BIR v. ombudsman (2002)

SECOND DIVISION

[ G.R. No. 115103, April 11, 2002 ]

BUREAU OF INTERNAL REVENUE, REPRESENTED BY THE COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. OFFICE OF THE OMBUDSMAN, RESPONDENT.

D E C I S I O N

DE LEON, JR., J.:

Graft Investigation Officer II Christopher S. Soquilon of the Office of the Ombudsman (OMBUDSMAN, for brevity) received information from an “informer-for-reward” regarding allegedly anomalous grant of tax refunds to Distillera Limtuaco & Co., Inc. (Limtuaco, for brevity) and La Tondeña Distilleries, Inc.  Upon receipt of the information, Soquilon recommended^[1] to then Ombudsman Conrado M. Vasquez that the “case” be docketed and subsequently assigned to him for investigation.^[2]

On November 29, 1993, the Ombudsman issued a subpoena duces tecum^[3] addressed to Atty. Millard Mansequiao of the Legal Department of the Bureau of Internal Revenue (BIR) ordering him to appear before the Ombudsman and to bring the complete original case dockets of the refunds granted to Limtuaco and La Tondeña.

The BIR, through Assistant Commissioner for Legal Service Jaime M. Maza, asked that it be excused from complying with the subpoena duces tecum because (a) the Limtuaco case was pending investigation by Graft Investigation Officer II Napoleon S. Baldrias; and (b) the investigation thereof and that of La Tondeña was mooted when the Sandiganbayan ruled in People v. Larin^[4] that “the legal issue was no longer in question since the BIR had ruled that the ad valorem taxes were erroneously paid and could therefore be the proper subject of a claim for tax credit.”^[5]

Without resolving the issues raised by the BIR, the Ombudsman issued another subpoena duces tecum, dated December 9, 1993, addressed to BIR Commissioner Liwayway Vinzons-Chato ordering her to appear before the Ombudsman and to bring the complete original case dockets of the refunds granted to Limtuaco and La Tondeña.^[6]

The BIR moved to vacate the subpoena duces tecum arguing that (a) the second subpoena duces tecum was issued without first resolving the issues raised in its Manifestation and Motion dated December 8, 1993; (b) the documents required to be produced were already submitted to Graft Investigation Officer II Baldrias; (c) the issue of the tax credit of ad valorem taxes has already been resolved as proper by the Sandiganbayan; (d) the subpoena duces tecum partook of the nature of an omnibus subpoena because it did not specifically described the particular documents to be produced; (e) there was no clear showing that the tax case dockets sought to be produced contained evidence material to the inquiry; (f) compliance with the subpoena duces tecum would violate Sec. 269^[7] of the National Internal Revenue Code (NLRC) on unlawful  divulgence of trade secrets and Sec. 277^[8] on procuring unlawful divulgence of trade secrets; and (g) Limtuaco and La Tondeña had the right to rely on the correctness and conclusiveness of the decisions of the Commissioner of Internal Revenue.^[9]

The Ombudsman denied^[10] the Motion to Vacate the Subpoena Duces Tecum, pointing out that the Limtuaco tax refund case then assigned to Baldrias was already referred to the Fact-Finding and Investigation Bureau of the Ombudsman for consolidation with Case No. OMB-0-93-3248.  The Ombudsman also claimed that the documents submitted by the BIR to Baldrias were incomplete and not certified.  It insisted that the issuance of the subpoena duces tecum was not a “fishing expedition” considering that the documents required for production were clearly and particularly specified.

The BIR moved to reconsider^[11] the respondent’s Order dated February 15, 1994 alleging that (a) the matter subject of the investigation was beyond the scope of the jurisdiction of the Ombudsman; (b) the subpoena duces tecum was not properly issued in accordance with law; and (c) non-compliance thereto was justifiable.  The BIR averred it had the exclusive authority whether to grant a tax credit and that the jurisdiction to review the same was lodged with the Court of Tax Appeals and not with the Ombudsman.

