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BIR Issued Guidelines and Procedures for the Conduct of Enforcement Operations, Forfeiture, and Prosecution of Cases Relative to the Unlicensed Production, Importation, Trade, Sale, or Possession of Articles Subject to Excise Tax

On 23 August 2022, the Bureau of Internal Revenue (“BIR”) issued Revenue Memorandum Order (“RMO”) No. 40-2022 which prescribes guidelines and procedures to be observed in the conduct of enforcement operations, forfeiture, and prosecution of cases relative to the unlicensed production, importation, trade, sale, or possession of articles subject to excise tax. This RMO shall also cover the raw materials, packages, cigarette paper, tipping paper cigarette filter tips, ingredients, machinery equipment, apparatus, mechanical contrivances, and removable fixture of any sort used for their production as well as the use or possession of false, counterfeit, restored or altered BIR internal revenue stamps, labels or tags.

Mission Orders Required

Under RMO No. 40-2022, all surveillance and/ or enforcement activities shall be covered by Mission Orders (“MOs”). The MO shall be signed by the DCIR- Operations Group, ACIR, LTS or the concerned Regional Director.

The MOs shall be issued in triplicate/quadruplicate copies, and to be distributed as follows:

  • Original- Revenue Officers directed to conduct the surveillance and to be attached to the report on surveillance after termination of the activity
  • 2nd Copy- Investigating Office’s/ Division file copy 
  • 3rd Copy- Issuing Office’s file 
  • 4th Copy- Taxpayers copy (in case of overt surveillance)

Conduct of Enforcement Action Based on Surveillance Results

After the necessary MO is prepared, the same shall be served upon the subject taxpayer. This MO shall direct the concerned Revenue Officers (“ROs”) to enter any house, building, or place where articles subject to excise tax are produced, or kept or are believed by him upon reasonable grounds to be produced or kept, so far as may be necessary to examine, discover, or seize the same; and to make seizure of any article wherein excise taxes has not been paid, in violation of the NIRC of 1997, as amended, and any of its implementing rules and regulations (“IRR”). There shall also be conduct of inventory-taking/ physical count of all the articles subject to excise tax. 

Thereafter, a letter shall be served directing the subject taxpayer to present the following documents within five (5) days from receipt of the letter:

  1. Registration of Branch/ Warehouse/ Storage Facility 
  2. Permit to operate as manufacturer/ importer/ dealer or maintain a warehouse, for excise tax purposes
  3. Authenticated copy of Lease of Contract/ Agreement
  4. Official Register Books (“ORB”) for each subject warehouse
  5. BIR forms
  6. Inventory books per warehouse
  7. Other documents that may be determined necessary

It was also provided in the RMO that the concerned ROs are authorized to make apprehension/ seizure of all articles subject to excise tax and used for unlicensed/ illicit/ unauthorized production and false, counterfeit, restored or altered BIR Internal Revenue stamps labels or tags for violation of any law, rule or regulation administered by the BIR and issuance of Apprehension Slip.

Lastly, RMO No. 40-2022 provides that a Memorandum Report shall be prepared containing the following:

  1. Facts of the case;
  2. Procedures undertaken;
  3. Documentary requirements;
  4. Results of the inventory taking;
  5. Violations of the provisions of the NIRC of 1997, as amended and its IRR and computation of Internal Revenue tax liability on excise tax; and
  6. Recommendation:
    1. Forfeiture and destruction of seized articles, machinery, apparatus, etc.
    2. Issuance of a Letter of Authority and the corresponding Assessment
    3. Filing of civil case and/ or criminal case under the RATE program
    4. Closure of business- if there is sufficient ground