CASE DIGEST : Commissioner of Internal Revenue v. Migrant Pagbilao Corporation

 G.R. No. 159593             October 12, 2006

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.

MIRANT1 PAGBILAO CORPORATION (formerly SOUTHERN ENERGY QUEZON, INC.)

FACTS: The CTA partially granted the claim of herein respondent Mirant Pagbilao Corporation (MPC) for the refund of the input Value Added Tax (VAT) on its purchase of capital goods and services for the period 1 April 1996 to 31 December 1996, and ordered herein petitioner Commissioner of the Bureau of Internal Revenue (BIR) to issue a tax credit certificate in the amount of P28,744,626.95. The CTA subsequently denied the BIR Commissioner's Motion for Reconsideration in a Resolution,8 dated 31 August 2001. Aggrieved, the BIR Commissioner filed with the Court of Appeals a Petition for Review. The Court of Appeals found no merit in the BIR Commissioner's Petition, and in its Decision, dated 30 July 2003. It was only after the CTA promulgated its Decision on 11 July 2000, which was favorable to MPC and adverse to the BIR Commissioner, that the latter filed his Petition for Review before the Court of Appeals on 4 October 2000, averring, for the very first time, that MPC was a public utility, subject to franchise tax and not VAT; and since it was not paying VAT, it could not claim the refund of input VAT on its purchase of capital goods and services. Hence this petition

ISSUE: WON a party can change his theory of the case on appeal.

HELD: The general rule is that a party cannot change his theory of the case on appeal. The Supreme Court ruled that it is a settled rule is that defenses not pleaded in the answer may not be raised for the first time on appeal. Courts of justice have no jurisdiction or power to decide a question not in issue. Courts cannot relax or suspend rules unless there is compelling reason to do so. Also, it is based on the sound discretion of the court whether such ground is good or sufficient to warrant the relaxation of the rules. The supreme court ruled there is no sufficient cause presented by the BIR in order to warrant the relaxation of the rules.