G.R. No.

104151 March 10, 1995

COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
COURT OF APPEALS, ATLAS CONSOLIDATED MINING AND
DEVELOPMENT CORPORATION an COURT OF TA! APPEALS,
respondents.
G.R No. 1055"# March 10, 1995
ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION,
petitioner,
$%.
COURT OF APPEALS COMMISSIONER OF INTERNAL REVENUE an
COURT OF TA! APPEALS, r&%'on&n(%.

REGALADO, J.:
)&*or& +% *or ,o-n( a,+-ca(-on ar& (.o '&(-(-on% *or r&$-&. on
certiorari %&'ara(&/0 *-/& 10 (h& Co22-%%-on&r o* In(&rna/ R&$&n+&
-n G.R. No. 104151, an 10 A(/a% Con%o/-a(& M-n-n3 an
D&$&/o'2&n( Cor'ora(-on -n G.R. No. 1055"#, .h-ch r&%'&c(-$&/0
%&&4 (h& a%-& o* (h& ,+32&n(% o* r&%'on&n( Co+r( o* A''&a/% -n
CA5G.R. SP No. 65945 'ro2+/3a(& on F&1r+ar0 16, 1996 1 an -n
CA5G.R. SP No. 6"078 'ro2+/3a(& on Ma0 66, 1996. 6
A(/a% Con%o/-a(& M-n-n3 an D&$&/o'2&n( Cor'ora(-on 9h&r&-n
a/%o r&*&rr& (o a% ACMDC: -% a o2&%(-c cor'ora(-on .h-ch o.n%
an o'&ra(&% a 2-n-n3 conc&%%-on a( To/&o C-(0, C&1+, (h&
'ro+c(% o* .h-ch ar& &;'or(& (o <a'an an o(h&r *or&-3n
co+n(r-&%. On A'r-/ 9, 1970, (h& Co22-%%-on&r o* In(&rna/ R&$&n+&
9a/%o Co22-%%-on&r, *or 1r&$-(0:, ac(-n3 on (h& 1a%-% o* (h& r&'or(
o* (h& &;a2-n&r% o* (h& )+r&a+ o* In(&rna/ R&$&n+& 9)IR:, ca+%&
(h& %&r$-c& o* an a%%&%%2&n( no(-c& an &2an *or 'a02&n( o*
(h& a2o+n( o* P16,#91,080.51 r&'r&%&n(-n3 &*-c-&nc0 ad valorem
'&rc&n(a3& an *-;& (a;&%, -nc/+-n3 -ncr&2&n(%, *or (h& (a;a1/&
0&ar 1985 a3a-n%( ACMDC. #
L-4&.-%&, on (h& 1a%-%. o* (h& )IR &;a2-n&r=% r&'or( -n ano(h&r
-n$&%(-3a(-on %&'ara(&/0 con+c(&, (h& Co22-%%-on&r ha
ano(h&r a%%&%%2&n( no(-c&, .-(h a &2an *or 'a02&n( o* (h&
a2o+n( o* P1#,5#1,4"".70 r&'r&%&n(-n3 (h& 198" &*-c-&nc0 ad
valorem an 1+%-n&%% (a;&% .-(h P5,000.00 co2'ro2-%& '&na/(0,
%&r$& on ACMDC on S&'(&21&r 6#, 1970. 4
ACMDC 'ro(&%(& 1o(h a%%&%%2&n(% 1+( (h&. %a2& .&r& &n-&,
h&nc& -( *-/& (.o %&'ara(& '&(-(-on% *or r&$-&. -n (h& Co+r( o* Ta;
A''&a/% 9a/%o, (a; co+r(: .h&r& (h&0 .&r& oc4&(& a% C.T.A.
Ca%&% No%. #4"8 an #765. Th&%& (.o ca%&%, 1&-n3 %+1%(an(-a//0
-&n(-ca/ -n 2o%( r&%'&c(% &;c&'( *or (h& (a;a1/& '&r-o% an (h&
a2o+n(% -n$o/$&, .&r& &$&n(+a//0 con%o/-a(&.
On Ma0 #1, 1991, (h& Co+r( o* Ta; A''&a/% r&n&r& a con%o/-a(&
&c-%-on ho/-n3, inter alia, (ha( ACMDC .a% no( /-a1/& *or
&*-c-&nc0 ad valorem (a;&% on co''&r an %-/$&r *or 1985 an
198" -n (h& r&%'&c(-$& a2o+n(% o* P11,68",540.89 an
P16,776,8"0.70 (h&r&10 &**&c(-$&/0 %+%(a-n-n3 (h& (h&or0 o* ACMDC
(ha( -n co2'+(-n3 (h& ad valorem (a; on co''&r 2-n&ra/, (h&
r&*-n-n3 an %2&/(-n3 char3&% %ho+/ 1& &+c(&, -n a-(-on (o
*r&-3h( an -n%+ranc& char3&%, *ro2 (h& Lonon M&(a/ E;chan3&
9LME: 'r-c& o* 2an+*ac(+r& co''&r.
>o.&$&r, (h& (a; co+r( h&/ ACMDC /-a1/& *or (h& a2o+n( o*
P1,586,"#8.47, &;c/+%-$& o* -n(&r&%(, con%-%(-n3 o* 65? %+rchar3&
*or /a(& 'a02&n( o* (h& ad valorem (a; an /a(& *-/-n3 o* no(-c& o*
r&2o$a/ o* %-/$&r, 3o/ an '0r-(& &;(rac(& +r-n3 c&r(a-n '&r-o%,
an *or a//&3& &*-c-&nc0 2an+*ac(+r&r=% %a/&% (a; an
con(rac(or=% (a;.
Th& 'ar(-c+/ar% o* (h& r&+c& a2o+n( o* %a- (a; o1/-3a(-on -%
&n+2&ra(& -n &(a-/ -n (h& -%'o%-(-$& 'or(-on o* (h& @+&%(-on&
,+32&n( o* (h& (a; co+r(, (h+%A
B>EREFORE, '&(-(-on&r %ho+/ an -% h&r&10 ORDERED (o
'a0 (h& (o(a/ a2o+n( o* (h& *o//o.-n3A
a: P698,900.#9 a% 65? %+rchar3& on %-/$&r
&;(rac(& +r-n3 (h& '&r-o No$&21&r 1, 1984 (o
D&c&21&r #1, 1985.
1: P1"1,068.5# a% 65? %+rchar3& on %-/$&r
&;(rac(& *or (h& (a;a1/& 0&ar 198".
c: P#15,068.#0 a% 65? %+rchar3& on 3o/
&;(rac(& +r-n3 (h& '&r-o No$&21&r 1, 1984 (o
D&c&21&r #1, 1985.
: P6"0,170.55 a% 65? %+rchar3& on 3o/ +r-n3
(h& (a;a1/& 0&ar 198".
&: P5#,575.#0 a% 65? %+rchar3& on '0r-(&
&;(rac(& +r-n3 (h& '&r-o No$&21&r 1, 1984 (o
D&c&21&r #1, 1985.
*: P5#,67#."9 a% 65? %+rchar3& on '0r-(&
&;(rac(& +r-n3 (h& (a;a1/& 0&ar 198".
3: P#1",118.5# a% &*-c-&nc0 2an+*ac(+r&r=% %a/&%
(a; an %+rchar3& +r-n3 (h& (a;a1/& 0&ar 1985C
'/+% 14? -n(&r&%( *ro2 <an+ar0 61, 198" +n(-/ *+//0
'a- a% 'ro$-& +n&r S&c(-on 17# o* P.D. No. "9.
h: P6#,"#1.44 a% &*-c-&nc0 con(rac(or=% (a; an
%+rchar3& on (h& /&a%& o* '&r%ona/ 'ro'&r(0
+r-n3 (h& (a;a1/& 0&ar 1985C '/+% 14? -n(&r&%(
*ro2 <an+ar0 61, 198" +n(-/ *+//0 'a- a% 'ro$-&
+n&r S&c(-on 17# o* P.D. "9.
-: P91,77#.85 a% &*-c-&nc0 con(rac(or=% (a; an
%+rchar3& on (h& /&a%& o* '&r%ona/ 'ro'&r(0
+r-n3 (h& (a;a1/& 0&ar 198", '/+% 14? -n(&r&%(
*ro2 A'r-/ 61, 198" +n(-/ *+//0 'a- a% 'ro$-&
+n&r. S&c(-on 17# o* P.D. No. "9.
B-(h co%(% a3a-n%( '&(-(-on&r. 5
A% a con%&@+&nc&, 1o(h 'ar(-&% &/&$a(& (h&-r r&%'&c(-$&
con(&n(-on% (o r&%'on&n( Co+r( o* A''&a/% -n (.o %&'ara(&
'&(-(-on% *or r&$-&.. Th& '&(-(-on *-/& 10 (h& Co22-%%-on&r, .h-ch
.a% oc4&(& a% CA5G.R. SP No. 65945, @+&%(-on& (h& 'or(-on o*
(h& ,+32&n( o* (h& (a; co+r( &/&(-n3 (h& ad valorem (a; on
co''&r an %-/$&r, .h-/& (h& a''&a/ *-/& 10 ACMDC an oc4&(&
a% CA5G.R. SP No. 6"078 a%%a-/& (ha( 'ar( o* (h& &c-%-on or&r-n3
-( (o 'a0 P1,586,"#8.47 r&'r&%&n(-n3 a//&3& &*-c-&nc0
a%%&%%2&n(.
On F&1r+ar0 16, 1996, ,+32&n( .a% r&n&r& 10 r&%'on&n(
Co+r( o* A''&a/% -n CA5G.R. SP No. 65945, -%2-%%-n3 (h& '&(-(-on
an a**-r2-n3 (h& (a; co+r(=% &c-%-on on (h& 2ann&r o* co2'+(-n3
(h& ad valorem tax. " >&nc&, (h& Co22-%%-on&r o* In(&rna/ R&$&n+&
*-/& a '&(-(-on 1&*or&5 +% -n G.R. No. 104151, ra-%-n3 (h& %o/& -%%+&
o* .h&(h&r or no(, -n co2'+(-n3 (h& ad valorem (a; on co''&r,
char3&% *or %2&/(-n3 an r&*-n-n3 %ho+/ a/%o 1& &+c(&, -n
a-(-on (o *r&-3h( an -n%+ranc& co%(%, *ro2 (h& 'r-c& o* co''&r
conc&n(ra(&%.
On Ma0 66, 1996, ,+32&n( .a% /-4&.-%& r&n&r& 10 (h& %a2&
r&%'on&n( co+r( -n CA5G.R. SP No. 6"078, 2o-*0-n3 (h& ,+32&n(
o* (h& (a; co+r( an *+r(h&r r&+c-n3 (h& (a; /-a1-/-(0 o* ACMDC 10
&/&(-n3 (h&r&*ro2 (h& *o//o.-n3 -(&2%A
91: (h& a.ar +n&r 'ara3ra'h 9a: o* P698,900.#9 a% 65?
%+rchar3& on %-/$&r &;(rac(& +r-n3 (h& '&r-o No$&21&r 1,
1984 (o D&c&21&r #1, 1985C
96: (h& a.ar +n&r 'ara3ra'h 9c: (h&r&o* o* P#15,068.#0 a%
65? %+rchar3& on 3o/ &;(rac(& +r-n3 (h& '&r-o No$&21&r
1, 1984 (o D&c&21&r #1, 1985C an
9#: (h& a.ar +n&r 'ara3ra'h 9&: (h&r&o* o* P5#,575.#0 a% 64?
9%-c, 65?: %+rchar3& on '0r-(& &;(rac(& +r-n3 (h& '&r-o
No$&21&r 1, 1984 (o D&c&21&r #1, 1985. 8
S(-// no( %a(-%*-& .-(h (h& %a- ,+32&n( .h-ch ha r&+c& -(% (a;
/-a1-/-(0 (o P90",164.49, a% a *-na/ r&co+r%& ACMDC ca2& (o (h-%
Co+r( on a '&(-(-on *or r&$-&. on certiorari -n G.R. No. 1055"#,
c/a-2-n3 (ha( -( -% no( /-a1/& a( a// *or an0 &*-c-&nc0. (a;
a%%&%%2&n(% *or 1985 an 198". In o+r r&%o/+(-on o* S&'(&21&r 1,
199#, G.R. No. 104151 .a% or&r& con%o/-a(& .-(h G.R. No.
1055"#. 7
I. G.R No. 104151
Th& Co22-%%-on&r o* In(&rna/ R&$&n+& c/a-2% (ha( (h& Co+r( o*
A''&a/% an (h& (a; co+r( &rr& -n a//o.-n3 (h& &+c(-on o*
r&*-n-n3 an %2&/(-n3 char3&% *ro2 (h& 'r-c& o* co''&r
conc&n(ra(&%. I( -% (h& con(&n(-on o* (h& Co22-%%-on&r (ha( (h&
ac(+a/ 2ar4&( $a/+& o* (h& 2-n&ra/ 'ro+c(% %ho+/ 1& (h& 3ro%%
%a/&% r&a/-D& *ro2 co''&r conc&n(ra(&%, &+c(-n3 (h&r&*ro2
2-n-n3, 2-//-n3, r&*-n-n3, (ran%'or(-n3, han/-n3, 2ar4&(-n3 or an0
o(h&r &;'&n%&%. >& %+12-(% (ha( (h& 'hra%& Eor an0 o(h&r
&;'&n%&%E -nc/+&% %2&/(-n3 an r&*-n-n3 char3&% an (ha( (h& /a.
a//o.% &+c(-on% *or ac(+a/ co%( o* oc&an *r&-3h( an -n%+ranc&
on/0 -n -n%(anc&% .h&r& (h& 2-n&ra/% or 2-n&ra/ 'ro+c(% ar& %o/
or con%-3n& a1roa 10 (h& /&%%&&% or o.n&r o* (h& 2-n& +n&r
C.I.F. (&r2%, h&nc& -( -% &rror (o a//o. %2&/(-n3 an r&*-n-n3 char3&%
a% &+c(-on%.
B& ar& no( '&r%+a& 10 h-% 'o%(+/a(-on an *-n (h& ar3+2&n(%
a+c& -n %+''or( (h&r&o* +n(&na1/&.
Th& '&r(-n&n( 'ro$-%-on% o* (h& Na(-ona/ In(&rna/ R&$&n+& Co&
9(a; co&, *or *ac-/-(0: a( (h& (-2& 2a(&r-a/ (o (h-% con(ro$&r%0, r&a
a% *o//o.%A
S&c. 64#. Ad valorem (a;&% on o+('+( o* 2-n&ra/ /an% no(
co$&r& 10 /&a%&. F Th&r& -% h&r&10 -2'o%& on (h& ac(+a/
2ar4&( $a/+& o* (h& ann+a/ 3ro%% o+('+( o* (h& 2-n&ra/%
2-n&ra/ 'ro+c(% &;(rac(& or 'ro+c& *ro2 a// 2-n&ra/ /an%
no( co$&r& 10 /&a%&, an ad valorem (a; -n (h& a2o+n( o* (.o
per centum o* (h& $a/+& o* (h& o+('+( &;c&'( 3o/ .h-ch %ha//
'a0 on& an on&5ha/* per centum.
)&*or& (h& 2-n&ra/% or 2-n&ra/ 'ro+c(% ar& r&2o$& *ro2 (h&
2-n&%, (h& Co22-%%-on&r o* In(&rna/ R&$&n+& or h-%
r&'r&%&n(a(-$&% %ha// *-r%( 1& no(-*-& o* %+ch r&2o$a/ on a
*or2 'r&%cr-1& *or (h& '+r'o%&. 9A% a2&n& 10 R&'. Ac( No.
"110.:
S&c. 64". D&*-n-(-on% o* (h& (&r2% E3ro%% o+('+(,E E2-n&ra/%E
an E2-n&ra/ 'ro+c(%.E F D-%'o%-(-on o* ro0a/(-&% an ad
valorem (a;&%. Th& (&r2 E3ro%% o+('+(E %ha// 1& -n(&r'r&(& a%
(h& ac(+a/ 2ar4&( $a/+& o* 2-n&ra/% or 2-n&ra/ 'ro+c(%, or o*
1+//-on *ro2 &ach 2-n& or 2-n&ra/ /an% o'&ra(& a% a
%&'ara(& &n(-(0 .-(ho+( an0 &+c(-on *ro2 2-n-n3, 2-//-n3,
r&*-n-n3, (ran%'or(-n3, han/-n3, 2ar4&(-n3, or an0 o(h&r
&;'&n%&%A Provided, however, Tha( -* (h& 2-n&ra/% or 2-n&ra/
'ro+c(% ar& %o/ or con%-3n&. a1roa 10 (h& /&%%&& or o.n&r
o* (h& 2-n& +n&r C.I.F. (&r2%, (h& ac(+a/ co%( o* oc&an *r&-3h(
an -n%+ranc& %ha// 1& &+c(&. Th& o+('+( o* an0 3ro+' o*
con(-3+o+% 2-n-n3 c/a-2 %ha// no( 1& %+1-$-&. Th& .or
E2-n&ra/%E %ha// 2&an a// -nor3an-c %+1%(anc&% *o+n -n
na(+r& .h&(h&r -n %o/-, /-@+-, 3a%&o+%, or an0 -n(&r2&-a(&
%(a(&. Th& (&r2 E2-n&ra/ 'ro+c(%E %ha// 2&an (h-n3%
'ro+c& 10 (h& /&%%&&, conc&%%-ona-r& or o.n&r o* 2-n&ra/
/an%, a( /&a%( &-3h(0 '&r c&n( o* .h-ch (h-n3% 2+%( 1&
2-n&ra/% &;(rac(& 10 %+ch /&%%&&, conc&%%-ona-r&, or o.n&r
o* 2-n&ra/ /an%. T&n per centum o* (h& ro0a/(-&% an ad
valorem (a;&% h&r&-n 'ro$-& %ha// accr+& (o (h& 2+n-c-'a/-(0
an (&n per centum (o (h& 'ro$-nc& .h&r& (h&52-n&% ar&
%-(+a(&, an &-3h(0 per centum (o (h& Na(-ona/ Tr&a%+r0. 9A%
a2&n& 10 R&'. Ac(% No%. 7#4, 1699, an 10 R&'. Ac( No.
1510, a''ro$& <+n& 1", 195":.E
To r&'hra%&, +n&r (h& a*or&@+o(& 'ro$-%-on%, (h& ad valorem (a;
o* 6? -% -2'o%& on (h& ac(+a/ 2ar4&( $a/+& o* (h& ann+a/ 3ro%%
o+('+( o* (h& 2-n&ra/% or 2-n&ra/ 'ro+c(% &;(rac(& or 'ro+c&
*ro2 a// 2-n&ra/ /an% no( co$&r& 10 /&a%&. In co2'+(-n3 (h& (a;,
(h& (&r2 E3ro%% o+('+(E %ha// 1& (h& ac(+a/ 2ar4&( $a/+& o*
2-n&ra/% or 2-n&ra/ 'ro+c(%, or o* 1+//-on *ro2 &ach 2-n& or
2-n&ra/ /an% o'&ra(& a% a %&'ara(& &n(-(0, .-(ho+( an0 &+c(-on
*or 2-n-n3, 2-//-n3, r&*-n-n3, (ran%'or(-n3, han/-n3, 2ar4&(-n3 or
an0 o(h&r &;'&n%&%. I* (h& 2-n&ra/% or 2-n&ra/ 'ro+c(% ar& %o/ or
con%-3n& a1roa 10 (h& /&%%&& or o.n&r o* (h& 2-n& +n&r C.I.F.
(&r2%, (h& ac(+a/ co%( o* oc&an *r&-3h( an -n%+ranc& %ha// 1&
&+c(&.
In o(h&r .or%, (h& a%%&%%2&n( %ha// 1& 1a%&, no( +'on (h& co%(
o* 'ro+c(-on or &;(rac(-on o* %a- 2-n&ra/% or 2-n&ra/ 'ro+c(%,
1+( on (h& 'r-c& .h-ch (h& %a2& F 1&*or& or .-(ho+( +n&r3o-n3 a
'roc&%% o* 2an+*ac(+r& F .o+/ co22an -n (h& or-nar0 co+r%&
o* 1+%-n&%%. 9
In (h& -n%(an( ca%&, (h& a//o.anc& 10 (h& (a; co+r( o* %2&/(-n3 an
r&*-n-n3 char3&% a% &+c(-on% -% no( con(rar0 (o (h& a1o$&5
2&n(-on& 'ro$-%-on% o* (h& (a; co& .h-ch o%(&n%-1/0 'roh-1-(
an0 *or2 o* &+c(-on &;c&'( *r&-3h( an -n%+ranc& char3&%. A
r&$-&. o* (h& r&cor% .-// %ho. (ha( -( .a% (h& Lonon M&(a/
E;chan3& 'r-c& on .-r& 1ar .h-ch .a% +%& a% (a; 1a%& 10 ACMDC
*or '+r'o%&% o* (h& 6? ad valorem (a; on co''&r conc&n(ra(&%
%-nc& (h&r& .a% no a$a-/a1/& 2ar4&( 'r-c& @+o(a(-on -n (h&
co22o-(0 &;chan3& or 2ar4&(% o* (h& .or/ *or co''&r
conc&n(ra(&% nor .a% (h&r& an0 2ar4&( @+o(a(-on /oca//0
o1(a-na1/&. 10 >&nc&, (h& char3&% *or %2&/(-n3 an r&*-n-n3 .&r&
a%%&%%& no( on (h& 1a%-% o* (h& 'r-c& o* (h& co''&r &;(rac(& a(
(h& 2-n& %-(& .h-ch -% 'roh-1-(& 10 /a., 1+( on (h& 1a%-% o* (h&
ac(+a/ 2ar4&( $a/+& o* (h& 2an+*ac(+r& co''&r .h-ch -n (h-% ca%&
-% (h& 'r-c& @+o(& *or co''&r .-r& 1ar 10 (h& Lonon M&(a/
E;chan3&.
Th& -%%+& o* .h&(h&r (h& ad valorem (a; %ho+/ 1& 1a%& +'on (h&
$a/+& o* (h& *-n-%h& 'ro+c(, or (h& $a/+& +'on &;(rac(-on o* (h&
ra. 2a(&r-a/% or 2-n&ra/% +%& -n (h& 2an+*ac(+r& o* %a- *-n-%h&
'ro+c(%, ha% 1&&n 'a%%& +'on 10 +% -n %&$&ra/ ca%&% .h&r&-n
.& h&/ (ha( (h& ad valorem (a; -% (o 1& co2'+(& on (h& 1a%-% o*
(h& 2ar4&( $a/+& o* (h& 2-n&ra/ -n -(% con-(-on a( (h& (-2& o* %+ch
r&2o$a/ an 1&*or& -( +n&r3o&% a ch&2-ca/ chan3& (hro+3h
2an+*ac(+r-n3 'roc&%%, a% -%(-n3+-%h& *ro2 a '+r&/0 'h0%-ca/
'roc&%% .h-ch o&% no( n&c&%%ar-/0 -n$o/$& (h& chan3& or
(ran%*or2a(-on o* (h& ra. 2a(&r-a/ -n(o a co2'o%-(& -%(-nc(
'ro+c(. 11
Th+%, -n (h& ca%& o* e!u Portland ement o. v". ommi""ioner
o# $nternal Revenue, 16 (h-% Co+r( r+/&A
. . . ad valorem (a; -% a (a; no( on (h& 2-n&ra/%, 1+( +'on (h&
'r-$-/&3& o* %&$&r-n3 or &;(rac(-n3 (h& %a2& *ro2 (h& &ar(h, (h&
3o$&rn2&n(=% r-3h( (o &;ac( (h& %a- -2'o%( %'r-n3-n3 *ro2 (h&
R&3a/-an (h&or0 o* S(a(& o.n&r%h-' o* -(% na(+ra/ r&%o+rc&%.
. . . Bh-/& c&2&n( -% co2'o%& o* 70? 2-n&ra/%, -( -% no(
2&r&/0 an a2-;(+r& or 1/&n-n3 o* ra. 2a(&r-a/%, a% /-2&,
%-/-ca, %ha/& an o(h&r%. I( -% (h& r&%+/( o* a &*-n-(& (h&
cr+%h-n3 o* 2-n&ra/%, 3r-n-n3, 2-;-n3, ca/c-n-n3, coo/-n3,
a-n3 o* r&(ar&r or ra. 30'%+2. In %hor(, 1&*or& c&2&n(
r&ach&% -(% %a/&a1/& *or2, (h& 2-n&ra/% ha a/r&a0 +n&r3on&
a ch&2-ca/ chan3& (hro+3h 2an+*ac(+r-n3 'roc&%%, Th-% co+/
no( ha$& 1&&n (h& %(a(& o* 2-n&ra/ 'ro+c(%= (ha( (h& /a.
con(&2'/a(&% *or '+r'o%&% o* -2'o%-n3 (h& ad valorem (a;. . . .
(h-% (a; -% -2'o%& on (h& 'r-$-/&3& o* &;(rac(-n3 or %&$&r-n3
(h& 2-n&ra/% *ro2 (h& 2-n&%. To o+r 2-n%, (h&r&*or& (h&
-nc/+%-on o* (h& (&r2 2-n&ra/ 'ro+c(% -% -n(&n& (o
co2'r&h&n ca%&% .h&r& (h& 2-n& or @+arr-& &/&2&n(% 2a0
no( 1& +%a1/& -n -(% or-3-na/ %(a(& .-(ho+( a''/-ca(-on o* %-2'/&
(r&a(2&n(% . . . .h-ch 'roc&%% o&% no( n&c&%%ar-/0 -n$o/$& (h&
chan3& or (ran%*or2a(-on o* (h& ra. 2a(&r-a/% -n(o a
co2'o%-(&, -%(-nc( 'ro+c(. . . . Bh-/& (h& %&//-n3 'r-c& o*
c&2&n( 2a0 r&*/&c( (h& ac(+a/ 2ar4&( $a/+& o* c&2&n(, %a-
%&//-n3 'r-c& canno( 1& (a4&n a% (h& 2ar4&( $a/+& a/%o o* (h&
2-n&ra/% co2'o%-n3 (h& c&2&n(. An -( .a% no( (h& c&2&n(
(ha( .a% 2-n&, on/0 (h& 2-n&ra/% co2'o%-n3 (h& *-n-%h&
'ro+c(.
Th-% $-&. .a% %+1%&@+&n(/0 a**-r2& -n (h& r&%o/+(-on o* (h& Co+r(
&n0-n3 (h& 2o(-on *or r&con%-&ra(-on o* -(% a*or&%a- &c-%-on, 1#
r&-(&ra(& (ha( (h& '&r(-n&n( 'ar( o* .h-ch r&-(&ra(& (ha( F
. . . (h& ad valorem (a; -n @+&%(-on %ho+/ 1& 1a%& on (h&
ac(+a/ 2ar4&( $a/+& o* (h& @+arr-& 2-n&ra/% +%& -n 'ro+c-n3
c&2&n(, . . . (h& /a. -n(&n& (o -2'o%& (h& ad valorem (a;
+'on (h& 2ar4&( $a/+& o* (h& co2'on&n( 2-n&ra/ 'ro+c(% -n
(h&-r or-3-na/ %(a(& 1&*or& 'roc&%%-n3 -n(o c&2&n(. . . . (h& /a.
o&% no( -2'o%& a (a; on c&2&n( @+a c&2&n(, 1+( on 2-n&ra/
'ro+c(% a( /&a%( 70? o* .h-ch 2+%( 1& 2-n&ra/% &;(rac(& 10
(h& /&%%&&, conc&%%-ona-r& or o.n&r o* 2-n&ra/ /an%.
Th& Co+r( - no(, an co+/ no(, r+/& (ha( c&2&n( -% a
2an+*ac(+r& 'ro+c( %+1,&c( (o %a/&% (a;, *or (h& r&a%on (ha(
%+ch /-a1-/-(0 ha n&$&r 1&&n /-(-3a(& 10 (h& 'ar(-&%. Bha( -(
- &c/ar& -% (ha(, .h-/& c&2&n( -% a 2-n&ra/ 'ro+c(, -( -% no
/on3&r -n (h& %(a(& or con-(-on con(&2'/a(& 10 (h& /a.C
h&nc& (h& 2ar4&( $a/+& o* (h& c&2&n( co+/ no( 1& (h& 1a%-%
*or co2'+(-n3 (h& ad valorem (a;, %-nc& (h& ad valorem (a; -% a
%&$&ranc& (a; -.&., a char3& +'on (h& 'r-$-/&3& o* %&$&r-n3 or
&;(rac(-n3 2-n&ra/% *ro2 (h& &ar(h, 9D&c. '. 4: an -% +& an
'a0a1/& +'on r&2o$a/ o* (h& 2-n&ra/ 'ro+c( *ro2 -(% 1& or
2-n& 9Ta; Co& %. 645:.
Th&r&*or&, (h& -2'o%a1/& ad valorem (a; %ho+/ 1& 1a%& on (h&
%&//-n3 'r-c& o* (h& @+arr-& 2-n&ra/%, .h-ch -% -(% ac(+a/ 2ar4&(
$a/+&, an no( on (h& 'r-c& o* (h& 2an+*ac(+r& 'ro+c(. I* (h&
2ar4&( $a/+& cho%&n *or (h& r&c4on-n3 -% (h& $a/+& o* (h&
2an+*ac(+r&. or *-n-%h& 'ro+c(, a% -n (h& ca%& a( 1ar, (h&n a//
&;'&n%&% o* 'roc&%%-n3 or 2an+*ac(+r-n3 %ho+/ 1& &+c(& -n
or&r (o a''ro;-2a(& a% c/o%&/0 a% -% h+2an/0 'o%%-1/& (h& ac(+a/
2ar4&( $a/+& o* (h& ra. 2-n&ra/ a( (h& 2-n& %-(&.
I( .a% co''&r or& (ha( .a% &;(rac(& 10 ACMDC *ro2 -(% 2-n& %-(&
.h-ch, (hro+3h a %-2'/& 'h0%-ca/ 'roc&%% o* r&2o$-n3 -2'+r-(-&%
(h&r&*ro2, .a% con$&r(& -n(o co''&r conc&n(ra(& In (+rn, (h-%
co''&r conc&n(ra(& +n&r.&n( (h& 'roc&%% o* %2&/(-n3 an
r&*-n-n3, an (h& *-n-%h& 'ro+c( -% ca//& co''&r ca(ho& or
co''&r .-r& 1ar.
Th& co''&r .-r& 1ar -% (h& 2an+*ac(+r& co''&r. I( -% no( (h&
2-n&ra/ &;(rac(& *ro2 (h& 2-n& %-(& nor can -( 1& con%-&r& a
2-n&ra/ 'ro+c( %-nc& -( ha% +n&r3on& a 2an+*ac(+r-n3 'roc&%%,
(o .-(A
I. Th& 'h0%-ca/ 'roc&%% -n$o/$& -n (h& 'ro+c(-on o* co''&r
conc&n(ra(& ar& (h& *o//o.-n3 9'. 19, )IR r&cor%C E;h. G>H, '.
4#, Fo/&r I o* E;h-1-(%.:
A M-n-n3 Proc&%% F
91: )/a%(-n3 F Th& or& 1o0 -%
1ro4&n +' 10 1/a%(-n3.
96: Loa-n3 F Th& or& a$&ra3-n3
a1o+( 1I6 '&rc&n(
co''&r -% /oa& -n(o or& (r+c4% 10
&/&c(r-c %ho$&/%.
9#: >a+/-n3 F Th& (r+c4% o* or& ar&
ha+/& (o (h& 2-//.
) M-//-n3 Proc&%% F
91: Cr+%h-n3 F Th& or& -% cr+%h& (o
'-&c&% (h& %-D& o* '&an+(%.
96: Gr-n-n3 F Th& cr+%h& or& -%
3ro+n (o 'o.&r *or2.
9#: Conc&n(ra(-n3 F Th& 2-n&ra/
1&ar-n3 'ar(-c/&% -n (h& 'o.&r& or&
ar& conc&n(ra(&.
Th& or&% or roc4%, (ran%'or(& 10 con$&0or%, ar& cr+%h&
r&'&a(&/0 10 %(&&/ 1a//% -n(o %-D& o* '&an+(%, .h&n (h&0 ar&
3ro+n an '+/$&r-D&. Th& 'o.&r -% *& -n(o conc&n(ra(or%
.h&r& -( -% 2-;& .-(h .a(&r an o(h&r r&a3&n(%. Th-% -% 4no.n
-n (h& -n+%(r0 a% a */o(a(-on 'ha%&. Th& co''&r51&ar-n3
2a(&r-a/% */oa( .h-/& (h& non5co''&r 2a(&r-a/% -n (h& roc4 %-n4.
Th& 2a(&r-a/ (ha( */oa(% -% %coo'& an r-& an '-/&. Th-% -%
4no.n a% co''&r conc&n(ra(&. Th& 2a(&r-a/ a( (h& 1o((o2 -%
.a%(&, an -% 4no.n -n (h& -n+%(r0 a% (a-/-n3%. In To/&o C-(0,
(a-/-n3% ar& -%'o%& o* (hro+3h 2&(a/ '-'&% *ro2 (h& */o(a(-on
2-//% (o (h& o'&n %&a. Co''&r conc&n(ra(& o* '&(-(-on&r
con(a-n% 675#1? co''&r. Th& conc&n(ra(& -% /oa& -n oc&an
$&%%&/% an %h-''& (o M-(%+1-%h- M&(a/ Cor'ora(-on 2-//% -n
<a'an, .h&r& (h& %2&/(-n3, r&*-n-n3 an *a1r-ca(-n3 'roc&%%&%
ar& on&. 9M&2oran+2 o* '&(-(-on&r, '. 81, CTA r&cor%.:
II. Th& ch&2-ca/ or 2an+*ac(+r-n3 'roc&%% -n (h& 'ro+c(-on o*
.-r& 1ar -% a% *o//o.%A 9E;h. =>=, '. 4#, Fo/&r I o* &;h-1-(%.:
A. S2&/(-n3 F
91: Dr0-n3 F Th& co''&r conc&n(ra(&% 9a$&ra3-n3
a1o+( #0 '&rc&n( co''&r: ar& r-&.
1. F/a%h F+rnac& F Th& r-& conc&n(ra(& -% %2&/(&
a+(o3&no+%/0 an a 2a((& con(a-n-n3 "5 '&rc&n( -%
'ro+c&.
6. Con$&r(&r F Th& 2a((& -% con$&r(& (o 1/-%(&r co''&r
.-(h a '+r-(0 o* a1o+( 99 '&r c&n(.
). R&*-n-n3 F
91: Ca%(-n3 Bh&&/ F )/-%(&r co''&r -% (r&a(& -n
an ano& *+rnac& .h&r&. co''&r r&@+-r-n3 *+r(h&r
(r&a(2&n( -% %&n( (o (h& ca%(-n3 .h&&/ (o 'ro+c&
ca(ho& co''&r.
96: E/&c(ro/0(-c R&*-n-n3 F Ano& co''&r -%
*+r(h&r r&*-n& 10 &/&c(ro/0(-c r&*-n-n3 (o 'ro+c&
ca(ho& co''&r.
C. Fa1r-ca(-n3 F
91: Ro//-n3 F F-r& r&*-n& or &/&c(ro/05(-c co''&r5
anIor 1ra%% 9a 2-;(+r& O* co''&r an D-nc: -%
2a& -n(o (+1&%, %h&&(%, ro% an .-r&.
96: E;(r+-n3 F Sh&&( (+1&%, ro% an .-r& ar&
*+r(h&r *a1r-ca(& -n(o (h& co''&r ar(-c/&% -n
&$&r0a0 +%&.
Th& r&cor% %ho. (ha( ca(ho&%, .-(h '+r-(0 o* 99.975? ar&
ca%( or *a1r-ca(& -n(o $ar-o+% %ha'&%, &'&n-n3 on (h&-r
-n+%(r-a/ &%(-na(-on. Ca(ho&% ar& 2&(a/ %h&&(% o* co''&r 1
2&(&r ; 1 2&(&r ; 1"51" 2-//-2&(&r (h-c4 an 1"0 4-/o3ra2% -n
.&-3h(, a/(ho+3h (h-% (h-c4n&%% -% no( +n-*or2 *or a// (h&
%h&&(%. Ca(ho&% %h&&(% ar& no( %+-(a1/& *or -r&c( *a1r-ca(-on,
h&nc&, ar& *+r(h&r *a1r-ca(& -n(o (h& &%-r& %ha'&, /-4& .-r&
1ar, 1-//&(% an ca4&%. 9'. 1, &'o%-(-on, Lonon,: B-r& 1ar% ar&
r&c(an3+/ar '-&c&%, 100 2-//-2&(&r ; 100 2-//-2&(&r ; 1.#8
2&(&r% /on3 an .&-3h %o2& 165 4-/o%. Th&0 ar& %+-(& *or
co''&r .-r&% an co''&r ro%. )-//&(% ar& *a1r-ca(& -n(o (+1&%
an h&a$0 &/&c(r-c %&c(-on%. Ca4&% ar& -n (h& *or2 o* (h-c4
%h&&(% an %(r-'%. 9''. 1#, 17561, &'o%-(-on, <a'an, E;h%. ECE
J EGE, <a'an, ''. 156, &'o%-(-on, Lonon, %&& ''. 80586, CTA
r&cor%.: 14
S-3n-*-can(/0, (h& *-n-n3 (ha( co''&r .-r& 1ar -% a 'ro+c( o* a
2an+*ac(+r-n3 'roc&%% *-n% %+''or( -n (h& &*-n-(-on o* a
E2an+*ac(+r&rE -n S&c(-on 194 9;: o* (h& a*or&%a- (a; co& .h-ch
'ro$-&%A
EMan+*ac(+r&rE -nc/+&% &$&r0 '&r%on .ho 10 'h0%-ca/ or
ch&2-ca/ 'roc&%% a/(&r% (h& &;(&r-or (&;(+r& or *or2 or -nn&r
%+1%(anc& o* an0 ra. 2a(&r-a/ or 2an+*ac(+r& or 'ar(-a//0
2an+*ac(+r& 'ro+c( -n %+ch a 2ann&r a% (o 'r&'ar& -( *or a
%'&c-a/ +%& or +%&% (o .h-ch -( co+/ no( ha$& 1&&n '+( -n -(%
or-3-na/ con-(-on, or .ho 10 an0 %+ch 'roc&%% a/(&r% (h&
@+a/-(0 o* an0 %+ch ra. 2a(&r-a/ or 2an+*ac(+r& or 'ar(-a//0
2an+*ac(+r& 'ro+c( %o a% (o r&+c& -( (o 2ar4&(a1/& %ha'&
or 'r&'ar& -( *or an0 o* (h& +%&% o* -n+%(r0, or .ho 10 an0
%+ch 'roc&%% co21-n&% an0 %+ch ra. 2a(&r-a/ or
2an+*ac(+r& or 'ar(-a//0 2an+*ac(+r& 'ro+c(% .-(h o(h&r
2a(&r-a/%A or 'ro+c(% o* (h& %a2& or -**&r&n( 4-n% an -n
%+ch 2ann&r (ha( (h& *-n-%h& 'ro+c( o* %+ch 'roc&%% or
2an+*ac(+r& can 1& '+( (o a %'&c-a/ +%& or +%&% (o .h-ch %+ch
ra. 2a(&r-a/ or 2an+*ac(+r& or 'ar(-a//0 2an+*ac(+r&
'ro+c(%, or co21-n&% (h& %a2& (o 'ro+c& %+ch *-n-%h&
'ro+c(% *or (h& '+r'o%& o* (h&-r %a/& or -%(r-1+(-on (o o(h&r%
an no( *or h-% o.n +%& or con%+2'(-on.
Mor&o$&r, -( -% a/%o .or(h no(-n3 a( (h-% 'o-n( (ha( (h& &c-%-on o*
(h& (a; co+r( .a% 1a%& on -(% 'r&$-o+% r+/-n3 -n (h& ca%& o* Atla"
on"olidated %inin& and 'evelopment orporation v".
ommi""ioner o# $nternal Revenue, 15 a(& <an+ar0 6#, 1971,
.h-ch .& @+o(& .-(h a''ro$a/A
. . . Th& con(ro//-n3 /a. -% c/&ar an %'&c-*-cC -( %ho+/ (h&r&*or&
1& a''/-& a% S-nc& (h& 2-n&ra/ or 2-n&ra/ 'ro+c( r&2o$&
*ro2 -(% 1& or 2-n& a( To/&o C-(0 10 '&(-(-on&r -% co''&r
conc&n(ra(& a% a2-((& 10 r&%'on&n( h-2%&/*, no( co''&r
.-r& 1ar, (h& ac(+a/ 2ar4&( $a/+& o* %+ch co''&r conc&n(ra(& -n
-(% con-(-on a( (h& (-2& o* %+ch r&2o$a/ .-(ho+( an0
&+c(-on *ro2 2-n-n3, 2-//-n3, r&*-n-n3, (ran%'or(-n3,
han/-n3, 2ar4&(-n3, or an0 o(h&r &;'&n%&% %ho+/ 1& (h&
1a%-% o* (h& 6? ad valorem (a;.
Th& conc/+%-on r&ach& -% r&n&r& c/&ar&r .h&n -( -% (a4&n
-n(o con%-&ra(-on (ha( (h& ad valorem (a; -% a %&$&ranc& (a;, a
char3& +'on (h& 'r-$-/&3& o* %&$&r-n3 or &;(rac(-n3 2-n&ra/%
*ro2 (h& &ar(h, an -% +& an 'a0a1/& +'on r&2o$a/ o* (h&
2-n&ra/ 'ro+c( *ro2 -(% 1& or 2-n&, (h& (a; 1&-n3 co2'+(&
on (h& 1a%-% o* (h& 2ar4&( $a/+& o* (h& 2-n&ra/ -n -(% con-(-on
a( (h& (-2& o* %+ch r&2o$a/ an 1&*or& -(% 1&-n3 %+1%(an(-a//0
chan3& 10 ch&2-ca/ or 2an+*ac(+r-n3 9a% -%(-n3+-%h& *ro2
'+r&/0 'h0%-ca/: 'roc&%%-n3. 9C&1+ Por(/an C&2&n( Co. $%.
Co22-%%-on&r o* In(&rna/ R&$&n+&, "upra.: Co''&r .-r& 1ar%,
a% -%c+%%& a1o$&,, ha$& a/r&a0 +n&r3on& ch&2-ca/ or
2an+*ac(+r-n3 'roc&%%-n3 -n <a'an, (h&0 ar& no( &;(rac(& or
'ro+c& *ro2 (h& &ar(h 10 '&(-(-on&r -n -(% 2-n& %-(& a( To/&o
C-(0. S-nc& (h& ad valorem (a; -% co2'+(& on (h& 1a%-% o* (h&
ac(+a/ 2ar4&( $a/+& o* (h& 2-n&ra/ -n -(% con-(-on a( (h& (-2&
o* -(% r&2o$a/ *ro2 (h& &ar(h, .h-ch -n (h-% ca%& -% co''&r
conc&n(ra(&, (h&r& -% no 1a%-% (h&r&*or& *or an a%%&r(-on (ha(
%+ch (a; %ho+/ 1& 2&a%+r& on (h& 1a%-% o* (h& Lonon M&(a/
E;chan3& 'r-c& @+o(a(-on o* (h& 2an+*ac(+r& .-r& 1ar%
.-(ho+( an0 &+c(-on o* %2&/(-n3 an r&*-n-n3 char3&%.
In r&%+2&A
1. Th& 2-n&ra/ or 2-n&ra/ 'ro+c( o* '&(-(-on&r (h&
&;(rac(-on or %&$&ranc& *ro2 (h& %o-/. o* .h-ch (h&
ad valorem (a; -% -r&c(& -% co''&r conc&n(ra(&.
6. Th& ad valorem (a; -% co2'+(& on (h& 1a%-% o*
(h& ac(+a/ 2ar4&( $a/+& o* (h& co''&r conc&n(ra(&
-n -(% con-(-on a( (h& (-2& o* r&2o$a/ *ro2 (h&
&ar(h an 1&*or& %+1%(an(-a//0 chan3& 10
ch&2-ca/ or 2an+*ac(+r-n3 'roc&%% .-(ho+( an0
&+c(-on 2-//-n3, r&*-n-n3, *ro2 2-n-n3,
(ran%'or(-n3, han/-n3, 2ar4&(-n3, or an0 o(h&r
&;'&n%&%. >o.&$&r, %-nc& (h& co''&r conc&n(ra(&
-% %o/ a1roa 10 '&(-(-on&r +n&r C.I.F. (&r2%, (h&
ac(+a/ co%( o* oc&an *r&-3h( an -n%+ranc& -%
&+c(-1/&.
#. Th&r& 1&-n3 no 2ar4&( 'r-c& @+o(a(-on o*
co''&r conc&n(ra(& /oca//0 or -n (h& co22o-(0
&;chan3&% or 2ar4&(% o* (h& .or/, (h& Lonon
M&(a/ E;chan3& 'r-c& @+o(a(-on o* co''&r .-r&
1ar, .h-ch -% +%& 10 '&(-(-on&r an M-(%+1-%h-
M&(a/ Cor'ora(-on a% r&*&r&nc& (o &(&r2-n& (h&
%&//-n3 'r-c& o* co''&r conc&n(ra(&, 2a0 /-4&.-%&
1& &2'/o0& -n (h-% ca%& a% r&*&r&nc& 'o-n( -n
a%c&r(a-n-n3 (h& ac(+a/ 2ar4&( $a/+& o* co''&r
conc&n(ra(& *or ad valorem (a; '+r'o%&%. )0
&+c(-n3 *ro2 (h& Lonon M&(a/ E;chan3& 'r-c&
@+o(a(-on o* co''&r .-r& 1ar a// char3&% an co%(%
-nc+rr& a*(&r (h& co''&r conc&n(ra(& ha% 1&&n
%h-''& *ro2 To/&o C-(0 (o (h& (-2& (h& %a2& ha%
1&&n 2an+*ac(+r& -n(o .-r& 1ar, na2&/0,
%2&/(-n3, &/&c(ro/0(-c r&*-n-n3 an *a1r-ca(-n3, (h&
r&2a-n&r r&'r&%&n(% (o a r&a%ona1/& &3r&& (h&
ac(+a/ 2ar4&( $a/+& o* (h& co''&r conc&n(ra(& -n
-(% con-(-on a( (h& (-2& o* &;(rac(-on or r&2o$a/
*ro2 -(% 1& -n To/&o C-(0 *or (h& '+r'o%&% o* (h&
ad valorem (a;.
Th& Co22-%%-on&r o* In(&rna/ R&$&n+& ar3+&% (ha( (h& r+/-n3 -n
(h& ca%& a1o$& %(a(& -% no( 1-n-n3, con%-&r-n3 (ha( (h&
-nc+21&n( Co22-%%-on&r o* In(&rna/ R&$&n+& -% no( 1o+n 10
&c-%-on% or r+/-n3% o* h-% 'r&&c&%%or .h&n h& *-n% (ha( a
-**&r&n( con%(r+c(-on o* (h& /a. %ho+/ 1& ao'(&, -n$o4-n3
(h&r&*or (h& oc(r-n& &n+nc-a(& -n (ilado v". ollector o# internal
Revenue, &( a1, 1" Th-% (r&nch&% on %'&c-o+% r&a%on-n3. Bha( .a%
-n$o/$& -n (h& >-/ao ca%& .a% a 'r&$-o+% r+/-n3 o* a *or2&r
Co22-%%-on&r o* In(&rna/ R&$&n+&. In (h& ca%& a( 1ar, (h&
Co22-%%-on&r 1a%& h-% *-n-n3% on a 'r&$-o+% &c-%-on r&n&r&
10 (h& Co+r( o* Ta; A''&a/% -(%&/*.
Th& Co+r( o* Ta; A''&a/% -% no( a 2&r& %+'&r-or a2-n-%(ra(-$&
a3&nc0 or (r-1+na/ 1+( -% a 'ar( o* (h& ,+-c-a/ %0%(&2 o* (h&
Ph-/-''-n&%. 18 I( .a% cr&a(& 10 Con3r&%% '+r%+an( (o R&'+1/-c
Ac( No. 1165, &**&c(-$& <+n& 1", 1954, a% a c&n(ra/-D& co+r(
%'&c-a/-D-n3 -n (a; ca%&%. I( -% a r&3+/ar co+r( $&%(& .-(h &;c/+%-$&
a''&//a(& ,+r-%-c(-on o$&r ca%&% ar-%-n3 +n&r (h& Na(-ona/ In(&rna/
R&$&n+& Co&, (h& Tar-** an C+%(o2% Co&, an (h& A%%&%%2&n(
La.. 17
A/(ho+3h on/0 (h& &c-%-on% o* (h& S+'r&2& Co+r( &%(a1/-%h
,+r-%'r+&nc& or oc(r-n&% -n (h-% ,+r-%-c(-on, non&(h&/&%% (h&
&c-%-on% o* %+1or-na(& co+r(% ha$& a '&r%+a%-$& &**&c( an 2a0
%&r$& a% ,+-c-a/ 3+-&%. I( -% &$&n 'o%%-1/& (ha( %+ch a conc/+%-on
or 'rono+nc&2&n( can 1& ra-%& (o (h& %(a(+% o* a oc(r-n& -*, a*(&r
-( ha% 1&&n %+1,&c(& (o (&%( -n (h& cr+c-1/& o* ana/0%-% an
r&$-%-on (h& S+'r&2& Co+r( %ho+/ *-n (ha( -( ha% 2&r-(% an
@+a/-(-&% %+**-c-&n( *or -(% con%&cra(-on a% a r+/& o* ,+r-%'r+&nc&.
19
F+r(h&r2or&, a% a 2a((&r o* 'rac(-c& an 'r-nc-'/&, (h& S+'r&2&
Co+r( .-// no( %&( a%-& (h& conc/+%-on r&ach& 10 an a3&nc0 %+ch
a% (h& Co+r( o* Ta; A''&a/%, .h-ch -%, 10 (h& $&r0 na(+r& o* -(%
*+nc(-on, &-ca(& &;c/+%-$&/0 (o (h& %(+0 an con%-&ra(-on o*
(a; 'ro1/&2% an ha% n&c&%%ar-/0 &$&/o'& an &;'&r(-%& on (h&
%+1,&c(, +n/&%% (h&r& ha% 1&&n an a1+%& or -2'ro$-&n( &;&rc-%& o*
a+(hor-(0 on -(% 'ar(. 60
II. G.R. No. 1055)*
Th& '&(-(-on h&r&-n ra-%&% (h& *o//o.-n3 -%%+&% *or r&%o/+(-onA
A. Bh&(h&r or no( '&(-(-on&r -% /-a1/& *or 'a02&n(,
o* (h& 65? %+rchar3& *or a//&3& /a(& *-/-n3 o*
no(-c& o* r&2o$a/I/a(& 'a02&n( o* (h& ad valorem
(a; on %-/$&r, 3o/ an '0r-(& &;(rac(& +r-n3 (h&
(a;a1/& 0&ar 198".
). Bh&(h&r or no( '&(-(-on&r -% /-a1/& *or 'a02&n(
o* (h& 2an+*ac(+r&r= % %a/&% (a; an %+rchar3&
+r-n3 (h& (a;a1/& 0&ar 1985, '/+% -n(&r&%(, on
3r-n-n3 %(&&/ 1a//% 1orro.& 10 -(% co2'&(-(orC
an
C. =Bh&(h&r or no( '&(-(-on&r -% /-a1/& *or 'a02&n(
o* (h& con(rac(or=% (a; an %+rchar3& on (h&
a//&3& /&a%& o* '&r%ona/ 'ro'&r(0 +r-n3 (h&
(a;a1/& 0&ar% 1985 an 198" '/+% -n(&r&%(. 61
A. S+rchar3& on S-/$&r, Go/ an P0r-(&
ACMDC ar3+&% (ha( (h& Co+r( o* A''&a/% &rr& -n ho/-n3 -( /-a1/&
(o 'a0 65? %+rchar3& on %-/$&r, 3o/ an '0r-(& &;(rac(& 10 -(
+r-n3 (a; 0&ar 198".
S&c. 645 o* (h& (h&n (a; co& %(a(&%A
S&c. 645. +ime and manner o# pa,ment o# ro,altie" or ad
valorem taxe". F Th& ro0a/(-&% or ad valorem (a;&% a% (h&
ca%& 2a0 1&, %ha// 1& +& an 'a0a1/& +'on (h& r&2o$a/ o* (h&
2-n&ra/ 'ro+c(% *ro2 (h& /oca/-(0 .h&r& 2-n&. >o.&$&r, (h&
o+('+( o* (h& 2-n& 2a0 1& r&2o$& *ro2 %+ch /oca/-(0 .-(ho+(
(h& 'r&5'a02&n( o* %+ch ro0a/(-&% or ad valorem taxe" -* (h&
/&%%&&, o.n&r, or o'&ra(or %ha// *-/& a 1on -n (h& *or2 an
a2o+n( an .-(h %+ch %+r&(-&% a% (h& Co22-%%-on&r o*
In(&rna/ R&$&n+& 2a0 r&@+-r&,. con-(-on& +'on (h& 'a02&n(
o* %+ch ro0a/(-&% or ad valorem (a;&%, -n .h-ch ca%& -( %ha// 1&
(h& +(0 o* &$&r0 /&%%&&, o.n&r, or o'&ra(or o* a 2-n& (o 2a4&
a (r+& an co2'/&(& r&(+rn -n +'/-ca(& +n&r oa(h %&((-n3
*or(h (h& @+an(-(0 an (h& ac(+a/ 2ar4&( $a/+& o* (h& o+('+( o*
h-% 2-n& r&2o$& +r-n3 &ach ca/&nar @+ar(&r an 'a0 (h&
ro0a/(-&% or ad valorem (a;&% +& (h&r&on .-(h-n (.&n(0 a0%
a*(&r (h& c/o%& o* %a- @+ar(&r.
In ca%& (h& ro0a/(-&% or ad valorem (a;&% ar& no( 'a- .-(h-n
(h& '&r-o 'r&%cr-1& a1o$&, (h&r& %ha// 1& a& (h&r&(o a
%+rchar3& o* (.&n(05*-$& per centum. Bh&r& a *a/%& or
*ra++/&n( r&(+rn -% 2a&, (h&r& %ha// 1& a& (o (h& ro0a/(-&%
or ad valorem (a;&% a %+rchar3& o* *-*(0 per centum o* (h&-r
a2o+n(. Th& %+rchar3& So, a&A %ha// 1& co//&c(& -n (h&
%a2& 2ann&r an a% 'ar( o* (h& ro0a/(-&% or ad valorem (a;&%,
a% (h& ca%& 2a0 1&.
Un&r (h& a*or&%a- 'ro$-%-on, (h& 'a02&n( o* (h& ad valorem (a;
%ha// 1& 2a& +'on r&2o$a/ o* (h& 2-n&ra/ 'ro+c(% *ro2 (h& 2-n&
%-(& or -* 'a02&n( canno( 1& 2a&, 10 *-/-n3 a 1on -n (h& *or2 an
a2o+n( (o 1& a''ro$& 10 (h& Co22-%%-on&r con-(-on& +'on (h&
'a02&n( o* (h& %a- (a;.
In (h& -n%(an( ca%&, (h& r&cor% %ho. (ha( (h& 'a02&n( o* (h& ad
