new brand were in order. 14

However, on May 28, 2002, Edwin R. Abella (Assistant Commissioner Abella), Bureau of Internal Revenue Large
Taxpayers Service Assistant Commissioner, issued a Notice of Discrepancy against San Miguel Corporation. The
Notice stated that "San Mig Light" was a variant of its existing beer products and must, therefore, be subjected to the
higher excise tax rate for variants.15 Specifically, for the year 1999, "San Mig Light" should be taxed at the rate of
₱19.91 per liter instead of ₱9.15 per liter; and for the year 2000, the 12% increase should be based on the rate of
Pl9.91 per liter under Section l 43(C)(2) of the Tax Code.16 Hence, the Notice demanded payments of deficiency
excise tax in the amount of

₱824,750,204.97, exclusive of increments for years 1999 to April 2002.17

The Finance Manager of San Miguel Corporation's Beer Division wrote a letter-reply dated July 9, 2002 requesting
the withdrawal of the Notice of Discrepancy.18 San Miguel Corporation stated, among other things, that "San Mig
Light" was not a variant of any of its existing beer brands because of "the distinctive shape, color scheme[,] and
general appearance"; and the "different alcohol content and innovative low calorie formulation."19 It also emphasized
that the Escudo logo was not a beer brand logo but a corporate logo.20

On October 14, 2002, Assistant Commissioner Abella wrote a letterrejoinder reiterating its finding that "San Mig Light
Pale Pilsen" was truly a variant of "San Miguel Pale Pilsen."21 The letter-rejoinder cited certain statements in San
Miguel Corporation's publication, "Kaunlaran," and the corporation's Annual Report as support for its finding. 22

On November 20, 2002, Villacorte replied by requesting that "San Mig Light be reconfirmed as a new brand . . . the
deficiency assessment be set aside and the demand for payment be withdrawn."23

Subsequently, three (3) conferences were held on the "San Mig Light" tax classification issue. At the conference held
on December 16, 2003, Commissioner Guillermo Parayno, Jr. (Commissioner Parayno) informed San Miguel
Corporation that five (5) members of the Bureau of Internal Revenue Management Committee voted that "San Mig
Light" was a variant of "Pale Pilsen in can," while two (2) members voted that it was a variant of "Premium," a high-
priced beer product of San Miguel Corporation.24

On January 6, 2004, Commissioner Parayno wrote San Miguel Corporation and validated the findings that "San Mig
Light" was a variant of "San Miguel Pale Pilsen in can," subject to the same excise tax rate of the latter-that is,
P13.61 per liter-and that an assessment for deficiency excise tax against San Miguel Corporation was forthcoming.25

On January 28, 2004, a Preliminary Assessment Notice (PAN) was issued against San Miguel Corporation for
deficiency excise tax in the amount of P852,039,418.15, inclusive of increments, purportedly for the removals of "San
Mig Pale Pilsen Light," from 1999 to January 7, 2004.26
On February 4, 2004, a Notice of Discrepancy was issued against San Miguel Corporation on an alleged deficiency
excise tax in the amount of ₱28,876,108.84, from January 8, 2004 to January 29, 2004.27

Accordingly, on March 24, 2004, Bureau of Internal Revenue Deputy Commissioner Estelita C. Aguirre (Deputy
Commissioner Aguirre) issued a PAN against San Miguel Corporation for ₱29,967,465.37 representing deficiency
excise tax, inclusive of increments, from January 8, 2004 to January 29, 2004.28

On April 12, 2004 and May 26, 2004, Deputy Commissioner Aguirre issued two (2) Formal Letters of Demand29 to
San Miguel Corporation with the accompanying Final Assessment Notice (FAN) Nos. LTS TF 004-06-02 and LTS TF
129-05-04, respectively, directing San Miguel Corporation to pay deficiency excise taxes in the amounts of:

(a) ₱876,098,898.83, inclusive of interest until April 30, 2004, for the period of November to December 1999 at
₱12.52 per liter, and January 2000 to January 7, 2004 at ₱13.61 per liter;30 and

(b) P30,763,133.68, inclusive of interest until June 30, 2004, for the period January 8, 2004 to January 29, 2004.31

San Miguel filed a Protest/Request for Reconsideration against each FAN. 32

On August 17, 2004 and August 20, 2004, Former Large Taxpayers Service Officer-in-Charge Deputy Commissioner
Kim S. Jacinto-Henares informed San Miguel Corporation of the denial of the Protest/Request for Reconsiderations
against the two (2) FANs "for lack of legal and factual basis."33

G.R. No. 205723

On September 1 7, 2004 and September 22, 2004, San Miguel Corporation filed before the Court of Tax Appeals
Petitions for Review, docketed as CTA Case Nos. 7052 and 7053, assailing the denials of its Protest/Request for
Reconsiderations of the deficiency excise tax assessments.34

To prevent the issuance of additional excise tax assessments on San Mig Light products and the disruption of its
operations, San Miguel Corporation paid excise taxes at the rate of ₱13.61 beginning February 1, 2004.35

On December 28, 2005, San Miguel Corporation filed with the Bureau of Internal Revenue its first refund claim. The
claim sought the refund of ₱782,238,161.47 for erroneous excise taxes collected on San Mig Light products from
February 2, 2004 to November 30, 2005.36

Due to inaction on its claim, on January 31, 2006, San Miguel Corporation filed before the Court Tax Appeals a
Petition for Review docketed as CTA Case No. 7405.37 The Court of Tax Appeals, upon motion, later consolidated
CTA Case No. 7405 with CTA Case Nos. 7052 and 7053.38

The Court of Tax Appeals First Division, in its Decision39 dated October 18, 2011, granted the Petitions in CTA Case
Nos. 7052 and 7053 and partially granted the Petition in CTA Case No. 7405.40 The Decision's dispositive portion
reads:

WHEREFORE, in view of the foregoing considerations, the consolidated Petitions for Review in CTA Case Nos. 7052
and 7053 are hereby GRANTED. The (1) [sic] letters dated August 17, 2004 and August 20, 2004 of respondents,
denying petitioner's Protest/Request for Reconsideration dated May 12, 2004 and July 7, 2004, respectively, and (2)
Assessment Notice Nos. LTS TF 004-06-02 and LTS TF 129-05-04 issued by respondent against petitioner for the
periods of November 1999 to January 7, 2004 and January 8, 2004 to January 29, 2004, are hereby CANCELLED
and SET ASIDE.
Moreover, the Petition for Review in CTA Case No. 7405 is hereby PARTIALLY GRANTED. Respondent CIR is
hereby ORDERED to REFUND petitioner, or to ISSUE A TAX CREDIT CERTIFICATE in its favor in, the amount of
SEVEN HUNDRED EIGHTY ONE MILLION FIVE HUNDRED FOURTEEN THOUSAND SEVEN HUNDRED
SEVENTY TWO PESOS AND FIFTY SIX CENTAVOUS [sic] (₱781,514,772.56), as determined below:

Claims for Over-Payment of Excise P782,238,161.47

Taxes per Petition

Less: Deductions from claims

1. Excise taxes due on SML P420,252.62

removals per ODI which were
not paid per Returns Polo Plant

2. Excise taxes due per Excise 121,975.00

Tax Returns were Lesser than
[the] amounts per ODI Polo
Plant

3. SML Removals per shipping

Memorandum were Greater
than OD Is

San Fernando Plant Bacolod 181,080.11

Plant
81.18

723,388.91

Recomputed Excise Taxes for P781,5l4,772.56

Refund/Issuance of Tax Credit
Certificate

SO ORDERED.41 (Emphasis in the original)

The Commissioner filed a Motion for Reconsideration with Motion for Production of Documents praying that San
Miguel Corporation be compelled to produce the following: (a) "Kaunlaran" publication for the months of October
1999 and January 2000; (b) 1999 Annual Report to stockholders; and (c) copies of the video footage of two (2) San
Mig Light commercials as seen in its website.42 The Commissioner claimed "that the admission of said documents
would lead to a better illumination of the oucome of the case."43

The Court of Appeals First Division denied the Motions in its Resolution44 dated February 6, 2012:

WHEREFORE, premises considered, respondent's [CIR's] MOTION FOR RECONSIDERATION WITH MOTION

FOR PRODUCTION OF DOCUMENTS (Re: Decision promulgated 18 October 2011) and
SUPPLEMENTAL MOTION FOR PRODUCTION OF DOCUMENTS are hereby DENIED for lack of merit.

SO ORDERED.45 (Emphasis in the original)

The Court of Tax Appeals En Banc, in its Decision46 dated October 24, 2012, dismissed the Petition and affirmed the
Division.47 It also denied reconsideration through the Resolution48 dated February 4, 2013.

Hence, the Commissioner on Internal Revenue filed the Petition for Review on Certiorari49 docketed as G.R. No.
205723.

G.R. No. 205045

On August 30, 2007, San Miguel Corporation filed its second refund claim with the Bureau of Internal Revenue in the
amount of ₱926,389,172.02.50 Due to inaction on its claim, San Miguel Corporation filed before the Court Tax
Appeals a Petition for Review, docketed as CTA Case No. 7708, on November 27, 2007.51

The Court of Tax Appeals Third Division, in its Decision dated January 7, 2011, partially granted the Petition.52 It also
denied reconsideration.53 The Decision's dispositive portion reads:

WHEREFORE, the Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is

hereby ORDERED TO REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor [of] petitioner in the amount of
₱926,169,056.74, representing erroneously, or excessively and/or illegally collected, and overpaid excise taxes on
"San Mig Light" during the period from December 1, 2005 up to July 31, 2007.

SO ORDERED.54 (Emphasis in the original)

On September 20, 2012, the Court of Tax Appeals En Banc55 affirmed the Division and thereafter also denied
reconsideration. The Decision's dispositive portion reads:

WHEREFORE, the present Petition for Review is hereby DENIED for lack of merit. The assailed decision and
resolution of the Third Division of this Court promulgated on January 7, 2011 and March 23, 2011, respectively, in
CTA Case No. 7708 entitled "SAN MIGUEL CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE["], are
hereby AFFIRMED.

Accordingly, petitioner is ORDERED TO REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor of respondent in
the amount of ₱926,169,056.74, representing erroneously, excessively and/or illegally collected and overpaid excise
taxes on "San Mig Light" during the period December 1, 2005 to July 31, 2007.

SO ORDERED.56 (Emphasis in the original)

Hence, the Commissioner on Internal Revenue filed the Petition for Review on Certiorari57 docketed as G.R. No.
205045. The two (2) cases were consolidated.

Respondent San Miguel Corporation filed its Comment58 on the Petitions, to which petitioner filed its Reply.59 The
parties then filed their respective memoranda. 60

The issues for resolution are:

First, whether a motion for production of documents and objects may be availed of after the court has rendered
judgment;

Second, whether petitioner complied with all requisites of a motion for production of documents and objects under
Rule 27, such as a showing of good cause;
Third, whether "San Mig Light" is a new brand and not a variant of "San Miguel Pale Pilsen";

Fourth, whether the "classification freeze" in Rep. Act No. 9334 refers to the freezing of classification of brands, and
not to the freezing of net retail prices of brands;

Fifth, whether the deficiency excise tax assessments issued by the Bureau of Internal Revenue against respondent
dated April 12, 2004 and May 26, 2004 are valid; and

Lastly, whether respondent is entitled to a refund of excess payment of excise taxes on "San Mig Light" in the
amount of ₱781,514, 772.56 for the period from February 1, 2004 up to November 30, 2005, and in the amount of
₱926,169,056.74 for the period from December 1, 2005 up to July 31, 2007.

Petitioner questions the denial of its Motion for Production of Documents and Objects. It argues that this motion may
be filed after pretrial or during the pendency of the action since Rule 27, Section 1 of the Revised Rules of Civil
Procedure does not explicitly provide that it must be availed of before trial or pre-trial.61 Petitioner contends that all
requisites for filing the motion were satisfied.62 Assuming the Motion was belatedly filed, it should have been granted
in the higher interest of justice. 63

Respondent counters that the Motions, which were filed only after the Court of Tax Appeals Division rendered
judgment, were belatedly filed since this mode of discovery must be availed of before trial.64 Rule 27, Section 1 used
the phrase, "in which an action is pending"; thus, this defines which court has authority to resolve the motion and
does not define when the motion must be made.65 Respondent contends that this remedy must be availed of before
trial in order to facilitate and expedite case preparations.66 Respondent adds that petitioner also failed to comply with
the requisites for the motion. Specifically, the Motion did not adequately describe the contents of the documents to be
produced to show their materiality and relevance to the case.67

Respondent further submits that the documents and objects are immaterial and irrelevant to the issues. The
documents petitioner sought to have respondent produce are referred to as having to do with the taste, alcohol
content, and calories of "San Mig Light," when the Tax Code definition of variant has nothing to do with these
matters.68 Respondent submits that in filing the Motions after judgment, petitioner was effectively seeking new trial,
which it may only avail itself of with "newly discovered" evidence. 69

Rule 27, Section 1 of the Revised Rules of Civil Procedure provides:

SECTION 1. Motion for production or inspection; order. - Upon motion of any party showing good
cause therefore, the court in which an action is pending may (a) order any party to produce and permit the inspection
and copying or photographing, by or on behalf of the moving party, of any designated documents, papers, books,
accounts, letters, photographs, objects or tangible things, not privileged, which constitute or contain
evidence material to any matter involved in the action and which are in his possession, custody or control; or (b)
order any party to permit entry upon designated land or other property in his possession or control for the purpose of
inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation
thereon. The order shall specify the time, place and manner of making the inspection and taking copies and
photographs, and may prescribe such terms and conditions as are just. (Emphasis supplied)