According to the BIR, for a subpoena duces tecum to be properly issued in accordance with law, there must first be a pending action because the power to issue a subpoena duces tecum is not an independent proceeding.  The BIR noted that the Ombudsman issued the assailed subpoena duces tecum based only on the information obtained from an “informer-for-reward” and the report of Asst. Comm. Imelda L. Reyes.  The BIR added that the subpoena duces tecum suffered from a legal infirmity for not  specifically describing the documents sought to be produced.

Finding no valid reason to reverse its Order dated February 15, 1994, the Ombudsman denied the motion for reconsideration and reiterated its directive to the BIR to produce the documents.^[12] Instead of complying, the BIR manifested its intention to elevate the case on certiorari to this Court.^[13] The Ombudsman thus ordered Asst. Comm. Maza to show cause why he should not be cited for contempt for contumacious refusal to comply with the subpoena duces tecum.^[14]

However, before the expiration of the period within which Asst. Comm. Maza was required to file a reply to the show cause order of the Ombudsman, the BIR filed before this Court the instant Petition for Certiorari, Prohibition and Preliminary Injunction and Temporary Restraining Order.^[15]

Petitioner BIR insists that the investigative power of the Ombudsman is not unbridled.  Particularly on the issue of tax refunds, the BIR maintains that the Ombudsman could validly exercise its power to investigate only when there exists an appropriate case and subject to the limitations provided by law.^[16] Petitioner opines that the fact-finding investigation by the Ombudsman is not the proper case as it is only a step preliminary to the filing of recovery actions on the tax refunds granted to Limtuaco and La Tondeña.

This Court is not persuaded.  No less than the 1987 Constitution enjoins that the “Ombudsman and his Deputies, as protectors of the people, shall act promptly on complaints filed in any form or manner against public officials or employees of the government, or any subdivision, agency or instrumentality thereof, including government-owned or controlled corporations, and shall, in appropriate case, notify the complainants of the action taken and the result thereof.”^[17]

Clearly, there is no requirement of a pending action before the Ombudsman could wield its investigative power.  The Ombudsman could resort to its investigative prerogative on its own^[18] or upon a complaint filed in any form or manner.  Even when the complaint is verbal or written, unsigned or unverified, the Ombudsman could, on its own, initiate the investigation.^[19] Thus –

There can be no objection to this procedure in the Office of the Ombudsman where anonymous letters suffice to start an investigation because it is provided in the Constitution itself.  In the second place, it is apparent that in permitting the filing of complaints “in any form and manner,” the framers of the Constitution took into account the well-known reticence of the people which keep them from complaining against official wrongdoings.  As this Court had occasion to point out, the Office of the Ombudsman is different from other investigatory and prosecutory agencies of the government because those subject to its jurisdiction are public officials who, through official pressure and influence, can quash, delay or dismiss investigations held against them.  On the other hand complainants are more often than not poor and simple folk who cannot afford to hire lawyers.^[20]

The term “in an appropriate case” has already been clarified by this Court in Almonte v. Vasquez,^[21] thus –

Rather than referring to the form of complaints, therefore, the phrase “in an appropriate case” in Art. XI, §12 means any case concerning official act or omission which is alleged to be “illegal, unjust, improper, or inefficient,” The phrase “subject to such limitations as may be provided by law” refers to such limitations as may be provided by Congress or, in the absence thereof, to such limitations as may be imposed by courts.

Plainly, the pendency of an action is not a prerequisite before the Ombudsman can start its own investigation.

Petitioner next avers that the determination of granting tax refunds falls within its exclusive expertise and jurisdiction and that its findings could no longer be disturbed by the Ombudsman purportedly through its investigative power as it was a valid exercise of discretion.  Petitioner suggests that what respondent should have done was to appeal its decision of granting tax credits to Limtuaco and La Tondeña to the Court of Tax Appeals since it is the proper forum to review the decisions of the Commissioner of Internal Revenue.