valorem (a; on 3o/, %-/$&r an '0r-(& .a% 1&/a(&/0 2a&. ACMDC,
ho.&$&r, 2a-n(a-n% (ha( -( %ho+/ no( 1& r&@+-r& (o 'a0 (h& 65?
%+rchar3& 1&ca+%& (h& corr&c( @+an(-(0 o* 3o/ an %-/$&r co+/ 1&
&(&r2-n& on/0 a*(&r (h& co''&r conc&n(ra(&% ha 3on& (hro+3h
(h& 'roc&%% o* %2&/(-n3 an r&*-n-n3 -n <a'an .h-/& (h& a2o+n( o*
'0r-(& canno( 1& &(&r2-n& +n(-/ a*(&r (h& */o(a(-on 'roc&%%
%&'ara(-n3 (h& co''&r 2-n&ra/ *ro2 (h& .a%(& 2a(&r-a/ .a%
*-n-%h&.
Pr&*a(or-/0, -( 2+%( no( 1& /o%( %-3h( o* (ha( 1a *a-(h -% C no(
&%%&n(-a/ *or (h& -2'o%-(-on o* (h& 65? %+rchar3& *or /a(& 'a02&n(
o* (h& ad valorem (a;. >&nc&,
MISSING PAGE 19
K. No., .ha( o 0o+ o .-(h (h& r&%+/( o* 0o+r
ana/0%-%L
A. Th&%& ar& (a1+/a(& an (h&n a$&ra3& o+( (o
r&'r&%&n( on& %h-'2&n(.
K. B-// 0o+ (&// (h-% >onora1/& Co+r( .h&(h&r -n
(ha( /a1ora(or0 (&%(-n3 0o+ 'h0%-ca//0 %&'ara(& (h&
3o/, 0o+ 'h0%-ca//0 %&'ara(& (h& %-/$&r an 0o+
'h0%-ca//0 %&'ara(& (h& co''&r con(&n( o* (ha( 40
(o 50 4-/o%L
A. No, no, .& ana/0D& (h-% -n on& %a2'/&. Th-%
%a2'/& -% ana/0D& *or 3o/, %-/$&r, an co''&r,
1+( (h&r& -% no r&co$&r0 2a&.
K. Mo+ 2&an (h&r& -% no 'h0%-ca/ %&'ara(-onL
A. No, no 'h0%-ca/ %&'ara(-on.
K. So (h&%& (hr&& 2-n&ra/% F co''&r, 3o/ an
%-/$&r F ar& -n (ha( %a2& 'o.&r (ha( 0o+ ha$&
(&%(&L
A M&%, -( -% -n (h& %a2& 'o.&r.
K. No. ho. o 0o+ r&*/&c( (h& r&%+/(% o* (h&
(&%(-n3L
A. Mo+ 2&an -n ana/0%-%L
K. In (h& ana/0%-%, 0&%.
A. Co''&r -% r&'or(& -n '&rc&n(.
K. P&rc&n(a3&L
A. M&%.
K. >o. a1o+( 3o/L
A. Go/ an %-/$&r 'ar( -% r&'r&%&n(& a% 3ra2%
'&r 2( or 'ar(% '&r 2-//-on.
K. )a%& on (h& r&%+/(% o* 0o+r a(a 3a(h&r& -n
(h& /a1ora(or0L
A. M&%.
K. No. .h&r& o 0o+ %+12-( (h& r&%+/(% o* (h&
/a1ora(or0 (&%(-n3L
A Bh&n a %h-'2&n( -% 2a& .& 'r&'ar& a
c&r(-*-ca(& o* ana/0%-% %-3n& 10 2& an (h&n
.h-ch 9%-c: -% %&n( (o Man-/a.
K. No., a% *ar a% 0o+ 4no. -n conn&c(-on .-(h
0o+r +(0 o 0o+ 4no. .ha( Man-/a .ha( o 0o+
%a0, Man-/a, ACMDCL
A. Ma4a(-.
K. Ma4a(-. Bha( o&% Ma4a(- ACMDC o .-(h 0o+r
a%%a0 r&'or(L
A. A% *ar a% I 4no. -( -% +%& a% (h& 1a%-% *or (h&
'a02&n( o* ad valorem tax. 64
Th& a1o$&5@+o(& (&%(-2on0 accor-n3/0 %+''or(% (h&%& *-n-n3%
o* (h& (a; co+r( -n -(% &c-%-on -n (h-% ca%&A
B& %&& -( 9%-c: (ha( &$&n -* (h& %-/$&r an 3o/ canno( a% 0&( 1&
'h0%-ca//0 %&'ara(& *ro2 (h& co''&r conc&n(ra(& +n(-/ (h&
'roc&%% o* %2&/(-n3 an r&*-n-n3 .a% co2'/&(&, (h& &%(-2a(&
co22&rc-a/ @+an(-(0 o* (h& %-/$&r an 3o/ co+/ ha$& 1&&n
&(&r2-n& -n 2+ch (h& %a2& .a0 (ha( '&(-(-on&r -% a1/& (o
&%(-2a(& (h& co22&rc-a/ @+an(-(0 o* co''&r +r-n3 (h& a%%a0.
I*, a% %(a(& 10 '&(-(-on&r, -( -% a1/& (o &%(-2a(& (h& 3ra& o* (h&
co''&r or&, an -( ha% &(&r2-n& (h& 3ra& no( on/0 o* (h&
co''&r 1+( a/%o (ho%& o* (h& 3o/ an %-/$&r +r-n3 (h& a%%a0
9P&(-(-on&r=% M&2oran+2, '. 608, R&cor:, &r3o, (h&
&%(-2a(& co22&rc-a/ @+an(-(0 o* (h& %-/$&r an 3o/ %+1,&c(
(o ad valorem (a; co+/ ha$& a/%o 1&&n &(&r2-n& an
'ro$-%-ona//0 'a- a% *or co''&r. 65
Th& o(h&r a//&3a(-on o* ACMDC -% (ha( (h&r& .a% no r&2o$a/ o*
'0r-(& *ro2 (h& 2-n& %-(& 1&ca+%& (h& '0r-(& .a% &/-$&r& (o -(%
%-%(&r co2'an0, A(/a% F&r(-/-D&r Cor'ora(-on, .ho%& '/an( -% /oca(&
-n%-& (h& 2-n&ra/ conc&%%-on o* ACMDC -n San3-, To/&o C-(0.
ACMDC, ho.&$&r, -% a/r&a0 1arr& 10 &%(o''&/ -n 'a-% *ro2
'+((-n3 (ha( 2a((&r -n -%%+&.
An ad valorem (a; on '0r-(& *or (h& %a2& (a; 0&ar .a% a/r&a0
&c/ar& an 'a- 10 ACMDC. In *ac(, (ha( 'a02&n( .a% +%& a%
(h& 1a%-% *or co2'+(-n3 (h& 65? %+rchar3&. I( .a% on/0 .h&n
ACMDC .a% a%%&%%& *or (h& 65? %+rchar3& (ha( %a- -%%+& .a%
ra-%& 10 -(. A/%o, (h& &$-&nc& %ho.% (ha( &/-$&r-&% o* '0r-(& .&r&
no( &;c/+%-$&/0 2a& (o -(% %-%(&r co2'an0, A(/a% F&r(-/-D&r
Cor'ora(-on. Th&r& .&r& %h-'2&n(% o* '0r-(& (o o(h&r co2'an-&%
/oca(& o+(%-& o* -(% 2-n& %-(&, -n a-(-on (o (ho%& &/-$&r& (o -(%
a*or&%a- %-%(&r co2'an0. 6"
). Man+*ac(+r&r=% Ta; an Con(rac(or=% Ta;
Th& 2an+*ac(+r&r=% (a; -% -2'o%& +n&r S&c(-on 17" o* (h& (a;
co& (h&n -n *orc& .h-ch 'ro$-&%A
S&c. 17". Percenta&e tax on "ale" o# other article". F Th&r&
%ha// 1& /&$-&, a%%&%%& an co//&c(& onc& on/0 on &$&r0
or-3-na/ %a/&, 1ar(&r, &;chan3&, or %-2-/ar (ran%ac(-on &-(h&r *or
no2-na/ or $a/+a1/& con%-&ra(-on, -n(&n& (o (ran%*&r
o.n&r%h-' o*, or (-(/& (o, (h& ar(-c/&% no( &n+2&ra(& -n
%&c(-on% on& h+nr& an &-3h(05*o+r5A, on& h+nr& an
&-3h(0 *-$&, on& h+nr& an &-3h(05*-$&5A, on& h+nr&
&-3h(05*-$&5), an on& h+nr& &-3h(05%-;5), a (a; &@+-$a/&n(
(o %&$&n per centum o* (h& 3ro%% %&//-n3 'r-c& or 3ro%% $a/+&
-n 2on&0 o* (h& ar(-c/&% %o %o/, 1ar(&r&, &;chan3&, or
(ran%*&rr&, %+ch (a; (o 1& 'a- 10 (h& 2an+*ac(+r&r or
'ro+c&rA Provided, Tha( .h&r& (h& ar(-c/&% %+1,&c( (o (a;
+n&r (h-% S&c(-on ar& 2an+*ac(+r& o+( o* 2a(&r-a/% /-4&.-%&
%+1,&c( (o (a; +n&r (h-% %&c(-on an %&c(-on on& h+nr&
&-3h(05n-n&, (h& (o(a/ co%( o* %+ch 2a(&r-a/%, a% +/0
&%(a1/-%h&, %ha// 1& &+c(-1/& *ro2 (h& 3ro%% %&//-n3 'r-c& or
3ro%% $a/+& -n 2on&0 o* %+ch 2an+*ac(+r& ar(-c/&%. 9A%
a2&n& 10 R&'. Ac( No. "110 an 10 Pr&%. D&cr&& No. "9.:
On (h& o(h&r han, (h& con(rac(or=% (a; -% 'ro$-& *or +n&r
S&c(-on 191 o* (h& %a2& co&, 'ara3ra'h 18 o* .h-ch &c/ar&% (ha(
/&%%or% o* '&r%ona/ 'ro'&r(0 %ha// 1& %+1,&c( (o a con(rac(or=% (a;
o* #? o* (h& 3ro%% r&c&-'(%.
S&c(-on% 17" an 191 *a// +n&r T-(/& V o* (h& (a; co&, &n(-(/&
EPr-$-/&3& Ta;&% on )+%-n&%% an Occ+'a(-on.E Th&%& E'r-$-/&3&
(a;&% on 1+%-n&%%E ar& (a;&% -2'o%& +'on (h& 'r-$-/&3& o*
&n3a3-n3 -n 1+%-n&%%. Th&0 ar& &%%&n(-a//0 &;c-%& (a;&%. 68 To 1&
h&/ /-a1/& *or (h& 'a02&n( o* a 'r-$-/&3& (a;, (h& '&r%on or &n(-(0
2+%( 1& &n3a3& -n 1+%-n&%%, a% %ho.n 10 (h& *ac( (ha( (h&
ra*(&r% o* (h& (a; co& ha '+r'o%&/0 3ro+'& %a- 'ro$-%-on%
+n&r (h& 3&n&ra/ h&a-n3 a$&r(& (o a1o$&.
ETo &n3a3&E -% (o &21ar4 on a 1+%-n&%% or (o &2'/o0 on&%&/*
(h&r&-n. Th& .or E&n3a3&E conno(&% 2or& (han a %-n3/& ac( or a
%-n3/& (ran%ac(-onC -( -n$o/$&% %o2& con(-n+-(0 o* ac(-on. ETo
&n3a3& -n 1+%-n&%%E -% +n-*or2/0 con%(r+& a% %-3n-*0-n3 an
&2'/o02&n( or occ+'a(-on .h-ch occ+'-&% on&=% (-2&, a((&n(-on,
an /a1or *or (h& '+r'o%& o* a /-$&/-hoo or 'ro*-(. Th& &;'r&%%-on%
E&n3a3& -n 1+%-n&%%,E Ecarr0-n3 on 1+%-n&%%E or Eo-n3 1+%-n&%%E
o no( ha$& -**&r&n( 2&an-n3%, 1+( %&'ara(&/0 or conn&c(&/0
con$&0 (h& -&a o* 'ro3r&%%-on, con(-n+-(0, or %+%(a-n& ac(-$-(0.
EEn3a3& -n 1+%-n&%%E 2&an% occ+'-& or &2'/o0& -n 1+%-n&%%C
carr0-n3 on 1+%-n&%%E o&% no( 2&an (h& '&r*or2anc& o* a %-n3/&
-%conn&c(& ac(, 1+( 2&an% con+c(-n3, 'ro%&c+(-n3, an
con(-n+-n3 1+%-n&%% 10 '&r*or2-n3 'ro3r&%%-$&/0 a// (h& ac(%
nor2a//0 -nc-&n( (h&r&(oC .h-/& Eo-n3 1+%-n&%%E con$&0% (h& -&a
o* 1+%-n&%% 1&-n3 on&, no( *ro2 (-2& (o (-2&, 1+( a// (h& (-2&. 67
Th& *or&3o-n3 no(.-(h%(an-n3, -( ha% /-4&.-%& 1&&n r+/& (ha( on&
ac( 2a0 1& %+**-c-&n( (o con%(-(+(& carr0-n3 on a 1+%-n&%%
accor-n3 (o (h& -n(&n( .-(h .h-ch (h& ac( -% on&. A %-n3/& %a/& o*
/-@+or 10 on& .ho -n(&n% (o con(-n+& %&//-n3 -% %+**-c-&n( (o r&n&r
h-2 /-a1/& *or E&n3a3-n3 -n or carr0-n3 onE (h& 1+%-n&%% o* a /-@+or
&a/&r. 69
Th&r& 2a0 1& a 1+%-n&%% .-(ho+( an0 %&@+&nc& o* ac(%, *or -* an
-%o/a(& (ran%ac(-on, .h-ch -* r&'&a(& .o+/ 1& a (ran%ac(-on -n a
1+%-n&%%, -% 'ro$& (o ha$& 1&&n +n&r(a4&n .-(h (h& -n(&n( (ha( -(
%ho+/ 1& (h& *-r%( o* %&$&ra/ (ran%ac(-on%, (ha( -%, .-(h (h& -n(&n( o*
carr0-n3 on a 1+%-n&%%, (h&n -( -% a *-r%( (ran%ac(-on -n an &;-%(-n3
1+%-n&%%. #0
Th+%, .h&r& (h& &n %o+3h( -% (o 2a4& a 'ro*-(, (h& ac( con%(-(+(&%
Eo-n35 1+%-n&%%.E Th-% -% no( .-(ho+( 1a%-%. Th& (&r2 E1+%-n&%%,E
a% +%& -n (h& /a. -2'o%-n3 a /-c&n%& (a; on 1+%-n&%%, (ra&%, an
%o *or(h, or-nar-/0 2&an% 1+%-n&%% -n (h& (ra& or co22&rc-a/
%&n%& on/0, carr-& on .-(h a $-&. (o 'ro*-( or /-$&/-hooC #1 I( -%
(h+% r&%(r-c(& (o ac(-$-(-&% or a**a-r% .h&r& 'ro*-( -% (h& '+r'o%&, or
/-$&/-hoo -% (h& 2o(-$&. S-nc& (h& (&r2 E1+%-n&%%E -% 1&-n3 +%&
.-(ho+( an0 @+a/-*-ca(-on -n o+r a*or&%a- (a; co&, -( %ho+/
(h&r&*or& 1& (h&r&*or& 1& con%(r+& -n -(% '/a-n an or-nar0
2&an-n3, r&%(r-c(& (o ac(-$-(-&% *or 'ro*-( or /-$&/-hoo. #6
In (h& ca%& a( 1ar, ACMDC c/a-2% &;&2'(-on% *ro2 (h& 'a02&n( o*
2an+*ac(+r&r=% (a;. I( a%%&r(% (ha( -( -% no( &n3a3& -n (h& 1+%-n&%%
o* %&//-n3 3r-n-n3 %(&&/ 1a//%, 1+( -( on/0 'ro+c&% 3r-n-n3 %(&&/
1a//% %o/&/0 *or -(% o.n +%& or con%+2'(-on, >o.&$&r, -( a2-(%
ha$-n3 /&n( -(% 3r-n-n3 %(&&/ 1a//% (o o(h&r &n(-(-&% 1+( on/0 -n $&r0
-%o/a(& ca%&%.
A*(&r a car&*+/ r&$-&. o* (h& r&cor% an on (h& 1a%-% o* (h& /&3a/
conc&'( o* E&n3a3-n3 -n 1+%-n&%%E h&r&-n1&*or& -%c+%%&, .& ar&
-nc/-n& (o a3r&& .-(h ACMDC (ha( -( %ho+/ no( an canno( 1& h&/
/-a1/& *or (h& 'a02&n( o* (h& 2an+*ac(+r&r=% (a;.
F-r%(, +n&r (h& (a; co& (h&n -n *orc&, (h& 8? 2an+*ac(+r&r=% %a/&%
(a; -% -2'o%& on (h& 2an+*ac(+r&r *or &$&r0 or-3-na/ %a/&, 1ar(&r,
&;chan3& an o(h&r %-2-/ar (ran%ac(-on -n(&n& (o (ran%*&r
o.n&r%h-' o* ar(-c/&%. A% h&r&-n1&*or& @+o(&, an .& r&'&a( (h&
%a2& *or *ac-/-(0 o* r&*&r&nc&, (h& (&r2 E2an+*ac(+r&rE -% &*-n& -n
(h& (a; co& a% -nc/+-n3 E&$&r0 '&r%on .ho 10 'h0%-ca/ or
ch&2-ca/ 'roc&%% a/(&r% (h& &;(&r-or (&;(+r& or *or2 or -nn&r
%+1%(anc& o* an0 ra. 2a(&r-a/ or 2an+*ac(+r& or 'ar(-a//0
2an+*ac(+r& 'ro+c( -n %+ch 2ann&r a% (o 'r&'ar& -( *or a %'&c-a/
+%& or +%&% (o .h-ch -( co+/ no( ha$& 1&&n '+( -n -(% or-3-na/
con-(-on, or .ho 10 an0 %+ch 'roc&%% a/(&r% (h& @+a/-(0 o* an0
%+ch ra. 2a(&r-a/ or 2an+*ac(+r& or 'ar(-a//0 2an+*ac(+r&
'ro+c( %o a% (o r&+c& -( (o 2ar4&(a1/& %ha'& or 'r&'ar& -( *or an0
o* (h& +%&% o* -n+%(r0, or .ho 10 an0 %+ch 'roc&%% co21-n&% an0
%+ch ra. 2a(&r-a/ or 2an+*ac(+r& or 'ar(-a//0 2an+*ac(+r&
'ro+c(% .-(h o(h&r 2a(&r-a/% or 'ro+c(% o* (h& %a2& or o*
-**&r&n( 4-n% an -n %+ch 2ann&r (ha( (h& *-n-%h& 'ro+c( o*
%+ch 'roc&%% or 2an+*ac(+r& can 1& '+( (o a %'&c-a/ +%& or +%&%
(o .h-ch %+ch ra. 2a(&r-a/% or 2an+*ac(+r& or 'ar(-a//0
2an+*ac(+r& 'ro+c(% -n (h&-r or-3-na/ con-(-on co+/ no( ha$&
1&&n '+(, an .ho -n a-(-on a/(&r% %+ch ra. 2a(&r-a/ or
2an+*ac(+r& or 'ar(-a//0 2an+*ac(+r& 'ro+c(%, or co21-n&% (h&
%a2& (o 'ro+c& %+ch *-n-%h& 'ro+c(% *or (h& '+r'o%& o* (h&-r
%a/& or -%(r-1+(-on (o o(h&r% an no( *or h-% o.n +%& or
con%+2'(-on. ##
Th+%, a 2an+*ac(+r&r, -n or&r (o 1& %+1,&c(& (o (h& n&c&%%-(0 o*
'a0-n3 (h& '&rc&n(a3& (a; -2'o%& 10 S&c(-on 17" o* (h& (a; co&,
2+%( 1& =&n3a3&= -n (h& %a/&, 1ar(&r or &;chan3& o*C '&r%ona/
'ro'&r(0. Un&r a %(a(+(& .h-ch -2'o%&% a (a; on '&r%on% &n3a3&
-n (h& %a/&, 1ar(&r or &;chan3& o* 2&rchan-%&, a '&r%on 2+%( 1&
occ+'-& or &2'/o0& -n (h& %a/&, 1ar(&r or &;chan3& o* '&r%ona/
'ro'&r(0. A '&r%on can har/0 1& con%-&r& a% occ+'-& or
&2'/o0& -n (h& %a/&, 1ar(&r or &;chan3& o* '&r%ona/ 'ro'&r(0
.h&n h& ha% 2a& on& '+rcha%& an %a/& on/0. #4
S&con, -( canno( 1& /&3a//0 a%%&r(&, *or '+r'o%&% o* (h-%
'ar(-c+/ar a%%&%%2&n( on/0, (ha( ACMDC .a% &n3a3& -n (h&
1+%-n&%% o* %&//-n3 3r-n-n3 %(&&/ 1a//% on (h& 1a%-% o* (h& -%o/a(&
(ran%ac(-on &n(&r& -n(o 10 -( -n 1985. Th&r& -% no %ho.-n3 (ha(
%a- (ran%ac(-on .a% +n&r(a4&n 10 ACMDC .-(h a $-&. (o 3a-n-n3
'ro*-(. (h&r&*ro2 an .-(h (h& -n(&n( o* carr0-n3 on a 1+%-n&%%
(h&r&-n. On (h& con(rar0, .ha( -% c/&ar *or +% -% (ha( (h& %a/& .a%
2or& o* an acco22oa(-on (o (h& o(h&r 2-n-n3 co2'an-&%, an
(ha( ACMDC .a% %+1%&@+&n(/0 r&'/ac& 10 o(h&r %+''/-&r% %hor(/0
(h&r&a*(&r.
Th-% *-n-n3 -% %(r&n3(h&n& 10 (h& -n$&%(-3a(-on r&'or(, a(&
March 11, 1970, o* (h& ).I.R. In$&%(-3a(-on T&a2 -(%&/* .h-ch *o+n
(ha( F
ACMDC ha% a *o+nr0 %ho' /oca(& a( San3-, To/&o C-(0, an
2an+*ac(+r&% 3r-n-n3 %(&&/ 1a//% *or +%& -n -(% 1a// 2-//% -n
'+/$&r-D-n3 (h& 2-n&ra/% 1&*or& (h&0 3o (o (h& conc&n(ra(or%,
For (h& 3r-n-n3 %(&&/ 1a//% 2an+*ac(+r& 10 ACMDC an +%&
-n -(% o'&ra(-on, .& *o+n -( no( %+1,&c( (o an0 1+%-n&%% (a;.
)+( (h&r& .&r& (-2&% -n 1985 .h&n o(h&r 2-n-n3 co2'an-&%
.&r& %hor( o* 3r-n-n3 %(&&/ 1a//% an ACMDC %+''/-& (h&2
.-(h (h&%& 2a(&r-a/% 2an+*ac(+r& -n -(% *o+nr0 %ho'.
Accor-n3 (o (h& -n*or2an(, (h&%& .&r& 2&r&/0
acco22oa(-on% an (h&0 .&r& r&'/ac& 10 (h& o(h&r
%+''/-&r%. #5
A( 2o%(, .ha(&$&r 'ro*-( ACMDC 2a0 ha$& r&a/-D& *ro2 (ha(
%-n3/& (ran%ac(-on .a% ,+%( -nc-&n(a/ (o -(% 'r-2or-a/ '+r'o%& o*
acco22oa(-n3 o(h&r 2-n-n3 co2'an-&%. B&//5%&((/& -% (h& r+/&
(ha( an0(h-n3 on& a% a 2&r& -nc-&n( (o, or a% a n&c&%%ar0
con%&@+&nc& o*, (h& 'r-nc-'a/ 1+%-n&%% -% no( or-nar-/0 (a;& a%
an -n&'&n&n( 1+%-n&%% -n -(%&/*. #" Bh&r& a '&r%on or
cor'ora(-on -% &n3a3& -n a -%(-nc( 1+%-n&%% an, a% a *&a(+r&
(h&r&o*, -n an ac(-$-(0 2&r&/0 -nc-&n(a/ .h-ch %&r$&% no o(h&r
'&r%on or 1+%-n&%%, (h& -nc-&n(a/ an r&%(r-c(& ac(-$-(0 -% no(
con%-&r& a% -n(&n& (o 1& %&'ara(&/0 (a;&. #8
In *-n&, on (h-% 'ar(-c+/ar a%'&c(, .& ar& con%&@+&n(/0 o* (h&
con%-&r& o'-n-on an %o ho/ (ha( ACMDC .a% no( a
2an+*ac(+r&r %+1,&c( (o (h& '&rc&n(a3& (a; -2'o%& 10 S&c(-on
17" o* (h& (a; co&.
Th& %a2& conc/+%-onC ho.&$&r, canno( 1& 2a& .-(h r&%'&c( (o
(h& con(rac(or=% (a; 1&-n3 -2'o%& on ACMDC. I( canno( $a/-/0
c/a-2 (ha( (h& /&a%-n3 o+( o* -(% '&r%ona/ 'ro'&r(-&% .a% 2&r&/0 an
-%o/a(& (ran%ac(-on. I(% 1oo4 o* acco+n(% %ho.% (ha( %&$&ra/
-%(-nc( 'a02&n(% .&r& 2a& *or (h& +%& o* -(% '&r%ona/ 'ro'&r(-&%
%+ch a% -(% '/an&, 2o(or 1oa( an +2' (r+c4. #7 Th& %&r-&% o*
(ran%ac(-on% &n3a3& -n 10 ACMDC *or (h& /&a%& o* -(% a*or&%a-
'ro'&r(-&% co+/ a/%o 1& &+c& *ro2 (h& *ac( (ha( *or (h& (a;
0&ar% 1985 an 198" (h&r& .&r& 'ro*-(% &arn& an r&'or(&
(h&r&*or. I( r&c&-$& a r&n(a/ -nco2& o* P"#0,181.5" *or (a; 0&ar #9
an P6,450,617."6 *or (a; 0&ar 198". 40
Con%-&r-n3 (ha( (h&r& .a% a %&r-&% o* (ran%ac(-on% -n$o/$&, '/+%
(h& *ac( (ha( (h&r& .a% an a''ar&n( an 'ro(rac(& -n(&n(-on (o
'ro*-( *ro2 %+ch ac(-$-(-&%, -( can 1& %a*&/0 conc/+& (ha( ACMDC
.a% ha1-(+a//0 &n3a3& -n (h& /&a%-n3 o+( o* -(% '/an&, 2o(or 1oa(
an +2' (r+c4, an -% '&r*orc& %+1,&c( (o (h& con(rac(or=% (a;.
Th& a//&3a(-on o* ACMDC (ha( -( - no( r&a/-D& an0 'ro*-( *ro2 (h&
/&a%-n3 o+( o* -(% %a- '&r%ona/ 'ro'&r(-&%, %-nc& -(% -nco2&
(h&r&*ro2 co$&r& on/0 (h& co%(% o* o'&ra(-on %+ch a% %a/ar-&% an
*+&/, -% no( %+''or(& 10 an0 oc+2&n(ar0 or %+1%(an(-a/ &$-&nc&.
B& ar& no(, (h&r&*or&, con$-nc& 10 %+ch -%a$o.a/.
A%%&%%2&n(% ar& 'r-2a *ac-& 'r&%+2& corr&c( an 2a& -n 3oo
*a-(h. Con(rar0 (o (h& (h&or0 o* ACMDC, -( -% (h& (a;'a0&r an no(
(h& )+r&a+ o* In(&rna/ R&$&n+& .ho ha% (h& +(0 o* 'ro$-n3
o(h&r.-%&. I( -% an &/&2&n(ar0 r+/& (ha( -n (h& a1%&nc& o* 'roo* o*
an0 -rr&3+/ar-(-&% -n (h& '&r*or2anc& o* o**-c-a/ +(-&%, an
a%%&%%2&n( .-// no( 1& -%(+r1&. A// 'r&%+2'(-on% ar& -n *a$or o*
(a; a%%&%%2&n(%. 41 V&r-/0, *a-/+r& (o 'r&%&n( 'roo* o* &rror -n
a%%&%%2&n(% .-// ,+%(-*0 ,+-c-a/ a**-r2anc& o* %a- a%%&%%2&n(. 46
F-na//0, .& &&2 -( o''or(+n& (o &2'ha%-D& (h& o*(5r&'&a(& r+/&
(ha( (a; %(a(+(&% ar& (o r&c&-$& a r&a%ona1/& con%(r+c(-on .-(h a
$-&. (o carr0-n3 o+( (h&-r '+r'o%&% an -n(&n(. 4# Th&0 %ho+/ no(
1& con%(r+& a% (o '&r2-( (h& (a;'a0&r (o &a%-/0 &$a& (h& 'a02&n(
o* (h& (a;. 44 On (h-% no(&, an +n&r (h& con*/+&nc& o* (h& .&-3h(0.
con%-&ra(-on% an a+(hor-(-&% &ar/-&r -%c+%%&, (h& cha//&n3&
a%%&%%2&n( a3a-n%( ACMDC *or con(rac(or=% (a; 2+%( 1& +'h&/.
B>EREFORE, (h& -2'+3n& ,+32&n( o* r&%'on&n( Co+r( o*
A''&a/% -n CA5G.R. SP No. 65945, %+1,&c( o* (h& 'r&%&n( '&(-(-on -n
G.R. No. 104151 -% h&r&10 AFFIRMEDC an -(% a%%a-/& ,+32&n( -n
CA5G.R SP No. 6"078 -% h&r&10 MODIFIED 10 &;&2'(-n3 A(/a%
Con%o/-a(& M-n-n3 an D&$&/o'2&n( Cor'ora(-on, '&(-(-on&r -n
G.R. No. 1055"# o* (h-% Co+r(, *ro2 (h& 'a02&n( o* 2an+*ac(+r&r=%
%a/&% (a;, %+rchar3& an -n(&r&%( +r-n3 (h& (a;a1/& 0&ar 1985.
SO ORDERED.
Narva"a, .J., -idin, Puno and %endo.a, JJ., concur.
G.R. No. L-19470 January 30, 1965
GONZALO P. NAVA, petitioner,
vs.
COMMIION!R O" IN#!RNAL R!V!N$!, respondent.
E. P. Villar and A. Tordesillas for petitioner.
Office of the Solicitor General for respondent.
R!%!, J.&.L., J.:
Gonzalo P. Nava prosecuted this appeal against a decision dated September 25, 1961 b
the !ourt o" #a$ %ppeals &!.#.%. !ase No. 56'( holding him liable in the amount o"
P),*52.** as de"icienc income ta$ "or the ear 195* as +ell as "rom its order dated
,ebruar 1*, 1962 dening a motion to reconsider said decision.
#he undisputed "acts are- that on .a 15, 1951, Nava "iled his income ta$ return "or the
ear 195*, and, on the same date, he +as assessed b respondent !ommissioner
&"ormerl !ollector( o" /nternal 0evenue in the sum o" P1,952.**, based solel on said
return. Nava paid one2hal" o" the ta$ due, leaving a balance o" P2,191.**. Subse3uentl,
Nava o""ered his bac4pa certi"icate to pa said balance, but respondent re"used the o""er.
5n 6ul 2', 195), he re3uested the respondent to hold in abeance the collection o" said
balance until the 3uestion o" +hether or not he +as entitled to pa the same out o" his
bac4pa shall have been decided, but this +as also re7ected b the latter in a repl letter
dated 6anuar 5, 1951. #his re7ection +as "ollo+ed b t+o more letters or notices
demanding pament o" the balance thereo", the last o" +hich +as dated ,ebruar 22,
1955.
5n .arch )*, 1955, a"ter investigation o" petitioner8s 195* income ta$ return, respondent
!ollector issued a de"icienc income ta$ assessment notice &9$hibit :1:( re3uiring
petitioner to pa not later than %pril )*, 1955 the sum o" P9,121.5*, that included the
balance o" P2,191.**, still unpaid under the original assessment, plus a 5*; surcharge.
Several notices o" this revised assessment are alleged to have been issued to the ta$paer,
but Nava claims to have learned o" it "or the "irst time on <ecember 19, 1956, more than
"ive ears since the original ta$ return +as "iled, and testi"ied to that e""ect in the court
belo+. /n a letter o" 6anuar 1*, 195=, Nava called attention to the "act that more than si$
ears had elapsed, protested the assessment, and contended that it +as a closed issue. #he
<irector insisted upon his demand that the ne+ assessment be paid &registered letter o"
.ach 25, 195=, 9$hibit :5:(. Nava as4ed "or reconsideration, and on 6une 16, 195' +as
in"ormed that reinvestigation +ould be granted provided the ta$paer +aived the statute
o" limitations &9$h. :=:(, a condition that +as re7ected &9$h. :':(. #hereupon, the
reconsideration o" the assessment +as denied b the !ollector8s letter o" 6ul 22, 195'
&9$h. :9:(, and on %ugust ', 195' Nava "iled a petition "or revie+ +ith the !ourt o" #a$
%ppeals. #he latter reduced the de"icienc to P),*52.**, and cancelled the 5*;
surcharge. #he petitioner appealed to this !ourt.
#he principal issue in this appeal is +hether the en"orcement o" the ta$ assessment has
prescribed. #he !ourt o" #a$ %ppeals ruled that it had not, stating that-
#he duplicate cop o" the income ta$ assessment notice indicates that it +as
issued on .arch )*, 1955 &9$h. 1, page =, >./.0. records(. :!all2up: letters +ere
sent to petitioner reminding him o" the obligation. #hese call2up letters or notices
+ere recorded in 9$h. ! "or petitioner &9$h. ) "or respondent, page 6, >./.0.
records(, to +it-
1st notice 1?1*?56
2nd notice =?)?56
,inal 9?25?56
/n addition to the +ritten notice sent to petitioner, he +as also personall
intervie+ed. % report on these +ritten notices and personal intervie+s appears in
the memorandum o" an agent o" the >ureau o" /nternal 0evenue dated <ecember
1*, 1956, the pertinent portion o" +hich reads as "ollo+s.
:Several call2up letters and repeated demands have been made to sub7ect
ta$paers but in spite o" the considerable length o" time that has elapsed
the above accounts still remain unsettled. #he +arrant assemblies o" the
above2stated ta$ cases +ere assigned to %gent %. @. %guilar and an
intervie+ +ith .r. G. P. Nava revealed that the latter re"used to pa
alleging that these cases come +ithin the purvie+ o" the %velino case,
hence, the
>./.0. has no more right to collect "rom him.: &9$h. <, page ', >./.0.
records(.
Petitioner8s claim that he came to 4no+ o" the assessment onl on or about
<ecember 19, 1956 can not be given much credence. Ae are inclined to believe
that the assessment notice dated .arch )*, 1955 and the several call2up letters
sent to him +ere received b him in due course o" mail but that he ignored them
because o" his belie" that the right o" the Government to collect the ta$ had
prescribed in vie+ o" the decision in the %velino case. #his conclusion "inds
support in a note sent or delivered b petitioner to an emploee o" the >ureau +ho
intervie+ed him, +herein he stated-
:#his is to certi" that / have received toda, second final notice "rom the
>ureau o" /nternal 0evenue delivered b .rs. !anlas. . repl to our
said final notice, as per our re3uest, +ill be sent to ou on or be"ore
6anuar ), 195=, in vie+ o" the "act that / ma not be able to contact right
a+a m %ccountant.: &9$h. 9, page 9, >./.0. recordsB 9mphasis ours.(
#he "act that petitioner admitted receipt o" the :second "inal notice: +ithout
protest is an indication that he received the previous notices
%ssuming that petitioner received the income ta$ assessment notice dated .arch
)*, 1955 in due course o" mail, that is, not later than %pril 1*, 1955, the
assessment +as made +ithin the "ive2ear period since he "iled his income ta$
return on .a 15, 1951, even granting that the ten2ear period applicable to "raud
cases does not appl to this case. &#he assessment includes the "raud penalt.(
Since the de"icienc income ta$ +as assessed on or about %pril 1*, 1955, the
Government is authorized to collect the same b distraint or lev or b 7udicial
action +ithin "ive ears "rom that date, or not later than %pril 1*, 196*. 6udicial
action +as instituted in the !ourt o" ,irst /nstance o" .anila in !ivil !ase No.
)2=96 "or collection o" said amount, "ollo+ed b the institution o" the instant
appeal in this !ourt b petitioner himsel" on %ugust ', 195', both +ithin the "ive2
ear period. #here"ore, +e are o" the opinion that the right o" the Government to
assess and collect said de"icienc income ta$ has not prescribed.: &%nne$ :5:,
petition, pp. 1)121)=, records(.
/t is to be noted that in its decision the !ourt o" #a$ %ppeals relied mainl on the
duplicate cop o" the de"icienc income ta$ notice "ound in the >ureau o" /nternal
0evenue "ile o" petitioner Nava &9$hibit :1:, page =, >./.0. records(. 5n the
corresponding blan4 space "or the date o" issue o" said duplicate cop +as tped
:)?)*?55:. Petitioner Nava denied having received the original cop o" said notice. #he
0evenue !ommissioner, on the other hand, presented a +itness &.r. Pablo Sangil, an
emploee Ccler4D o" the >./.0.( +ho attempted to establish that the original cop thereo"
+as actuall issued or sent on .arch )*, 1955. #his +itness, ho+ever, disclaimed having
personal 4no+ledge o" its issuance or release on said date either b mail or personal
deliver because, according to him, he +as assigned in the income ta$ section o" the
>ureau o" /nternal 0evenue in 5ctober, 1956 onl. Sangil also declared that there is no
notation +hatsover in said "ile cop &9$hibit :1:(, nor even a slip o" paper attached to the
records, to sho+ that the original cop o" said e$hibit +as ever actuall issued or sent to
the ta$paer. @e even admitted that he had no hand in the preparation or sending o"
+ritten notices or demand letters o" the >ureau o" /nternal 0evenue to the ta$paers, his
duties being merel to 4eep the doc4ets o" ta$paers pertaining to income ta$, to post and
transmit papers to the other branches o" the >ureau "or action, and to 4eep letters o"
ta$paers, memorandum and other o""icial matters. 0espondent presented another
+itness, .r. 9liseo >. ,ernandez, +hose duties, as record cler4 o" the 0ecords !ontrol
Section o" the >ureau o" /nternal 0evenue since 195= &alread past the limitation period
o" this case(, are to send mail and to 4eep a record boo4 o" letters +hich are mailed to the
ta$paers. /nso"ar as the testimon o" this +itness is concerned, he onl declared as to the
"act that there appears in his record boo4 a note &9$hibit :1*:( that a letter dated .arch
15, 195= +as mailed b special deliver +ith return card to Gonzalo P. Nava. @e
admitted, ho+ever, that he +as not the one +ho prepared such entr in the record boo4.
Ahat +as the nature o" the letter does not appearB at an rate, it +as mailed beond the 52
ear limitation period.
#he lo+er court also relied on the supposed notices noted in in4 &"ollo+ed b an illegible
initial( in 9$hibit :): "or respondent &page 6, >./.0. records(, the "irst o" +hich +as
purportedl sent on %pril 1*, 1956, the second on 6ul ), 1956, and the "inal one on
%ugust 25, 1956, as +ell as on the supposed :call2up: or demand letters re"erred to in a
memorandum o" an agent &.rs. !anlas( o" the >ureau o" /nternal 0evenue. &9$hibit :<:,
page ', >./.0. records(. No +itness "or the respondent testi"ied to the issuance or sending
o" an o" these supposed +ritten demand letters or notices, nor +as there an duplicate or
even a simple cop thereo" "ound in petitioner Nava8s >ureau o" /nternal 0evenue "ile.
%lthough +itness Sangil testi"ied as to the meaning o" the dates noted in 9$hibit :):, his
testimon cannot be given much credence because those supposed notices +ere sent on
or be"ore %ugust 25, 1956 at the latest, and, as hereinabove pointed out, the +itness +as
assigned in the income ta$ section o" the >ureau o" /nternal 0evenue since 5ctober, 1956
onl.
#hus, contrar to the "inding o" the !ourt o" #a$ %ppeals, respondent utterl "ailed to
prove b substantial evidence that the assessment notice dated .arch )*, 1955 and the
other supposed +ritten demand letters or notices subse3uent thereto +ere in "act issued or
sent to ta$paer Nava. #he presumption that a letter dul directed and mailed +as
received in the regular course o" mail &Sec. 5 CvD, 0ule 1)1, revised 0ules o" !ourt(
cannot be applied to the case at bar.
#he "acts to be proved to raise this presumption are &a( that the letter +as properly
addressed +ith postage prepaid, and &b( that it +as mailed. 5nce these "acts are
proved, the presumption is that the letter +as received b the addressee as soon as
it could have been transmitted to him in the ordinar course o" the mail. >ut i" one
o" the said "acts "ails to appear, the presumption does not lie.: &E/, .oran,
!omments on the 0ules o" !ourt, 196) ed., 5625=B citing 9nri3uez vs. Sun Fi"e
%ssurance o" !anada, 11 Phil. 269( &9mphasis supplied(.
Since none o" these re3uirements have been sho+n, there has been no valid and e""ective
issuance or release o" said de"icienc income ta$ assessment notice dated .arch )*, 1955
and o" the other demand letters or notices subse3uent thereto, the latest o" +hich +as
purportedl sent on %ugust 25, 1956, and these dates cannot be rec4oned +ith in
computing the period o" prescription +ithin +hich a court action to collect the same ma
be brought.
#he "act that in 9$hibit :9: Nava ac4no+ledged receipt o" the second final notice
personall delivered to him is no proo" that he received the "irst notice b mail. #here is a
di""erence bet+een receiving a second "inal notice and receiving a "inal notice "or the
second time.
/t being undisputed that an original assessment o" Nava8s 195* income ta$ return +as
made on .a 15, 1951, and no valid and e""ective notice o" the re2assessment having
been made against the petitioner a"ter that date &.a 15, 1951(, it is evident that the
period under Section ))1 o" the #a$ !ode +ithin +hich to ma4e a re2assessment e$pired
on .a 15, 1956. Since the notice o" said de"icienc income ta$ +as e""ectivel made on
<ecember 19, 1956 at the earliest, the 7udicial action to collect an de"icienc ta$ on
Nava8s 195* income ta$ return has alread prescribed under Section ))2 &c( o" the #a$
!ode, it having been "ound b the #a$ %ppeals court that said return +as not "alse or
"raudulent.
Ahile +e have held that an assessment is made +hen sent +ithin the prescribed period,
even i" received b the ta$paer a"ter its e$piration &!oll. o" /nt. 0ev. vs. >autista, F2
1225* and F212259, .a 2=, 1959(, this ruling ma4es it the more imperative that the
release, mailing, or sending o" the notice be clearl and satis"actoril proved. .ere
notations made +ithout the ta$paer8s intervention, notice, or control, +ithout ade3uate
supporting evidence, cannot su""iceB other+ise, the ta$paer +ould be at the merc o" the
revenue o""ices, +ithout ade3uate protection or de"ense.
@aving reached the conclusion that the action to collect said de"icienc income ta$ has
alread prescribed, it is unnecessar to discuss the other issues raised b petitioner Nava
in the instant appeal.1wph1.t
A@909,509, the decision o" the !ourt o" #a$ %ppeals under revie+ is reversed,
+ithout costs.
!en"#on$ %.&.$ %oncepcion$ !arrera$ Paredes$ 'i#on$ (e"ala$ )a*alintal$ !en"#on$ &.P.$
and +aldi,ar$ &&.$ conc-r.
!a-tista An"elo$ &.$ too* no part.
G.R. No. 9"6"6 March 66, 1999
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
EM)ROIDERM AND GARMENTS INDUSTRIES 9P>IL.:, INC., respondent.