Rule 18, Section 6 of the Rules of Court on Pre-Trial requires that the pre-trial briefs shall include "[a] manifestation of
their having availed or intention to avail themselves of discovery procedures."
On July 13, 2004, this Court approved A.M. No. 03-1-09-SC, otherwise known as the Rule on Guidelines to be
Observed by Trial Court Judges and Clerks of Court in the Conduct of Pre-Trial and Use of Deposition - Discovery
Measures. Among other things, these rules direct trial courts to require parties to submit, at least three (3) days
before pretrial, pre-trial briefs containing "[a] manifestation of the parties of their having availed or their intention to
avail themselves of discovery procedures or referral to commissioners."70

Republic v. Sandiganbayan71 explained the purpose and policy behind modes of discovery:

The truth is that "evidentiary matters" may be inquired into and learned by the parties before the trial. Indeed, it is the
purpose and policy of the law that the parties - before the trial if not indeed even before the pre-trial - should discover
or inform themselves of all the facts relevant to the action, not only those known to them individually, but also those
known to their adversaries; in other words, the desideratum is that civil trials should not be carried on in the dark; and
the Rules of Court make this ideal possible through the deposition-discovery mechanism set forth in Rules 24 to 29.
The experience in other jurisdictions has been that ample discovery before trial, under proper regulation,
accomplished one of the most necessary ends of modern procedure: it not only eliminates unessential issues from
trials thereby shortening them considerably, but also requires parties to play the game with the cards on the table so
that the possibility of/air settlement before trial is measurably increased ....

As just intimated, the deposition-discovery procedure was designed to remedy the conceded inadequacy and
cumbersomeness of the pre-trial functions of notice-giving, issue-formulation and fact revelation theretofore
performed primarily by the pleadings.

The various modes or instruments of discovery are meant to serve (1) as a device, along with the pre-trial hearing
under Rule 20, to narrow and clarify the basic issues between the parties, and (2) as a device for ascertaining the
facts relative to those issues. The evident purpose is, to repeat, to enable the parties, consistent with recognized
privileges, to obtain the fullest possible knowledge of the issues and facts before civil trials and thus prevent that said
trials are carried on in the dark. 72 (Emphasis supplied, citations omitted)

Specifically, this Court discussed the importance of a motion for production of documents under Rule 27 of the Rules
of Court in expediting time-consuming trials:

This remedial measure is intended to assist in the administration of justice by facilitating and expediting the
preparation of cases for trial and guarding against undesirable surprise and delay; and it is designed to simplify
procedure and obtain admissions of facts and evidence, thereby shortening costly and time-consuming trials. It is
based on ancient principles of equity. More specifically, the purpose of the statute is to enable a party-litigant to
discover material information which, by reason of an opponent's control, would otherwise be unavailable for judicial
scrutiny, and to provide a convenient and summary method of obtaining material and competent documentary
evidence in the custody or under the control of an adversary. It is a further extension of the concept of
pretrial. 73 (Emphasis supplied)

Consistent with litigation's quest for truth, parties should welcome every opportunity in attaining this objective, such
as acting in good faith to reveal material documents. 74

The scope of discovery must be liberally construed, as a general rule, to serve its purpose of providing the parties
with essential information to reach an amicable settlement or to expedite trial. 75 "Courts, as arbiters and guardians of
truth and justice, must not countenance any technical ploy to the detriment of an expeditious settlement of the case
or to a fair, full and complete determination on its merits."76
Rule 27, Section 1 of the Rules of Court does not provide when the motion may be used. Hence, the allowance of a
motion for production of document rests on the sound discretion of the court where the case is pending, with due
regard to the rights of the parties and the demands of equity and justice. 77

In Eagleridge Development Corporation v. Cameron Granville 3 Asset Management, Inc., 78 we held that a motion for
production of documents may be availed of even beyond the pre-trial stage, upon showing of good cause as required
under Rule 27.79 We allowed the production of documents because the petitioner was able to show "good cause" and
relevance of the documents sought to be produced, and the trial court had not yet rendered its judgment.

In this case, petitioner filed its Motion for Production of Documents after the Court of Tax Appeals Division had
rendered its judgment. According to the Court of Tax Appeals Division, the documents sought to be produced were
already discussed in the Commissioner's Memorandum dated October 21, 2010 and were already considered by the
tax court when it rendered its Decision. 80 If petitioner believed that the evidence in the custody and control of
respondent "would provide a better illumination of the outcome of the case," it should have sought their production at
the earliest opportunity as it had been already aware of their existence.81 Petitioner's laxity is inexcusable and is a
fatal omission.

Under these circumstances, there was indeed no further need for the production of documents and objects desired
by petitioner. These pieces of evidence could have served no useful purpose. On the contrary, the production of
those documents after judgment defeats the purpose of modes of discovery in expediting case preparation and
shortening trials.

We find no reversible error on the part of the Court of Tax Appeals En Banc in affirming the Division's denial of
petitioner's Motion for Production of Documents.

II

These consolidated cases involve the Tax Code provision defining new brand as opposed to variant of brand, as
these two are treated differently for excise tax on fermented liquor.

Effective January 1, 1998, Republic Act No. 8424, otherwise known as the Tax Reform Act of 1997, reproduced as
Section 143 the provisions of Section 140 of the old Tax Code, as amended by Republic Act No. 8240, governing
excise taxes on fermented liquor. Section 143 distinguishes a new brand from a variant of brand:

Sec. 143. Fermented Liquor. - There shall be levied, assessed and collected an excise tax on beer, lager beer, ale,
porter and other fermented liquors except tuba, basi, tapuy and similar domestic fermented liquors in accordance
with the following schedule:

(a) If the net retail price (excluding the excise tax and value-added tax) per liter of volume capacity is less than
Fourteen pesos and fifty centavos (₱14.50), the tax shall be Six pesos and fifteen centavos (P6.15) per liter;

(b) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is Fourteen
pesos and fifty centavos (P14.50) up to Twenty-two pesos (P22.00), the tax shall be Nine pesos and fifteen centavos
(P9.15) per liter;

(c) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is more than
Twenty-two pesos (P22.00), the tax shall be Twelve pesos and fifteen centavos (Pl2.15) per liter.
Variants of existing brands which are introduced in the domestic market after the ejfectivity of Republic Act No. 8240
shall be taxed under the highest classification of any variant of that brand.

Fermented liquor which are brewed and sold at micro-breweries or small establishments such as pubs and
restaurants shall be subject to the rate in paragraph (c) hereof. The excise tax from any brand of fermented liquor
within the next three (3) years from the effectivity of Republic Act No. 8240 shall not be lower than the tax which was
due from each brand on October 1, 1996. The rates of excise tax on fermented liquor under paragraphs (a), (b) and
(c) hereof shall be increased by twelve percent (12%) on January 1, 2000. New brands shall he classified according
to their current net retail price.