This contention of the BIR is baseless.  The power to investigate and to prosecute which was granted by law to the Ombudsman is plenary and unqualified.^[22] The Ombudsman Act makes it perfectly clear that the jurisdiction of the Ombudsman encompasses “all kinds of malfeasance, misfeasance and nonfeasance that have been committed by any officer or employee xxx during his tenure of office.^[23]

Concededly, the determination of whether to grant a tax refund falls within the exclusive expertise of the BIR.  Nonetheless, when there is a suspicion of even just a tinge of impropriety in the grant of the same, the Ombudsman could rightfully ascertain whether the determination was done in accordance with law and identify the persons who may be held responsible thereto.  In that sense, the Ombudsman could not be accused of unlawfully intruding into and intervening with the BIR’s  exercise of discretion.

As correctly posited by the Office of the Solicitor General –

xxx (T)he Ombudsman undertook the investigation “not as an appellate body exercising the power to review decisions or rulings rendered by a subordinate body, with the end view of affirming or reversing the same, but as an investigative agency tasked to discharge the role as ‘protector of the people’^[24] pursuant to his authority ‘to investigate xxx any act or omission of any public official, employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient.”^[25] The OSG insists that the “mere finality of petitioner’s ruling on the subject of tax refund cases is not a legal impediment to the exercise of respondent’s investigative authority under the Constitution and its Charter (RA 6770) which xxx is so encompassing as to include ‘all kinds of malfeasance, misfeasance and nonfeasance that  have been committed by any officer or employee during his tenure of office.’”^[26]

Indeed, the clause “any [illegal] act or omission of any public official” is broad enough to embrace any crime committed by a public official.  The law does not qualify the nature of the illegal act or omission of the public official or employee that the Ombudsman may investigate.  It does not require that the act or omission be related to or be connected with or arise from the performance of official duty.^[27]

Petitioner fears that the fact-finding investigation being conducted by respondent would only amount to “a general inquisitorial examination on the ‘case dockets’ with a view to search through them to gather evidence”^[28] considering that the subpoena duces tecum did not describe with particularity the documents sought to be produced.

This Court is unimpressed.  We agree with the view taken by the Solicitor General that the assailed subpoena duces tecum indeed particularly and sufficiently described the records to be produced.  There is every indication that petitioner knew precisely what records were being referred to as it even suggested that the tax dockets sought to be produced may not contain evidence material to the inquiry and that it has already submitted the same to Baldrias.

The records do not show how the production of the subpoenaed documents would necessarily contravene Sec. 269^[29] of the National Internal Revenue Code (NIRC) on unlawful divulgence of trade secrets and Sec. 277^[30] of the same Code on  procuring unlawful divulgence of trade secrets.  The documents sought to be produced were only the case dockets of the tax refunds granted to Limtuaco and La Tondeña which are public  records, and the subpoena duces tecum were directed to the  public officials who  have   the official custody of the said records.  We find no valid reason why the trade secrets of Limtuaco and La Tondeña would be unnecessarily disclosed if such official records, subject of the subpoena duces tecum, were to be produced by the petitioner BIR to respondent Office of the Ombudsman.

Assuming, for the sake of argument, that the case dockets of the tax refunds which were granted to Limtuaco and La Tondeña contain trade secrets, that fact, however, would not justify their non-production before the Ombudsman.  As this Court has underscored in Almote v. Vasquez^[31] -

At common law a governmental privilege against disclosure is recognized with respect to state secrets bearing on military, diplomatic and similar matters.  This privilege is based upon public interest of such paramount importance as in and of itself transcending the individual interests of a private citizen, even though, as a consequence thereof, the plaintiff cannot enforce his legal rights xxx

In the case at bar, there is no claim that military or diplomatic secrets will be disclosed by the production of records pertaining to the personnel of EIB.  Indeed, EIIB’s function is the gathering and evaluation of intelligence reports and information regarding “illegal activities affecting the national economy, such as, but not limited to economic sabotage, smuggling, tax evasion, dollar salting.  Consequently, while in cases which involve state secrets it may be sufficient to determine from the circumstances of the case that there is reasonable danger that compulsion of the evidence will expose military maters without compelling production, no similar excuse can be made for a privilege resting on other consideration.