PARDO, J.:
The case is an appeal via certiorari from a decision of the Court of Appeals
1

affirming that of the Court of Tax Appeals
6
absolving respondent from liability for
deficiency income tax and advance sales tax in the amounts of P2,75,2!".#,
and P$,5%%,7&#.!7, respectively, for the years "&5& to "&".
The facts may be related as follo's(
)n *eptember 2", "&!, on the basis of a s'orn report of an informer, the Courts
of +irst ,nstance of -anila and .ulacan issued search 'arrants for the sei/ure of
certain documents from the offices of respondent 0mbroidery and 1arments
,ndustries 2Phil.3, ,nc. in -anila and 4alen/uela, .ulacan. Armed 'ith the
'arrants, agents of the Anti5Technical *muggling 6nit, .ureau of ,nternal
7evenue, sei/ed various business records and documents from respondent8s
offices.
)n 9anuary !, "&, petitioner assessed respondent the sum of P!$,#!.!!,
inclusive of 75: surcharge and penalty as advance sales tax for the years "&5&
to "&" and, on -arch 2$, "&, assessed deficiency income tax in the sum of
P!,7&&,!".&5, inclusive of 5%: surcharge and ";2: monthly interest for the
years "&% and "&".
7espondent protested the assessments, and on <ecember &,"&7%, petitioner
issued to respondent a revised assessment re=uiring the latter to pay the amount
of P2,75,2!".#, inclusive of 5%: surcharge and ";2: monthly interest as
deficiency income tax for the years "&5& to "&". )n <ecember 22, "&7%,
petitioner re=uired respondent to pay P$,5%%,7&#.!7, as advance sales tax and
75: surcharge corresponding to the same years.
)n 9anuary 7, "&7", respondent filed 'ith the .ureau of ,nternal 7evenue a
protest disputing the revised assessments and re=uesting further investigation.
)n the same date, petitioner denied the protest.
)n 9anuary 2%, "&7", respondent re=uested petitioner to reconsider the denial of
its protest. )n 9anuary 2&, "&7", petitioner granted the re=uest upon
respondent8s execution of a 'aiver of the statute of limitations.
)n *eptember "!, "&7", petitioner denied respondent8s protest on the disputed
assessments.
)n )ctober "!, "&7" , respondent filed 'ith the Court of Tax Appeals a petition
for revie' of the disputed tax assessments.
)n -arch 2&, "&72, respondent filed its ans'er to the petition praying for its
dismissal.
)n 9anuary "5, "&&%, the Court of Tax Appeals rendered decision finding
respondent not liable for deficiency income tax and advance sales tax assessed
against it, and accordingly, reversed the .,7 decision. ,n its decision, the Court of
Tax Appeals held that the assessments 'ere doubtful validity as they 'ere based
on the incompetent evidence consisting of an informant8s report and the s'orn
statement of the disgruntled former general manager of respondent that in the
years in =uestion respondent sold all its dollar =uotas to local Chinese textile
traders at an overprice or premium on the dollar value of textile importation of
#%: for suiting materials and 7%.: for 'omen8s clothing materials and fa>ed its
invoices to reduce its costs of importation. )n the other hand, respondent
adduced evidence consisting of official records of the .ureau of Customs that its
tax5free importation8s had been re5exported to their suppliers in accordance 'ith
the 0mbroidery ?a' and cleared by the .ureau of Customs. The tax court ruled
that the assessments must be based on actual facts and proved by competent
evidence, not imposed based on unverified information supplied by an informant,
or disputed presumptions.
)n 9une "$, "&&%, petitioner filed 'ith the Court of Appeals a petition for revie'
of the decision of the Court of Tax Appeals.
#
)n @ovember &, "&&%, the Court of Appeals promulgated its decision affirming
the appealed decision of the tax court.
4
)n <ecember !, "&&%, petitioner filed a motion for reconsideration of the Court of
Appeals8 decision.
)n +ebruary 7, "&&", the Court of Appeals denied the motion.
5
)n -arch "#, "&&", 'ithin, the extended time granted, petitioner filed 'ith the
*upreme Court a petition for revie' on certiorari of the decision of the Court of
Appeals.
"
,n the petition, the Commissioner of ,nternal 7evenue submits that the Court of
Appeals erred(
2"3 in not holding that respondent is liable for deficiency income tax and advance
sales tax in vie' of its failure to declare its income reali/ed for the years "&5& to
"&" from the sales of its dollar =uota to local Chinese textile dealers at a
premium of 7%: to #%: of the dollar value, 'hich dollar =uota rights 'ere
allocated by the Central .an> of the Philippines to enable respondent to import
tax5free textile ra' materials to be manufactured into finished products for re5
export pursuant to the provisions of the 0mbroidery ?a' 27. A. @o. $"$73, and
223 in not holding that the imposition of 5%: surcharge for fraud 'as legal and
Austified.
8
The issues raised are clearly factual and must be resolved on the basis of the
evidence adduced before the tax court. The case tarried too long in the tax court.
,n the meantime, the star 'itness had died, and the needed originals of
documentary evidence could no longer be located.
Bhat is more, it is a, fundamental rule that on appeal via certiorari from a
decision of the Court of Appeals to the *upreme Court may raise only =uestions
of la', 'hich must be distinctly set forth.
7
+indings of fact of the Court of Appeals
and even of the tax court are final, binding or conclusive on the parties
9
and
upon this Court,
10
'hich 'ill not be revie'ed
11
or disturbed on appeal unless
these findings are not supported by evidence,
16
'ith certain 'ell recogni/ed
exceptions, such as 2"3 'hen the conclusion is grounded entirely on speculations
1#
, surmises or conAecturesC 223 'hen the inference made is manifestly mista>en,
absurd or impossibleC 2$3 'here there is grave abuse of discretionC 2!3 'hen the
Audgment is based on a misapprehension of factsC 253 'hen the findings of fact
are conflictingC 23 'hen the Court of Appeals, in ma>ing its findings, 'ent
beyond the issues of the case and the same is contrary to the admissions of both
appellant and appelleeC 273 'hen the findings of the Court of Appeals are contrary
to those of the trial courtsC
14
2#3 'hen the findings of fact are conclusions 'ithout
citation of specific evidence on 'hich they are basedC 2&3 'hen the Court of
Appeals overloo>ed certain relevant facts not disputed by the parties, 'hich, if
properly considered, 'ould Austify a different conclusionC and 2"%3 'hen the
findings of fact of the Court of Appeals are premised on the absence of evidence
and are contradicted by the evidence on record.
15
This case does not come
'ithin any of the exceptions.
BD070+)70, the Court hereby A++,7-* the appealed decision of the Court of
Appeals in CA51.7. *P @o. 2%#"$.
@o costs.
*) )7<070<.
Davide, Jr, C.J., Melo and Kapunan, JJ., concur.
G.R. No. 167'60 "()ruary '7, '009
#*( CI#% O" ILOILO, Mr. ROM!O V. MANI+AN, ,n *,- .a/a.,0y a- 0*(
#r(a-ur(r o1 I2o,2o C,0y, Petitioners,
vs.
MAR# COMM$NICA#ION, INC. 3MAR#4 0espondent.
< 9 ! / S / 5 N
&RION, J.:
>e"ore this !ourt is the appeal b certiorari "iled b the !it o" /loilo &petitioner( under
0ule 15 o" the 0ules o" !ourt see4ing to set aside the decision o" the 0egional #rial !ourt
&0#!( o" /loilo !it, >ranch 2', +hich declared that respondent S.%0#
!ommunications, /nc. &S.%0#( is e$empt "rom the pament o" local "ranchise and
business ta$es.
>%!GG05HN< ,%!#S
#he "acts o" the case are not in dispute. S.%0# received a letter o" assessment dated
,ebruar 12, 2**2 "rom petitioner re3uiring it to pa de"icienc local "ranchise and
business ta$es &in the amount o" P=61,515.29, plus interests and surcharges( +hich it
incurred "or the ears 199= to 2**1. S.%0# protested the assessment b sending a letter
dated ,ebruar 15, 2**2 to the !it #reasurer. /t claimed e$emption "rom pament o"
local "ranchise and business ta$es based on Section 9 o" its legislative "ranchise under
0epublic %ct &(.A.( No. =291 &S.%0#Is "ranchise(. Hnder S.%0#Is "ranchise, it +as
re3uired to pa a "ranchise ta$ e3uivalent to ); o" all gross receipts, +hich amount shall
be in lieu o" all ta$es. S.%0# contends that the :in lieu o" all ta$es: clause covers local
"ranchise and business ta$es.
S.%0# similarl invo4ed 0.%. No. =925 or the Public #elecommunications Polic %ct
&Public #elecoms %ct( +hose Section 2) declares that an e$isting privilege, incentive,
advantage, or e$emption granted under e$isting "ranchises shall ipso "acto become part o"
previousl granted2telecommunications "ranchise. S.%0# contends that b virtue o"
Section 2), ta$ e$emptions granted b the legislature to other holders o"
telecommunications "ranchise ma be e$tended to and availed o" b S.%0#.
#hrough a letter dated %pril 1, 2**2, petitioner denied S.%0#Is protest, citing the
"ailure o" S.%0# to compl +ith Section 252 o" 0.%. No. =16* or the Focal
Government !ode &FG!( be"ore "iling the protest against the assessment. Section 252 o"
the FG! re3uires pament o" the ta$ be"ore an protest against the ta$ assessment can be
made.
S.%0# ob7ected to the petitionerIs denial o" its protest b instituting a case against
petitioner be"ore the 0#! o" /loilo !it.
1
#he trial court ruled in "avour o" S.%0# and
declared the telecommunications "irm e$empt "rom the pament o" local "ranchise and
business ta$esB
2
it agreed +ith S.%0#Is claim o" e$emption under Section 9 o" its
"ranchise and Section 2) o" the Public #elecoms %ct.
)
,rom this 7udgment, petitioner "iles this petition "or revie+ on certiorari raising the sole
issue o" +hether S.%0# is e$empt "rom the pament o" local "ranchise and business
ta$es.
#@9 !5H0#IS 0HF/NG
S.%0# relies on t+o provisions o" la+ to support its claim "or ta$ e$emption- Section 9
o" S.%0#Is "ranchise and Section 2) o" the Public #elecoms %ct. %"ter a revie+ o"
pertinent la+s and 7urisprudence J particularl o" S.%0# !ommunications, /nc. v. !it
o" <avao,
1
a case +hich, e$cept "or the respondent, involves the same set o" "acts and
issues J +e "ind S.%0#Is claim "or e$emption to be un"ounded. !onse3uentl, +e "ind
the petition meritorious.1awphi1
#he basic principle in the construction o" la+s granting ta$ e$emptions has been ver
stable. %s earl as 1916, in the case o" Government o" the Philippine /slands v. .onte de
Piedad,
5
this !ourt has declared that he +ho claims an e$emption "rom his share o" the
common burden o" ta$ation must 7usti" his claim b sho+ing that the Fegislature
intended to e$empt him b +ords too plain to be beond doubt or mista4e. #his doctrine
+as repeated in the 1926 case o" %siatic Petroleum v. Flanes,
6
as +ell as in the case o"
>or7a v. !ommissioner o" /nternal 0evenue &!/0(
=
decided in 1961. !iting %merican
7urisprudence, the !ourt stated in 9. 0odriguez, /nc. v. !/0-
'