For the above purpose, 'net retail price' shall mean the price at which the fermented liquor is sold on retail in twenty
(20) major supermarkets in Metro Manila (for brands of fermented liquor marketed nationally), excluding the amount
intended to cover the applicable excise tax and the value-added tax. For brands which are marketed only outside
Metro Manila, the 'net retail price' shall mean the price at which the fermented liquor is sold in five (5) major
supermarkets in the region excluding the amount intended to cover the applicable excise tax and the value-added
tax.

The classification of each brand of fermented liquor based on its average net retail price as of October 1, 1996, as
set forth in Annex 'C,' shall remain in force until revised by Congress.

A 'variant of brand' shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand
and/or a different brand which carries the same logo or design of the existing brand.

Every brewer or importer of fermented liquor shall, within thirty (30) days from the effectivity of R.A. No. 8240, and
within the first five (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume
of sales for each particular brand of fermented liquor sold at his establishment for the three-month period immediately
preceding.

Any brewer or importer who, in violation of this Section, knowingly misdeclares or misrepresents in his or its sworn
statement herein required any pertinent data or information shall be penalized by a summary cancellation or
withdrawal of his or its permit to engage in business as brewer or importer of fermented liquor.

Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be
fined treble the amount of deficiency taxes, surcharges and interest which may be assessed pursuant to this Section.

Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and
penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act
or omission shall be criminally liable in the same manner as the principal.

If the offender is not a citizen of the Philippines, he shall be deported / immediately after serving the sentence,
without further proceedings for A deportation. (Emphasis supplied)

On January 1, 2005, Republic Act No. 933482 took effect, amending

Section 143 of the Tax Code to read:

Sec.143. Fermented Liquors. - There shall be levied, assessed and collected an excise tax on beer, lager beer, ale,
porter and other fermented liquors except tuba, basi, tapuy and similar fermented liquors in accordance with the
following schedule:
(a) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is less than
Fourteen pesos and fifty centavos (P14.50), the tax shall be Eight pesos and twenty-seven centavos (P8.27) per liter;

(b) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is Fourteen
pesos and fifty centavos (P14.50) up to Twenty-two pesos (P22.00), the tax shall be Twelve pesos and thirty
centavos (P12.30) per liter;

(c) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is more than
Twenty-two pesos (P22.00), the tax shall be Sixteen pesos and thirty-three centavos (₱16.33) per liter.

Variants of existing brands and variants of new brands which are introduced in the domestic market after the
effectivity of this Act shall be taxed under the proper classification thereof based on their suggested net retail price:
Provided, however, That such classification shall not, in any case, be lower than the highest classification of any
variant of that brand.

A 'variant of a brand' shall refer to a brand on which a modifier is prefvced and/or suffvced to the root name of the
brand.

Fermented liquors which are brewed and sold at micro-breweries or small establishments such as pubs and
restaurants shall be subject to the rate in paragraph (c) hereof.

New brands, as defined in the immediately following paragraph, shall initially be classified according to their
suggested net retail price.

'New brand' shall mean a brand registered after the date of effectivity of R.A. No. 8240.

'Suggested net retail price' shall mean the net retail price at which new brands, as defined above, of locally
manufactured or imported fermented liquor are intended by the manufacturer or importer to be sold on retail in major
supermarkets or retail outlets in Metro Manila for those marketed nationwide, and in other regions, for those with
regional markets. At the end of three (3) months from the product launch, the Bureau of Internal Revenue shall
validate the suggested net retail price of the new brand against the net retail price as defined herein and determine
the correct tax bracket to which a particular new brand of fermented liquor, as defined above, shall be classified. After
the end of eighteen (18) months from such validation, the Bureau of Internal Revenue shall revalidate the initially
validated net retail price against the net retail price as of the time of revalidation in order to finally determine the
correct tax bracket which a particular new brand of fermented liquors shall be classified: Provided, however, That
brands of fermented liquors introduced in the domestic market between January 1, 1997 and December 31, 2003
shall remain in the classification under which the Bureau of Internal Revenue has determined them to belong as of
December 31, 2003. Such classification of new brands and brands introduced between January 1, 1997 and
December 31, 2003 shall not be revised except by an act of Congress.

'Net retail price', as determined by the Bureau of Internal Revenue through a price survey to be conducted by the
Bureau of Internal Revenue itself, or the National Statistics Office when deputized for the purpose by the Bureau of
Internal Revenue, shall mean the price at which the fermented liquor is sold on retail in at least twenty (20) major
supermarkets in Metro Manila (for brands of fermented liquor marketed nationally), excluding the amount intended to
cover the applicable excise tax and the value-added tax. For brands which are marketed outside Metro Manila, the
'net retail price' shall mean the price at which the fermented liquor is sold in at least five (5) major supermarkets in the
region excluding the amount intended to cover the applicable excise tax and the value-added tax.

The classification of each brand of fermented liquor based on its average net retail price as of October 1, 1996, as
set forth in Annex 'C', including the classification of brands for the same products which, although not set forth in said
Annex 'C', were registered and were being commercially produced and marketed on or after October 1, 1996, and
which continue to be commercially produced and marketed after the e/fectivity of this Act, shall remain in force until
revised by Congress.

The rates of tax imposed under this Section shall be increased by eight percent (8%) every two years starting on
January 1, 2007 until January 1, 2011.

Any downward reclassification of present categories, for tax purposes, of existing brands of fermented liquor duly
registered at the time of the effectivity of this Act which will reduce the tax imposed herein, or the payment thereof,
shall be prohibited.

Every brewer or importer of fermented liquor shall, within thirty (30) days from the effectivity of this Act, and within the
first five (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales for
each particular brand of fermented liquor sold at his establishment for the three-month period immediately preceding.

Any brewer or importer who, in violation of this Section, knowingly misdeclares or misrepresents in his or its sworn
statement herein required any pertinent data or information shall be penalized by a summary cancellation or
withdrawal of his or its permit to engage in business as brewer or importer of fermented liquor.

Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be
fined treble the amount of deficiency taxes, surcharges and interest which may be assessed pursuant to this Section.

Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and
penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act
or omission shall be criminally liable in the same manner as the principal.