Above all, even if the subpoenaed documents are treated as presumptively privileged, this decision would only justify ordering their inspection in camera but not their nonproduction xxx

Besides, under the facts of this case, petitioner should not have concerned itself with possibly violating the pertinent provisions of the NLRC on unlawful divulgence or unlawful procurement of trade secrets considering Rule V of the Rules of Procedure of the Office of the Ombudsman^[32] which  provides that –

(a) Any person whose testimony or production of documents or other evidence is necessary to determine the truth in any inquiry, hearing, or proceeding being conducted by the Office of the Ombudsman or under its authority in the performance or furtherance or its constitutional functions and statutory objectives, including preliminary investigation, may be granted immunity from criminal prosecution by the Ombudsman, upon such terms and conditions as the Ombudsman may determine, taking into account the pertinent provisions of the Rules of Court xxx

With regard to the manner in which the investigation was conducted, petitioner asserts that the investigation conducted by the Office of the Ombudsman violated due process, inasmuch as it commenced its investigation by issuing the subpoena duces tecum without first furnishing petitioner with a summary of the complaint and requiring it to submit a written answer.^[33] The Ombudsman labels this assertion of the BIR as premature maintaining that it is only when the Ombudsman finds reasonable ground to investigate further that it is required to furnish respondent with the summary of the complaint.  The Ombudsman insists that in the instant case, it has yet to make that determination.

On this score, we rule in favor of petitioner BIR.  Records show that immediately upon receipt of the information from an “informer-for-reward”, Graft Investigator Soquilon, in a Memorandum dated November 26, 1993 addressed to then Ombudsman Conrado M. Vasquez, requested that the “case” be docketed and assigned to him for a “full-blown fact-finding investigation.”^[34] In his Memorandum, Soquilon averred that he is “certain that these refunds can be recovered by reason of the Tanduay precedent xxx and using the power of this Office, we will not only bring back to the government multi-million illegal refunds but, like the Tanduay case, we will be establishing graft and corruption against key BIR officials.”^[35] In a marginal note dated November 26, 1993,^[36] Ombudsman Vasquez approved the docketing of the case and its assignment to Soquilon. Likewise, in the Preliminary Evaluation Sheet^[37] of the Office of the Ombudsman, the Fact Finding Investigation Bureau of the Ombudsman was named as complainant against Concerned High Ranking and Key Officials of the Bureau of Internal Revenue who granted multi-million tax refunds to Limtuaco and La Tondeña Distilleries for alleged violation of RA 3019.  On November 29, 1993 and December 9, 1993 Soquilon issued the assailed subpoena duces tecum requiring the concerned BIR officials to appear before the Ombudsman and to bring with them the complete case dockets of the tax refunds granted to Limtuaco and La Tondeña.

It is our view and we hold that the procedure taken by the respondent did not comply with the safeguards enumerated in Sec. 26, §(2) of RA 6770 or the Ombudsman Act of 1989, which clearly provides that –

(2) The Office of the Ombudsman shall receive complaints from any source in whatever form concerning an official act or omission.  It shall act on the complaint immediately and if it finds the same entirely baseless, it shall dismiss the same and inform the complainant of such dismissal citing the reasons therefore.  If it finds a reasonable, ground to investigate further, it shall first furnish the respondent public officer or employee with a summary of the complaint and require him to submit a written answer within seventy-two hours from receipt hereof.  If the answer is found satisfactory, it shall dismiss the case.

The procedure which was followed by the respondent likewise contravened the Rules of Procedure of the Office of the Ombudsman,^[38] Sec. 4, Rule 11 of which provides that –

(a) If the complaint is not under oath or is based only on official reports, the investigating officer shall require the complaint or supporting witnesses to execute affidavits to substantiate the complaints.

(b) After such affidavits have been secured, the investigating officer shall issue an order, attaching thereto a copy of the affidavits and other supporting documents, directing the respondent to submit, within ten (10) days from receipt thereof, his counter-affidavits and controverting evidence with proof of service thereof on the complainant.  The complainant may file reply affidavits within ten (10) days after service of the counter-affidavits xxx

It is clear from the initial comments of Soquilon in his Memorandum to Ombudsman Vasquez that he undoubtedly found reasonable grounds to investigate further.  In fact, he recommended that the “case” be docketed immediately and assigned to him for a “full-blown fact-finding investigation.” Even during that initial stage, Soquilon was convinced that the granting of the tax refunds was so anomalous that he assured Ombudsman Vasquez of the eventual recovery of the tax refunds and the prosecution and conviction of key BIR officials for graft and corruption.