#he right o" ta$ation is inherent in the State. /t is a prerogative essential to the perpetuit
o" the governmentB and he +ho claims an e$emption "rom the common burden, must
7usti" his claim b the clearest grant o" organic or statute la+ $$$ Ahen e$emption is
claimed, it must be sho+n indubitabl to e$ist. %t the outset, ever presumption is against
it. % +ell2"ounded doubt is "atal to the claimB it is onl +hen the terms o" the concession
are too e$plicit to admit "airl o" an other construction that the proposition can be
supported.
/n the recent case o" <igital #elecommunications, /nc. v. !it Government o" >atangas,
et al.,
9
+e adhered to the same principle +hen +e said-
% ta$ e$emption cannot arise "rom vague in"erence...#a$ e$emptions must be clear and
une3uivocal. % ta$paer claiming a ta$ e$emption must point to a speci"ic provision o"
la+ con"erring on the ta$paer, in clear and plain terms, e$emption "rom a common
burden. %n doubt +hether a ta$ e$emption e$ists is resolved against the ta$paer.
#he burden there"ore is on S.%0# to prove that, based on its "ranchise and the Public
#elecoms %ct, it is entitled to e$emption "rom the local "ranchise and business ta$es
being collected b the petitioner.
!laim "or 9$emption under
S.%0#Is "ranchise
Section 9 o" S.%0#Is "ranchise states-
Section 9. #a$ provisions. K #he grantee, its successors or assigns shall be liable to pa
the same ta$es on their real estate buildings and personal propert, e$clusive o"8 this
"ranchise, as other persons or corporations +hich are no+ or herea"ter ma be re3uired b
la+ to pa. /n addition thereto, the grantee, its successors or assigns shall pa a "ranchise
ta$ e3uivalent to three percent &);( o" all gross receipts o" the business transacted under
this "ranchise b the grantee, its successors or assigns and the said percentage shall be in
lieu o" all ta$es on this "ranchise or earnings thereo"- Provided, #hat the grantee, its
successors or assigns shall continue to be liable "or income ta$es paable under #itle // o"
the National /nternal 0evenue !ode pursuant to Section 2 o" 9$ecutive 5rder No. =2
unless the latter enactment is amended or repealed, in +hich case the amendment or
repeal shall be applicable thereto.
#he grantee shall "ile the return +ith and pa the ta$ due thereon to the !ommissioner o"
/nternal 0evenue or his dul authorized representative in accordance +ith the National
/nternal 0evenue !ode and the return shall be sub7ect to audit b the >ureau o" /nternal
0evenue. C9mphasis supplied.D
#he petitioner posits that S.%0#Is claim "or e$emption under its "ranchise is not
e3uivocal enough to prevail over the speci"ic grant o" po+er to local government units to
e$act ta$es "rom businesses operating +ithin its territorial 7urisdiction under Section 1)=
in relation to Section 151 o" the FG!. .ore importantl, it claimed that e$emptions "rom
ta$ation have alread been removed b Section 19) o" the FG!-
Section 19). Aithdra+al o" #a$ 9$emption Privileges. K Hnless other+ise provided in
this !ode, ta$ e$emptions or incentives granted to, or presentl en7oed b all persons,
+hether natural or 7uridical, including government2o+ned or controlled corporations,
e$cept local +ater districts, cooperatives dul registered under 0% No. 69)', non2stoc4
and non2pro"it hospitals and educational institutions, are hereb +ithdra+n upon the
e""ectivit o" this !ode. C9mphasis supplied.D
#he petitioner argues, too, that S.%0#Is claim "or e$emption "rom ta$es under Section 9
o" its "ranchise is not couched in plain and une3uivocal language such that it restored the
+ithdra+al o" ta$ e$emptions under Section 19) above. /t claims that :i" !ongress
intended that the ta$ e$emption privileges +ithdra+n b Section 19) o" 0% =16* CFG!D
+ere to be restored in respondentIs CS.%0#IsD "ranchise, it +ould have so e$pressl
provided therein and not merel Crestored the e$emptionD b the simple e$pedient o"
including the Lin lieu o" all ta$esI provision in said "ranchise.:
1*
Ae have indeed ruled that b virtue o" Section 19) o" the FG!, all ta$ e$emption
privileges then en7oed b all persons, save those e$pressl mentioned, have been
+ithdra+n e""ective 6anuar 1, 1992 J the date o" e""ectivit o" the FG!.
11
#he "irst
clause o" Section 1)= o" the FG! states the same rule.
12
@o+ever, the +ithdra+al o"
e$emptions, +hether under Section 19) or 1)= o" the FG!, pertains onl to those alread
e$isting +hen the FG! +as enacted. #he intention o" the legislature +as to remove all
ta$ e$emptions or incentives granted prior to the FG!.
1)
%s S.%0#Is "ranchise +as
made e""ective on .arch 2=, 1992 J a"ter the e""ectivit o" the FG! J Section 19) +ill
there"ore not appl in this case.
>ut +hile Section 19) o" the FG! +ill not a""ect the claimed ta$ e$emption under
S.%0#Is "ranchise, +e "ail to "ind a categorical and encompassing grant o" ta$
e$emption to S.%0# covering e$emption "rom both national and local ta$es-
0.%. No =291 does not e$pressl provide +hat 4ind o" ta$es S.%0# is e$empted "rom.
/t is not clear +hether the :in lieu o" all ta$es: provision in the "ranchise o" S.%0#
+ould include e$emption "rom local or national ta$ation. Ahat is clear is that S.%0#
shall pa "ranchise ta$ e3uivalent to three percent &);( o" all gross receipts o" the
business transacted under its "ranchise. >ut +hether the "ranchise ta$ e$emption +ould
include e$emption "rom e$actions b both the local and the national government is not
une3uivocal.
#he uncertaint in the :in lieu o" all ta$es: clause in 0.%. No. =291 on +hether S.%0#
is e$empted "rom both local and national "ranchise ta$ must be construed strictl against
S.%0# +hich claims the e$emption. C9mphasis supplied.D
11

6ustice !arpio, in his Separate 5pinion in PF<# v. !it o" <avao,
15
e$plains +h-
#he proviso in the "irst paragraph o" Section 9 o" SmartIs "ranchise states that the grantee
shall :continue to be liable "or income ta$es paable under #itle // o" the National
/nternal 0evenue !ode.: %lso, the second paragraph o" Section 9 spea4s o" ta$ returns
"iled and ta$es paid to the :!ommissioner o" /nternal 0evenue or his dul authorized
representative in accordance +ith the National /nternal 0evenue !ode.: .oreover, the
same paragraph declares that the ta$ returns :shall be sub7ect to audit b the >ureau o"
/nternal 0evenue.: Nothing is mentioned in Section 9 about local ta$es. #he clear intent
is "or the :in lieu o" all ta$es: clause to appl onl to ta$es under the National /nternal
0evenue !ode and not to local ta$es.
Nonetheless, even i" Section 9 o" S.%0#Is "ranchise can be construed as covering local
ta$es as +ell, reliance thereon +ould no+ be unavailing. #he :in lieu o" all ta$es: clause
basicall e$empts S.%0# "rom paing all other 4inds o" ta$es "or as long as it pas the
); "ranchise ta$B it is the "ranchise ta$ that shall be in lieu o" all ta$es, and not an other
"orm o" ta$.
16
,ranchise ta$es on telecommunications companies, ho+ever, have been
abolished b 0.%. No. ==16 or the 9$panded Ealue2%dded #a$ Fa+ &92E%# Fa+(, +hich
+as enacted b !ongress on 6anuar 1, 1996.
1=
#o replace the "ranchise ta$, the 92E%#
Fa+ imposed a 1*;
1'
value2added ta$ on telecommunications companies under Section
1*' o" the National /nternal 0evenue !ode.
19
#he :in lieu o" all ta$es: clause in the
legislative "ranchise o" S.%0# has thus become "unctus o""icio, made inoperative "or
lac4 o" a "ranchise ta$.
2*

S.%0#Is claim "or e$emption "rom local business and "ranchise ta$es based on Section
9 o" its "ranchise is there"ore un"ounded.
!laim "or 9$emption
Hnder Public #elecoms %ct
S.%0# additionall invo4es the :e3ualit clause: under Section 2) o" the Public
#elecoms %ct-
S9!#/5N 2). 93ualit o" #reatment in the #elecommunications /ndustr. K %n
advantage, "avor, privilege, e$emption, or immunit granted under e$isting "ranchises, or
ma herea"ter be granted, shall ipso "acto become part o" previousl granted
telecommunications "ranchise and shall be accorded immediatel and unconditionall to
the grantees o" such "ranchises- Provided, ho+ever, #hat the "oregoing shall neither appl
to nor a""ect provisions o" telecommunications "ranchises concerning territor covered b
the "ranchise, the li"e span o" the "ranchise, or the tpe o" service authorized b the
"ranchise. C9mphasis supplied.D
%s in the case o" S.%0# v. !it o" <avao,
21
S.%0# posits that since the "ranchise o"
telecommunications companies granted a"ter the enactment o" its "ranchise contained
provisions e$empting these companies "rom both national and local ta$es, these
privileges should e$tend to and bene"it S.%0#, appling the :e3ualit clause: above.
#he petitioner, on the other hand, believes that the claimed e$emption under Section 2)
o" the Public #elecoms %ct is similarl un"ounded.
Ae agree +ith the petitioner.
Ahether Section 2) o" the cited la+ e$tends ta$ e$emptions granted b !ongress to ne+
"ranchise holders to e$isting ones has been ans+ered in the negative in the case o" PF<#
v. !it o" <avao.
22
#he term :e$emption: in Section 2) o" the Public #elecoms %ct does
not mean ta$ e$emptionB rather, it re"ers to e$emption "rom certain regulator or
reporting re3uirements imposed b government agencies such as the National
#elecommunications !ommission. #he thrust o" the Public #elecoms %ct is to promote
the gradual deregulation o" entr, pricing, and operations o" all public
telecommunications entities, and thus to level the plaing "ield in the telecommunications
industr. #he language o" Section 2) and the proceedings o" both @ouses o" !ongress are
bere"t o" anthing that +ould signi" the grant o" ta$ e$emptions to all
telecommunications entities.
2)
/ntent to grant ta$ e$emption cannot there"ore be discerned
"rom the la+B the term :e$emption: is too general to include ta$ e$emption and runs
counter to the re3uirement that the grant o" ta$ e$emption should be stated in clear and
une3uivocal language too plain to be beond doubt or mista4e.
Surcharge and /nterests
Since S.%0# cannot validl claim an ta$ e$emption based either on Section 9 o" its
"ranchise or Section 2) o" the Public #elecoms %ct, it "ollo+s that petitioner can impose
and collect the local "ranchise and business ta$es amounting to P=61,515.29 it assessed
against S.%0#. %side "rom these, S.%0# should also be made to pa surcharge and
interests on the ta$es due.lawphil.net
#he settled rule is that good "aith and honest belie" that one is not sub7ect to ta$ on the
basis o" previous interpretation o" government agencies tas4ed to implement the ta$ la+s
are su""icient 7usti"ication to delete the imposition o" surcharges and interest.
21
/n re"uting
liabilit "or the local "ranchise and business ta$es, +e do not believe S.%0# relied in
good "aith in the "indings and conclusion o" the >ureau o" Focal Government and
,inance &>FG,(.
/n a letter dated %ugust 1), 199', the >FG, opined that S.%0# should be considered
e$empt "rom the "ranchise ta$ that the local government ma impose under Section 1)=
o" the FG!.
25
S.%0#, reling on the letter2opinion o" the >FG,, invo4ed the same in the
administrative protest it "iled against petitioner on ,ebruar 15, 2**2, as +ell as in the
petition "or prohibition that it "iled be"ore the 0#! o" /loilo on %pril )*, 2**2. @o+ever,
in the 2**1 case o" PF<# v. !it o" <avao,
26
+e declared that +e do not "ind >FG,Is
interpretation o" local ta$ la+s to be authoritative and persuasive. #he >FG,Is "unction is
merel to provide consultative services and technical assistance to the local governments
and the general public on local ta$ation, real propert assessment, and other related
matters.
2=
Hnli4e the !ommissioner o" /nternal 0evenue +ho has been given the e$press
po+er to interpret the #a$ !ode and other national ta$ la+s,
2'
no such po+er is given to
the >FG,. S.%0#Is dependence on >FG,Is interpretation +as thus misplaced.
56!R!"OR!, +e hereb GRAN# the petition and 09E90S9 the decision o" the
0#! dated 6anuar 19, 2**5 in !ivil !ase No. *222=111 and "ind S.%0# liable to pa
the local "ranchise and business ta$es amounting to P=61,515.29, assessed against it b
petitioner, plus the surcharges and interest due thereon.
S5 50<909<.
AR#$RO 7. &RION
%ssociate 6ustice
G.R. No. L-8685 January 31, 1957
#6! COLL!C#OR O" IN#!RNAL R!V!N$!, petitioner,
vs.
A$R!LIO P. R!%! an9 CO$R# O" #A: APP!AL, respondents.
Office of the Solicitor General Am.rosio Padilla$ Assistant Solicitor General (amon /.
A,ancea$ Solicitor &ose P. Ale0andro$ )el1-iades G-tierre# and /i.rada del (osario2
3ati,idad for petitioner.
)eer$ )eer and )eer for respondents.
"!LI:, J.;
#his is a petition "or certiorari "iled b the !ollector i" the /nternal 0evenue +herein he
see4s to nulli" the resolution o" the !ourt o" #a$ %ppeals restraining him "rom
collecting, through summar administrative methods, ta$es allegedl due "rom <r.
%urelio P. 0ees. #he "acts o" the case ma be summarized as "ollo+s-
/n a letter dated 5ctober 1), 1951, petitioner, the !ollector o" /nternal 0evenue
demanded "rom %urelio P. 0ees pament o" his alleged de"icienc income ta$es,
surcharges, interests and penalties "or the ta$ ears 1916 to 195* amounting to
P611,1=*.*1 as o" 5ctober )1, 1951, +ith the suggestion that the a"oresaid ta$ liabilities
be paid either to the >ureau o" /nternal 0evenue or the !it #reasurer o" .anila.
#ogether +ith said letter o" assessment, respondent %urelio P. 0ees received a +arrant o"
distraint and lev on his properties in the event that he should "ail to pa the alleged
de"icienc income ta$es on or be"ore 5ctober )1, 1951, >eing in"ormed b the !it
#reasurer o" .anila b a letter dated November 1, 1951, that said #reasurer +as
instructed b petitioner to e$ecute the +arrant o" distraint and lev on the amount
demanded is not settled on or be"ore November 1*, 1951, %urelio P. 0ees "iled +ith the
!ourt o" #a$ %ppeals on November 15, 1951, a petition "or revie+ o" the !ollector8s
assessment o" his alleged de"icienc income ta$ liabilities. #his +as "ollo+ed b an
urgent petition, "iled on November 16, 1951, to restrain the !ollector o" /nternal 0evenue
"rom e$ecuting the +arrant o" distraint and lev on his properties, alleging among others,
that the right o" respondent to collect b summar proceedings the ta$ demanded had
alread prescribed in accordance +ith section 51 &d( o" the National /nternal 0evenue
!ode, as his income ta$ returns "or the ta$ ears 1916 to 195* had been "iled more than
three ears ago, the last one being on %pril 2=, 1951B that a distraint and lev on his
properties +ould +or4 in7ustice or irreparable in7ur to him and +ould tend to render an
7udgment o" the !ourt in the main case meaningless and ine""ectualB that the re3uisite i"
Section 11 o" 0epublic %ct No. 1125 "or the "iling o" a bond or deposit be"ore a +rit o"
distraint and lev ma be suspended is not applicable in this caseB and that a greater
portion o" his assets consists o" real properties located in .anila and shares a stoc4 in the
Philippine 0acing !lub +hich are all encumbered in various "inancial institutions and
there"ore there is no possibilit that he +ould abscond +ith his propert or remove or
conceal the same.
#he !ollector o" /nternal 0evenue opposed said petition in November 19, 1951, on the
ground that !ourt o" #a$ %ppeals has no authorit to restrain him "rom e$ecuting the
+arrant o" distraint and lev on his properties o" %urelio P. 0ees in connection +ith the
collection o" the latter8s de"icienc income ta$esB that said ta$paer has an ade3uate
remed in la+ b paing "irst and then see4 "or the recover thereo"B and that section 51
&d( does not preclude distraint and lev. > resolution o" 6anuar ', 1955, the !ourt o"
#a$ %ppeals upheld the stand o" %urelio P. 0ees and ordered the !ollector o" /nternal
0evenue to desist "rom collecting b administrative method the ta$es allegedl due "rom
0ees pending the outcome o" his appeal, +ithout pre7udice to other 7udicial remed or
remedies +hich the !ollector ma desire to pursue "or the protection o" the interest o" the
Government, pending the "inal decision o" the case on the merits. 5n 6anuar 21, 1955,
the Solicitor General "iled a notice o" appeal "rom said resolution and instituted in this
!ourt the instant certiorari case on 6anuar 22, 1955.
/t is not disputed that respondent 0ees "iled his income ta$ returns "or the ears 1916 to
195*, and that the +arrant o" distraint and lev against the properties o" said respondent
+as issued onl on 5ctober 1), 1951, or ) ears, 5 months and 16 das a"ter the
respondent ta$paer has "iled his returns "or the ta$ ear 195*, +hich he made on %pril
2=, 1951. #here"ore, the issues in this instances are- &1( +hether the !ourt o" #a$ %ppeals
could restrain the !ollector o" /nternal 0evenue "rom en"orcing collection o" income ta$
de"icienc b summar proceedings a"ter the e$piration o" the three2ear period provided
"or in section 51 &d( o" the National /nternal 0evenue !odeB and &2( granting that the
!ollector could be restrained, +hether the !ourt o" #a$ %ppeals had an po+er to grant
an in7unction +ithout re3uiring the "iling o" a bond or ma4ing a deposit as prescribed b
section 11 o" 0epublic %ct No. 1125.
Section 51 &d( o" the National /nternal 0evenue !ode reads as "ollo+s-
S9!. 51. Assessment and Payment of income Ta4. K
$ $ $ $ $ $ $ $ $
&d( (ef-sal or ne"lect to ma*e ret-rn5 fra-d-lent ret-rns$ etc. K /n cases o"
re"usal or neglect to ma4e return or in cases o" erroneous, "alse or "raudulent
returns, the !ollector o" /nternal 0evenue shall, upon discover thereo", at any
time within three years after said ret-rn is d-e$ or has .een made, ma4e a return
upon in"ormation obtained as provided "or in this !ode or b e$isting la+, or
re3uire the necessar corrections to be made, and the assessment made b the
!ollector on /nternal 0evenue thereon shall be paid b such person or corporation
immediatel upon noti"ication o" the amount o" said assessment.
and in a long line o" cases this !ourt has alread construed this 7ust 3uoted provision to
mean that the three ear prescriptive period provided therein constituted a limitation to
the right o" the Government to enforce the collection of income ta4es .y the s-mmary
proceedin"s of distraint and le,y though it could proceed to recover the ta$es due b the
institution o" the corresponding civil action &!ollector o" /nternal 0evenue ,s. Eillegas,
56 Phil., 551, citing @olmes, ,ederal /ncome #a$, 2d., p. 5'1B !ollector o" /nternal
0evenue ,s. @agood, 65 Phil., 52*B and 6uan de la EiMa vs. 9l Gobierno de las ,ilipinas,
G.0. No. 12669, 6anuar 29, 19)'(. #his doctrine +as reiterated in the case o" Philippine
S-"ar Estate 'e,elopment %o.$ 6nc.$ ,s. &-an Posadas, 6' Phil., 216, +herein it +as held
that-
. . . a"ter the three ears have elapsed "rom the date to +hich income ta$ returns
+hich have been "ound to be "alse, "raudulent or erroneous, ma have been made,
the !ollector o" /nternal 0evenue cannot ma4e an summar collection through
administrative methods, but must do so through 7udicial proceedings.
/n the recent case o" the %ollector of 6nternal (e,en-e ,s. &ose A,elino et al.$ s-pra, p.
)2=, promulgated November 19, 1956, this !ourt held-
/t there"ore appears that +hen it re"ers to the !ollection o" income ta$ it is
mandator that the right o" the !ollector o" /nternal 0evenue to collect it b the
summar methods o" distraint and lev be e$ercised +ithin the period o" three
ears "rom the time the income ta$ return is "iled, other+ise the right can onl be
en"orced b 7udicial action. Since, admittedl, the de"icienc ta$es in 3uestion
+ere assessed and the +arrants "or their collection b distraint and lev +ere
issued a"ter the period o" three ears "rom the "iling o" the returns, it is evident
that said +arrants, as +ell as the steps ta4en in connection +ith the sale o" the
properties o" the ta$paer, +ere issued +ithout authorit o" the la+ and, hence,
the !ourt o" #a$ %ppeals acted properl in en7oining their en"orcement as praed
"or b petitioner.
/t is, ho+ever, contended b petitioner that the respondent !ourt o" #a$ %ppeals acted in
complete disregard o" the prohibition o" said section )*5 o" the National /nternal
0evenue !ode +hen it restrained the "ormer "rom e$ecuting the +arrant o" distraint and
lev against the properties o" respondent %urelio P. 0ees. Said provision reads as
"ollo+s-
S9!. )*5. /N6HN!#/5N N5# %E%/F%>F9 #5 09S#0%/N #@9
!5FF9!#/5N 5, #%N. K No court shall have authorit to grant an in7unction
to restrain the collection o" an internal revenue ta$, "ee, or charge imposed b
this !ode &National /nternal 0evenue !ode(.
@o+ever, Section 11 o" 0epublic %ct No. 1125 prescribes the "ollo+ing-
S9!. 11. K 7ho may appeal5 effect of appeal. K %n person, association or
corporation adversel a""ected b a decision or ruling o" the !ollector o" internal
0evenue,. ma "ile an appeal in the !ourt o" #a$ %ppeals +ithin thirt das a"ter
receipt o" such decision or ruling.
No appeal ta4en to the !ourt o" #a$ %ppeals "rom the decision o" the !ollector o"
/nternal 0evenue . . . shall suspend the pament, lev, distraint, and?or sale o" an
propert o" the ta$paer "or the satis"action o" his ta$ liabilit as provided b
e$isting la+- Pro,ided$ howe,er, #hat when in the opinion of the %o-rt the
collection .y the !-rea- of 6nternal (e,en-e . . . may 0eopardi#e the interest of the
Government and?or the ta$paer the !ourt at an stage o" the proceeding ma
suspend said collection and re3uire the ta$paer either to deposit the amount
claimed or to "ile a suret bond "or not more than double the amount +ith the
!ourt.
/t can be in"erred "rom the a"ore3uoted provision that there ma be instances li4e the one
at bar, +hen the !ollector o" /nternal 0evenue could be restrained "rom proceeding +ith
the collection, lev, distraint and?or sale o" an propert o" the ta$paer. /n this respect,
this !ourt said in the case o" %ollector of 6nternal (e,en-e ,s. A,elino et al.$ s-pra-
#his section &Sec. 11 o" 0ep. %ct No. 1125( must be deemed to have modi"ied
section )*5 o" the National /nternal 0evenue !ode in vie+ o" the repeating clause
contained in said %ct to the e""ect that :an la+ or part o" la+, or an e$ecutive
order, rule or regulation or part thereo", inconsistent +ith the provisions o" this
%ct is hereb repealed: &Section 21(.
>ut petitioner asserts that even assuming that under Section 11 o" 0epublic %ct No. 1125
respondent court is empo+ered to order him to desist "rom the collection o" said ta$es b
e$tra27udicial methods, et the !ourt erred in issuing the in7unction +ithout re3uiring the
ta$paer either to deposit the amount claimed or "ile a suret bond "or an amount not
more than double the ta$ sought to be collected. Ae disagree +ith this contention. %t "irst
blush it might be as contended b the Solicitor General, but a care"ul analsis o" the
second paragraph o" said Section 11 +ill lead us to the conclusion that the re3uirement o"
the bond as a condition precedent to the issuance o" the +rit o" in7unction applies onl in
cases +here the processes b +hich the collection sought to be made b means thereo"
are carried out in consonance +ith the la+ "or such cases provided and not when said
processes are o.,io-sly in ,iolation of the law to the e4treme that they ha,e to .e
S8SPE3'E' for 0eopardi#in" the interests of the ta4payer.
Section 11 o" 0epublic %ct No. 1125 is there"ore premised on the assumption that the
collection b s-mmary proceedin"s is b itsel" in accordance +ith e$isting la+B and then
+hat is suspended is the act o" collecting, +hereas, in the case at bar +hat the respondent
!ourt suspended +as the -se of the method employed to ,erify the collection which was
e,idently ille"al after the lapse of the three2year limitation period. #he respondent !ourt
issued the in7unction in 3uestion on the basis o" its "inding that the means intended to be
used b petitioner in the collection o" the alleged de"icienc ta$es +ere in violation o"
la+. /t certainl +ould be an absurdit on the part o" the !ourt o" #a$ %ppeals to declare
that the collection b the summar methods o" distraint and lev +as violative o" la+, and
then, on the same breath re3uire the petitioner to deposit or "ile a bond as a prere3uisite
"or the issuance o" a +rit o" in7unction. Fet us suppose, "or the sa4e o" argument, that the
!ourt a 1-o +ould have re3uired the petitioner to post the bond in 3uestion and that the
ta$paer +ould re"use or "ail to "urnish said bond, +ould the !ourt a 1-o be obliged to
authorize or allo+ the !ollector o" /nternal 0evenue to proceed +ith the collection "rom
the petitioner o" the ta$es due b a means it previousl declared to be contrar to la+O
#he pronouncement made b the respondent !ourt, a"ter due hearing, to the e""ect that
summar methods o" collection b distraint and lev +ould be improper in the instant
case, +as done in the e$ercise o" its po+er to pass 7udgment on all matters brought be"ore
it. /t +as a la+"ul e$ercise o" the 7urisdiction vested in said !ourt +hich is +ell22provided
"or in section = o" 0epublic %ct No. 1125-
S9!. =. &-risdiction. K #he !ourt o" #a$ %ppeals shall e$ercise e$clusive
appellate 7urisdiction to revie+ b appeal, as herein provided K
&1( <ecisions o" the !ollector o" /nternal 0evenue in cases involving
disputed assessments, re"unds o" internal revenue ta$es, "ees or other
charges, penalties imposed in relation thereto, or other matters arisin"
-nder the 3ational 6nternal (e,en-e %ode or other la+ or part o" la+
administered b the >ureau o" /nternal 0evenue.
#here is another issue raised b respondent %urelio P. 0ees that merits consideration. /t
does not appear "rom the records that a motion "or reconsideration +as ever "iled b
counsel "or petitioner, although a notice o" appeal, dated 6anuar 21, 1955, +as "iled in
the court belo+. /t is an established doctrine in this 7urisdiction that the attention o" the
!ourt should "irst be called to its supposed error, and its correction as4ed "or on a motion
"or reconsideration &@errera ,s. >arretto, 25 Phil., 215B H !hua ,s. /mperial, 11 Phil.,
2=B .anila Post Publishing !o. ,s. Sanchez, '1 Phil., 611 16 5""., Suppl. &1( 112B
%lvarez ,s. /baMez, ') Phil., 1*1, 16 5"". Gaz., 12))(.
#hat "ailure o" the petitioner to "ile +ith the court belo+ a motion "or reconsideration o"
the order sub7ect o" the certiorari proceedings is a "atal and insurmountable barrier, is
"urther stressed in the case o" Valeriano 3icolas et al. ,s. The 9on. )odesto %astillo et
al., &9= Phil., ))6( +herein this !ourt held-
No motion "or reconsideration +as ever "iled b petitioners in the court belo+,
calling its attention to the alleged errors and irregularities no+ raised in this
petition, to give it an opportunit to correct such errors and irregularities, i"
indeed an +ere committed. :or his reason alone if not for any other$ the writ
was applied for sho-ld .e denied.
Ahere"ore, the petition "or certiorari is denied and the resolution o" the respondent !ourt
o" #a$ %ppeals is hereb a""irmed, +ithout pronouncement as to costs. /t is so ordered.
Paras$ %.&.$ !en"#on$ Padilla$ )ontemayor$ (eyes$ A.$ !a-tista An"elo$ /a.rador and
Endencia$ &&.$ concur.
(/ara0( O/,n,on-
R!%!, J.&.L., J., concurring-
/ concur in the result, sub7ect to m dissenting opinion in the case o" %ollector of 6nternal
(e,en-e ,s. A,elino and the %o-rt of Ta4 Appeals, &s-pra, p. )2=( regarding the necessit
o" the ta$paer8s posting a bond or depositing the amount o" the ta$es claimed, be"ore the
ta$ collection ma be suspended.
G.R. No. 50' January '9, 1946
&AILIA CA&R!RA, plainti""2appellee,
vs.
#6! PROVINCIAL #R!A$R!R O" #A%A&A an9 P!7RO J. CA#IG&AC,
de"endants2appellants.
/oren#o S-m-lon" for appellant.
&ose 7. 'io*no for appellee.
PARA, J.;
5n 5ctober )*, 191*, the provincial treasurer o" #aabas issued a notice "or the sale at
public auction o" numerous, real properties "or"eited "or ta$ delin3uenc, including a
certain parcel o" land located in the barrio o" >uenavista, municipalit o" !andelaria,
Province o" #aabas, and assessed in the name o" Nemesio !abrera, said sale to be held
:on <ecember 15, 191* at ' a.m. and ever da therea"ter at the same place and hour
until all the properties shall have been sold to the highest bidder.: !op o" the notice +as
sent b registered mail to Nemesio !abrera, but the envelope containing the same +as
returned +ith the remar4 :Hnclaimed,: undoubtedl because Nemesio !abrera had
alread died in 19)5. #he land +as actuall sold on .a 12, 1911, "or the sum o" P=1.)1
to the appellant Pedro 6. !atigbac, in +hose "avor the "inal bill o" sale +as e$ecuted on
September 2), 1912. #herea"ter the appellee, >asilia !abrera, "iled a complaint in the
!ourt o" ,irst /nstance o" #aabas against the provincial treasurer and the appellant,
attac4ing the validit o" the ta$ sale on the grounds that she +as not noti"ied there"ore
and that although the land had remained in the assessment boo4 in the name o" Nemesio
!abrera, a "ormer o+ner, she has become its registered o+ner, since 19)1 +hen a #orrens
title &No. '16=( +as issued to her b the register o" deeds o" #aabas. ,rom a 7udgment
"avorable to the appellee, the present appeal +as ta4en b Pedro 6. !atigbac.
Hnder the la+ &!ommon+ealth %ct No. 1=*, section )5(, the provincial treasurer is
en7oined to set "orth in the notice, among other particulars, the date o" the ta$ sale. Ae are
o" the opinion that this mandator re3uirement +as not satis"ied in the present case,
because the announcement that the sale +ould ta4e place on <ecember 15, 191* and
ever da therea"ter, is as general and inde"inite as a notice "or the sale :+ithin this or
ne$t ear: or :some time +ithin the month o" <ecember.: /n order to enable a ta$paer to
protect his rights, he should at least appraised o" the e$act date o" the proceeding b
+hich he is to lose his propert. Ahen +e consider the "act that the sale in "avor o" the
appellant +as e$ecuted on .a 12, 1911, or nearl "ive months a"ter <ecember 15, 191*,
the violation o" the mandator re3uirement becomes more obvious. /ndeed, in his motion
"or reconsideration &see 0ecord on %ppeal, pp. ))211(, the appellant had admitted,
un4no+ingl perhaps, that +hen he +ent to the o""ice o" the municipal treasurer a"ter
reading the notice o" sale in <ecember, 191*, to in3uire about the advertised land, he +as
told to return on .a 12, 1911. #he implication that "ollo+s is that the ta$ o""icials had
reall adopted the vie+ that the could sell an o" the numerous "or"eited lots on an date
subse3uent to <ecember 15, 191*, +ithout ne+ notice, thereb ma4ing the resulting sale
more private than public, li4e+ise in violation o" the la+. /t ma be observed that as
regards ta$ sales, unli4e ordinar e$ecution sales, the statute does not e$pressl authorize
ad7ournment "rom da to da. #he reminder ma, ho+ever, be given that the ta$ o""icials
+ill greatl be inconvenienced b "ollo+ing the la+ strictl, especiall +hen numerous
properties are, as in the present case &1)2 parcels(, to be disposed o" "or ta$ delin3uenc.
Ae +ill not venture to disagree, but it is believed that the o""icials +ho are ever solicitous
in protecting private proprietar rights, shall have helped, to the same e$tent, in
maintaining the solid "oundation o" the Government +hich the see4 to serve and o"
+hich the themselves are a part.
Ahat has been said is su""icient to decide this appeal, although it +ill not altogether be
amiss to re"er to details that "urther support the 7udgment o" the lo+er court. #he appellee
+as admittedl not noti"ied o" the auction sale, and this also vitiates the proceeding. She
is the registered o+ner o" the land and, since 19)1, has become liable "or the ta$es
thereon. ,or all purposes, she is the delin3uent ta$paer :against +hom the ta$es +ere
assessed,: re"erred to in section )1 o" !ommon+ealth %ct No. 1=*. /t cannot be Nemesio
!abrera "or the latter8s obligation to pa ta$es ended +here the appellee8s liabilit began.
Neither the alleged receipt b the appellee o" a cop o" certi"icate o" sale dated .a 12,
1911, nor her "ailure to redeem therea"ter, had the e""ect o" validating the prior ta$
proceeding. #he sale in "avor o" the appellant cannot bind the appellee, since the land
purportedl conveed +as o+ned b Nemesio !abrera, not b the appelleeB and, at the
time o" the sale, Nemesio !abrera had no interest +hatsoever in the land in 3uestion that
could have passed to the appellant.
#he appellee ma be criticized "or her "ailure to have the land trans"erred to her name in
the assessment record. #he circumstance, nevertheless, cannot supplant the absence o"
notice. 5" course, it is the dut o" an person ac3uiring at the time real propert to
prepare and submit a ta$ declaration +ithin si$t das &!ommon+ealth %ct No. 1=*,
section 12(, but it is no less true that +hen the o+ner re"uses or "ails to ma4e the re3uired
declaration, the provincial assessor should himsel" declare the propert in the name o" the
de"aulting o+ner &!ommon+ealth %ct No. 1=*, section 11(. /n this case there is
absolutel no sho+ing that the appellee had deliberatel "ailed to ma4e the declaration to
de"raud the ta$ o""icialsB and it ma be remar4ed that there can be no reason +h her
#orrens title, +hich binds the +hole +orld, cannot at least charge the Government +hich
had issued it, +ith notice thereo". % little snchronization bet+een the o""ices o" the
register o" deeds and o" the provincial assessor, +ith perhaps ver negligible additional
clerical +or4 on the part o" both, +ill surel result in a more e""icient en"orcement o" the
ta$ la+s.
Not having appealed, the appellee cannot no+ pretend that the 7udgement o" the lo+er
court is erroneous in so "ar as it "ailed to a+ard damages in her "avor "or the sum o" P5**.
Ahile an appellee can on appeal ma4e a counter2assignment o" error, it must be +ith a
vie+ merel to sustaining the 7udgement, not to obtaining other a""irmative relie".
#he appealed 7udgment is a""irmed, +ith costs o" both instances against the appellant. So
ordered.
)oran$ %.&.$ &aranilla$ and Pa.lo$ &&.$ concur.
(/ara0( O/,n,on-
"!RIA, J., concurring and dissenting-
/ concur e$cept in the conclusion o" the ma7orit that the appellee ma ma4e a counter2
assignment o" error even in the sense therein stated, "or it is misleading and erroneous. /n
no case ma a counter2assignment o" error be properl allo+ed. % counter2assignment o"
error means, as the pre"i$ :counter: indicates, a proposition that the court committed an
error opposite or contrar to that assigned b the adverse part. %ppellee should not or
need not ma4e such counter2assignment in order to re"ute or disprove plainti""8s
assignment o" error.
9ven i" b counter2assignment is meant an assignment o" error, it is improper and o" no
avail "or an appellee to ma4e it in ordinar civil cases. /t is not incumbent on appellee,
+ho occupies a purel de"ensive position, to ma4e assignments o" error. &Garcia Ealdez
,s. SoteraMa #uason, 1* Phil., 91).( @e cannot, as appellee, obtain "rom the appellate
court more or greater relie" than that granted him b the trial court though the latter8s
decision be erroneous in that respect. Ahen the trial 7udge decides a case in "avor o" a
part on certain ground, the appellate court ma base its decision upon some other point,
ignored or erroneousl decided in "avor o" the appellant b the trial court &do$ do(.
Aithout an assignment o" errors, appellee ma point out in his brie" an error committed
b the lo+er court in not admitting certain evidence, or not ta4ing into consideration
certain points o" la+ or "act, in support o" the decision appealed "rom.
/n election cases, ho+ever, the appellee ma ma4e an assignment o" error although not
re3uired to do so, because as said cases are tried de no,o on appeal, )endo#a ,s.
)endiola &5) Phil., 26=(, appellee ma see4 a""irmative relie" and the appellate court
grant or decide that appellee has received more votes than those ad7udicated to him b the
lo+er court.
&RION!, M., concurrente-
9sto con"orme con la parte dispositivia de la sentencia por el unico "undamento de 3ue
cuando se veri"ico la venta por morosidad en el impuesto territorial, >asilia !abrera, la
demandante2apelada, era la dueMa del terreno en cuestion con certi"icado de titulo #orrens
registrado a su nombre. 9l articulo )5 de la Fe del !ommon+ealth No. 1=* prescribe
3ue una copia del anuncio de la venta debera enviarse al contribuente moroso en su
residencia si esta "uese conocida por el tesorero. !omo acertadamente si dice en la
ponecia, el titulo #orrens es obligatorio para todo el mundoB por tanto K aMado K debe
serlo mas para los agentes del "isco. 9n el presente caso era deber del tesorero enviar una
copia del anuncio de venta a la damandante apelada como dueMa registrada del torreno,
en vez de mandarla al dueMo anterior 3ue por cierto a habia "allecido. Si esto hace
imperativo 3ue se de cuenta a las tesorerias de todos los traspasos inscritos registrados
en el 0egistro de la Propiedad, estimo 3ue ello debe hacerse el implementando la
ma3uinaria o""icial al e"ecto. 0azones de e3uidad e"iciencia administrativa demandan la
rigida adopcion de seme7ante practica.
G.R. No. 1#04#0 D&c&21&r 1#, 1999
REPU)LIC OF T>E P>ILIPPINES, r&'r&%&n(& 10 (h& Co22-%%-on&r o* (h&
)+r&a+ o* In(&rna/ R&$&n+& 9)IR:, petitioner,
vs.
SALUD V. >INON, respondent.