If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence, without
further proceedings for deportation. (Emphasis supplied)

On December 19, 2012, Rep. Act No. 10351, otherwise known as the Sin Tax Law,83 was promulgated to further
amend certain provisions on excise taxes on alcohol and tobacco products. Among the amendments to Section 143
were:

(1) Increase in the excise tax rates and transition from three (3)- tiered to two (2)-tiered tax rates starting January 1,
2014 until December 31, 2016; and to a single tax rate beginning January 1, 201 7, irrespective of the price levels at
which the products were sold in the market;

(2) All fermented liquors existing in the market at the time of the effectivity of the Act shall be classified according to
the net retail prices and the tax rates provided, based on the latest price survey of the fermented liquors conducted
by the Bureau of Internal Revenue. However, any downward reclassification is prohibited;

(3) Fermented liquors introduced in the domestic market after the effectivity of the Act shall be initially tax-classified
according to their suggested net retail prices until such time that their correct tax bracket is finally determined under a
specified period; and

(4) The proper tax classification of fermented liquors, whether registered before or after the effectivity of the Act, shall
be determined every two (2) years from the date of effectivity of the Act.
Excise taxes are imposed on the production, sale, or consumption of specific goods. Generally, excise taxes on
domestic products are paid by the manufacturer or producer before removal of those products from the place of
production.84 The excise tax based on weight, volume capacity, or any other physical unit of measurement is referred
to as "specific tax." If based on selling price or other specified value, it is referred to as "ad valorem" tax. 85

The excise tax on beer is a specific tax based on volume, or on a per liter basis. Before its amendment, Section 143
provided for three (3) layers of tax rates, depending on the net retail price per liter. How a new beer product is taxed
depends on its classification, i.e. whether it is a variant of an existing brand or a new brand. Variants of a brand that
were introduced in the market after January 1, 1997 are taxed under the highest tax classification of any variant of
the brand. On the other hand, new brands are initially classified and taxed according to their suggested net retail
price, until a survey is conducted by the Bureau of Internal Revenue to determine their current net retail price in
accordance with the specified procedure.

III

Petitioner argues that "San Mig Light," launched in November 1999, is not a new brand but merely a low-calorie
variant of "San Miguel Pale Pilsen."86 Thus, the application of the higher excise tax rate for variant products is
appropriate and respondent should not be entitled to a refund or issuance of a tax credit certificate. 87

Respondent counters that "San Mig Light" is a new brand; the classification of "San Mig Light" as a new and medium-
priced brand may not be revised except by an act of Congress;88 and the Court of Tax Appeals did not err in granting
its claim for refund or issuance of tax credit certificate.

The refund claim in CTA Case No. 7405, subject of the Petition docketed as G.R. No. 205723, covers the period from
February 2, 2004 to November 30, 2005, while the refund claim in CTA Case No. 7708, subject of the Petition
docketed as G.R. No. 205045, covers the period from December 1, 2005 up to July 31, 2007.

We find for respondent.

Parenthetically, the Bureau of Internal Revenue's actions reflect its admission and confirmation that "San Mig Light"
is a new brand.

When respondent's October 19, 1999 letter requested the registration and authority to manufacture "San Mig Light,"
to be taxed at ₱12.15 per liter,89 the Bureau of Internal Revenue granted the request.90

The response dated February 7, 2002 of the LTAD II Acting Chief confirmed that respondent was allowed to register,
manufacture, and sell "San Mig Light" as a new brand.91

The Joint Stipulation of Facts, Documents and Issues in CTA Cases Nos. 7052 and 7053 dated July 29,
2005,92 signed by both parties, includes paragraph 1.08, which reads:

1.08. From the time of its registration as a new brand in October 1999 and its production in November 1999, "San
Mig Light" products have been withdrawn and sold, and taxes have been paid on such removals, on the basis of its
registration and tax rate as a new brand. (CTA No. 7052: Petition, par. 5.06; Answer, par. 2[e]; CTA No. 7053:
Petition, par. 5.06; Answer, par. 2[e]). 93 (Emphasis supplied)

The May 28, 2002 Notice of Discrepancy was effectively nullified by the subsequent issuance of Revenue
Memorandum Order No. 6-2003, which included "San Mig Light" as a new brand.
The Bureau of Internal Revenue issued Revenue Memorandum Order No. 6-2003 dated March 11, 2003 with the
subject, Prescribing the Guidelines and Procedures in the Establishment of Current Net Retail Prices of New Brands
of Cigarettes and Alcohol Products Pursuant to Revenue Regulations No. 9-2003. Annex "A-3" is the Master List of
Registered Brands of Locally Manufactured Alcohol Products as of February 28, 2003, and the list includes "San Mig
Light,"94 classified as "NB" or "new brand registered on or after January 1, 1997" : 95

INTENDED
REMARKS
MARKET
BRAND NAME CLASS SPECIFICATION PACKAGE
Domestic Date of Last
Export Status
Sale Production
B. FERMENTED              

LIQUOR
I. SAN MIGUEL              
CORPORATION
....              
"San Mig Light" NB 330ml flint bottle 24 bots x x Active96  

IV

Any reclassification of fermented liquor products should be by act of Congress. Section 143 of the Tax Code, as
amended by Rep. Act No. 9334, provides for this classification freeze referred to by the parties:

Provided, however, That brands of fermented liquors introduced in the domestic market between January 1, 1997
and December 31, 2003 shall remain in the classification under which the Bureau of Internal Revenue has
determined them to belong as of December 31, 2003. Such classification of new brands and brands introduced
between January 1, 1997 and December 31, 2003 shall not be revised except by an act of Congress.

....

The classification of each brand of fermented liquor based on its average net retail price as of October 1, 1996, as
set forth in Annex 'C', including the classification of brands for the same products which, although not set forth in said
Annex 'C', were registered and were being commercially produced and marketed on or after October 1, 1996, and
which continue to be commercially produced and marketed after the effectivity of this Act, shall remain in force until
revised by Congress.97 (Emphasis supplied)

In her Dissenting Opinion, Court of Tax Appeals Associate Justice Cielito N. Mindaro-Grulla discussed that British
American Tobacco v. Camacho98 explained the purpose and application of the classification freeze. 99 Her Dissenting
Opinion concludes that the classification freeze does not apply when a brand is a variant erroneously determined as
a new brand. 100

British American Tobacco involves Section 145 of the Tax Code governing excise taxes for cigars and cigarettes.

This Court in British American Tobacco discussed that Rep. Act No. 9334 includes, among other things, the
legislative freeze on cigarette brands introduced between January 2, 1997 and December 31, 2003, in that these
cigarette brands will remain in the classification determined by the Bureau of Internal Revenue as of December 31,
2003 until revised by Congress.101 In other words, after a cigarette brand is classified under the low-priced, medium-
priced, high-priced, or premium-priced tax bracket based on its

current net retail price, its classification is frozen unless Congress reclassifies it.102

The petitioner in British American Tobacco questioned this legislative freeze under Section 145 for creating a "grossly
discriminatory classification scheme between old and new brands." 103 This Court ruled that the classification freeze
provision does not violate the constitutional provisions on equal protection. 104

This Court discussed the legislative intent behind the classification freeze, that is, to deter the potential for abuse if
the power to reclassify is delegated and much discretion is given to the Department of Finance and Bureau of
Internal Revenue:

To our mind, the classification freeze provision was in the main the result of Congress' earnest efforts to improve the
efficiency and effectivity of the tax administration over sin products while trying to balance the same with other state
interests. In particular, the questioned provision addressed Congress' administrative concerns regarding delegating
too much authority to the DOF and BIR as this will open the tax system to potential areas of abuse and corruption.
Congress may have reasonably conceived that a tax system which would give the least amount of discretion to the
tax implementers would address the problems of tax avoidance and tax evasion. 105

British American Tobacco discussed the legislative history of the classification freeze, but it did not explicitly rule that
the classification freeze only refers to retail price tax brackets.