We commend the graft investigators of the Office of the Ombudsman in their efforts to cleanse our bureaucracy of scalawags.  Sometimes, however, in their zeal and haste to pin down the culprits they tend to circumvent some procedures.  In this case, Graft Investigation Officer Soquilon forgot that there are always two (2) sides to an issue and that each party must be given every opportunity to air his grievance or explain his side as the case may be.  This is the essence of due process.

The law clearly provides that if there is a reasonable ground to investigate further, the investigator of the Office of the Ombudsman shall first furnish the respondent public officer or employee with a summary of the complaint and require him to submit a written answer within seventy-two (72) hours from receipt thereof.  In the instant case, the BIR officials concerned were never furnished by the respondent with a summary of the complaint and were not given the opportunity to submit their counter-affidavits and controverting evidence.  Instead, they were summarily ordered to appear before the Ombudsman and to produce the case dockets of the tax refunds granted to Limtuaco and La Tondeña.  They are aggrieved in that, from the point of view of the respondent, they were already deemed probably guilty of granting anomalous tax refunds.  Plainly, respondent Office of the Ombudsman failed to afford petitioner with the basics of due process in conducting its investigation.

WHEREFORE, the petition is GRANTED.  The respondent Office of the Ombudsman is prohibited and ordered to desist from proceeding with Case No. OMB-0-93-3248; and its Orders dated November 29, 1993, December 9, 1993 and February 15, 1994 are hereby ANNULLED and SET ASIDE.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, and Quisumbing, JJ., concur.

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^[1] Memorandum dated November 26, 1993, Folder 1, pp. 3-4.

^[2] The “case” was subsequently docketed as OMB-0-93-3248.

^[3] Folder 1, p. 7.

^[4] Criminal Cases Nos. 14208 and 14209, September 18, 1992.

^[5] Manifestation and Motion dated December 8, 1993; Folder 1, pp. 8-9.

^[6] Folder 1, p. 12.

^[7] Now Sec. 270, National Internal Revenue Code.

^[8] Now Sec. 278, id.

^[9] Motion to Resolve Manifestation and Motion dated December 8, 1993 to Vacate Subpoena Duces Tecum; Folder 1, pp. 14-15.

^[10] Order dated February 15, 1994; Folder 1, pp. 22-25.

^[11] Folder 1, pp. 26-33.

^[12] Id., pp. 49-50.

^[13] Manifestation and Motion, April 12, 1994; Folder 1, pp. 51-52.

^[14] Order dated April 26, 1994; Folder 1, pp. 64-65.

^[15] Rollo, pp. 1-29.

^[16] Id., pp. 16-17.

^[17] Article Ix, Sec. 12, 1987 Constitution; underscoring supplied.

^[18] Section 15 § (1), RA 6770.

^[19] Almonte v. Vasquez, G.R. No. 95367, May 23, 1995, 244 SCRA 302.

^[20] Id., p. 304.

^[21] Id., p. 303.

^[22] Uy v. The Hon. Sandiganbayan, et al., G.R. Nos. 105965-70, March 20, 2001.

^[23] Deloso v. Domingo, G.R. No. 90591, November 21, 1990, 191 SCRA 551.

^[24] Comment, p. 10; Rollo, p. 126.

^[25] Id., p. 11; Id., p. 127.

^[26] Id., pp. 12-13; id., pp. 128-129.

^[27] See Note 23, p. 550.

^[28] Rollo, pp. 25-26.

^[29] Now Sec. 270, National Internal Revenue Code.

^[30] Now Sec. 278, Id.

^[31] See Note 19, pp. 295, 298, 300; underscoring supplied.

^[32] Administrative Order No.  07.

^[33] Memorandum, Rollo, p. 240.

^[34] Folder 1, pp. 3-4.

^[35] Id., p. 3.

^[36] Id., p. 2.

^[37] Id., p. 1.

^[38] See Note 32.

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