Consebido Doctrine: Revisiting tax cases prescription
The facts are straightforward — the BIR charged a construction firm owner with willfully failing to file his quarterly VAT return for the third quarter of 2008.
Daily TribuneThe facts are straightforward — the BIR charged a construction firm owner with willfully failing to file his quarterly VAT return for the third quarter of 2008.
In the landmark case People v. Ulysses Consebido, the Supreme Court en banc, through Justice Henri Jean Paul Inting, clarified how prescriptive periods apply under the 1997 National Internal Revenue Code (NIRC), significantly narrowing the scope of the Discovery Rule, or the Blameless Ignorance Doctrine.
The facts are straightforward. The Bureau of Internal Revenue (BIR) charged Consebido, a construction firm owner, with willfully failing to file his quarterly VAT return for the third quarter of 2008, in violation of Sections 255 and 114 of the 1997 NIRC.
The BIR filed a complaint with the Department of Justice (DoJ) on 30 January 2014, and the Information was eventually filed before the Court of Tax Appeals (CTA) on 18 March 2019.
The CTA dismissed the case for having prescribed, ruling that the five-year period started on 30 January 2014 — the date of “discovery.” Since the Information was filed on 18 March 2019, or beyond the cut-off of 30 January 2019, the case was deemed time-barred. The CTA en banc affirmed, and the BIR elevated the case to the Supreme Court.
The High Court upheld the dismissal, but took the opportunity to refine jurisprudence. It revisited Lim Sr. v. Court of Appeals, which held that when the date of commission of a tax offense is unknown, prescription runs from discovery until the filing of the Information. However, the Court emphasized that “discovery” is not synonymous with the filing of the complaint. Rather, it refers to the moment when it is known that a violation occurred.
Here lies the important shift: the Court ruled that where the offense is discoverable through readily available records or information, the prescriptive period should begin on the date of commission — not on discovery. In Consebido, the BIR could have easily determined that no VAT return was filed as early as 25 October 2008. This was data they could generate from their own system. Thus, the prescriptive period started on that date and expired on 25 October 2013. Filing the Information in 2019 was clearly out of time.
This ruling limits the application of the Discovery Rule. It now only applies to offenses where the facts constituting the crime are not readily available or discoverable with reasonable diligence.
Tax violations, by their nature, often leave a paper trail accessible to revenue authorities. Allowing a belated reckoning of prescription based on “discovery” would invite abuse and unduly penalize the accused.
Significantly, the Court also addressed a procedural issue: whether the filing of a complaint with the DoJ tolls the prescriptive period. It held that it does — even for cases covered by summary procedure. The Court thus abandoned its previous rulings in Republic v. Desierto and in Corpus Jr. v. People, which held that prescription only stops upon the filing of the Information in court.
Citing People v. Olarte, the Court explained that the State, as the offended party, should not be prejudiced by delays in preliminary investigations beyond its control. As long as a valid complaint has been filed with the DoJ, the prescriptive clock should pause.
Nonetheless, this clarification will apply prospectively, consistent with the rule that laws on prescription should be interpreted in favor of the accused.
Lastly, the Court — through Justice Japar Dimaampao — urged Congress to revisit Section 281 of the NIRC, noting that a literal application of its wording could lead to absurd or unjust consequences, with prescription both commencing and being interrupted by the same act.
In sum, the Consebido ruling reinforces two principles: (1) reckoning of prescription from the actual date of commission when the violation is easily verifiable; and (2) recognition that the filing of a complaint with the DoJ interrupts prescription — even for summary procedures.
The decision is both a refinement and a rebalancing — protecting the rights of the accused while reinforcing the State’s authority to prosecute tax evasion.
For more of Dean Nilo Divina’s legal tidbits, please visit www.divinalaw.com. For comments and questions, please send an email to cad@divinalaw.com.