In any event, petitioner's letters and Notices of Discrepancy, which effectively changed San Mig Light's brand's
classification from "new brand to variant of existing brand," necessarily changes San Mig Light's tax bracket. Based
on the legislative intent behind the classification freeze provision, petitioner has no power to do this.

A reclassification of a fermented liquor brand introduced between January 1, 1997 and December 31, 2003, such as
"San Mig Light," must be by act of Congress. There was none in this case.

Before Rep. Act No. 9334 was passed, the Tax Code under Republic Act No. 8240 defined a "variant of a brand" as
follows:

A variant of a brand shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the
brand and/or a different brand which carries the same logo or design of the existing brand. 106

This definition includes two (2) types of "variants." The first involves the use of a modifier that is prefixed and/ or
suffixed to a brand root name, and the second involves the use of the same logo or design of an existing brand.

Rep. Act No. 9334 took effect on January 1, 2005 and deleted the second type of "variant" from the definition:

A 'variant of a brand' shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the
brand. 107
Revenue Regulations No. 3-2006, with the subject: "Prescribing the Implementing Guidelines of the Revised Tax
Rates on Alcohol and Tobacco Products Pursuant to the Provisions of Republic Act No. 9334, and Clarifying Certain
Provisions of Existing Revenue Regulations Relative Thereto " reiterated the deletion of the second type of "variant":

SEC. 2. DEFINITION OF TERMS. - For purposes of these Regulations, the following words and phrases shall have
the meaning indicated below:

....

(d) VARIANT OF A BRAND - shall refer to a brand of alcohol  or tobacco products on which a modifier is pref1Xed
and/or suff1Xed to the root name of the brand. (Emphasis supplied)

For this purpose, the term "root name" shall refer to a letter, word, number, symbol, or character; or a combination of
letters, words, numbers, symbols, and/or characters that may or may not form a word; or shall consist of a word or
group of words, which may or may not describe the other word or words: Provided, That the root name has been
originally registered as such with the Bureau of Internal Revenue (BIR).

Examples of root name: "L & M", "

The term "modifier" shall refer to a word, a number or a combination of words and/or numbers that specifically
describe the root name to distinguish one variant from another whether or not the use of such modifier is a common
industry practice. The root name, although accompanied by a modifier at the time of the original brand registration,
shall be the basis in determining the tax classification of subsequent variants of such brands.

Examples of modifiers: ...

For beer: "Light", "Dry", "Ice'', "Lager",

"Hard", "Premium", etc.

Any variation in the color and/or design of the label (such as logo, font, picturegram, and the like), manner and/or
form of packaging or size of container of the brand originally registered with the BIR shall not, by itself, be deemed an
introduction of a new brand or a variant of a brand: Provided, That all instances of such variation shall require a prior
written permit from the BIR.

In case such BIR-registered brand has more than one (1) tax classification as a result of the shift in the manner of
taxation from ad valorem tax to specific tax under R.A. No. 8240, the highest tax classification shall be applied to
such brand bearing a new label, package, or volume content per package, subject to the provisions of the
immediately preceding paragraph.

ILLUSTRATION:

No. 1. -

....

In case a letter(s), number(s), symbols(s) or word(s) is/are deleted from or replaced by another letter(s), number(s),
symbol(s) or word(s) in the root name of a previously BIR-registered brand, such that the introduction of the said
brand bearing such change(s) shall ride on the popularity of the said previously registered brand, the same shall be
classified as a variant of such previously registered brand: Provided, That where the introduction of such brand by
another manufacturer or importer will give rise to any legal action with respect to infringement of patent or unfair
competition, such brand shall be considered a variant of such previously registered brand.

ILLUSTRATION:

No. 2. –

ROOT NAME MODIFIER IS PREFIXED MODDIFIER IS MODIFIED ROOT

SUFFIXED NAME
L&M Kings L& M L & M Lights M&L
10 Perfect 10 10 Menthols Ten
Blue Ice Wild Blue Ice Blue Ice Supreme Blue Iced
Red Horse Flying Red Horse Red Horse Premium Reddish Horse
Pall Mall Long Pall Mall Pall Mall Filter Pal Mall

Petitioner submits that the complete name of "San Mig Light" is "San Mig Light Pale Pilsen," and Section 143 of the
Tax Code, in relation to its Annexes C-1 and C-2, show that the parent brands of San Mig Light are RPT108 in cans or
San Miguel Beer Pale Pilsen in can 330 ml, Pale Pilsen, and Super Dry. 109 It contends that the root name of the
existing brand is "Pale Pilsen," and RPT had the highest tax classification at the time "San Mig Light" was
introduced. 110 "San Miguel Beer Pale Pilsen" and "San Mig Light" have almost identical labels, and only these two
labels bear the same "Pale Pilsen."111

Respondent counters that petitioner changed its theory of the case on appeal, and this should not be allowed. 112 It
argues that petitioner categorically invoked the second part of the definition of variant in Section 143, and this part of
the definition has been deleted by Rep. Act No. 9334. 113 Moreover, petitioner made no categorical assertion on the
first part of the definition, but only a vague statement that "the root name of the existing brand is 'Pale
Pilsen."' 114 Respondent adds that petitioner "has not specified which type of 'San Mig Light', in bottle or in can, is a
variant of 'RPT' in can (San Miguel Beer Pale Pilsen)." 115

Petitioner, on the other hand, maintains that even during the trial stage, its theory has always been that "San Mig
Light" falls under both first and second parts of Section 143, before its amendment by Rep. Act No. 9334. 116

A change of theory on appeal is generally disallowed in this jurisdiction for being unfair to the adverse party. 117

Even then, the Court of Tax Appeals En Banc, in both assailed Decisions, quoted with approval the First Division's
finding that "San Mig Light" does not fall under both first and second parts of the definition of variant:

The fact that "San Mig Light" is a "new brand" and not merely a variant of an existing brand is bolstered by the fact
that Annexes "C-1" and "C-2" of RA No. 8240, which enumerated the fermented liquors registered with the BIR do
not include the brand name "San Mig Light". Instead, what were listed, as existing brands of petitioner, as of the
effectivity of RA No. 8240, were as follows: "Pale Pilsen 320 ml.", "Super Dry 355 ml." and "Premium Can 330 ml."
Even in Section 4 of RR No. 2- 97, which provides for the classification and manner of taxation of existing brands,
new brands and variants of existing brands, the list of existing brands of fermented liquors of petitioner does not
include the brand "San Mig Light", but merely "RPT in cans 330 ml.", "Premium Bottles 355 ml.", "Premium Bottles
355 ml." and "Premium Bottle Can 330 ml." for high priced brands; and "Super Dry 355 ml.", "Pale Pilsen 320 ml.",
and "Grande" for medium-priced brands.118