MENDONA, J.:
This is a petition for revie' of the decision
1
of the 7egional Trial Court, .ranch
!!, *an +ernando, Pampanga, dismissing the suit filed by the .ureau of ,nternal
7evenue for collection of tax.
The facts are as follo's(
)n 9uly "#, "&#, the .,7 issued to respondent *alud 4. Di/on a deficiency
income tax assessment of P",""$,$5&.# covering the fiscal year "&#"5"&#2.
7espondent not having contested the assessment, petitioner, on 9anuary "2,
"&#&, served 'arrants of distraint and levy to collect the tax deficiency. Do'ever,
for reasons not >no'n, it did not proceed to dispose of the attached properties.
-ore than three years later, or on @ovember $, "&&2, respondent 'rote the .,7
re=uesting a reconsideration of her tax deficiency assessment. The .,7, in a
letter dated August "", "&&!, denied the re=uest. )n 9anuary ", "&&7, it filed a
case 'ith the 7egional Trial Court, .ranch !!, *an +ernando, Pampanga to
collect the tax deficiency. The complaint 'as signed by @orberto *alud, Chief of
the ?egal <ivision, .,7 7egion !, and verified by Amancio *aga, the .ureau8s
7egional <irector in Pampanga.
7espondent moved to dismiss the case on t'o grounds( 2"3 that the complaint
'as not filed upon authority of the .,7 Commissioner as re=uired by E22" 2 of
the @ational ,nternal 7evenue Code, and 223 that the action had already
prescribed. )ver petitioner8s obAection, the trial court, on August 2#, "&&7,
granted the motion and dismissed the complaint. Dence, this petition. Petitioner
raises the follo'ing issues(
#
,. BD0TD07 )7 @)T TD0 ,@*T,T6T,)@ )+ TD0 C,4,? CA*0 +)7
C)??0CT,)@ )+ TAF0* BA* B,TD)6T TD0 APP7)4A? )+ TD0
C)--,**,)@07 ,@ 4,)?AT,)@ )+ *0CT,)@ 22" )+ TD0 @AT,)@A?
,@T07@A? 7040@60 C)<0.
,,. BD0TD07 )7 @)T TD0 ACT,)@ +)7 C)??0CT,)@ )+ TAF0* +,?0<
A1A,@*T 70*P)@<0@T DA< A?70A<G .00@ .A770< .G TD0 *TAT6T0
)+ ?,-,TAT,)@*.
First. ,n sustaining respondent8s contention that petitioner8s complaint 'as filed
'ithout the authority of the .,7 Commissioner, the trial court stated(
4
There is no =uestion that the @ational ,nternal 7evenue Code explicitly provides
that in the matter of filing cases in Court, civil or criminal, for the collection of
taxes, etc., the approval of the commissioner must first be secured. . . . HAIn
action 'ill not prosper in the absence of the commissioner8s approval. Thus, in
the instant case, the absence of the approval of the commissioner in the
institution of the action is fatal to the cause of the plaintiff . . . .
The trial court arrived at this conclusion because the complaint filed by the
.,7 'as not signed by then Commissioner ?i'ay'ay Chato.
*ec. 22" of the @,7C provides(
Form and mode of proceeding in actions arising under this Code. J Civil and
criminal actions and proceedings instituted in behalf of the 1overnment under the
authority of this Code or other la' enforced by the .ureau of ,nternal 7evenue
shall be brought in the name of the 1overnment of the Philippines and shall be
conducted by the provincial or city fiscal, or the *olicitor 1eneral, or by the legal
officers of the .ureau of ,nternal 7evenue deputi/ed by the *ecretary of 9ustice,
but no civil and criminal actions for the recovery of taxes or the enforcement of
any fine, penalty or forfeiture under this Code shall begun without the approval of
the Commissioner. 20mphasis supplied3
To implement this provision 7evenue Administrative )rder @o. 55#$ of the
.,7 provides in pertinent portions(
The follo'ing civil and criminal cases are to be handled by *pecial Attorneys and
*pecial Counsels assigned in the ?egal .ranches of 7evenues 7egions(
xxx xxx xxx
,,. Civil Cases
". Complaints for collection on cases falling 'ithin the Aurisdiction
of the 7egion . . . .
,n all the abovementioned cases, the 7egional <irector is
authori/ed to sign all pleadings filed in connection there'ith
'hich, other'ise, re=uires the signature of the Commissioner.
xxx xxx xxx
7evenue Administrative )rder @o. "%5&5 specifically authori/es the ?itigation and
Prosecution *ection of the ?egal <ivision of regional district offices to institute the
necessary civil and criminal actions for tax collection. As the complaint filed in
this case 'as signed by the .,78s Chief of ?egal <ivision for 7egion ! and
verified by the 7egional <irector, there 'as, therefore, compliance 'ith the la'.
Do'ever, the lo'er court refused to recogni/e 7A) @o. "%5&5 and, by
implication, 7A) @o. 55#$. ,t held(
H-IemorandHaI, circulars and orders emanating from bureaus and agencies
'hether in the purely public or =uasi5public corporations are mere guidelines for
the internal functioning of the said offices. They are not la's 'hich courts can
ta>e Audicial notice of. As such, they have no binding effect upon the courts for
such memorandHaI and circulars are not the official acts of the legislative,
executive and Audicial departments of the Philippines. . . .
5
This is erroneous. The rule is that as long as administrative issuances relate
solely to carrying into effect the provisions of the la', they are valid and have the
force of la'.
"
The governing statutory provision in this case is E!2d3 of the @,7C
'hich provides(
pecific provisions to be contained in regulations. J The regulations of the
.ureau of ,nternal 7evenue shall, among other things, contain provisions
specifying, prescribing, or defining(
xxx xxx xxx
2d3 The conditions to be observed by revenue officers, provincial fiscals and other
officials respecting the institution and conduct of legal actions and proceedings.
7A) @os. 55#$ and "%5&5 are in harmony 'ith this statutory mandate.
As amended by 7.A. @o. #!2!, the @,7C is no' even more categorical. *ec. 7 of
the present Code authori/es the .,7 Commissioner to delegate the po'ers
vested in him under the pertinent provisions of the Code to any subordinate
official 'ith the ran> e=uivalent to a division chief or higher, except the follo'ing(
2a3 The po'er to recommend the promulgation of rules and regulations by the
*ecretary of +inanceC
2b3 The po'er to issue rulings of first impression or to reverse, revo>e or modify
any existing ruling of the .ureauC
2c3 The po'er to compromise or abate under E2%! 2A3 and 2.3 of this Code, any
tax deficiency( !rovided, however, that assessment issued by the 7egional
)ffices involving basic deficiency taxes of five hundred thousand pesos
2P5%%,%%%.%%3 or less, and minor criminal violations as may be determined by
rules and regulations to be promulgated by the *ecretary of +inance, upon the
recommendation of the Commissioner, discovered by regional and district
officials, may be compromised by a regional evaluation board 'hich shall be
composed of the 7egional <irector as Chairman, the Assistant 7egional <irector,
heads of the ?egal, Assessment and Collection <ivisions and the 7evenue
<istrict )fficer having Aurisdiction over the taxpayer, as membersC and
2d3 The po'er to assign or reassign internal revenue officers to establishments
'here articles subAect to excise tax are produced or >ept.
@one of the exceptions relates to the Commissioner8s po'er to approve
the filing of tax collection cases.
econd. Bith regard to the issue that the case filed by petitioner for the collection
of respondent8s tax deficiency is barred by prescription, E22$2c3 of the @,7C
provides(
Any internal revenue tax 'hich has been assessed 'ithin the period of limitation
above5prescribed may be collected by distraint or levy or by a proceeding in court
'ithin three years
8
follo'ing the assessment of the tax.
The running of the three5year prescriptive period is suspended
7
J
for the period during 'hich the Commissioner is prohibited from ma>ing the
assessment or beginning distraint or levy or a proceeding in court and for sixty
days thereafterC 'hen the taxpayer re=uests for a reinvestigation 'hich is granted
by the CommissionerC 'hen the taxpayer cannot be located in the address given
by him in the return filed upon 'hich the tax is being assessed or collectedC
provided, that, if the taxpayer informs the Commissioner of any change in
address, the running of the statute of limitations 'ill not be suspendedC 'hen the
'arrant of distraint or levy is duly served upon the taxpayer, his authori/ed
representative or a member of his household 'ith sufficient discretion, and no
property could be locatedC and 'hen the taxpayer is out of the Philippines.
Petitioner argues that, in accordance 'ith this provision, respondent8s
re=uest for reinvestigation of her tax deficiency assessment on @ovember
$, "&&2 effectively suspended the running of the period of prescription
such that the government could still file a case for tax collection.
9
The contention has no merit. *ec. 22&
10
of the Code mandates that a re=uest for
reconsideration must be made 'ithin $% days from the taxpayer8s receipt of the
tax deficiency assessment, other'ise the assessment becomes final,
unappealable and, therefore, demandable.
11
The notice of assessment for
respondent8s tax deficiency 'as issued by petitioner on 9uly "#, "&#. )n the
other hand, respondent made her re=uest for reconsideration thereof only on
@ovember $, "&&2, 'ithout stating 'hen she received the notice of tax
assessment. *he explained that she 'as constrained to as> for a reconsideration
in order to avoid the harassment of .,7 collectors.
16
,n all li>elihood, she must
have been referring to the distraint and levy of her properties by petitioner8s
agents 'hich too> place on 9anuary "2, "&#&. 0ven assuming that she first
learned of the deficiency assessment on this date, her re=uest for
reconsideration 'as nonetheless filed late since she made it more than $% days
thereafter. Dence, her re=uest for reconsideration did not suspend the running of
the prescriptive period provided under E22$2c3. Although the Commissioner acted
on her re=uest by eventually denying it on August "", "&&!, this is of no moment
and does not detract from the fact that the assessment had long become
demandable.
@onetheless, it is contended that the running of the prescriptive period under
E22$2c3 'as suspended 'hen the .,7 timely served the 'arrants of distraint and
levy on respondent on 9anuary "2, "&#&.
1#
Petitioner cites for this purpose our
ruling in "dvertising "ssociates #nc., v. Court of "ppeals.
14
.ecause of the
suspension, it is argued that the .,7 could still avail of the other remedy under
E22$2c3 of filing a case in court for collection of the tax deficiency, as the .,7 in
fact did on 9anuary ", "&&7.
Petitioner8s reliance on the Court8s ruling in "dvertising "ssociates #nc. v. Court
of "ppeals is misplaced. Bhat the Court stated in that case and, indeed, in the
earlier case of !alanca v. Commissioner of #nternal $evenue,
15
is that the timely
service of a 'arrant of distraint or levy suspends the running of the period to
collect the tax deficiency in the sense that the disposition of the attached
properties might 'ell ta>e time to accomplish, extending even after the lapse of
the statutory period for collection. ,n those cases, the .,7 did not file any
collection case but merely relied on the summary remedy of distraint and levy to
collect the tax deficiency. The importance of this fact 'as not lost on the Court.
Thus, in Advertising Associates, it 'as held(
1"
K,t should be noted that the
Commissioner did not institute any Audicial proceeding to collect the tax. De relied
on the 'arrants of distraint and levy to interrupt the running of the statute of
limitations.
-oreover, if, as petitioner in effect says, the prescriptive period 'as suspended
t'ice, i.e., 'hen the 'arrants of distraint and levy 'ere served on respondent on
9anuary "2, "&#& and then 'hen respondent made her re=uest for
reinvestigation of the tax deficiency assessment on @ovember $, "&&2, the three5
year prescriptive period must have commenced running again sometime after the
service of the 'arrants of distraint and levy. Petitioner, ho'ever, does not state
'hen or 'hy this too> place and, indeed, there appears to be no reason for such.
,t is note'orthy that petitioner raised this point before the lo'er court apparently
as an alternative theory, 'hich, ho'ever, is untenable.
+or the foregoing reasons, 'e hold that petitioner8s contention that the action in
this case had not prescribed 'hen filed has no merit. )ur holding, ho'ever, is
'ithout preAudice to the disposition of the properties covered by the 'arrants of
distraint and levy 'hich petitioner served on respondent, as such 'ould be a
mere continuation of the summary remedy it had timely begun. Although
considerable time has passed since then, as held in "dvertising "ssociates #nc.
v. Court of "ppeals
18
and !alanca v. Commissioner of #nternal $evenue,
17
the
enforcement of tax collection through summary proceedings may be carried out
beyond the statutory period considering that such remedy 'as seasonably
availed of.
BD070+)70, the petition is <0@,0<.
%ellosillo, &uisumbing, %uena and De 'eon, Jr., JJ., concur.
G.R. No. 119#66 <+n& 4, 199"
COMMISSIONER ON INTERNAL REVENUE, SENIOR STATE PROSECUTOR
AURORA S. LAGMAN, SENIOR STATE PROSECUTOR )ERNELITO R.
FERNANDEN, SENIOR STATE PROSECUTOR >ENRICO P. GINGOMON,
ROGELIO F. VISTA, STATE PROSECUTOR ALFREDO AGCAOILI,
PROSECUTING ATTORNEM EMMANUEL VELASCO, CITM PROSECUTOR
CANDIDO V. RIVERA, AND ASSISTANT CITM PROSECUTOR LEOPOLDO E.
)ARAKUIA, petitioners,
vs.
T>E >ONORA)LE COURT OF APPEALS, T>E >ONORA)LE TIRSO D=C
VELASCO, PRESIDING <UDGE, REGIONAL TRIAL COURT OF KUENON
CITM, )RANC> 77, FORTUNE TO)ACCO CORPORATION, LUCIO TAN,
>ARRM C. TAN, CARMEN OAO TAN, FLORENCIO SANTOS, SALVADOR
MISON, C>UNG POE OEE, RO<AS C>UA, MARIANO TANENGLIAN,
<UANITA LEE AND ANTONIO P. A)AMA, respondents.
DAGUPAN COM)INED COMMODITIES, INC., TOBNSMAN COMMERCIALS,
INC., LANDMARO SALES AND MAROETING INC., CRIMSON CROCOER
DISTRI)UTORS, INC., MOUNT MATUTUM MAROETING CORP., FIRST
UNION TRADING CORP., CARLS)URG AND SONS, INC., OMAR ALI
DISTRI)UTORS, INC., ORIEL AND COMPANM, NEMESIO TAN, KUINTIN
CALLE<A, MOLANDA MANALILI, CARLOS C>AN, ROMEO TAN, VICENTE
CO, BILLIAM MU, LETICIA LIM, GLORIA LOPEN, RO)ERT TANTAMCO,
FELIPE LOM, ROLANDO C>UA, >ONORINA TAN, BILLIE TANTAMCO,
>ENRM BEEC>EE, <ESUS LIM, TEODORO TAN, ANTONIO APOSTOL,
DOMINGO TENG, CANDELARIO LI, ERLINDA CRUN, CARLOS TUMPALAN,
LARRM <O>N SM, ERNESTO ONG, BILFREDO MACRO>ON, ANTONIO TIU,
ROSARIO LESTER, BILFREDO ONG, )ONIFACIO C>UA, GO C>ING
C>UAN, >ENRM C>UA, LOPE LIM GUAN, EMILIO TAN, FELIPE TAN SE>
C>UAN, ANDRES CO, FELIPE OEE, >ENRM GO CO, NARCISO GO, ADOLFO
LIM, CO S>U, DANIEL MAO CA)IGUN, GA)RIELLE. KUINTELA, NELSON
TE, EMILLIO GO, EDBIN LEE, CESAR LEDESMA, <R., <AO C>EP SENG,
ARNULFO TAN, )EN<AMIN T. >ONG, P>ILIP <AO, <OSE P. MU, AND DAVID
R. CORTES, respondents5intervenors.

OAPUNAN, J.:p
The pivotal issue in this petition for revie' is 'hether or not respondent Court of
Appeals in its decision
1
in CA51.7. *P @o. $$5&& correctly ruled that the
7egional Trial Court of Lue/on City 2.ranch ##3 in Civil Case @o. L5&!5 "#7&%
did not commit grave abuse of discretion amounting to lac> of Aurisdiction in
issuing four 2!3 orders directing the issuance of 'rits of preliminary inAunction
restraining petitioner prosecutors from continuing 'ith the preliminary inAunction
of ,.*. @os. &$55%# and &$55#! in the <epartment of 9ustice and ,.*. @o. &$5
"7&!2 in the )ffice of the City Prosecutors of Lue/on City 'herein private
respondents 'ere respondents and denying petitioners8 -otion to <ismiss said
Civil Case @o. &!5"#7&%.
6
,n resolving the issue raised in the petition, the Court may be guided by its
definition of 'hat constitutes grave abuse of discretion. .y grave abuse of
discretion is meant such capricious and 'himsical exercise of Audgment as is
e=uivalent to lac> of Aurisdiction. The abuse of discretion must be patent and
gross as to amount to an evasion of positive duty or a virtual refusal to perform a
duty enAoined by la', or to act at all in contemplation of la' as 'here the po'er
is exercised in an arbitrary and despotic manner by reason of passion and
hostility.
#
)n 9une ", "&&$, the President issued a -emorandum creating a Tas> +orce to
investigate the tax liabilities of manufacturers engaged in tax evasion scheme,
such as selling products through dummy mar>eting corporations to avoid
payment of correct internal revenue tax, to collect from them any tax liabilities
discovered from such investigation, and to file the necessary criminal actions
against those 'ho may have violated the tax code. The tas> force 'as composed
of the Commissioner of ,nternal 7evenue as Chairman, a representative of the
<epartment of 9ustice and a representative of the 0xecutive *ecretary.
)n 9uly ", "&&$, the Commissioner of ,nternal 7evenue issued a 7evenue
-emorandum Circular @o. $75&$ reclassifying best selling cigarettes bearing the
brands KDope,K K-ore,K and KChampionK as cigarettes of foreign brands subAect
to a higher rate of tax.
)n August $, "&&$, respondent +ortune Tobacco Corporation 2+ortune3
=uestioned the validity of the reclassification of said brands of cigarettes as
violative of its right to due process and e=ual protection of la'. Parenthetically, on
*eptember #, "&&$, the Court of Tax Appeals by resolution ruled that the
reclassification made by the Commissioner Kis of doubtful legalityK and enAoined
its enforcement.
,n a letter of August "$, "&&$ 'hich 'as received by +ortune on August 2!, "&&$,
the Commissioner assessed against +ortune the total amount of
P7,#5,&!2,22". representing deficiency income, ad valorem and value5added
tax for the year "&&2 'ith the re=uest that the said amount be paid 'ithin thirty
2$%3 days upon receipt thereof.
4
+ortune on *eptember "7, "&&$ moved for
reconsideration of the assessments.
)n *eptember 7, "&&$, the Commissioner of ,nternal 7evenue filed a complaint
'ith the <epartment of 9ustice against respondent +ortune, its corporate officers,
nine 2&3 other corporations and their respective corporate officers for alleged
fraudulent tax evasion for supposed non5payment by +ortune of the correct
amount of income tax, ad valorem tax and value5added tax for the year "&&2.
The complaint alleged, among others, that(
,n the said income tax return, the taxpayer declared a net taxable income of
P"#$,"$,!%#.%% and an income tax due of P!,2!,&$.%%. .ased mainly on
documentary evidence submitted by the taxpayer itself, these declarations are
false and fraudulent because the correct taxable income of the corporation for
the said year is P",2#2,&5&,$&&.25.
This underdeclaration 'hich resulted in the evasion of the amount of
P72$,77$,75&.7& as deficiency income tax for the year "&&2 is a violation of
*ection !5 of the Tax Code, penali/ed under *ection 25$ in relation to *ections
2522b3 and 2d3 and 25$ thereof, thus( . . .
xxx xxx xxx
+ortune Tobacco Corporation, through its 4ice5President for +inance, 7oxas
Chua, li>e'ise filed value5added tax returns for the "st, 2nd, $rd and !th =uarters
of "&&2 'ith the 7ev. <istrict )ffice of -ari>ina, -etro -anila, declaring therein
gross taxable sales, as follo's(
"st Ltr. P 2,&2!,!"#,%55.%%
2nd Ltr. 2,&#%,$$5,2$5.%%
$rd Ltr. 2,#$&,5"&,$25.%%
!th Ltr. 2,&&2,$#,%%5.%%
Do'ever, contrary to 'hat have been reported in the said value5 added tax
returns, and based on documentary evidence obtained from the taxpayer, the
total actual taxable sales of the corporation for the year "&&2 amounted to
P","5#,575,%$5.%% instead of P"",&2&,$22,$$!.52 as declared by the
corporation in the said 4AT returns.
These fraudulent underdeclarations 'hich resulted in the evasion of value5added
taxes in the aggregate amount of P","&,##,!5.$ for the entire year "&&2 are
violations of *ection ""% in relation to *ection "%% of the Tax Code, 'hich are
li>e'ise penali/ed under the afore=uoted *ection 25$, in relation to *ection 252,
thereof. *ections ""% and "%% provide(
xxx xxx xxx
+urthermore, based on the corporation8s 4AT returns, the corporation reported its
taxable sales for "&&2 in the amount of P"",7$,5#,5#%. This declaration is
li>e'ise false and fraudulent because, based on the daily manufacturer8s s'orn
statements submitted to the .,7 by the taxpayer, its total taxable sales during the
year "&&2 is P",#,$72,2&5.%%. As a result thereof, the corporation 'as able to
evade the payment of ad valorem taxes in the aggregate amount of
P5,7&2,!7&,#".2! in violation of *ection "27 in relation to *ection "!2, as
amended by 7.A. &5, penali/ed under the afore=uoted *ection 25$, in relation
to *ection 252, all of the Tax Code. *ections "27 and "!2, as amended by 7.A.
&5, are =uoted as follo's( . . .
The complaint doc>eted as ,.*. @o. &$55%#, 'as referred to the <epartment of
9ustice Tas> +orce on revenue cases 'hich found sufficient basis to further
investigate the allegations that +ortune, through fraudulent means, evaded
payment of income tax, ad valorem tax, and value5added tax for the year "&&2
thus, depriving the government of revenues in the amount of *even and )ne5half
2P7.53 .illion Pesos.
The fraudulent scheme allegedly adopted by private respondents consisted of
ma>ing fictitious and simulated sales of +ortune8s cigarette products to non5
existing individuals and to entities incorporated and existing only for the purpose
of such fictitious sales by declaring registered 'holesale prices 'ith the .,7
lo'er than +ortune8s actual 'holesale prices 'hich are re=uired for determination
of +ortune8s correct income, ad valorem, and value5added tax liabilities. The
Kghosts 'holesale buyersK then ostensibly sold the products to customers and
other 'holesalers;retailers at higher 'holesale prices determined by +ortune.
The tax returns and manufacturer8s s'orn statements filed by +ortune 'ould then
declare the fictitious sales it made to the conduit corporators and non5existing
individual buyers as its gross sales.
5
)n *eptember #, "&&$, the <epartment of 9ustice Tas> +orce issued a subpoena
directing private respondents to submit their counter5affidavits not later than
*eptember 2%, "&&$.
"
,nstead of filing their counter5affidavits, the private respondents on )ctober "5,
"&&$ filed a 4erified -otion to <ismissC Alternatively -otion to *uspend,
8
based
principally on the follo'ing grounds(
". The complaint of petitioner Commissioner follo's a pattern of prosecution
against private respondents in violation of their right to due process and e=ual
protection of the la'.
2. Petitioner Commissioner and the Court of Tax Appeals have still to determine
+ortune8s tax liability for "&&2 in =uestionC 'ithout any tax liability, there can be
no tax evasion.
$. 0xclusive Aurisdiction to determine tax liability is vested in the Court of Tax
AppealsC therefore, the <)9 is 'ithout Aurisdiction to conduct preliminary
investigation.
!. The complaint of petitioner Commissioner is not supported by any evidence to
serve as ade=uate basis for the issuance of subpoena to private respondents
and to put them to their defense.
At the scheduled preliminary investigation on )ctober "5, "&&$, private
respondents 'ere as>ed by the panel of prosecutors to inform it of the aspects of
the 4erified -otion to <ismiss 'hich counsel for private respondents did so
briefly. Counsel for the Commissioner of ,nternal 7evenue as>ed for fifteen 2"53
days 'ithin 'hich to file a reply in 'riting to private respondents8 4erified -otion
to <ismiss. Thereupon, the panel of prosecutors declared a recess. 6pon
reconvening, the panel of prosecutors denied the motion to dismiss and treated
the same as private respondents8 counter5affidavits.
7
)n )ctober 2%, "&&$, private respondents filed a motion for reconsideration of
the order of )ctober "5, "&&$.
9
)n )ctober 2", "&&$, private respondents filed a
motion to re=uire the submission by the .ureau of ,nternal 7evenue of certain
documents in further support of their 4erified -otion to <ismiss. Among the
documents sought to be produced are the K<aily -anufacturer8s *'orn
*tatementsK 'hich according to petitioner Commissioner in her complaint 'ere
submitted by +ortune to the .,7 and 'hich 'ere the basis of her conclusion that
+ortune8s tax declarations 'ere false and fraudulent. +ortune claimed that
'ithout the K<aily -anufacturer8s *'orn *tatements,K there is no evidence to
support the complaint, hence, 'arranting its outright dismissal.
)n )ctober 2, "&&$, private respondents moved for the inhibition of the *tate
prosecutors assigned to the case for alleged lac> of impartiality.
10
Private
respondents also sought the production of the K<aily -anufacturer8s *'orn
*tatementsK submitted by certain cigarette companies similarly situated as
+ortune but 'ere not proceeded against, thus, private respondents charged that
+ortune and its officers 'ere being singled out for criminal prosecution 'hich is
discriminatory and in violation of the e=ual protection clause of the Constitution.
)n <ecember 2%, "&&$, the panel of prosecutors issued an )mnibus )rder
11

