BIR v.
OFFICE OF THE OMBUDSMAN proper case as it is only a step preliminary to the filing of recovery actions on
2002|De Leon
Graft Investigation Officer II (GIO) Soquilon received information from an informer-for-
reward that tax refunds have been anomalously granted to Distillera Limtuaco & Co.,
Inc. and La Tondeña Distilleries, Inc. Upon receipt of the information, Soquilon
recommended to then Ombudsman Conrado M. Vasquez that the “case” be docketed
and subsequently assigned to him for investigation.
The OMB issued a subpoena duces tecum addressed to Atty. Mansequiao of the
Legal Department of the BIR ordering him to appear before him and to bring the
complete original case dockets of the refunds granted to the said companies.
 BIR resisted: grant of the tax refund had already been mooted by the
Sandiganbayan in People vs Larin, and the Limtuaaco case was pending
investigation by GIO II Baldrias
o OMB rejected the motion to vacate, issued another subpoena
duces tecum to BIR Commissioner Liwayway Vinzons-Chato
BIR: (a) the issues weren’t even resolved, (b) documents required were already with
GIO II Baldrias, (c) 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,” (d) the subpoena took on the nature of an
omnibus subpoena since it did not specifically describe the particular documents to be
produced, (e) no clear showing that the tax case dockets sought to be produced had
evidence material to the inquiry, (f) compliance with the subpoena duces tecum would
violate Sec. 269 of the National Internal Revenue Code (NLRC) on unlawful
divulgence of trade secrets and Sec. 277 on procuring unlawful divulgence of trade
secrets; and (g) Limtuaco and La Tondea had the right to rely on the correctness and
conclusiveness of the decisions of the Commissioner of Internal Revenue.
 OMB denied. The referral to Baldrias was already referred again to the Fact
Finding and Investigation Bureau of the OMB for consolidation and the
documents to Baldrias were incomplelete and uncertified. Subpoena was not
a fishing expedition since the documents were clearly specified.
BIR’s MR: (a) OMB has no jurisdiction, (b) the subpoena was not properly
issued in accordance with law, and (c) non-compliance was justifiable.
 BIR said it had the exclusive authority w/n to grant a tax credit and that the
jurisdiction to review the same was in the Court of Tax Appeals, not the
OMB. What respondent should have done was to appeal BIR’s decision of
granting tax credits to Limtuaco and La Tondea to the Court of Tax Appeals
since it is the proper forum to review the decisions of the Commissioner of
Internal Revenue.
 For the subpoena to be lawfully issued, 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. Reyes as well
as not specifically describing the documents to be produced.
 The investigative powers of OMB is not unbridled, it could exercise it only
when there exists an appropriate case and subject to the limitations
provided by law, the fact-finding investigation by the Ombudsman is not the
the tax refunds granted to Limtuaco and La Tondea.

o OMB denied, show cause why Asst. Comm. Maza should not be
cited for contempt.
o
However, before the expiration fo the period for which Maza was required to reply to
the show cause order, the BIR filed before this Court the instant petition for certiorari,
prohibition, preliminary injunction & TRO.
ISSUE:
1. W/N the case is an “appropriate case” for the OMB to adjudicate upon - YES
2. W/N OMB has jurisdiction over the tax refund case - YES
3. W/N the complaint was too general fr not specifying the documents - NO
4. W/N the subpoena duces tecum violated the NLRC - NO
5. W/N BIR’s due process was violated - YES
HELD: No.
1. 1987 Constitituon 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.
 No requirement of a pending action before OMB could investigate: on its
own or upon any complaint even if verbal, written, unsigned, unverified, OMB
could on its own initiate the investigation
 “in an appropriate case” was defined in Almonte v. Vasquez as: “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.”
CASE AT BAR: No objection to the informer-for-reward. The framers of the
Constitution took into account how reticent Filipinos are which keeps them from
complaining. 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 thus a
complaint of any form is allowed.
2. The power of the OMB to investigate and prosecute is plenary and
unqualified. 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.
CASE AT BAR: While it is true that the determination of w/n to grant a tax refund falls
within the exclusive expertise of BIR, when there is a suspicion or even just a
tinge of impropriety in such grant, the OMB could ascertain whether such was
done in accordance to law and identify the person who may be responsible. The
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.
3. The assailed subpoena duces tecum sufficiently described the records to be
produced and petitioner knew which records were being referred to as It even
suggested that the tax dockets sought to be produced may not contain evidence
material o the inquiry and it had already submitted it to Baldrias.
4. No violation of S269 or S277 of NLRC. The documents sought to be produced
were only the case dockets of the tax refunds granted to Limtuaco and La Tondea
which are public records, and the subpoena duces tecum were directed to the
public officials who have the official custody of the said records. Trade secrets
will be unnecessarily disclosed. But even if they were trade secrets, it would not justify
the non-production before the OMB.
 Almote v.Vasquez: 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 that it transcends the individual interests of a private citizen,
even though, as a consequence thereof, the plaintiff cannot enforce his legal
rights
CASE AT BAR: No claim military or diplomatic secrets are in the records. Even if
privileged, such would only justify ordering their inspection in camera but not their
non-production.
 Anyway, Rule V of the Rules of Procedure of the Office of the OMB provides
for immunity from criminal prosecution by the OMB for any person whose
testimony or production of evidence is necessary to determine the truth in
any inquiry hearing or proceeding done by the Office of the OMB or under its
authority in the performance of its constitutional functions and statutory
objectives, including Preliminary Investigation.
5. Petitioner asserts that its due process was violated since the subpoena was issued
without first furnishing BIR with a summary of the complaint and requiring it to submit
a written answer. The OMB argued this complaint was premature since it is only when
the OMB finds reasonable ground to investigate further that it is required to furnish R
with the summary of the complaint.
CASE AT BAR: True that due process was not afforded. Immediately upon receipt of
the information, OMB Vasquez requested it to be docketed and assigned to him for a
full-blown fact-finding investigation. Even during that initial stage, GIO Soquilon was
convinced that the granting of the tax refunds was so anomalous that he assured
OMB Vasquez of the eventual recovery of the tax refunds and the prosecution and
conviction of key BIR officials for graft and corruption. This does not comply with
the safeguards enumerated in Sec. 26, (2) of RA 6770 or the Ombudsman Act of
1989:
(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.
As well as the Rules of Procedure of the Office of the OMB S4R11:
(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.
In this case, GIO Soquilon forgot that ther are always two 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. The
BIR officials were summarily ordered to appear and produce the case dockets. From
the POV of the respondent, they were already deemed probably guilty of granting
anomalous tax refunds. No due process.
GRANTED. OMB is prohibited and ordered to desist from proceeding with the case.
RSAT