Thus, it is clear that when the product "San Mig Light" was introduced in 1999, it was considered as an entirely new
product and a new brand of petitioner's fermented liquor, there being no root name of "San Miguel" or "San Mig" in its
existing brand names. The existing registered and classified brand name of petitioner at that time was "Pale Pilsen."
Therefore, the word "Light" cannot he considered as a mere suff1:x to the word "San Miguel," hut it is part and parcel
of an entirely new brand name, "San Mig Light." Evidently, as correctly pointed out by petitioner, "San Mig Light" is
not merely a variant of an existing brand, but an entirely new brand:

Anent the second type of "variant of brand," i.e., when a different brand carries the same logo or design of an existing
brand, records show that there are marked differences in the designs of the existing brand "Pale Pilsen" and the new
brand "San Mig Light":

a) as to "Pale Pilsen" and "San Mig Light" in bottles:

1. the size, shape and color of the respective bottles are different. Each brand has a distinct design in its packaging.
"Pale Pilsen" is in a steiny bottle, while "San Mig Light" is packed in a tall and slim transparent bottle;

2. the design and color of the inscription on the bottles are different from each other. "Pale Pilsen" has its label
encrypted or embossed on the bottle itself, while "San Mig Light" has a silver and blue label of distinctive design that
is printed on paper pasted on the bottle; and

3. the color of the letters in the "Pale Pilsen" brand is white against the color of the bottle, while that of the words
"San Mig" is white against a blue background and the word "Light" is blue against a silver background.

b) As to "Pale Pilsen" and "San Mig Light" in cans:

1. the words "Pale Pilsen" are in ordinary font printed horizontally in black on the can against a diagonally striped light
yellow gold background, while the words "San Mig" are in Gothic font printed diagonally on the can against a blue
background and the word "Light" in ordinary font printed diagonally against a diagonally striped silver background;
and

2. the general color scheme of "Pale Pilsen" is light yellow gold, while that of "San Mig Light" is silver.

Though the "escudo" logo appears on both "Pale Pilsen" bottle and "San Mig Light" bottle and can, the same cannot
be considered as an indication that "San Mig Light" is merely a variant of the brand "Pale Pilsen", since the said
"escudo" insignia is the corporate logo of petitioner. It merely identifies the products, as having been manufactured
by petitioner, but does not form part of its brand. In fact, it appears not only in petitioner's beer products, but even in
its non-beer products. 119

VI

A variant under the Tax Code has a technical meaning. It 1s determined by the brand (name) or logo of the beer
product.

To be sure, all beers are composed of four (4) raw materials: barley, hops, yeast, and water. 120 Barley grain has
always been used and associated with brewing beer, while hops act as the bittering substance. 121 Yeast plays a role
in alcoholic fermentation, with bottom-fermenting yeasts resulting in light lager and top-fermenting ones producing the
heavy and rich ale. 122 With only four (4) ingredients combined and processed in varying quantities, all beer are
essentially related variants of these mixtures.

A manufacturer of beer may produce different versions of its products, distinguished by features such as flavor,
quality, or calorie content, to suit the tastes and needs of specific segments of the domestic market. It can also
leverage on the popularity of its existing brand and sell a lower priced version to make it affordable for the low-
income consumers. These strategies are employed to gain a higher overall level of share or profit from the market.

In intellectual property law, a registered trademark owner has the right to prevent others from the use of the same
mark (brand) for identical goods or services. The use of an identical or colorable imitation of a registered trademark
by a person for the same goods or services or closely related goods or services of another party constitutes
infringement. It is a form of unfair competition123 because there is an attempt to get a free on the reputation and
selling power of another manufacturer by passing of one's goods as identical or produced by the same manufacturer
as those carrying the other mark (brand). 124

The variant contemplated under the tax Code has a technical meaning. A variant is determined by the brand (name)
of the beer product, whether it was formed by prefixing or suffixing a modifier to the root name of the alleged parent
brand, or whether it carries the same logo or design. The purpose behind the definition was to properly tax brands
that were presumed to be riding on the popularity of previously registered brands by being marketed under an almost
identical name with a prefix, suffix, or a variant. 125 It seeks to address price differentials employed by a manufacturer
on similar products differentiated only in brand or design. Specifically, the provision was meant to obviate any tax
avoidance by manufacturing firms from the sale of lower priced variants of its existing beer brands, thus, falling in the
lower tax bracket with lower excise tax rates. To favor government, a variant of a brand is taxed according to the
highest rate of tax for that particular brand.

"San Mig Light" and "Pale Pilsen" do not share a root word. Neither is there an existing brand in the list (Annexes C-1
and C-2 of the Tax Code) called "San Mig" to conclude that "Light" is a suffix rendering "San Mig Light" as its
"variant."126 As discussed in the Court of Tax Appeals Decision, "San Mig Light" should be considered as one brand
name. 127

Respondent's statements describing San Mig Light as a low-calorie variant is not conclusive of its classification as a
variant for excise tax purposes. Burdens are not to be imposed nor presumed to be imposed beyond the plain and
express terms of the law. 128 "The general rule of requiring adherence to the letter in construing statutes applies with
peculiar strictness to tax laws and the provisions of a taxing act are not to be extended by implication." 129

Furthermore, respondent's payment of the higher taxes starting January 30, 2004 after deficiency assessments were
made cannot be considered as an admission that its San Mig Light is a variant. Section 130(A)(2) of the Tax Code
requires payment of excise tax "before removal of domestic products from place of production." 130 These payments
were made in protest as respondent subsequently filed refund claims.

VII

Petitioner argues that although the Bureau of Internal Revenue erroneously allowed San Miguel Corporation to
manufacture and sell "San Mig Light" in 1999 as a "new brand" with the lower excise tax rate for "new brands,"
government is not estopped from correcting previous errors by its agents. 131

Petitioner submits that the Notice of Discrepancy was to remedy the ‘misinterpretation"132 of "San Mig Light" as new
brand. It submits that respondent's self-assessment of excise taxes as a new brand was without approval:
San Mig Light was never registered with BIR as a new brand but always as a variant. Thus, petitioner's payment of
excise taxes on San Mig Light as a new brand is based on its own classification of San Mig Light as a new brand
without approval of the BIR. Under existing procedures in the payment of excise taxes, taxpayers are required to pay
their taxes based on self-assessment system with the government relying heavily on the honesty of taxpayers. Such
being the case, any payments made, even those allegedly made as a condition for the withdrawal of the product from
the place of production, cannot be considered as a confirmation by the BIR 133 of the correctness of such payment.

