When prescription starts and is tolled

The accused was charged by the Bureau of Internal Revenue (BIR) with violation of Section 255 in relation to Section 114 of the National Internal Revenue Code. The Court of Tax Appeals, however, dismissed the case based on prescription. On appeal, the CTA En Banc affirmed the decision on the same ground.

The State then challenged the CTA’s interpretation before the Supreme Court on when prescription of the crime begins to run and sets in. The High Court ruled that prescription commences upon discovery of the crime if unknown at the time of commission, but is tolled upon filing of the complaint with the prosecutor’s office.

“The Court takes this opportunity to re-examine its ruling in Lim Sr. and to clarify the prescriptive period under Section 281 of the 1997 NIRC, specifically with respect to violations that are unknown at the time of its commission. There are two components in determining when the prescriptive period shall begin to run under Section 281: first, the discovery of the commission of the violation; and second, the institution of judicial proceedings for its investigation and punishment.

“As observed in Lim Sr., this makes the prosecution of offenses under the 1997 NIRC practically imprescriptible as the prescriptive period will only begin to run upon the institution of judicial proceedings. But the next paragraph of Section 281 states that prescription shall be interrupted when proceedings are instituted against the guilty persons.

“If Lim Sr. is to be followed, prescription would both be started and interrupted by the institution of proceedings against the accused. This is not the first time that the Court encountered this conundrum. Petitioner duly pointed out that Section 2 of Act No. 3326 is similarly worded to the second and third paragraphs of Section 281 of the 1997 NIRC.

“Section 2 provides: Prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. The prescription shall be interrupted when proceedings are instituted against the guilty person and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy.

“When Act No. 3326 was passed on 4 December 1926, it was the justice of the peace that conducted the preliminary investigation of criminal offenses. Accordingly, the filing of the complaint with the justice of the peace also signified the institution of criminal proceedings against the accused. The prevailing rule then was that the filing of the complaint with the justice of the peace tolled the prescription of the offense.

“The Court thus clarified in Panaguiton Jr. v. Department of Justice that the term ‘proceedings’ in Section 2 of Act No. 3326 should now be understood to include those before the executive branch of government. Hence, preliminary investigation tolls prescription, the reason being that ‘to rule otherwise would deprive the injured party of the right to obtain vindication on account of delays that are not under his control.’

“In People v. Duque, the Court held that the phrase ‘institution of judicial proceedings for its investigation and punishment’ may be either disregarded as surplusage or should be deemed preceded by the word ‘until.’ A literal reading of Section 2 of Act No. 3326 would be unfavorable to the accused and is unnecessary. The Court opined that ‘the prescription period would both begin and be interrupted by the same occurrences. The net effect would be that the prescription period would not have effectively begun, having been rendered academic by the simultaneous interruption of that same period.’

“The Court affirmed this interpretation in Presidential Commission on Good Government v. The Ombudsman and added that this interpretation is consistent with the second paragraph of Section 2 of Act No. 3326. Notably, Lim Sr. applied Section 354 of the 1939 NIRC. Associate Justice Japar B. Dimaampao astutely noted that the 1939 NIRC was passed when justices of the peace conducted preliminary investigations.

“This is no longer the case now, as observed in Panaguiton. Thus, in consideration of the foregoing, the Court clarifies that under Section 281 of the 1997 NIRC, prescription for criminal offenses where the commission of the violation is not known shall begin to run from its discovery. The adoption of the interpretation in Duque is apt in order to harmonize the second and third paragraphs of Section 281 of the 1997 NIRC. The institution of proceedings, specifically the commencement of preliminary investigation, shall interrupt the prescriptive period for the offense.”

The facts and quoted portion of the decision are from SC G.R. 258563 (2 April 2025).