denying private respondents8 motion for reconsideration, motion for suspension
of investigation, motion to inhibit the *tate Prosecutors, and motion to re=uire
submission by the .,7 of certain documents to further support private
respondents8 motion to dismiss.
)n 9anuary !, "&&!, private respondents filed a petition for certiorari and
prohibition 'ith prayer for preliminary inAunction 'ith the 7egional Trial Court,
.ranch ##, Lue/on City, doc>eted as L5&!5"#7&%, praying that the complaint of
the Commissioner of ,nternal 7evenue and the orders of the prosecutors in ,.*.
@o. &$55%# be dismissed or set aside, alternatively, the proceedings on the
preliminary investigation be suspended pending final determination by the
Commissioner of +ortune8s motion for reconsideration; reinvestigation of the
August "$, "&&$ assessment of the taxes due.
16
)n 9anuary "7, "&&!, petitioners filed a motion to dismiss the petition
1#
on the
grounds that 2a3 the trial court is bereft of Aurisdiction to enAoin a criminal
prosecution under preliminary investigationC 2b3 a criminal prosecution for tax
fraud can proceed independently of criminal or administrative actionC 2c3 there is
no preAudicial =uestion to Austify suspension of the preliminary investigationC 2d3
private respondents8 rights to due process 'as not violatedC and 2e3 selective
prosecution is not a valid defense in this Aurisdiction.
)n 9anuary "&, "&&!, at the hearing of the incident for the issuance of a 'rit of
preliminary inAunction in the petition, private respondents offered in evidence their
verified petition for certiorari and prohibition and its annexes. Petitioners
responded by praying that their motion to dismiss the petition for certiorari and
prohibition be considered as their opposition to private respondents8 application
for the issuance of a 'rit of preliminary inAunction.
)n 9anuary 25, "&&!, the trial court issued an order granting the prayer for the
issuance of a preliminary inAunction.
14
The trial court rationali/ed its order in this
'ise(
a3 ,t is private respondents8 claim that the ad valorem tax for the year "&&2 'as
levied, assessed and collected by the .,7 under *ection "!22c3 of the Tax Code
on the basis of the Kmanufacturer8s registered 'holesale priceK duly approved by
the .,7. +ortune8s taxable sales for "&&2 'as in the amount of
P"",7$,5#,5#%.%%.
b3 )n the other hand, it is petitioners8 contention that +ortune8s declaration 'as
false and fraudulent because, based on its daily manufacturer8s s'orn
statements submitted to the .,7, its taxable sales in "&&2 'ere
P",#,$72,2&5.%%, as a result of 'hich, +ortune 'as able to evade the
payment of ad valorem tax in the aggregate amount of P5,7&2,!7&,#".2!.
c3 At the hearing for preliminary investigation, the K<aily -anufacturer8s *'orn
*tatementsK 'hich, according to petitioners, 'ere submitted to the .,7 by private
respondents and made the basis of petitioner Commissioner8s complaint that the
total taxable sales of +ortune in "&&2 amounted to P",#,$72, 2&5.%% 'ere not
produced as part of the evidence for petitioners. ,n fact, private respondents had
filed a motion to re=uire petitioner Commissioner to submit the aforesaid daily
manufacturer8s s'orn statements before the <)9 panel of prosecutors to sho'
that +ortune8s actual taxable sales totaled P",#,$7$,2&5.%%, but the motion
'as denied.
d3 There is nothing on record in the preliminary investigation before the panel of
investigators 'hich supports the allegation that +ortune made a fraudulent
declaration of its "&&2 taxable sales.
e3 *ince, as alleged by private respondents, the ad valorem tax for the year "&&2
should be based on the Kmanufacturer8s registered 'holesale priceK 'hile, as
claimed by petitioners, the ad valorem taxes should be based on the 'holesale
price at 'hich the manufacturer sold the cigarettes, 'hich is a legal issue as
admitted by a .,7 la'yer during the hearing for preliminary inAunction, the correct
interpretation of the la' involved, 'hich is *ection "!22c3 of the Tax Code,
constitutes a preAudicial =uestion 'hich must first be resolved before criminal
proceedings for tax evasion may be pursued. ,n other 'ords, the .,7 must first
ma>e a final determination, 'hich it has not, of +ortune8s tax liability relative to its
"&&2 ad valorem, value5added and income taxes before the taxpayer can be
made liable for tax evasion.
f3 There 'as a precipitate issuance by the panel of prosecutors of subpoenas to
private respondents, on the very day follo'ing the filing of the complaint 'ith the
<)9 consisting of about %% pages, and the precipitate denial by the panel of
prosecutors, after a recess of about t'enty 22%3 minutes, of private respondents8
motion to dismiss, consisting of one hundred and thirty five 2"$53 pages.
g3 Private respondents had been especially targeted by the government for
prosecution. Prior to the filing of the complaint in ,.*. @o. &$55%#, petitioner
Commissioner issued 7evenue -emorandum Circular @o. $75&$ reclassifying
+ortune8s best selling cigarettes, namely KDope,K K-ore,K and KChampionK as
cigarettes bearing a foreign brand, thereby imposing upon them a higher rate of
tax that 'ould price them out of the mar>et.
h3 Bhile in petitioner Commissioner8s letter of August "$, "&&$, she gave +ortune
a period of thirty 2$%3 days from receipt thereof 'ithin 'hich to pay the alleged
tax deficiency assessments, she filed the criminal complaint for tax evasion
before the period lapsed.
i3 .ased on the foregoing, the criminal complaint against private respondents
'as filed prematurely and in violation of their constitutional right to e=ual
protection of the la's.
)n 9anuary 2, "&&!, private respondents filed 'ith the trial court a -otion to
Admit *upplemental Petition and sought the issuance of a 'rit of preliminary
inAunction to enAoin the *tate Prosecutors from continuing 'ith the preliminary
investigation filed by them against private respondents 'ith the Lue/on City
Prosecutor8s )ffice, doc>eted as ,.*. &$5"7&!2, for alleged fraudulent tax
evasion, committed by private respondents for the taxable year "&&%. Private
respondents averred in their motion that no supporting documents or copies of
the complaint 'ere attached to the subpoena in ,.*. &$5"7&!2C that the subpoena
violates private respondents8 constitutional right to due process, e=ual protection
and presumption of innocenceC that ,.*. &$5"7&!2 is substantially the same as
,.*. &$55%#C that no tax assessment has been issued by the Commission of
,nternal 7evenue and considering that taxes paid have not been challenged, no
tax liability existsC and that since Assistant City Prosecutor .ara=uia 'as a former
classmate of Presidential ?egal Counsel Antonio T. Carpio, the former cannot
conduct the preliminary investigation in an impartial manner.
)n 9anuary 2#, "&&!, private respondents filed 'ith the trial court a second
supplemental petition,
15
also see>ing to stay the preliminary investigation in ,.*.
&$55#!, 'hich 'as the third complaint filed against private respondents 'ith the
<)9 for alleged fraudulent tax evasion for the taxable year "&&".
)n 9anuary $", "&&!, the lo'er court admitted the t'o 223 supplemental petitions
and issued a temporary restraining order in ,.*. &$5"7&!2 and ,.*. &$55#!.
1"
Also,
on the same day, petitioners filed an 6rgent -otion for ,mmediate 7esolution of
petitioners8 motion to dismiss.
)n +ebruary 7, "&&!, the trial court issued an order denying petitioners8 motion to
dismiss private respondents8 petition see>ing to stay preliminary investigation in
,.*. &$55%#, ruling that the issue of 'hether *ec. "272b3 of the @ational Tax
7evenue Code should be the basis of private respondents8 tax liability as
contended by the .ureau of ,nternal 7evenue, or 'hether it is *ection "!22c3 of
the same Code that applies, as argued by herein private respondents, should
first be settled before any complaint for fraudulent tax evasion can be initiated.
1
8
)n +ebruary "!, "&&!, the trial court issued an order granting private
respondents8 petition for a supplemental 'rit of preliminary inAunction, li>e'ise
enAoining the preliminary investigation of the t'o 223 other complaints filed 'ith
the Lue/on City Prosecutor8s )ffice and the <)9 for fraudulent tax evasion, ,.*.
&$5"7&!2 and ,.*. &$55#!, for alleged tax evasion for the taxable years "&&% and
"&&" respectively.
17
,n granting the supplemental 'rit, the trial court stated that
the t'o other complaints are the same as in ,.*. &$55%#, except that the former
refer to the taxable years "&&% and "&&".
)n -arch 7, "&&!, petitioners filed a petition for certiorari and prohibition 'ith
prayer for preliminary inAunction before this Court. Do'ever, the petition 'as
referred to the Court of Appeals for disposition by virtue of its original concurrent
Aurisdiction over the petition.
)n <ecember "&, "&&!, the Court of Appeals in CA51.7 @o. *P5$$5&& rendered
a decision denying the petition. The Court of Appeals ruled that the trial court
committed no grave abuse of discretion in ordering the issuance of 'rits of
preliminary inAunction and in denying petitioners8 motion to dismiss. ,n upholding
the reasons and conclusions given by the trial court in its orders for the issuance
of the =uestioned 'rits, the Court of Appeals said in part(
,n ma>ing such conclusion the respondent Court must have understood from
herein petitioner Commissioner8s letter5complaint of "! pages 2pp. !775!&%, rollo
of this case3 and the Aoint affidavit of eight revenue officers of "7 pages attached
thereto 2pp. !&"55%7, supra3 and its annexes 2pp. 5%#5"%77, supra3, that the
charge against herein respondents is for tax evasion for non5payment by herein
respondent +ortune of the correct amounts of income tax, ad valorem tax and
value added tax, not necessarily Kfraudulent tax evasion.K Dence, the need for
previous assessment of the correct amount by herein petitioner Commissioner
before herein respondents may be charged criminally. Certiorari 'ill not be
issued to cure errors in proceedings or correct erroneous conclusions of la' or
fact. As long as a Court acts 'ithin its Aurisdictions, any alleged error committed
in the exercise of its Aurisdiction, 'ill amount to nothing more than errors of
Audgment 'hich are revie'able by timely appeal and not by a special civil action
of certiorari 2*antos, 9r. vs. Court of Appeals, "52 *C7A $7#C 1old City
,ntegrated Port *ervices, ,nc. vs. ,ntermediate Appellate Court, "7" *C7A 57&3.
The =uestioned orders issued after hearing 2Annexes A, ., C and <, petition3
being but interlocutory, revie' thereof by this Court is inappropriate until final
Audgment is rendered, absent a sho'ing of grave abuse of discretion on the part
of the issuing court 2*ee 4an <orn vs. 7omillo, "$& *C7A "$&, "!"C @e's'ee>,
,nc. vs. ,AC, "7", "77C -endo/a vs. Court of Appeals, 2%" *C7A $!$, $523. The
factual and legal issues involved in the main case still before the respondent
Court are best resolved after trial. Petitioners, therefore, instead of resorting to
this petition for certiorari and prohibition should have filed an ans'er to the
petition as ordained in *ection !, 7ule ", in connection 'ith 7ule "" of the
7evised 7ules of Court, interposing as defense or defenses the obAection or
obAections raised in their motion to dismiss, then proceed to trial in order that
thereafter the case may be decided on the merits by the respondent Court. ,n
case of an adverse decision, they may appeal therefrom by 'hich the entire
record of the case 'ould be elevated for revie' 2ee -endo/a vs. Court of
Appeals, supra3. Therefore, certiorari and prohibition resorted to by herein
petitioners 'ill not lie in vie' of the remedy open to them. Thus, the resulting
delay in the final disposition of the case before the respondent Court 'ould not
have been incurred.
1rave abuse of discretion as a ground for issuance of 'rits of certiorari and
prohibition implies capricious and 'himsical exercise of Audgment as is
e=uivalent to lac> of Aurisdiction, or 'here the po'er is exercised in an arbitrary
or despotic manner by reason of passion, preAudice, or personal hostility,
amounting to an evasion of positive duty or to a virtual refusal to perform the duty
enAoined, or to act at all in contemplation of la' 2Confederation of Citi/ens ?abor
6nion vs. @?7C, % *C7A #!C .ustamante vs. Commission on Audit, 2" *C7A
"$!3. +or such 'rits to lie, there must be capricious, arbitrary and 'himsical
exercise of po'er, the very antithesis of the Audicial prerogative in accordance
'ith centuries of both civil la' and common la' traditions 2Goung vs. *ulit, "2
*C7A 5&, !C +CC vs. ,AC, " *C7A "55C Purefoods Corp. vs. @?7C, "7"
*C7A !53. Certiorari and prohibition are remedies narro' in scope and inflexible
in character. They are not general utility tools in the legal 'or>shop 24da. de 1uia
vs. 4eloso, "5# *C7A $!%, $!!3. Their function is but limited to correction of
defects of Aurisdiction solely, not to be used for any other purpose 21arcia vs.
7anada, " *C7A &3, such as to cure errors in. proceedings or to correct
erroneous conclusions of la' or fact 21old City ,ntegrated Ports *ervices vs. ,AC,
"7" *C7A 57&3. <ue regard for the foregoing teachings enunciated in the
decisions cited can not bring about a decision other than 'hat has been reached
herein.
@eedless to say, the case before the respondent court involving those against
herein respondents for alleged non5payment of the correct amounts due as
income tax, ad valorem tax and value added tax for the years "&&%, "&&" and
"&&2 2Civil Case @o. L5&!5"#7&%3 is not ended by this decision. The respondent
Court is still to try the case and decide it on the merits. All that is decided here is
but the validity of the orders of the respondent Court granting herein respondents8
application for preliminary inAunction and denying herein petitioners8 motion to
dismiss. ,f upon the facts established after trial and the applicable la', dissolution
of the 'rit of preliminary inAunction allo'ed to be issued by the respondent Court
is called for and a Audgment favorable to herein petitioners is demanded, the
respondent Court is duty bound to render Audgment accordingly.
BD070+)70, the instant petition for certiorari and prohibition 'ith application
for issuance of restraining order and 'rit of preliminary inAunction is <,*-,**0<.
Costs de oficio.
19
Their motion for reconsideration having been denied by respondent appellate
court on +ebruary 2$, "&&5, petitioners filed the present petition for revie' based
on the follo'ing grounds(
TD0 70*P)@<0@T C)67T* C)--,TT0< 17A40 A.6*0 )+ <,*C70T,)@
A-)6@T,@1 T) ?ACM )7 0FC0** )+ 967,*<,CT,)@ ,@ D)?<,@1 TDAT(
,. TD070 ,* A P7096<,C,A? A@<;)7 ?01A? L60*T,)@ T) 96*T,+G TD0
*6*P0@*,)@ )+ TD0 P70?,-,@A7G ,@40*T,1AT,)@.
,,. P7,4AT0 70*P)@<0@T*8 7,1DT* T) <60 P7)C0**, 0L6A?
P7)T0CT,)@ A@< P70*6-PT,)@ )+ ,@@)C0@C0 B070 4,)?AT0<C )@
TD0 C)@T7A7G, TD0 *TAT0 ,T*0?+ BA* <0P7,40< )+ <60 P7)C0**.
,,,. TD0 A<-,**,)@ )+ P7,4AT0 70*P)@<0@T*8 *6PP?0-0@TA?
P0T,T,)@* B070 P7)P07.
,4. TD070 BA* *0?0CT,40 P7)*0C6T,)@.
4. TD0 +ACT6A? A??01AT,)@* ,@ TD0 P0T,T,)@ A70 DGP)TD0T,CA??G
A<-,TT0< ,@ A -)T,)@ T) <,*-,** .A*0< )@ 967,*<,CT,)@A?
17)6@<*.
4,. TD0 ,**6A@C0 )+ TD0 B7,T* )+ ,@96@CT,)@ ,* @)T A <0C,*,)@ )@
TD0 -07,T* )+ TD0 P0T,T,)@ .0+)70 TD0 ?)B07 C)67T.
60
The petition is bereft of merit.
,n essence, the complaints in ,.*. @os. &$55%#, &$55#! and &$5"7&!2 charged
private respondents 'ith fraudulent tax evasion or 'ilfully attempting to evade or
defeat payment of income tax, ad valorem tax and value5added tax for the year
"&&2, as 'ell as for the years "&&%5"&&".
The pertinent provisions of la' involved are *ections "272b3 and "!22c3 of the
@ational ,nternal 7evenue Code 'hich state(
*ec. "27. . . .
2b3 Determination of gross selling price of goods sub(ect to ad valorem tax. 55
6nless other'ise provided, the price, excluding the value5added tax, at 'hich the
goods are sold at 'holesale in the place of production or through their sales
agents to the public shall constitute the gross selling price. ,f the manufacturer
also sells or allo's such goods to be sold at 'holesale price in another
establishment of 'hich he is the o'ner or in the profits at 'hich he has an
interest, the 'holesale price in such establishment shall constitute the gross
selling price. *hould such price be less than the costs of manufacture plus
expenses incurred until the goods are finally sold, then a proportionate margin of
profit, not less than "%: of such manufacturing costs and expenses, shall be
added to constitute the gross selling price.
*ec. "!2. . . .
2c3 Cigarettes pac)ed in twenties. 55 There shall be levied, assessed and
collected on cigarettes pac>ed in t'enties an ad valorem tax at the rates
prescribed belo' based on the manufacturer8s registered 'holesale price.
xxx xxx xxx
Private respondents contend that per +ortune8s 4AT returns, correct taxable sales
for "&&2 'as in the amount of P"",7$,5#,5#%.%% 'hich 'as the
Kmanufacturer8s registered 'holesale priceK in accordance 'ith *ection "!22c3 of
the Tax Code and paid the amount of P!,#%5,25!,52$ as ad valorem tax.
)n the other hand, petitioners allege, as specifically 'orded in the complaint in
,.*. @o. &$55%#, that Kbased on the daily manufacturer8s s'orn statements
submitted to the .,7 by the Taxpayer 2+ortune8s3 total taxable sales during the
year "&&2 is P",#,$72,2&5.%%,K as result of 'hich +ortune K'as able to evade
the payment of ad valorem taxes in the aggregate amount of
P5,7&2,!7&,#".2! . . .K
Petitioners no' argue that *ection "272b3 lays do'n the rule that in determining
the gross selling price of goods subAect to ad valorem tax, it is the price,
excluding the value5added tax, at 'hich the goods are sold at 'holesale price in
the place of production or through their sales agents to the public. The registered
'holesale price shall then be used for computing the ad valorem tax 'hich is
imposable upon removal of the taxable goods from the place of production.
Do'ever, petitioners claim that +ortune used the Kmanufacturer8s registered
'holesale priceK in selling the goods to alleged fictitious individuals and dummy
corporations for the purpose of evading the payment of the correct ad valorem
tax.
There can be no =uestion that under *ection "272b3, the ad valorem tax should
be based on the correct price excluding the value5added tax, at 'hich goods are
sold at 'holesale in the place of production. ,t is significant to note that among
the goods subAect to ad valorem tax, the la' 55 specifically *ection "!22c3 55
re=uires that the corresponding tax on cigarettes shall be levied, assessed and
collected at the rates based on the Kmanufacturer8s registered 'holesale price.K
Bhy does the 'holesale price need to be registered and 'hat is the purpose of
the registrationN The reason is self5evident, 'hich is to ensure the payment of
the correct taxes by the manufacturers of cigarettes through close supervision,
monitoring and chec>ing of the business operations of the cigarette companies.
As pointed out by private respondents, no industry is as intensely supervised by
the .,7 and also by the @ational Tobacco Administration 2@TA3. Thus, the
purchase and use of ra' materials are subAect to prior authori/ation and approval
by the @TA. ,mportations of bobbins or cigarette paper, the manufacture, sale,
and utili/ation of the same, are subAect to .,7 supervision and approval.
61
-oreover, as pointed to by private respondents, for purposes of closer
supervision by the .,7 over the production of cigarettes, 7evenue 0nforcement
)fficers are detailed on a 2!5hour basis in the premises of the manufacturer to
secure production and removal of finished products. Composite -obile Teams
conduct counter5security on the business operations as 'ell as the performance
of the 7evenue 0nforcement )fficers detailed thereat. 0very transfer of any ra'
material is not allo'ed unless, in addition to the re=uired permits, accompanied
by 7evenue 0nforcement )fficer. +or the purpose of determining the
K-anufacturer8s 7egistered Bholesale PriceK a cigarette manufacturer is re=uired
to file a -anufacturer8s <eclaration 2.,7 +orm @o. $".%$3 for each brand of
cigarette manufactured, stating( a3 -aterials, b3 ?aborC c3 )verheadC d3 Tax
.urden and the Bholesale Price by Case. The data submitted there'ith is
verified by the 7evenue )fficers and approved by the Commission of ,nternal
7evenue. Any change in the manufacturer8s registered 'holesale price of any
brand cannot be effected 'ithout submitting the corresponding *'orn
-anufacturer8s <eclaration and verified by the 7evenue )fficer and approved by
the Commissioner on ,nternal 7evenue.
66
The amount of ad valorem tax
payments together 'ith the Payment )rder and Confirmation 7eceipt @os. must
be indicated in the sales and delivery invoices and together 'ith the
-anufacturer8s *'orn <eclarations on 2a3 the =uantity of ra' materials used
during the day8s operationsC 2b3 the total =uantity produced according to brandC
and 2c3 the corresponding =uantity removed during the day, the corresponding
'holesale price thereof, and the 4AT paid thereon must be presented to the
corresponding .,7 representative for authentication before removal.
Thus, as observed by the trial court in its order of 9anuary 25, "&&! granting
private respondents8 prayer for the issuance of a 'rit of preliminary inAunction,
+ortune8s registered 'holesale price 2'as3 duly approved by the .,7, 'hich fact
is not disputed by petitioners.
6#
@o', if every step in the production of cigarettes 'as closely monitored and
supervised by the .,7 personnel specifically assigned to +ortune8s premises, and
considering that the -anufacturer8s *'orn <eclarations on the data re=uired to
be submitted by the manufacturer 'ere scrutini/ed and verified by the .,7 and,
further, since the manufacturer8s 'holesale price 'as duly approved by the .,7,
then it is presumed that such registered 'holesale price is the same as, or
approximates Kthe price, excluding the value5added tax, at 'hich the goods are
sold at 'holesale in the place production,K other'ise, the .,7 'ould not have
approved the registered 'holesale price of the goods for purposes of imposing
the ad valorem tax due. ,n such case, and in the absence of contrary evidence, it
'as precipitate and premature to conclude that private respondents made
fraudulent returns or 'ilfully attempted to evade payment of taxes due. KBilfulK
means KpremeditatedC maliciousC done 'ith intent, or 'ith bad motive or purpose,
or 'ith indifference to the natural conse=uence . . .K
64
K+raudK in its general
sense, Kis deemed to comprise anything calculated to deceive, including all acts,
omissions, and concealment involving a breach of legal or e=uitable duty, trust or
confidence Austly reposed, resulting in the damage to another, or by 'hich an
undue and unconscionable advantage ta>en of another.
65
+raud cannot be presumed. ,f there 'as fraud or 'ilful attempt to evade payment
of ad valorem taxes by private respondents through the manipulation of the
registered 'holesale price of the cigarettes, it must have been 'ith the
connivance or cooperation of certain .,7 officials and employees 'ho supervised
and monitored +ortune8s production activities to see to it that the correct taxes
'ere paid. .ut there is no allegation, much less evidence, of .,7 personnel8s
malfeasance. ,n the very least, there is the presumption that the .,7 personnel
performed their duties in the regular course in ensuing the correct taxes 'ere
paid by +ortune.
6"
,t is the opinion of both the trial court and respondent Court of Appeals, that
before +ortune and the other private respondents could be prosecuted for tax
evasion under *ections 25$ and 255 of the Tax Code, the fact that the deficiency
income, ad valorem and value5added taxes 'ere due from +ortune for the year
"&&2 should first be established. +ortune received form the Commissioner of
,nternal 7evenue the deficiency assessment notices in the total amount of
P7,#5,&!2,22".% on August 2!, "&&$. Do'ever, under *ection 22& of the Tax
Code, the taxpayer has the right to move for reconsideration of the assessment
issued by the Commissioner of ,nternal 7evenue 'ithin thirty 2$%3 days from
receipt of the assessmentC and if the motion for reconsideration is denied, it may
appeal to the Court of Appeals 'ithin thirty 2$%3 days from receipt of the
Commissioner8s decision. Dere, +ortune received the Commissioner8s
assessment notice dated August "$, "&&$ on August 2!, "&&$ as>ing for the
payment of the deficiency taxes. Bithin thirty 2$%3 days from receipt thereof,
+ortune moved for reconsideration. The Commissioner has not resolved the
re=uest for reconsideration up to the present.
Be share 'ith the vie' of both the trial court and court of Appeals that before the
tax liabilities of +ortune are first finally determined, it cannot be correctly asserted
that private respondents have 'ilfully attempted to evade or defeat the taxes
sought to be collected from +ortune. ,n plain 'ords, before one is prosecuted for
'ilful attempt to evade or defeat any tax under *ections 25$ and 255 of the Tax
code, the fact that a tax is due must first be proved.
*uppose the Commissioner eventually resolves +ortune8s motion for
reconsideration of the assessments by pronouncing that the taxpayer is not liable
for any deficiency assessment, then, the criminal complaints filed against private
respondents 'ill have no leg to stand on.
,n vie' of the foregoing reasons, 'e cannot subscribe to the petitioners8 thesis
citing *ngad v. Cusi,
6
8 that the lac> of a final determination of +ortune8s exact or
correct tax liability is not a bar to criminal prosecution, and that 'hile a precise
computation and assessment is re=uired for a civil action to collect tax
deficiencies, the Tax Code does not re=uire such computation and assessment
prior to criminal prosecution.
7eading *ngad carefully, the pronouncement therein that deficiency assessment
is not necessary prior to prosecution is pointedly and deliberately =ualified by the
Court 'ith follo'ing statement =uoted from +u,i) v. *..(
67
KThe crime is
complete 'hen the violator has >no'ingly and 'ilfully filed a fraudulent return
'ith intent to evade and defeat apart or all of the tax.K ,n plain 'ords, for criminal
prosecution to proceed before assessment, there must be a prima facie sho'ing
of a wilful attempt to evade taxes. There 'as a 'ilful attempt to evade tax in
*ngad because of the taxpayer8s failure to declare in his income tax return Khis
income derived from banana sapplings.K ,n the mind of the trial court and the
Court of Appeals, +ortune8s situation is =uite apart factually since the registered
'holesale price of the goods, approved by the .,7, is presumed to be the actual
'holesale price, therefore, not fraudulent and unless and until the .,7 has made
a final determination of 'hat is supposed to be the correct taxes, the taxpayer
should not be placed in the crucible of criminal prosecution. Derein lies a 'hale
of difference bet'een *ngad and the case at bar.
This brings us to the erroneous dis=uisition that private respondents8 recourse to
the trial court by 'ay of special civil action of certiorari and prohibition 'as
improper because( a3 the proceedings before the state prosecutors 2preliminary
inAunction3 'ere far from terminated 55 private respondents 'ere merely
subpoenaed and as>ed to submit counter affidavits, matters that they should
have appealed to the *ecretary of 9usticeC b3 it is only after the submission of
private respondents8 counter affidavits that the prosecutors 'ill determine
'hether or not there is enough evidence to file in court criminal charges for
fraudulent tax evasion against private respondentsC and c3 the proper procedure
is to allo' the prosecutors to conduct and finish the preliminary investigation and
to render a resolution, after 'hich the aggrieved party can appeal the resolution
to the *ecretary of 9ustice.
Be disagree.
As a general rule, criminal prosecutions cannot be enAoined. Do'ever, there are
recogni/ed exceptions 'hich, as summari/ed in %roc)a v. -nrile
69
are(
a. To afford ade=uate protection to the constitutional rights of the accused
2Dernande/ vs. Albano, et al., ?5"&272, 9anuary 25, "&7, "& *C7A &53C
b. Bhen necessary for the orderly administration of Austice or to avoid oppression
or multiplicity of actions 2<imayuga, et al. vs. +ernande/, !$ Phil. $%!C
Dernande/ vs. Albano, supraC +ortun vs. ?abang, et al., ?5$#$#$, -ay 27, "&#",
"%! *C7A %73C
c. Bhen there is a preAudicial =uestion 'hich is sub (udice 2<e ?eon vs.
-abanag, 7% Phil 2%23C
d. Bhen the acts of the officer are 'ithout or in excess of authority 2Planas vs.
1il, 7 Phil 23C
e. Bhere the prosecution is under an invalid la', ordinance or regulation 2Goung
vs. 7afferty, $$ Phil. 55C Gu Cong 0ng vs. Trinidad, !7 Phil. $#5, $#&3C
f. Bhen double Aeopardy is clearly apparent 2*angalang vs. People and Alvendia,
"%& Phil. ""!%3C
g. Bhere the court had no Aurisdiction over the offense 2?ope/ vs. City 9udge, ?5
257&5, )ctober 2&, "&, "# *C7A "3C
h. Bhere it is a case of persecution rather than prosecution 27ustia vs. )campo,
CA51.7. @o. !7%, -arch 25, "&%3C
i. Bhere the charges are manifestly false and motivated by the lust for
vengeance 27ecto vs. Castelo, "# ?.9. H"&5$I, cited in 7ano vs. Alvenia, CA51.7.
@o. $%72%57, )ctober #, "&2C Cf. 1uingona, et al. vs. City +iscal, ?5%%$$, April
!, "&#!, "2# *C7A 5773C and
A. Bhen there is clearly no prima facie case against the accused and a motion to
=uash on that ground has been denied 2*alonga vs. Pane, et al., ?55&52!,
+ebruary "#, "&#5, "$! *C7A !$#3.
,n issuing the =uestioned orders granting the issuance of a 'rit of preliminary
inAunction, the trial court believed that said orders 'ere 'arranted to afford
private respondents ade=uate protection of their constitutional rights, particularly
in reference to presumption of innocence, due process and e=ual protection of
the la's. The trial court also found merit in private respondents8 contention that
preliminary inAunction should be issued to avoid oppression and because the acts
of the state prosecutors 'ere 'ithout or in excess of authority and for the reason
that there 'as a preAudicial =uestion.
Contrary to petitioners8 submission, preliminary investigation may be enAoined
'here exceptional circumstances so 'arrant. ,n .ernande, v. "lbano
#0
and
Fortun v. 'abang,
#1
inAunction 'as issued to enAoin a preliminary investigation. ,n
the case at bar, private respondents filed a motion to dismiss the complaint
against them before the prosecution and alternatively, to suspend the preliminary
investigation on the grounds cited hereinbefore, one of 'hich is that the
complaint of the Commissioner is not supported by any evidence to serve as
ade=uate basis for the issuance of the subpoena to them and put them to their
defense.
,ndeed, the purpose of a preliminary inAunction is to secure the innocent against
hasty, malicious and oppressive prosecution and to protect him from an open and
public accusation of crime, from the trouble, expense and anxiety of a public trial
and also to protect the state from useless and expensive trials.
#6
Thus, the
pertinent provisions of 7ule ""2 of the 7ules of Court state(
*ec. $. Procedure. 55 0xcept as provided for in *ection 7 hereof, no complaint or
information for an offense cogni/able by the 7egional Trial Court shall be filed
'ithout a preliminary investigation having been first conducted in the follo'ing
manner(
2a3 The complaint shall state the >no'n address of the respondent and be
accompanied by affidavits of the complainant and his 'itnesses as 'ell as other
supporting documents, in such number of copies as there are respondents, plus
t'o 223 copies for the official file. The said affidavits shall be s'orn to before any
fiscal, state prosecutor or government official authori/ed to administer oath, or, in
their absence or unavailability, a notary public, 'ho must certify that he
personally examined the affiants and that he is satisfied that they voluntarily
executed and understood their affidavits.
2b3 Bithin ten 2"%3 days after the filing of the complaint, the investigating officer
shall either dismiss the same if he finds no ground to continue 'ith the in=uiry, or
issue a subpoena to the respondent, attaching thereto a copy of the complaint,
affidavits and other supporting documents. Bithin ten 2"%3 days from receipt
thereof, the respondent shall submit counter5affidavits and other supporting
documents. De shall have the right to examine all other evidence submitted by
the complainant.
2c3 *uch counter5affidavits and other supporting evidence submitted by the
respondent shall also be s'orn to and certified as prescribed in paragraph 2a3
hereof and copies thereof shall be furnished by him to the complainant.
2d3 ,f the respondent cannot be subpoenaed, or if subpoenaed, does not submit
counter5affidavits 'ithin the ten 2"%3 day period, the investigating officer shall
base his resolution on the evidence presented by the complainant.
2e3 ,f the investigating officer believes that there are matters to be clarified, he
may set a hearing to propound clarificatory =uestions to the parties or their
'itnesses, during 'hich the parties shall be afforded an opportunity to be present
but 'ithout the right to examine or cross5examine. ,f the parties so desire, they
may submit =uestions to the investigating officer 'hich the latter may propound
to the parties or 'itnesses concerned.
2f3 Thereafter, the investigation shall be deemed concluded, and the investigating
officer shall resolve the case 'ithin ten 2"%3 days therefrom. 6pon the evidence
thus adduced, the investigating officer shall determine 'hether or not there is
sufficient ground to hold the respondent for trial.
As found by the Court of Appeals, there 'as obvious haste by 'hich the
subpoena 'as issued to private respondents, Aust the day after the complaint
'as filed, hence, 'ithout the investigating prosecutors being afforded material
time to examine and study the voluminous documents appended to the complaint
for them to determine if preliminary investigation should be conducted. The Court
of Appeals further added that the precipitate haste in the issuance of the
subpoena Austified private respondents8 misgivings regarding the obAectivity and
neutrality of the prosecutors in the conduct of the preliminary investigation and
so, the appellate court concluded, the grant of preliminary investigation by the
trial court to afford ade=uate protection to private respondents8 constitutional
rights and to avoid oppression does not constitute grave abuse of discretion
amounting to lac> of Aurisdiction.
The complaint filed by the Commissioner on ,nternal 7evenue states itself that
the primary evidence establishing the falsity of the declared taxable sales in "&&2
in the amount of P"",7$,5#,5#%.%% 'ere the Kdaily -anufacturer8s *'orn
*tatementsK submitted by the taxpayer 'hich 'ould sho' that the total taxable
sales in "&&2 are in the amount of P",#,$72,2&5.%%. Do'ever, the
Commissioner did not present the K<aily -anufacturer8s *'orn *tatementsK
supposedly submitted to the .,7 by the taxpayer, prompting private respondents
to move for their production in order to verify the basis of petitioners8
computation. *till, the Commissioner failed to produce the declarations. ,n %or(a
v. Moreno,
##
it 'as held that the act of the investigator in proceeding 'ith the
hearing 'ithout first acting on respondents8 motion to dismiss is a manifest
disregard of the re=uirement of due process. ,mplicit in the opinion of the trial
court and the Court of Appeals is that, if upon the examination of the complaint, it
'as clear that there 'as no ground to continue, 'ith the in=uiry, the investigating
prosecutor 'as duty bound to dismiss the case. )n this point, the trial court
stressed that the prosecutor conducting the preliminary investigation should have
allo'ed the production of the K<aily -anufacturer8s *'orn *tatementsK submitted
by +ortune 'ithout 'hich there 'as no valid basis for the allegation that private
respondents 'ilfully attempted to evade payment of the correct taxes. The
prosecutors should also have produced the K<aily -anufacturer8s *'orn
*tatementsK by other cigarette companies, as sought by private respondents, to
sho' that these companies 'hich had paid the ad valorem taxes on the same
basis and in the same manner as +ortune 'ere not similarly criminally charged.
.ut the investigating prosecutors denied private respondents8 motion, thus,
indicating that only +ortune 'as singled out for prosecution. The trial court and
the Court of Appeals maintained that at that stage of the preliminary
investigation, 'here the complaint and the accompanying affidavits and
supporting documents did not sho' any violation of the Tax Code providing penal
sanctions, the prosecutors should have dismissed the complaint outright because
of total lac> of evidence, instead of re=uiring private respondents to submit their
counter affidavits under *ection $2b3 of 7ule ""2.
Be believe that the trial court in issuing its =uestioned orders, 'hich are
interlocutory in nature, committed no grave abuse of discretion amounting to lac>
of Aurisdiction. There are factual and legal bases for the assailed orders. )n the
other hand, the burden is upon the petitioners to demonstrate that the =uestioned
orders constitute a 'himsical and capricious exercise of Audgment, 'hich they
have not. +or certiorari 'ill not be issued to cure errors in proceedings or correct
erroneous conclusions of la' or fact. As long as a court acts 'ithin its Aurisdiction,
any alleged errors committed in the exercise of its Aurisdiction 'ill amount to
nothing more than errors of Audgment 'hich are revie'able by timely appeal and
not by a special civil action of certiorari.
#4
Conse=uently, the 7egional Trial Court
acted correctly and Audiciously, and as demanded by the facts and the la', in
issuing the orders granting the 'rits of preliminary inAunction, in denying
petitioners8 motion to dismiss and in admitting the supplemental petitions. Bhat
petitioners should have done 'as to file an ans'er to the petition filed in the trial
court, proceed to the hearing and appeal the decision of the court if adverse to
them.
BD070+)70, the instant petition is hereby <,*-,**0<.
*) )7<070<.
.ermosisima, Jr., J., concurs.