Section 143 of the Tax Code, as amended by Rep. Act No. 9334, provides for the Bureau of Internal Revenue's role
in validating and revalidating the suggested net retail price of a new brand of fermented liquor for purposes of
determining its tax bracket:

'Suggested net retail price' shall mean the net retail price at which new brands, as defined above, of locally
manufactured or imported fermented liquor are intended by the manufacturer or importer to be sold on retail in major
supermarkets or retail outlets in Metro Manila for those marketed nationwide, and in other regions, for those with
regional markets.At the end of three (3) months from the product launch, the Bureau of InternalRevenue shall
validate the suggested net retail price of the new brandagainst the net retail price as defined herein and determine
the correcttax bracket to which a particular new brand of fermented liquor, asdefined above, shall be classified. After
the end of eighteen (18) monthsfrom such validation, the Bureau of Internal Revenue shall revalidatethe initially
validated net retail price against the net retail price as of thetime of revalidation in order to finally determine the
correct tax bracketwhich a particular new brand of fermented liquors shall be classified: Provided, however, That
brands of fermented liquors introduced in the domestic market between January 1, 1997 and December 31, 2003
shall remain in the classification under which the Bureau of Internal Revenue has determined them to belong as of
December 31, 2003. Such classification of new brands and brands introduced between January 1, 1997 and
December 31, 2003 shall not be revised except by an act of Congress.

When respondent launched "San Mig Light" in 1999, it wrote the Bureau of Internal Revenue on October 19, 1999
requesting registration and authority to manufacture "San Mig Light" to be taxed as P12.15.

The Bureau of Internal Revenue granted this request in its October 27, 1999 letter. Contrary to petitioner's
contention, the registration granted was not merely for intellectual property protection 134 but "for internal revenue
purposes only":

Your request dated October 19, 1999, for the registration of San Miguel Corporation commercial label for beer
bearing the trade mark "San Mig Light" Pale Pilsen, for domestic sale or export, 24 bottles in a case, each flint bottle
with contents of 330 ml., is hereby granted.

....

Please follow strictly the requirements of internal revenue laws, rules and regulations relative to the marks to be
placed on each case, cartons or box used as secondary containers. It is understood that the said brand be brewed
and bottled in the breweries at Polo, Valenzuela (A-2-21).

You are hereby informed that the registration of commercial labels in this Office is for internal revenue purposes only
and does not give you protection against any person or entity whose rights may be prejudiced by infringement or
unfair competition resulting from your use of the above indicated trademark. 135 (Emphasis supplied)

Because the Bureau of Internal Revenue granted respondent's request in its October 27, 1999 letter and confirmed
this grant in its subsequent letters, respondent cannot be faulted for relying on these actions by the Bureau of Internal
Revenue.
While estoppel generally does not apply against government, especially when the case involves the collection of
taxes, an exception can be made when the application of the rule will cause injustice against an innocent party.136

Respondent had already acquired a vested right on the tax classification of its San Mig Light as a new brand. To
allow petitioner to change its position will result in deficiency assessments in substantial amounts against respondent
to the latter's prejudice.

The authority of the Bureau of Internal Revenue to overrule, correct, or reverse the mistakes or errors of its agents is
conceded. However, this authority must be exercised reasonably,137 i.e., only when the action or ruling is patent y
erroneous138 or patent y contrary to law.139 For the presumption lies in the regularity of performance of official
duty,140 and reasonable care has been exercised by the revenue officer or agent in evaluating the facts before him or
her prior to rendering his or her decision or ruling-in this case, prior to the approval of the registration of San Mig
Light as a new brand for excise tax purposes. A contrary view will create disorder and confusion in the operations of
the Bureau of Internal Revenue and open the administrative agency to inconsistencies in the administration and
enforcement of tax laws.

In Commissioner v. Algue:141

It is said that taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack
of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard-
earned income to the taxing authorities, every person who is able to must contribute his share in the running of the
government. The government for its part, is expected to respond in the form of tangible and intangible benefits
intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship
is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in
the seat of power.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes
that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a
right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may
still be stopped in his tracks if the taxf:ayer can demonstrate, as it has here, that the law has not been observed.142

VIII

The Tax Code includes remedies for erroneous collection and overpayment of taxes. Under Sections 229 and 204(C)
of the Tax Code, a taxpayer may seek recovery of erroneously paid taxes within two (2) years from date of payment:

SEC. 229. Recovery of tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court
for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed
or collected, or of any penalty claimed to have been collected without authority, of any sum alleged to have been
excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been
paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of
the tax or penalty regardless of any supervening case that may arise after payment: Provided, however, That the
Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return
upon which payment was made, such payment appears clearly to have been erroneously paid.

....
SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. -The Commissioner
may –

....

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of
internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or
change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No
credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a
claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a
return filed showing an overpayment shall be considered as a written claim for credit or refund.

A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any internal revenue
tax, excluding withholding taxes, for which the taxpayer is directly liable. Any request for conversion into refund of
unutilized tax credits may be allowed, subject to the provisions of Section 230 of this Code: Provided, That the
original copy of the Tax Credit Certificate showing a creditable balance is surrendered to the appropriate revenue
officer for verification and cancellation: Provided, further, That in no case shall a tax refund be given resulting from
availment of incentives granted pursuant to special laws for which no actual payment was made.

The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of both the Senate and
House of Representatives, every six (6) months, a report on the exercise of his powers under this Section, stating
therein the following facts and information, among others: names and addresses of taxpayers whose cases have
been the subject of abatement or compromise; amount involved; amount compromised or abated; and reasons for
the exercise of power: Provided, That the said report shall be presented to the Oversight Committee in Congress that
shall be constituted to determine that said powers are reasonably exercised and that the Government is not unduly
deprived of revenues.

In G.R. No. 205045, the Court of Tax Appeals En Banc ruled that "San Mig Light" is a new brand and not a variant of
an existing brand. Accordingly, it ordered the refund of erroneously collected excise taxes on"San Mig Light" products
in the amount of ₱926,169,056.74 for the period of December 1, 2005 to July 31, 2007. 143

In G.R. No. 205723, the Court of Tax Appeals En Banc found proper the refund of erroneously collected excise taxes
on "San Mig Light" products in the amount of '₱781,514,772.56 for the period of February 2, 2004 to November 30,
2005. 144 It referred to, and agreed with, the findings of the Court-commissioned Independent Certified Public
Accountant Normita L. Villaruz on reaching this amount. 145 The Court of Tax Appeals also found, from the records,
that respondent timely filed its administrative claim for refund on December 28, 2005, and its judicial claim on
January 31, 2006. 146

This Court accords the highest respect to the factual findings of the Court of Tax Appeals. We recognize its
developed expertise on the subject as it is the court dedicated solely to considering tax issues, unless there is a
showing of abuse in the exercise of authority. 147 We find no reason to overturn the factual findings of the Court of Tax
Appeals on the amounts allowed for refund.

WHEREFORE, the Petitions are DENIED. The assailed Decisions and Resolutions of the Court of Tax Appeals En
Banc in CTA Case Nos. 7052, 7053, 7405, and 7708 are AFFIRMED.