S&'ara(& O'-n-on%

)ELLOSILLO, J., concurring and dissenting(
, am in full accord 'ith the conclusion of the maAority that the trial court
committed no grave abuse of discretion in issuing the assailed inAunctive 'rits.
.ut , am constrained to dissent insofar as it finds that there 'as Kselective
prosecutionK in charging private respondents.
?et me first touch on Kselective prosecution.K There is no sho'ing that petitioner
Commissioner of ,nternal 7evenue is not going after others 'ho may be
suspected of being big tax evaders and that only private respondents are being
prosecuted, or even merely investigated, for tax evasion. As pointed out by the
*olicitor 1eneral, assuming ex hypothesi that other corporate manufacturers are
guilty of using similar schemes for tax evasion, the proper remedy is not the
dismissal of the complaints against private respondents, but the prosecution of
other similar evaders. ,n this regard, in the absence of 'illful or malicious
prosecution, or so5called Kselective prosecution,K the choice on 'hom to
prosecute ahead of the others belongs legitimately, and rightly so, to the public
prosecutors.
.ut, , share the vie' of the maAority that the trial court did not commit grave
abuse of discretion amounting to lac> of Aurisdiction. At once it must be pointed
out that the trial court merely issued 'rits of preliminary inAunction. Do'ever to
grant the prayer of herein petitioners 'ould effectively dismiss the petition for
certiorari and prohibition filed by private respondents 'ith the trial court even
before the issues in the main case could be Aoined, 'hich seems to me to be a
procedural lapse since the main case is already being resolved 'hen the only
issue before the Court is the propriety of the ancillary or provisional remedy.
The trial court granted the 'rits of preliminary inAunction upon finding, after
hearing for the purpose, that private respondents sufficiently established that
Kthey are entitled to certain constitutional rights and that these rights have been
violated,K
1
and that they have complied 'ith the re=uirements of *ec. $, 7ule 5#,
7ules of Court.
6
,n support of its conclusion, the trial court enumerated its
reasons( first, inspite of the motion of respondent +ortune Tobacco Corporation,
petitioner Commissioner of ,nternal 7evenue failed to present the Kdaily
manufacturer8s s'orn statements submitted to the .,7 by the taxpayer,K
supposedly stating that the total taxable sales of respondent Corporation for the
year "&&2 is P",#,$72,2&5.%%, 'hich is the basis of petitioner Commissioner8s
allegation that private respondents failed to pay the correct taxes since it
declared in its 4AT returns that its total taxable sales in "&&2 'as only
P"",7$,5#.5#%.%%C second, the proper application of *ec. "!2, par. 2c3, of the
@ational ,nternal 7evenue Code is a preAudicial =uestion 'hich must first be
resolved by the Court of Tax Appeals to determine 'hether a tax liability 'hich is
an essential element of tax evasion exists before criminal proceedings may be
pursuedC third, from the evidence submitted, it appears that the .ureau of
,nternal 7evenue has not yet made a final determination of the tax liability of
private respondents 'ith respect to its ad valorem, value added and income
taxes for "&&2C and, fourth, the precipitate issuance by the prosecutors of
subpoenas to private respondents one 2"3 day after the filing of the complaint,
consisting of about %% pages, inclusive of the "!5page complaint, "75page Aoint
affidavit of eight 2#3 revenue officers and the annexes attached thereto, and their
hasty denial of private respondents8 "$55page motion to dismiss, after a recess of
only about 2% minutes, sho' that private respondents8 constitutional rights may
have been violated.
These circumstances as 'ell as the other traces of discrimination mentioned by
the trial court, i.e., the announcement by the PC11 that it 'ould ta>e over the
various corporations associated 'ith respondent ?ucio C. TanC the creation of the
Tas> +orce on 7evenue Cases among the functions of 'hich is to KHiInvestigate
the tax liabilities of manufacturers that engage in 'ell5>no'n tax evasion
schemes, such as selling products through dummy mar>eting companies to
evade the payment of the correct internal revenue taxes,K the very charge
against respondent TanC the reclassification of respondent corporation8s best
selling cigarettes as foreign brands thereby imposing upon them a higher tax rate
that 'ould price them out of the mar>et 'ithout notice and hearingC the singling
out of private respondents as subAects of a complaint for tax evasion 'hen other
cigarette manufacturers have been using the same basis private respondents are
using in paying ad valorem, value added and income taxesC and, the failure of
petitioner Commissioner to 'ait for the expiration of the $%5day period she
herself gave to private respondents to pay the supposed tax deficiencies before
the filing of the complaint, obviously impelled the trial court to issue the 'rit of
preliminary inAunction. Practically the same grounds 'ere found by the trial court
'hen it provisionally restrained the investigation of the t'o 223 other complaints,
i.e., tax evasion complaints for +Gs "&&% and "&&".
)n the basis of the findings of the trial court, it indeed appears that private
respondents8 constitutional rights to due process of la' and e=ual protection of
the la's may have been for the moment set aside, if not outright violated. The
trial court 'as convinced that the tell5tale signs of malice and partiality 'ere
indications that the constitutional rights of private respondents may not have
been afforded ade=uate protection. Accordingly , see no manifest abuse, much
less grave, on the part of the trial court in issuing the inAunctive 'rits. Thus it is
my opinion that the trial court did not commit grave abuse of discretion in
granting the assailed 'rits.
Bell entrenched is the rule that the issuance of the 'rit of preliminary inAunction
as an ancillary or preventive remedy to secure the rights of a party in a pending
case rests upon the sound discretion of the court hearing it. The exercise of
sound Audicial discretion by the trial court in inAunctive matters should not be
interfered 'ith except in case of manifest abuse,
#
'hich is not true in the case
before us. 0=ually 'ell settled is that under *ec. 7, 7ule 5#, 7ules of Court,
4
a
'ide latitude is given to the trial court.
5
This is because the conflicting claims in
an application for a provisional 'rit more often than not involves a factual
determination 'hich is not the function of this Court, or even respondent
appellate court. Thus in the case at bar the ascertainment of the actual tax
liability, if any, based on the evidence already presented and still to be presented,
is more 'ithin the competence of the trial court before 'hich the parties have
raised the very same issue in the main case. The truth or falsity of the divergent
statements that there 'as deliberate haste in issuing the subpoenas and in
denying private respondents8 motion to dismiss may be confirmed not by this
Court but by the trial court during that hearing on the merits.
,n fine, no grave abuse of discretion can be attributed to a Audge or body in the
issuance of a 'rit of preliminary inAunction 'here a party 'as not deprived of its
day in court as it 'as heard and had exhaustively presented all its arguments
and defenses.
"
,t is undisputed that in the case before us petitioners and private
respondents 'ere given sufficient time and opportunity to present their respective
pieces of evidence as 'ell as arguments in support of their positions.
Conse=uently, , concur 'ith the finding of the maAority that the trial court
committed no grave abuse of discretion. As respondent appellate court said,
KHgIrave abuse of discretion as a ground for issuance of 'rits of certiorari and
prohibition implies capricious and 'himsical exercise of Audgment as is
e=uivalent to lac> of Aurisdiction, or 'here the po'er is exercised in an arbitrary
or despotic manner by reason of passion, preAudice or personal hostility
amounting to an evasion of positive duty or to a virtual refusal to perform the duty
enAoined, or to act at all in contemplation of la'.
8
+or such 'rits to lie there must
be capricious, arbitrary and 'himsical exercise of po'er, the very antithesis of
the Audicial prerogative in accordance 'ith centuries of both civil and common
la' traditions.K
7
The trial court, to my mind, is not guilty of any of these. Thus ,
accord respect to the exercise of the trial court8s sound Audicial discretion and
hold that the same should not be interfered 'ith.
To permanently enAoin the trial court from proceeding in any manner in Civil Case
@o. L5&!5"&7&% and allo' the preliminary investigation of the complaints
doc>eted as ,.*. @os. &$55%#, &$5"7&!2 and &$55#! 'ith the <epartment of
9ustice to resume until their final conclusion and completion 'ould go against the
prevailing rule that courts should avoid issuing a 'rit or preliminary inAunction
'hich 'ould in effect dispose of the main case 'ithout trial.
9
<ue process
considerations dictate that the assailed inAunctive 'rits are not Audgments on the
merits but merely orders for the grant of a provisional and ancillary remedy to
preserve the status /uo until the merits of the case can be heard. The hearing on
the application for issuance of a 'rit of preliminary inAunction is separate and
distinct from the trial on the merits of the main case. The =uantum of evidence
re=uired for one is different from that for the other, so that it does not necessarily
follo' that if the court grants and issues the temporary 'rit applied for the same
court 'ill no' have to rule in favor of the petition for prohibition and ipso facto
ma>e the provisional inAunction permanent.
,f grave abuse of discretion attended the issuance of the 'rit of preliminary
inAunction, then by all means nullify the abusive act 55 but only that. The main
case should be allo'ed to proceed according to due process. The trial court
should receive the evidence from the contending parties, 'eigh and evaluate the
same and then ma>e its findings. Clearly, the dismissal of the main case as a
result of a mere incident relative to the issuance of an ancillary 'rit is
procedurally a'>'ard and violates due process, as it deprives private
respondents of their right to present their case in court and support it 'ith its
evidence.
,n resolving the fundamental issue at hand, i.e., 'hether the trial court committed
grave abuse of discretion in issuing the subAect 'rits of preliminary inAunction, 'e
cannot avoid balancing on the scales the po'er of the *tate to tax and its
inherent right to prosecute perceived transgressors of the la' on one side, and
the constitutional rights of a citi/en to due process of la' and the e=ual
protection of the la's on the other. )bviously the scales must tilt in favor of the
individual, for a citi/en8s right is amply protected by the .ill of 7ights of the
Constitution. Thus 'hile Ktaxes are the lifeblood of the government,K the po'er to
tax has its limits, inspite of all its plenitude. Dence in Commissioner of #nternal
$evenue v. "lgue, #nc.,
10
'e said 55
Taxes are the lifeblood of the government and so should be collected 'ithout
unnecessary hindrance. )n the other hand, such collection should be made in
accordance 'ith la' as any arbitrariness 'ill negate the very reason for
government itself. ,t is therefore necessary to reconcile the apparently conflicting
interests of the authorities and the taxpayers so that the real purpose of taxation,
'hich is the promotion of the common good, may be achieved.
xxx xxx xxx
,t is said that taxes are 'hat 'e pay for civili/ed society. Bithout taxes, the
government 'ould be paraly/ed for the lac> of the motive po'er to activate and
operate it. Dence, despite the natural reluctance to surrender part of one8s hard5
earned income to taxing authorities, every person 'ho is able to must contribute
his share in the running of the government. The government for its part is
expected to respond in the form of tangible and intangible benefits intended to
improve the lives of the people and enhance their moral and material values. This
symbiotic relationship is the rationale of taxation and should dispel the erroneous
notion that it is an arbitrary method of exaction by those in the seat of po'er.
.ut even as 'e concede the inevitability and indispensability of taxation, it is a
re=uirement in all democratic regimes that it be exercised reasonably and in
accordance 'ith the prescribed procedure. ,f it is not, then the taxpayer has a
right to complain and the courts 'ill then came to his succor. +or all the a'esome
po'er of the tax collector, he may still be stopped in his trac>s if the taxpayer can
demonstrate . . . that the la' has not been observed.
,n the instant case, it seems that due to the over/ealousness in collecting taxes
from private respondents and to some accident of immediate over'helming
interest 'hich distressingly impassions and distorts Audgment, the *tate has
un'ittingly ignored the citi/ens8 constitutional rights. Thus even the rule that
inAunction 'ill not lie to prevent a criminal prosecution has admitted exceptions,
'hich 'e enumerated in %roc)a v. -nrile
11
and in 0campo #1 v. 0mbudsman
16
55
2a3 to afford ade=uate protection to the constitutional rights of the accusedC 2b3
'hen necessary for the orderly administration of Austice or to avoid oppression or
multiplicity of actionsC 2c3 'hen there is a preAudicial =uestion 'hich is sub2(udiceC
2d3 'hen the acts of the officer are 'ithout or in excess of authorityC 2e3 'here the
prosecution is under an invalid la', ordinance or regulationC 2f3 'hen double
Aeopardy is clearly apparentC 2g3 'hen the court has no Aurisdiction over the
offenseC 2h3 'here it is a case of persecution rather than prosecutionC 2i3 'here
the charges are manifestly false and motivated by lust for vengeanceC 2A3 'hen
there is clearly no prima facie case against the accused and a motion to =uash
on that ground has been deniedC and, 2>3 to prevent a threatened unla'ful arrest.
+inally, courts indeed should not hesitate to invo>e the constitutional guarantees
to give ade=uate protection to the citi/ens 'hen faced 'ith the enormous po'ers
of the *tate, even 'hen 'hat is in issue are only provisional remedies, as in the
case at hand. ,n days of great pressure, it is alluring to ta>e short cuts by
borro'ing dictatorial techni=ues. .ut 'hen 'e do, 'e set in motion an arbitrary
or subversive influence by our o'n design 'hich destroys us from 'ithin. ?et not
the present case dangerously s'ay to'ards that trend.
+or all the foregoing, , vote to dismiss the instant petition for lac> of merit, and to
order the trial court to proceed 'ith Civil Case @o. L5&!5"&7&% 'ith reasonable
dispatch.

PADILLA, J., dissenting(
.ecause of 'hat , humbly perceive to be the crippling, chilling and fatal effects of
the maAority opinion on the po'er of the state to investigate fraudulent tax
evasion in the country, , am constrained to dissent, as vigorously as , can, from
the maAority opinion.
3.- #*-
The main issue in this petition for revie' on certiorari is 'hether or not there are
valid grounds to stop or stay the preliminary investigation of complaints filed by
the .ureau of ,nternal 7evenue 2.,73 'ith the <epartment of 9ustice 2<)93
7evenue Cases Tas> +orce against private respondents for alleged fraudulent
tax evasion for the years "&&%, "&&" and "&&2. *tated differently, the issue is(
did respondent trial court commit grave abuse of discretion amounting to lac> or
excess of Aurisdiction in stopping the subAect preliminary investigationN
3.- C"- "4D 3.- F"C3
)n 7 *eptember "&&$, petitioner Commissioner of ,nternal 7evenue filed a
complaint 'ith the <)9 against private respondents +ortune Tobacco
Corporation 2hereinafter referred to simply as K+ortuneK3, its corporate officers,
nine 2&3 other corporations, and their respective corporate officers, for alleged
fraudulent tax evasion for the year "&&2.
The complaint, doc>eted as ,.*. @o. &$55%#, 'as referred to the <)9 Tas> +orce
on 7evenue Cases 'hich found sufficient grounds to further investigate the
allegation that +ortune fraudulently evaded payment of income, value5added and
ad valorem taxes for the year "&&2 thus depriving the 1overnment of revenue
allegedly in excess of seven and one5half 27 ";23 billion pesos.
The fraudulent scheme allegedly adopted and employed by private respondents,
is described by the .,7 as follo's(
,n order to evade payment of said taxes, H+ortuneI made fictitious and simulated
sales of its cigarette products to non5existent individuals and to entities
incorporated and existing only for the purpose of such fictitious sales by declaring
registered 'holesale prices 'ith the .,7 lo'er than H+ortune8sI actual 'holesale
prices 'hich are re=uired for determination of H+ortune8sI correct ad valorem,
income and value5added tax liabilities. These Kghost 'holesale buyersK then
ostensibly sold the product to consumers and other 'holesalers;retailers at
higher 'holesale prices determined by H+ortuneI. The tax returns and
manufacturer8s s'orn statements filed by H+ortuneI as aforesaid declare the
fictitious sales it made to the conduit corporations and non5existent individual
buyers as its gross sales.
1
.ased on the initial evaluation of the <)9 Tas> +orce, private respondents 'ere
subpoenaed and re=uired to submit their counter5affidavits not later than 2%
*eptember "&&$.
6
,nstead of filing counter5affidavits, private respondents filed a
K4erified -otion to <ismissC Alternatively, -otion to *uspend.K
#
*aid motion 'as
denied by the <)9 Tas> +orce and treated as private respondents8 counter5
affidavit, in an order dated "5 )ctober "&&$.
4
Private respondents sought reconsideration of the aforementioned order of denial
and li>e'ise filed motions to re=uire submission by the .ureau of ,nternal
7evenue 2.,73 of certain documents to support the verified motion to dismiss or
suspend the investigation, and for the inhibition of the state prosecutors assigned
to the case for alleged lac> of impartiality.
5
)n 2% <ecember "&&$, an omnibus order 'as issued by the investigating Tas>
+orce(
"
a. denying reconsiderationC
b. denying suspension of investigationC and
c. denying the motion to inhibit the investigating state prosecutors.
Thereupon, or on ! 9anuary "&&!, private respondents 'ent to court. They filed a
petition for certiorari and prohibition 'ith prayer for preliminary inAunction in the
7egional Trial Court, .ranch ##, Lue/on City, praying that the proceedings
2investigation3 before the <)9 Tas> +orce be stopped. The petition 'as doc>eted
as Civil Case @o. L5&!5"&7&%.
8
)n "7 9anuary "&&!, petitioners filed 'ith the trial court a motion to dismiss the
aforesaid petition.
7
)n 25 9anuary "&&!, the trial court issued instead an order
granting the herein private respondents8 prayer for a 'rit of preliminary inAunction,
9
to stop the preliminary investigation in the <)9 7evenue Cases Tas> +orce.
)n 2 9anuary "&&!, private respondents filed 'ith the trial court a -otion to
Admit *upplemental Petition see>ing this time the issuance of another 'rit of
preliminary inAunction against a second complaint of the .,7 'ith the <)9
doc>eted as ,.*. @o. &$5"7&!2 li>e'ise against herein private respondents for
fraudulent tax evasion for the year "&&%. Private respondents averred in their
aforesaid motion 'ith the trail court that 55
a. no supporting documents nor copies of the complaint 'ere attached to the
subpoena in ,.*. @o. &$5"7&!2C
b. the abovementioned subpoena violates private respondents8 constitutional
rights to due process, e=ual protection and presumption of innocenceC
c. ,.*. @o. &$5"7&!2 is substantially the same as ,.*. @o. &$55%# except that it
concerns the year "&&%C
d. no tax assessment has been issued by the Commissioner of ,nternal 7evenue
and since taxes already paid have not been challenged by the .,7, no tax liability
existsC
e. Assistant Lue/on City Prosecutor ?eopoldo 0. .ara=uia 'as a former
classmate of then Presidential ?egal Counsel Antonio T. Carpio, thus, he cannot
conduct the preliminary investigation in an impartial manner.
)n 2# 9anuary "&&!, private respondents filed 'ith the trial court a second
supplemental petition
10
this time see>ing to stay the preliminary investigation in
,.*. @o. &$55!#, a third .,7 complaint 'ith the <)9 against private respondents
for fraudulent tax evasion for the year "&&".
)n $" 9anuary "&&!, the trial court admitted the t'o 223 supplemental petitions
and issued a temporary restraining order stopping the preliminary investigation of
the t'o 223 later complaints 'ith the <)9 against private respondents for alleged
fraudulent tax evasion for the years "&&% and "&&".
)n 7 +ebruary "&&!, the trial court also issued an order denying herein
petitioners8 motion to dismiss private respondents8 petition see>ing to stay the
preliminary investigation in ,.*. @o. &$55%#. The trial court ruled that the issue of
'hether *ec. "272b3 of the @ational ,nternal 7evenue 2Tax3 Code should be the
basis of herein private respondents8 tax liability, as contended by the .ureau of
,nternal 7evenue, or 'hether it is *ec. "!22c3 of the same code that applies, as
argued by herein private respondents, should first be settled before any criminal
complaint for fraudulent tax evasion can be initiated or maintained.
)n "! +ebruary "&&!, the trial court issued a supplemental 'rit of preliminary
inAunction this time enAoining the preliminary investigations of the t'o 223 other
.,7 complaints 'ith the <)9 for fraudulent tax evasion. The trial court then
denied motions to dismiss the t'o 223 supplemental petitions, filed by therein
respondents Commissioner of ,nternal 7evenue and the <)9 7evenue Cases
Tas> +orce investigators.
)n 7 -arch "&&!, herein petitioners filed 'ith this Court a petition for certiorari
and prohibition 'ith prayer for preliminary inAunction 'hich =uestioned the orders
issued by the trial court granting the private respondents8 prayer for preliminary
inAunction to stop the preliminary investigation in the <)9 of the .,78s complaints
for fraudulent tax evasions against private respondents and denying petitioners8
motions to dismiss private respondents8 various petitions 'ith the trial court. The
petition 'as referred by this Court to the Court of Appeals 'hich has original
concurrent Aurisdiction over the petition.
)n "& <ecember "&&!, the Court of Appeals rendered a decision 'hich, in part,
reads(
,n ma>ing such conclusion the respondent Court 2the 7egional Trial Court of
Lue/on City, .ranch ##3 must have understood from herein petitioner
Commissioner8s letter5complaint of "! pages and the Aoint affidavit of eight
revenue officers of "7 pages attached thereto and its annexes, that the charge
against herein respondents is for tax evasion for non5payment by herein
respondent +ortune of the correct amounts of income tax, ad valorem tax and
value added tax, not necessarily Kfraudulent tax evasionK. Dence, the need for
previous assessment of the correct amount by herein petitioner Commissioner
before herein respondents may be charged criminally. Certiorari 'ill not be
issued to cure errors in proceedings or correct erroneous conclusions of la' or
fact. As long as a Court acts 'ithin its Aurisdiction, any alleged error committed in
the exercise of its Aurisdiction, 'ill amount to nothing more than errors of
Audgment 'hich are revie'able by timely appeal and not by a special civil action
of certiorari.
The =uestioned orders issued after hearing being but interlocutory, revie' thereof
by this court is inappropriate until final Audgment is rendered, absent a sho'ing of
grave abuse of discretion on the part of the issuing court. The factual and legal
issues involved in the main case still before the respondent Court are best
resolved after trial. Petitioners, therefore, instead of resorting to this petition for
certiorari and prohibition should have filed an ans'er to the petition as ordained
in *ection !, 7ule ", in connection 'ith 7ule "" of the 7evised 7ules of Court,
interposing as defense or defenses the obAection or obAections raised in their
motion to dismiss, then proceed to trial in order that thereafter the case may be
decided on the merits by the respondent Court. ,n case of an adverse decision,
they may appeal therefrom by 'hich the entire record of the case 'ould be
elevated for revie'. Therefore, certiorari and prohibition resorted to by herein
petitioners 'ill not lie in vie' of the remedy open to them. Thus, the resulting
delay in the final disposition of the case before the respondent Court 'ould not
have been incurred.
1rave abuse of discretion as a ground for issuance of 'rits of certiorari and
prohibition implies capricious and 'himsical exercise of Audgment as is
e=uivalent to lac> of Aurisdiction, or 'here the po'er is exercised in an arbitrary
or despotic manner by reason of passion, preAudice, or personal hostility,
amounting to an evasion of positive duty or to a virtual refusal to perform the duty
enAoined, or to act at all in contemplation of la'. +or such 'rits to lie, there must
be capricious, arbitrary and 'himsical exercise of po'er, the very antithesis of
the Audicial prerogative in accordance 'ith centuries of both civil la' and
common la' traditions. Certiorari and prohibition are remedies narro' in scope
and inflexible in character. They are not general utility tools in the legal 'or>shop.
Their function is but limited to correction of defects of Aurisdiction solely, not to be
used for any other purpose, such as to cure errors in proceedings or to correct
erroneous conclusions of la' or fact. <ue regard for the foregoing teachings
enunciated in the decision cited can not bring about a decision other than 'hat
has been reached herein.
@eedless to say, the case before the respondent Court involving those against
herein respondents for alleged non5payment of the correct amount due as
income tax, ad valorem tax and value5added tax for the years "&&%, "&&", and
"&&2 is not ended by this decision. The respondent Court is still to try the case
and decide it on the merits. All that is decided here is but the validity of the orders
of the respondent Court granting herein respondents8 application for preliminary
inAunction and denying herein, petitioners8 motion to dismiss. ,f upon the facts
established after trial and the applicable la', dissolution of the 'rit of preliminary
inAunction allo'ed to be issued by the respondent Court is called for and a
Audgment favorable to herein petitioners is demanded, the respondent Court is
duty bound to render Audgment accordingly.
BD070+)70, the instant petition for certiorari and prohibition 'ith application
for issuance of restraining order and 'rit of preliminary inAunction is <,*-,**0<.
Costs de officio. 2references to annexes and citations omitted3
11
Petitioners8 motion for reconsideration of the afore=uoted Audgment 'as denied
by respondent appellate court on 2$ +ebruary "&&5, hence, the present petition
for revie' on certiorari based on the follo'ing grounds(
+$0*4D F0$ 3.- !-3#3#04
TD0 70*P)@<0@T C)67T* C)--,TT0< 17A40 A.6*0 )+ <,*C70T,)@
A-)6@T,@1 T) ?ACM )7 0FC0** )+ 967,*<,CT,)@ ,@ D)?<,@1 TDAT(
,. TD070 ,* A P7096<,C,A? A@<;)7 ?01A? L60*T,)@ T) 96*T,+G TD0
*6*P0@*,)@ )+ TD0 P70?,-,@A7G ,@40*T,1AT,)@
,,. P7,4AT0 70*P)@<0@T*8 7,1DT* T) <60 P7)C0**, 0L6A?
P7)T0CT,)@ A@< P70*6-PT,)@ )+ ,@@)C0@C0 B070 4,)?AT0<C )@
TD0 C)@T7A7G, TD0 *TAT0 ,T*0?+ BA* <0P7,40< )+ <60 P7)C0**
,,,. TD0 A<-,**,)@ )+ P7,4AT0 70*P)@<0@T*8 *6PP?0-0@TA?
P0T,T,)@* B070 P7)P07
,4. TD070 BA* *0?0CT,40 P7)*0C6T,)@
4 TD0 +ACT6A? A??01AT,)@* ,@ TD0 P0T,T,)@ A70 DGP)TD0T,CA??G
A<-,TT0< ,@ A -)T,)@ T) <,*-,** .A*0< )@ 967,*<,CT,)@A?
17)6@<*
4,. TD0 ,**6A@C0 )+ TD0 B7,T* )+ ,@96@CT,)@ ,* @)T A <0C,*,)@ )@
TD0 -07,T* )+ TD0 P0T,T,)@ .0+)70 TD0 ?)B07 C)67T
16
D#C*#04
At the outset, it should be pointed out that respondent appellate court8s
observations to the effect that herein petitioners8 recourse to said court through a
special civil action of certiorari and prohibition 'as improper 2as discussed in the
afore=uoted portion of the CA decision3 actually and appropriately apply to
private respondents 'hen they resorted to the remedy of certiorari and
prohibition 'ith application for preliminary inAunction 'ith the respondent
7egional Trial Court to stop the preliminary investigation being conducted by the
<)9 7evenue Cases Tas> +orce of the .,7 complaints for fraudulent tax evasion
against private respondents. ,t is to be noted that the proceedings before the
investigators 2preliminary investigation before the <)9 7evenue Cases Tas>
+orce3 are far from terminated. ,n fact, private respondents 'ere merely
subpoenaed and as>ed to submit counter5affidavits. They instead resorted to the
courts for redress after denial of their motion to dismiss. The proper procedure on
the part of private respondents after their motion to dismiss 'as denied by the
investigating panel, should have been an appeal from such an adverse resolution
to the *ecretary of 9ustice, not a special civil action for certiorari and prohibition
'ith application for preliminary inAunction before the respondent trial court.
As a corollary, the respondent trial court should have desisted from entertaining
private respondents8 original petition for certiorari and prohibition 'ith prayer for
preliminary inAunction because a court order to stop a preliminary investigation is
an act of interference 'ith the investigating officers8 discretion, absent any
sho'ing of grave abuse of discretion on the part of the latter in conducting such
preliminary investigation.
The rule is settled that the fiscal 2prosecutor3 cannot be prohibited from
conducting and finishing his preliminary investigation.
1#
The private respondents8
petition before the trial court in this case 'as clearly premature since the case
did not fall 'ithin any of the exceptions 'hen prohibition lies to stop a preliminary
investigation.
14
The decision of the maAority in this case clearly constitutes an untenable
usurpation of the primary duty and function of the prosecutors to conduct the
preliminary investigation of a criminal offense and the po'er of the *ecretary of
9ustice to revie' the resolution of said prosecutors.
,n +uingona, supra, the Court en banc ruled thus(
KAs a general rule, an inAunction 'ill not be granted to restrain a criminal
prosecutionK. Bith more reason 'ill inAunction not lie 'hen the case is still at the
preliminary investigation stage. This Court should not usurp the primary function
of the City +iscal to conduct the preliminary investigation of the estafa charge
and of the petitioners8 countercharge for perAury, 'hich 'as consolidated 'ith the
estafa charge.
The City +iscal8s office should be allo'ed to finish its investigation and ma>e its
factual findings. This Court should not conduct the preliminary investigation. ,t is
not a trier of facts. 27eference to footnotes omitted3.
.efore resolving the main issue in this petition, as earlier stated in this opinion,
several preliminary issues raised by private respondents in their K4erified -otion
To <ismissC Alternatively, -otion To *uspendK need to be addressed, namely(
A.3 Private respondent +ortune8s right to due process and e=ual protection of the
la's have been violated because of the subAect preliminary investigation before
the <)9 7evenue Cases Tas> +orce.
..3 9urisdiction over +ortune8s tax liability pertains to the Court of Tax Appeals
and not the 7egional Trial Courts, thus, the <epartment of 9ustice, through its
state prosecutors, is 'ithout Aurisdiction to conduct the subAect preliminary
investigation.
C.3 The complaints for fraudulent tax evasion are unsupported by any evidence
to serve as basis for the issuance of a subpoena.
<.3 The lac> of final determination of +ortune8s tax liability precludes criminal
prosecution.
". )n the alleged violation of +ortune8s rights to due process and e=ual protection
of the la's, , fail to see any violation of said rights.
+ortune, its corporate officers, nine 2&3 other corporations and their respective
corporate officers alleged by the .,7 to be mere KdummiesK or conduits of
+ortune in the fraudulent tax evasion on the 1overnment, 'ere given the
opportunity to file their counter5affidavits to refute the allegations in the .,7
complaints, together 'ith their supporting documents. ,t is only after submission
of counter5affidavits that the investigators 'ill determine 'hether or not there is
enough evidence to file in court criminal charges for fraudulent tax evasion
against private respondents or to dismiss the .,7 complaints. At this stage of the
preliminary investigation, the constitutional right of private respondents to due
process is ade=uately protected because they have been given the opportunity to
be heard, i.e., to file counter5affidavits.
@or can it be said, as respondents falsely argue, that there 'as no ground or
basis for re=uiring the private respondents to file such counter5affidavits. As
respondent Court of Appeals admitted in its here assailed decision, the .,7
complaint 2"st complaint3 signed by the Commissioner of ,nternal 7evenue
consisted of fourteen 2"!3 pages supported by an annex consisting of seventeen
2"73 pages in the form of a Aoint affidavit of eight 2#3 revenue officers, to 'hich
'ere attached voluminous documents as annexes 'hich, 'hen put together,
constituted a formidable net'or> of evidence tending to sho' fraudulent tax
evasion on the part of private respondents. Bhen, on the basis of such .,7
complaint and its supporting documents, the investigating Tas> +orce sa' a need
to proceed 'ith the in=uiry and, conse=uently, re=uired private respondents to file
their counter5affidavits, grave abuse of discretion could hardly be imputed to said
investigators.
2. )n respondents8 assertions that there is selective prosecution 2no e=ual
protection of the la's3 since other corporations similarly situated as they are, are
not being prosecuted and;or investigated, the argument is =uite ludicrous, to say
the least. As pointed out by the *olicitor 1eneral, more than one thousand
2",%%%3 criminal cases for tax evasion have been filed in -etro -anila alone. This
number, even if it seems to represent but a small fraction of Kcases of actual tax
evasion, undoubtedly sho' that respondents are not being singled out. ,t is of
note that the memorandum issued by the President of the Philippines creating a
tas> force to investigate tax evasion schemes of manufacturers 'as issued three
2$3 months before the complaints against private respondents 'ere filed. This
ma>es any charge of selective prosecution baseless since it could not then be
sho'n, nor has it been sho'n by private respondents that only they
2respondents3 'ere being investigated;prosecuted. ,n fact, up to this time,
respondents have failed to substantiate this allegation of selective prosecution
against them.
-oreover, assuming arguendo that other corporate manufacturers are guilty of
using similar schemes for tax evasion, allegedly used by respondents, the
*olicitor 1eneral correctly points out that the remedy is not dismissal of the
complaints against private respondents or stoppage of the investigations of said
complaints, but investigation and prosecution of other similar violators 2fraudulent
tax evaders3.
$. Private respondents8 allegations that the Assistant Lue/on City Prosecutor
2among those investigating the complaints against them3 lac>s impartiality, are so
unsubstantiated, imaginary, speculative and indeed puerile. They need not be
elaborately refuted as a mere denial 'ould suffice under the circumstances.
!. )n the issue of Aurisdiction, the rule is settled that city and state prosecutors
are authori/ed to conduct preliminary investigations of criminal offenses under
the @ational ,nternal 7evenue Code. *aid criminal offenses are 'ithin the
Aurisdiction of the 7egional Trial Court.
15
5. The issue of 'hether or not the evidence submitted by petitioners is sufficient
to 'arrant the filing of criminal informations for fraudulent tax evasion is
prematurely raised.
1"
To argue, as private respondents do, that one piece of
evidence, i.e. the <aily -anufacturer8s *'orn *tatements, should be produced at
a particular stage of the investigation, in order to determine the probable guilt of
the accused, is to dictate to the investigating officers the procedure by 'hich
evidence should be presented and examined. +urther, Ka preliminary
investigation is not the occasion for the full and exhaustive display of the parties8
evidenceC it is for the presentation of such evidence only as may engender a 'ell
grounded belief that an offense has been committed and that the accused is
probably guilty thereof . . .K
1
8
.esides, the preliminary investigation has not yet been terminated. The proper
procedure then should be to allo' the investigators, 'ho undeniably have
Aurisdiction, to conduct and finish the preliminary investigation and to render a
resolution. The party aggrieved by said resolution can then appeal it to the
*ecretary of 9ustice,
17
as re=uired by the settled doctrine of exhaustion of
administrative remedies. Bhat special =ualification or privilege, , may as>, do
private respondents have, particularly +ortune and ?ucio Tan, as to exempt them
from the operation of this rooted principle and entitle them to immediate Audicial
relief from the respondent trial court in this caseN
. The respondents Court of Appeals and the trial court maintain, as private
respondents do, that a previous assessment of the correct amount of taxes due
is necessary before private respondents may be charged criminally for fraudulent
tax evasion. This vie' is decidedly not supported by la' and Aurisprudence.
The lac> of a final determination of respondent +ortune8s exact or correct tax
liability is not a bar to criminal prosecution for fraudulent tax evasion. Bhile a
precise computation and assessment is re=uired for a civil action to collect a tax
deficiency, the @ational ,nternal 7evenue Code does not re=uire such
computation and assessment prior to criminal prosecution for fraudulent tax
evasion. Thus, as this Court had earlier ruled 55
An assessment of a deficiency is not necessary to a criminal prosecution for
'illful attempt to defeat and evade the income tax. A crime is complete 'hen the
violator has >no'ingly and 'illfully filed a fraudulent return 'ith intent to evade
and defeat the tax. The perpetration of the crime is grounded upon >no'ledge on
the part of the taxpayer that he has made an inaccurate return, and the
government8s failure to discover the error and promptly to assess has no
connections 'ith the commission of the crime.
19
,t follo's that, under the *ngab doctrine, the filing of a criminal complaint for
fraudulent tax evasion 'ould be proper even without a previous assessment of
the correct tax.
The argument that the *ngab doctrine 'ill not apply to the case at bar because it
involves a factual setting different from that of the case at bar, is erroneous. The
*ngab case involved the filing of a fraudulent income tax return because the
defendant failed to report his income derived from sale of banana saplings. ,n the
case at bar, the complaints filed before the <)9 for investigation charge private
'holesale respondents 'ith fraudulent concealment of the actual price of
products sold through declaration of registered 'holesale prices lo'er than the
actual 'holesale prices, resulting in underpayment of income, ad valorem, and
value5added taxes. .oth cases involve, therefore, fraudulent schemes to evade
payment to the 1overnment of correct taxes.
The Court in *ngab stated further as follo's(
The petitioner also claims that the filing of the informations 'as precipitate and
premature since the Commissioner of ,nternal 7evenue has not yet resolved his
protests against the assessment of the 7evenue <istrict )fficerC and that he 'as
denied recourse to the Court of Tax Appeals.
The contention is 'ithout merit. Bhat is involved here is not the collection of
taxes 'here the assessment of the Commissioner of ,nternal 7evenue may be
revie'ed by the Court of Tax Appeals, but a criminal prosecution for violations of
the @ational ,nternal Code 'hich is 'ithin the cogni/ance of courts of first
instance. Bhile there can be no civil action to enforce collection before the
assessment procedures provided in the Code have been follo'ed, there is no
re=uirement for the precise computation and assessment of the tax before there
can be a criminal prosecution under the Code.
The contention is made, and is here reAected, that an assessment of the
deficiency tax due is necessary before the taxpayer can be prosecuted criminally
for the charges preferred. 3he crime is complete when the violator has, as in this
case, )nowingly and wilfully filed fraudulent returns with intent to evade and
defeat a part or all of the tax. H1u/i> vs. 6.*., 5! +2d "#I 2emphasis supplied3
3he ruling in the *ngab case is undisputably on all fours with, and conclusive to
the case at bar. ,t should be stressed and pointed out that in *ngab the Court
denied the prayer of therein petitioner to =uash informations for tax evasion that
had already been filed in court. ,n other 'ords, the prosecutors in *ngab had
already found probable cause to try therein petitioner for tax evasion. <espite this
fact there 'as no finding by the Court of violation of any of petitioner8s
constitutional rights.
,n the present case, private respondents 'ere merely being re=uired to submit
counter5affidavits to the complaints filed. ,f no violation of constitutional rights
'as committed in *ngab, upon the filing of the criminal informations in Court,
ho' can there no' be a violation of private respondents8 constitutional rights
upon a re=uirement by the investigators that private respondents submit their
counter5affidavits.
The Court has not been presented any compelling or persuasive argument 'hy
the 6ngab doctrine has to be abandoned. ,t is good la' and should be the
nemesis of fraudulent tax evaders. ,t gives teeth to the proper enforcement of our
tax la's.
7. Private respondents argue that a case earlier file before the Court of Tax
Appeals 2CTA3 and no' before this Court
60
involves a preAudicial =uestion
Austifying or re=uiring suspension of the preliminary investigation of the
complaints for fraudulent tax evasion against private respondents. *aid case
involves the validity of .,7 7evenue -emorandum Circular @o. $75&$ dated "
9uly "&&$ 'hich reclassified cigarettes manufactured by respondent +ortune.
The circular subAects cigarettes 'ith brand names KDopeK, K-oreK and
KChampionK to a "%: increase in ad valorem taxes starting 2 9uly "&&$.
7espondent +ortune has assailed the validity of said revenue circular and the
case has yet to be decided 'ith finality.
.ut the foregoing issue is irrelevant to the issue of fraudulent tax evasion
involved in this case. A final decision either upholding or nullifying the
aforementioned revenue circular 'ill not affect private respondents8 criminal
liability for fraudulent tax evasion, for the follo'ing reasons(
a3 The revenue circular involved in the other case pertains to ad valorem taxes
on sales of +ortune8s named cigarette brands after " 9uly "&&$ 'hile the
fraudulent tax evasion involved in the present case pertains to years "&&%, "&&"
and "&&2.
b3 The fraudulent scheme allegedly utili/ed by +ortune and its dummies, as
described in the .,7 complaints pending 'ith the <)9 7evenue Cases Tas>
+orce, 'hich resulted in the misdeclaration;underdeclaration of +ortune8s gross
sales receipts resulting in turn in underpayment of ad valorem, value5added and
income taxes 'as actually a Kbuilt5inK tax evasion device already in place even
before the assailed revenue circular 'as issued. The scheme is particularly
designed to result in the underpayment of ad valorem, value5added and income
taxes regardless of the tax rate fixed by the government on cigarette products.
#. 7espondents also argue that the issue of 'hether *ection "272b3 or *ection
"!22c3 of the @ational ,nternal 7evenue Code is applicable to private
respondents should first be settled before any criminal cases can be filed against
them. This argument is both misleading and erroneous.
The aforementioned provisions read(
*ec. "27. . . .
2b3 Determination of gross selling price of goods sub(ect to ad valorem tax. 55
6nless other'ise provided, the price, excluding the value5added tax, at 'hich the
goods are sold at 'holesale in the place of production or through their sales
agents to the public shall constitute the gross selling price. ,f the manufacturer
also sells or allo's such goods to be sold at 'holesale price in another
establishment of 'hich he is the o'ner or in the profits at 'hich he has an
interest, the 'holesale price in such establishment shall constitute the gross
selling price. *hould such price be less than the cost of manufacture plus
expenses incurred until the goods are finally sold, then a proportionate margin of
profit, not less than "%: of such manufacturing cost and expenses, shall be
added to constitute the gross selling price.
*ec. "!2 . . .
2c3 Cigarettes pac)ed in twenties. 55 There shall be levied, assessed and
collected on cigarettes pac>ed in t'enties an ad valorem tax at the rates
prescribed belo' based on the manufacturer8s registered 'holesale price(
2"3 )n locally manufactured cigarettes bearing a foreign brand, fifty5five percent
255:3( !rovided, That this rate shall apply regardless of 'hether or not the right
to use or title to the foreign brand 'as sold or transferred by its o'ner to the local
manufacturer. Bhenever it has to be determined 'hether or not a cigarette bears
a foreign brand, the listing of brands manufactured in foreign countries appearing
in the current Borld Tobacco <irectory shall govern.
223 )n other locally manufactured cigarettes, forty5five percent 2!5:3.
<uly registered or existing brands of cigarettes pac>ed in t'enties shall not be
allo'ed to be pac>ed in thirties.
Bhen the existing registered 'holesale price, including tax, of cigarettes pac>ed
in t'enties does not exceed P!.%% per pac>, the rate shall be t'enty percent
22%:3.
As the *olicitor 1eneral correctly points out, the t'o 223 afore=uoted provisions of
the Tax Code are both applicable in determining the amount of tax due. *ection
"272b3 provides for the method of determining the gross wholesale price to be
registered with the %#$ 'hile *ection "!22c3 provides for the rate of ad valorem
tax to be paid. *aid rate is expressed as a percentage of the registered gross
selling price 'hich is determined, in turn, based on *ection "272b3.
The aforementioned t'o 223 provisions of the Tax Code are certainly not
determinative of private respondents8 criminal liability, if any. A reading of the .,7
complaints pending 'ith the <)9 7evenue Cases Tas> +orce sho's that private
respondent +ortune is being accused of using KdummyK corporations and
business conduits as 'ell as non5existent individuals and entities to enable the
company 2+ortune3 to report gross receipts from sales of its cigarette brands
lower than gross receipts 'hich are actually derived from such sales. *uch lo'er
gross receipts of the company, as reported by respondent +ortune thus result in
lo'er ad valorem, value5added and income taxes paid to the government. *tated
a little differently, respondent +ortune is accused of selling at 'holesale prices its
cigarette brands through dummy entities in the profits of 'hich it has a controlling
interest. 6nder *ection "272b3, the gross selling price of the goods should be the
'holesale price of such dummy 55 entities to its buyers but it is alleged by the
government that respondent +ortune has purposely made use of such entities to
evade payment of higher but legally correct taxes.
&. As to respondents8 additional claim that 'ith regard to ad valorem tax, they
merely based their liability on the 'holesale price registered 'ith the .ureau of
,nternal 7evenue 2.,73 follo'ing the method used by all cigarette manufacturers,
said claim cannot absolve +ortune and its officers from criminal liability.
61

Payment of ad valorem and other taxes based on the 'holesale price registered
'ith the .,7 presupposes and naturally assumes that the registered wholesale
price correspond to the actual wholesale prices at which the manufacturer sells
the product. ,f a manufacturer ma>es use of a method or device to ma>e it
appear that products are sold at a 'holesale price lo'er than the amounts that
the manufacturer actually reali/es from such 'holesale of its products, as 'hat
respondent +ortune is accused of doing, through the use of dummy entities, then
there arises criminal liability under the penal provisions of the Tax Code. This is
clear from *ection "272b3 afore=uoted in relation to the penal provisions of the
Tax Code.
"%. Private respondents contend that the registration 'ith the .,7 of
manufacturer8s 'holesale price and the corresponding close supervision and
monitoring by .,7 officials of the business operations of cigarette companies,
ensure payment of correct taxes. The argument is baseless. ,t does not follo'
that the cited procedure is a guarantee against fraudulent schemes resorted to
by tax5evading individuals or entities. ,t only indicates that taxpayers bent on
evading payment of taxes 'ould explore more creative devices or mechanisms in
order to defraud the government of its sources of income even under its very
nose. ,t is precisely to avoid and detect cases li>e this that the President issued a
-emorandum on " 9une "&&$ creating a tas> force to investigate tax liabilities of
manufacturers engaged in tax evasion schemes, such as selling products
through dummy mar>eting companies at underdeclared 'holesale prices
registered 'ith the .,7.
-oreover, the -anufacturer8s <eclaration 'hich is the basis for determining the
K-anufacturer8s 7egistered Bholesale PriceK 2'hich in turn becomes the basis
for the imposition of ad valorem tax3, even if verified by revenue officers and
approved by the Commissioner of ,nternal 7evenue, does not necessarily reflect
the actual 'holesale price at 'hich the cigarettes are sold. This is 'hy
manufacturers are still re=uired to file other documents, li>e the Kdaily
manufacturer8s s'orn statementsK in order to assist in determining 'hether or not
correct taxes have been paid. ,n fine, even if .,7 officials may have verified
+ortunes8 .,7 registered 'holesale price for its products, the same does not
estop or preclude the 1overnment from filing criminal complaints for fraudulent
tax evasion based on evidence subse=uently gathered to the effect that such .,7
registered 'holesale prices 'ere a misdeclaration or underdeclaration of the
actual 'holesale price. ,t is hornboo> la' that the 1overnment is not bound or
estopped by the mista>es, inadvertence, and 'hat more, connivance of its
officials and employees 'ith fraudulent schemes to defraud the 1overnment.
66
0ven on the assumption that official duty of .,7 officials and employees has
been regularly performed, the allegations in the complaints are clear enough in
that private respondents allegedly made use of schemes to ma>e it appear that
respondent +ortune8s tax liabilities are far less than 'hat it 2+ortune3 should be
actually liable for under the la'. The very nature of the offense for 'hich
respondents are being investigated, certainly ma>es regularity;irregularity in the
performance of official duties irrelevant.
,t should also be pointed out that the offense allegedly committed by private
respondents8 consists in8 the intentional use of KdummyK entities to ma>e it
appear that respondent +ortune sells its products at lo'er 'holesale prices,
'hich prices 'ould correspond to the 'holesale prices registered by +ortune 'ith
the .,7, but not to the prices at 'hich its products are sold by +ortune8s
dummies. The difference bet'een +ortune8s .,75reported 'holesale prices and
the prices at 'hich its dummies sell +ortune8s products thus constitutes amounts
for 'hich +ortune should actually incur tax liabilities but for 'hich it allegedly
never paid taxes because of the operation of the tax evasion scheme founded on
a combined underdeclaration 'ith the .,7 of +ortune8s 'holesale price of its
products and the sale of such products to is KdummyK corporations or to non5
existing individuals or entities. This is the obvious reason 'hy the government
has sought to investigate the alleged tax evasion scheme purportedly utili/ed by
respondent +ortune and its dummy corporations.
.ased on the foregoing discussions, it follo's that the ans'er to the main issue
formulated earlier in this opinion is in the negative since the private respondents
have not sho'n that there exist, in this case, exceptional grounds removing it
from the general rule that preliminary investigations of criminal offenses and
criminal prosecutions cannot be stayed or enAoined by the courts.
6#
"". The trial court8s ruling that private respondents8 constitutional rights have
been violated, rests on untenable grounds. ,t must be remembered, in this
connection, that exceptions to a settled rule, by their nature, must be strictly
applied. And any claim to an exception must be fully substantiated. ,n other
'ords, it must have real basis for existing.
The exceptions to the general rule against restraining orders or inAunctions to
stop preliminary investigations or criminal prosecutions are enumerated in
%roc)a vs. -nrile.
64
)ne specific exception is 'hen an inAunction is needed for
the ade=uate protection of the accused8s constitutional rights. The exception
definitely does not apply in the case at bar.
.efore proceeding to illustrate this point, it is important to stress that in a
preliminary investigation, the investigating officers8 sole duty is to determine,
before the presentation of evidence by the prosecution and by the defense, if the
latter should 'ish to present any, 'hether or not there are reasonable grounds
for proceeding formally against the accused.
65
This is in conformity 'ith the
purpose of a preliminary investigation 'hich is to secure the innocent against
hasty, malicious, and oppressive prosecutions, and to protect him from an open
and public accusation of crime, from the trouble, expense and anxiety of public
trial, and also to protect the state from useless and expensive trials.
6"
As restated
by the illustrious late Chief 9ustice -anuel 4. -oran 55
. . . the purpose of a preliminary investigation is to afford the accused an
opportunity to sho' by his o'n evidence that there is no reasonable ground to
believe that he is guilty of the offense charged and that, therefore, there is no
good reason for further holding him to a'ait trial in the Court of +irst ,nstance.
6
8
Prescinding from the tenets above5discussed, it is clear from the inception that
there had been no violation of private respondents8 constitutional rights to
presumption of innocence, due process and e=ual protection of the la's. The
preliminary investigation, , repeat, has not yet been terminated. At this stage,
only the complainant has finished presenting its affidavits and supporting
documents. )bviously then, the investigating panel found that there 'ere
grounds to continue 'ith the in=uiry, hence, the issuance of subpoena and an
order for the submission of counter5affidavits by private respondents. ,nstead of
filing counter5affidavits, private respondents filed a 4erified -otion to <ismissC
Alternatively, -otion to *uspend. At this point, it may be as>ed, ho' could private
respondents8 constitutional right to presumption of innocence be violated 'hen, in
all stages of the preliminary investigation, they 'ere presumed innocentN
<eclaring that there are reasonable grounds to continue 'ith the in=uiry is not
the same as pronouncing that a respondent is guilty or probably guilty of the
offense charged.
"2. Private respondents cannot also claim that they 'ere not afforded due
process and e=ual protection of the la's. ,n fact, the investigating panel 'as
concerned 'ith Aust that 'hen it ordered the submission of private respondents8
counter5affidavits. This procedure afforded private respondents the opportunity to
sho' by their o'n evidence that no reasonable grounds exist for the filing of
informations against them. +urthermore, contrary to the findings of the trial court
and the Court of Appeals, the alleged haste by 'hich the subpoena 'as issued
to private respondents 2the day after the filing of the %%5page annexed
complaint3 does not lessen the investigating panel8s ability to study and examine
the complainant8s evidence. @either does such act merit the conclusion that the
investigating panel 'as less than obAective in conducting the preliminary
investigation. Conse=uently, the general and settled rule must apply that the
courts cannot interfere 'ith the discretion of the investigating officer to determine
the specificity and ade=uacy of the averments in the complaint filed, except in
very exceptional circumstances,
67
'hich do not obtain here.
Therefore, private respondents8 act of filing a petition for certiorari and prohibition
before the 7egional Trial Court 'as rather untimely and uncalled for, not only
because private respondents failed to exhaust their administrative remedies but
also because the grounds cited in their petition before the trial court 'ere highly
speculative 55 more fancied than real.
+inally, .ernande, v. "lbano 2"& *C7A &53, cited by the maAority to support the
conclusion that preliminary investigation can be stayed by the courts, clearly
states that preliminary investigation can be stayed by court order only in extreme
cases. .ernande, also states that(
.y statute, the prosecuting officer of the City of -anila and his assistants are
empo'ered to investigate crimes committed 'ithin the city8s territorial Aurisdiction.
@ot a mere privilege, it is the s'orn duty of a +iscal to conduct an investigation of
a criminal charge filed 'ith his office. The po'er to investigate postulates the
other obligation on the part of the +iscal to investigate promptly and file the case
of as speedily. Public interest 55 the protection of society 55 so demands.
Agreeably to the foregoing, a
rule 55 no' of long standing and fre=uent application 55 'as formulated that
ordinarily criminal prosecution may not be bloc>ed by court prohibition or
inAunction. 7eally, if at every turn investigation of a crime 'ill be halted by a court
order, the administration of criminal Austice 'ill meet 'ith an undue setbac>.
,ndeed, the investigative po'er of the +iscal may suffer such a tremendous
shrin>age that it may end up in hollo' sound rather than as a part and parcel of
the machinery of criminal Austice.
,t should be noted that 'hile .ernande, lays do'n the extreme grounds 'hen
preliminary investigation of criminal offenses may be restrained by the courts, the
dispositive portion of the decision affirmed the decision of the trial court
dismissing a petition for certiorari and prohibition 'ith prayer for preliminary
inAunction filed to stay the preliminary investigation of criminal complaints against
petitioner Dernande/.
The other case cited by the maAority to support its decision in this case, Fortun v.
'abang
69
involves criminal complaints filed against a Audge of the Court of +irst
,nstance by disgruntled la'yers 'ho had lost their cases in the Audge8s sala.
Clearly, the basis for the Court to stay preliminary investigation in Fortun 'as a
finding that said complaints 'ere filed merely as a form of harassment against
the Audge and 'hich Kcould have no other purpose than to place petitioner5Audge
in contempt and disreputeK. The factual situation in the case at bar is poles apart
from the factual situation in Fortun.
+urther, in Fortun there 'as an express finding by the Court that complaints
against Audges of the Courts of +irst ,nstance are properly filed 'ith the *upreme
Court under 0xecutive )rder @o. 2! 2"&7%3 since the Court is considered as the
department head of the Audiciary. ,n the present case it cannot be disputed that
Aurisdiction to conduct preliminary investigation over fraudulent tax evasion cases
lies 'ith the state prosecutors 2fiscals3.
,t cannot therefore be denied that neither .ernande, nor Fortun supports 'ith
any plausibility the maAority8s disposition of the issues in the present case. )n the
other hand, it appears to me all too clearly that the maAority opinion, in this case,
has altered the entire rationale and concept of preliminary investigation of alleged
criminal offenses. That alteration has, of course, served the purposes of
distinguished private respondents. .ut , 'ill have no part in the shoc>ing process
especially in light of the fact that 1overnment cries out that the people have been
cheated and defrauded of their taxes to the tune allegedly of P25. billion pesos,
and yet, it is not given by this Court even a beggar8s chance to prove itO
"$. There is great and vital public interest in the successful investigation and
prosecution of criminal offenses involving fraudulent tax evasion. *aid public
interest is much more compelling in the present case since private respondents
are not only accused of violating tax and penal la's but are also, as a
conse=uence of such violations, possibly depriving the government of a primary
source of revenue so essential to the life, gro'th and development of the nation
and for the prestation of essential services to the people.
"!. ,t should be made clear, at this point, ho'ever, that this opinion is not a pre5
Audgment or pre5determination of private respondents8 guilt of the offense
charged. @o one, not even the prosecutors investigating the cases for fraudulent
tax evasion, is, at this stage of the proceedings, 'hen private respondents have
yet to file their counter5affidavits, in a position to determine and state 'ith finality
or conclusiveness 'hether or not private respondents are guilty of the offense
charged in the .,7 complaints, no' 'ith the <)9 7evenue Cases Tas> +orce. ,t
is precisely through the preliminary investigation that the <)9 Tas> +orce on
7evenue Cases can determine 'hether or not there are grounds to file
informations in court or to dismiss the .,7 complaints.
"5. , see no grave abuse of discretion committed by the state prosecutors in
re=uiring private respondents to submit counter5affidavits to the complaints for
fraudulent tax evasion and to determine the existence or absence of probable
criminal liability.
The 7ules on Criminal Procedure do not even re=uire, as a condition sine /ua
non to the validity of a preliminary investigation, the presence of the respondent
as long as efforts to reach him are made and an opportunity to controvert the
complainant8s evidence is accorded him. The purpose of the rule is to chec>
attempts of unscrupulous respondents to th'art criminal investigations by not
appearing or employing dilatory tactics.
#0
". *ince the preliminary investigation in the <)9 7evenue Cases Tas> +orce
against private respondents for alleged fraudulent tax evasion is 'ell 'ithin its
Aurisdiction and constitutes no grave abuse of discretion, it 'as in fact the
respondent trial court that committed grave abuse of discretion, amounting to
lac> or excess of Aurisdiction, 'hen it stayed such preliminary investigation.
"7. The successful prosecution of criminal offenders is not only a right but the
duty of the state. )nly 'hen the state8s acts clearly violate constitutional rights
can the courts step in to interfere 'ith the state8s exercise of such right and
performance of such duty. , am indubitably impressed that there is no violation of
private respondents8 constitutional rights in this case.
"#. ?astly, the consolidation of the three 2$3 complaints in the <)9 against private
respondents should be allo'ed since they all involve the same scheme allegedly
used by private respondents to fraudulently evade payment of taxes.
Consolidation 'ill not only avoid multiplicity of suits but 'ill also enable private
respondents to more conveniently prepare 'hatever responsive pleadings are
re=uired or expected of them.
,t is, therefore, my considered vie' that the decision of the Court of Appeals of "&
<ecember "&&! in CA 1.7. *P @o. $$5&& should be *0T A*,<0. The
respondent trial court should be 0@9),@0< from proceeding in any manner in
Civil Case @o. L5&!5"&7&%, or at least until further orders from this Court.
The preliminary investigation of the .,7 complaints doc>eted as ,.*. @os. &$55%#,
&$5"7&!2 and &$55#! 'ith the <epartment of 9ustice 7evenue Cases Tas>
+orce, being constitutionally and legally in order, should be allo'ed to resume
until their final conclusion or completion, 'ith private respondents given a non5
extendible period of ten 2"%3 days from notice to submit to the investigating panel
their respective counter5affidavits and supporting documents, if any.

VITUG, J., dissenting(
, see in the petition the overriding issue of 'hether or not Audicial relief could be
resorted to in order to stop state prosecutors from going through 'ith their
investigation of complaints lodged against private respondents. Almost invariably,
this Court has resolved not to unduly interfere, let alone to peremptorily prevent,
the prosecuting agencies or offices of the government in their investigatorial 'or>
or in their o'n evaluation of the results of investigation. ,t 'ould indeed be, in my
vie', an act precipitate for the courts to ta>e on a case even before the complaint
or information is filed by the prosecution. )f course, one cannot preclude the
possibility that at times compelling reasons may dictate other'iseC , do not thin>,
ho'ever, that the instant case could be the right occasion for it.
Bhile , do understand the concern expressed by some of my colleagues, i.e.,
that stopping the trial court from no' proceeding 'ith Civil Case @o. L5&!5&"7%
'ould, effectively, mean a disposition of the main case 'ithout its merits having
first been fully heard in the court belo', in this particular situation before the
Court, ho'ever, the parties have since exhaustively and ade=uately presented
their respective cases. ,n the interest of good order, the practical measure of
enAoining the trial court from ta>ing further cogni/ance of the case 'ould not thus
appear to be really all that un'arranted.
A final 'ord( The matter affecting the civil liability for the due payment of internal
revenue taxes, including the applicable remedies and proceedings in the
determination thereof, must be considered apart from and technically
independent of the criminal aspect that may be brought to bear in appropriate
cases. A recourse in one is not necessarily preclusive of, nor 'ould the results
thereof be conclusive on, the other.
Accordingly, , vote to grant the petition.

S&'ara(& O'-n-on%
)ELLOSILLO, J., concurring and dissenting(
, am in full accord 'ith the conclusion of the maAority that the trial court
committed no grave abuse of discretion in issuing the assailed inAunctive 'rits.
.ut , am constrained to dissent insofar as it finds that there 'as Kselective
prosecutionK in charging private respondents.
?et me first touch on Kselective prosecution.K There is no sho'ing that petitioner
Commissioner of ,nternal 7evenue is not going after others 'ho may be
suspected of being big tax evaders and that only private respondents are being
prosecuted, or even merely investigated, for tax evasion. As pointed out by the
*olicitor 1eneral, assuming ex hypothesi that other corporate manufacturers are
guilty of using similar schemes for tax evasion, the proper remedy is not the
dismissal of the complaints against private respondents, but the prosecution of
other similar evaders. ,n this regard, in the absence of 'illful or malicious
prosecution, or so5called Kselective prosecution,K the choice on 'hom to
prosecute ahead of the others belongs legitimately, and rightly so, to the public
prosecutors.
.ut, , share the vie' of the maAority that the trial court did not commit grave
abuse of discretion amounting to lac> of Aurisdiction. At once it must be pointed
out that the trial court merely issued 'rits of preliminary inAunction. Do'ever to
grant the prayer of herein petitioners 'ould effectively dismiss the petition for
certiorari and prohibition filed by private respondents 'ith the trial court even
before the issues in the main case could be Aoined, 'hich seems to me to be a
procedural lapse since the main case is already being resolved 'hen the only
issue before the Court is the propriety of the ancillary or provisional remedy.
The trial court granted the 'rits of preliminary inAunction upon finding, after
hearing for the purpose, that private respondents sufficiently established that
Kthey are entitled to certain constitutional rights and that these rights have been
violated,K
1
and that they have complied 'ith the re=uirements of *ec. $, 7ule 5#,
7ules of Court.
6
,n support of its conclusion, the trial court enumerated its
reasons( first, inspite of the motion of respondent +ortune Tobacco Corporation,
petitioner Commissioner of ,nternal 7evenue failed to present the Kdaily
manufacturer8s s'orn statements submitted to the .,7 by the taxpayer,K
supposedly stating that the total taxable sales of respondent Corporation for the
year "&&2 is P",#,$72,2&5.%%, 'hich is the basis of petitioner Commissioner8s
allegation that private respondents failed to pay the correct taxes since it
declared in its 4AT returns that its total taxable sales in "&&2 'as only
P"",7$,5#.5#%.%%C second, the proper application of *ec. "!2, par. 2c3, of the
@ational ,nternal 7evenue Code is a preAudicial =uestion 'hich must first be
resolved by the Court of Tax Appeals to determine 'hether a tax liability 'hich is
an essential element of tax evasion exists before criminal proceedings may be
pursuedC third, from the evidence submitted, it appears that the .ureau of
,nternal 7evenue has not yet made a final determination of the tax liability of
private respondents 'ith respect to its ad valorem, value added and income
taxes for "&&2C and, fourth, the precipitate issuance by the prosecutors of
subpoenas to private respondents one 2"3 day after the filing of the complaint,
consisting of about %% pages, inclusive of the "!5page complaint, "75page Aoint
affidavit of eight 2#3 revenue officers and the annexes attached thereto, and their
hasty denial of private respondents8 "$55page motion to dismiss, after a recess of
only about 2% minutes, sho' that private respondents8 constitutional rights may
have been violated.
These circumstances as 'ell as the other traces of discrimination mentioned by
the trial court, i.e., the announcement by the PC11 that it 'ould ta>e over the
various corporations associated 'ith respondent ?ucio C. TanC the creation of the
Tas> +orce on 7evenue Cases among the functions of 'hich is to KHiInvestigate
the tax liabilities of manufacturers that engage in 'ell5>no'n tax evasion
schemes, such as selling products through dummy mar>eting companies to
evade the payment of the correct internal revenue taxes,K the very charge
against respondent TanC the reclassification of respondent corporation8s best
selling cigarettes as foreign brands thereby imposing upon them a higher tax rate
that 'ould price them out of the mar>et 'ithout notice and hearingC the singling
out of private respondents as subAects of a complaint for tax evasion 'hen other
cigarette manufacturers have been using the same basis private respondents are
using in paying ad valorem, value added and income taxesC and, the failure of
petitioner Commissioner to 'ait for the expiration of the $%5day period she
herself gave to private respondents to pay the supposed tax deficiencies before
the filing of the complaint, obviously impelled the trial court to issue the 'rit of
preliminary inAunction. Practically the same grounds 'ere found by the trial court
'hen it provisionally restrained the investigation of the t'o 223 other complaints,
i.e., tax evasion complaints for +Gs "&&% and "&&".
)n the basis of the findings of the trial court, it indeed appears that private
respondents8 constitutional rights to due process of la' and e=ual protection of
the la's may have been for the moment set aside, if not outright violated. The
trial court 'as convinced that the tell5tale signs of malice and partiality 'ere
indications that the constitutional rights of private respondents may not have
been afforded ade=uate protection. Accordingly , see no manifest abuse, much
less grave, on the part of the trial court in issuing the inAunctive 'rits. Thus it is
my opinion that the trial court did not commit grave abuse of discretion in
granting the assailed 'rits.
Bell entrenched is the rule that the issuance of the 'rit of preliminary inAunction
as an ancillary or preventive remedy to secure the rights of a party in a pending
case rests upon the sound discretion of the court hearing it. The exercise of
sound Audicial discretion by the trial court in inAunctive matters should not be
interfered 'ith except in case of manifest abuse,
#
'hich is not true in the case
before us. 0=ually 'ell settled is that under *ec. 7, 7ule 5#, 7ules of Court,
4
a
'ide latitude is given to the trial court.
5
This is because the conflicting claims in
an application for a provisional 'rit more often than not involves a factual
determination 'hich is not the function of this Court, or even respondent
appellate court. Thus in the case at bar the ascertainment of the actual tax
liability, if any, based on the evidence already presented and still to be presented,
is more 'ithin the competence of the trial court before 'hich the parties have
raised the very same issue in the main case. The truth or falsity of the divergent
statements that there 'as deliberate haste in issuing the subpoenas and in
denying private respondents8 motion to dismiss may be confirmed not by this
Court but by the trial court during that hearing on the merits.
,n fine, no grave abuse of discretion can be attributed to a Audge or body in the
issuance of a 'rit of preliminary inAunction 'here a party 'as not deprived of its
day in court as it 'as heard and had exhaustively presented all its arguments
and defenses.
"
,t is undisputed that in the case before us petitioners and private
respondents 'ere given sufficient time and opportunity to present their respective
pieces of evidence as 'ell as arguments in support of their positions.
Conse=uently, , concur 'ith the finding of the maAority that the trial court
committed no grave abuse of discretion. As respondent appellate court said,
KHgIrave abuse of discretion as a ground for issuance of 'rits of certiorari and
prohibition implies capricious and 'himsical exercise of Audgment as is
e=uivalent to lac> of Aurisdiction, or 'here the po'er is exercised in an arbitrary
or despotic manner by reason of passion, preAudice or personal hostility
amounting to an evasion of positive duty or to a virtual refusal to perform the duty
enAoined, or to act at all in contemplation of la'.
8
+or such 'rits to lie there must
be capricious, arbitrary and 'himsical exercise of po'er, the very antithesis of
the Audicial prerogative in accordance 'ith centuries of both civil and common
la' traditions.K
7
The trial court, to my mind, is not guilty of any of these. Thus ,
accord respect to the exercise of the trial court8s sound Audicial discretion and
hold that the same should not be interfered 'ith.
To permanently enAoin the trial court from proceeding in any manner in Civil Case
@o. L5&!5"&7&% and allo' the preliminary investigation of the complaints
doc>eted as ,.*. @os. &$55%#, &$5"7&!2 and &$55#! 'ith the <epartment of
9ustice to resume until their final conclusion and completion 'ould go against the
prevailing rule that courts should avoid issuing a 'rit or preliminary inAunction
'hich 'ould in effect dispose of the main case 'ithout trial.
9
<ue process
considerations dictate that the assailed inAunctive 'rits are not Audgments on the
merits but merely orders for the grant of a provisional and ancillary remedy to
preserve the status /uo until the merits of the case can be heard. The hearing on
the application for issuance of a 'rit of preliminary inAunction is separate and
distinct from the trial on the merits of the main case. The =uantum of evidence
re=uired for one is different from that for the other, so that it does not necessarily
follo' that if the court grants and issues the temporary 'rit applied for the same
court 'ill no' have to rule in favor of the petition for prohibition and ipso facto
ma>e the provisional inAunction permanent.
,f grave abuse of discretion attended the issuance of the 'rit of preliminary
inAunction, then by all means nullify the abusive act 55 but only that. The main
case should be allo'ed to proceed according to due process. The trial court
should receive the evidence from the contending parties, 'eigh and evaluate the
same and then ma>e its findings. Clearly, the dismissal of the main case as a
result of a mere incident relative to the issuance of an ancillary 'rit is
procedurally a'>'ard and violates due process, as it deprives private
respondents of their right to present their case in court and support it 'ith its
evidence.
,n resolving the fundamental issue at hand, i.e., 'hether the trial court committed
grave abuse of discretion in issuing the subAect 'rits of preliminary inAunction, 'e
cannot avoid balancing on the scales the po'er of the *tate to tax and its
inherent right to prosecute perceived transgressors of the la' on one side, and
the constitutional rights of a citi/en to due process of la' and the e=ual
protection of the la's on the other. )bviously the scales must tilt in favor of the
individual, for a citi/en8s right is amply protected by the .ill of 7ights of the
Constitution. Thus 'hile Ktaxes are the lifeblood of the government,K the po'er to
tax has its limits, inspite of all its plenitude. Dence in Commissioner of #nternal
$evenue v. "lgue, #nc.,
10
'e said 55
Taxes are the lifeblood of the government and so should be collected 'ithout
unnecessary hindrance. )n the other hand, such collection should be made in
accordance 'ith la' as any arbitrariness 'ill negate the very reason for
government itself. ,t is therefore necessary to reconcile the apparently conflicting
interests of the authorities and the taxpayers so that the real purpose of taxation,
'hich is the promotion of the common good, may be achieved.
xxx xxx xxx
,t is said that taxes are 'hat 'e pay for civili/ed society. Bithout taxes, the
government 'ould be paraly/ed for the lac> of the motive po'er to activate and
operate it. Dence, despite the natural reluctance to surrender part of one8s hard5
earned income to taxing authorities, every person 'ho is able to must contribute
his share in the running of the government. The government for its part is
expected to respond in the form of tangible and intangible benefits intended to
improve the lives of the people and enhance their moral and material values. This
symbiotic relationship is the rationale of taxation and should dispel the erroneous
notion that it is an arbitrary method of exaction by those in the seat of po'er.
.ut even as 'e concede the inevitability and indispensability of taxation, it is a
re=uirement in all democratic regimes that it be exercised reasonably and in
accordance 'ith the prescribed procedure. ,f it is not, then the taxpayer has a
right to complain and the courts 'ill then came to his succor. +or all the a'esome
po'er of the tax collector, he may still be stopped in his trac>s if the taxpayer can
demonstrate . . . that the la' has not been observed.
,n the instant case, it seems that due to the over/ealousness in collecting taxes
from private respondents and to some accident of immediate over'helming
interest 'hich distressingly impassions and distorts Audgment, the *tate has
un'ittingly ignored the citi/ens8 constitutional rights. Thus even the rule that
inAunction 'ill not lie to prevent a criminal prosecution has admitted exceptions,
'hich 'e enumerated in %roc)a v. -nrile
11
and in 0campo #1 v. 0mbudsman
16
55
2a3 to afford ade=uate protection to the constitutional rights of the accusedC 2b3
'hen necessary for the orderly administration of Austice or to avoid oppression or
multiplicity of actionsC 2c3 'hen there is a preAudicial =uestion 'hich is sub2(udiceC
2d3 'hen the acts of the officer are 'ithout or in excess of authorityC 2e3 'here the
prosecution is under an invalid la', ordinance or regulationC 2f3 'hen double
Aeopardy is clearly apparentC 2g3 'hen the court has no Aurisdiction over the
offenseC 2h3 'here it is a case of persecution rather than prosecutionC 2i3 'here
the charges are manifestly false and motivated by lust for vengeanceC 2A3 'hen
there is clearly no prima facie case against the accused and a motion to =uash
on that ground has been deniedC and, 2>3 to prevent a threatened unla'ful arrest.
+inally, courts indeed should not hesitate to invo>e the constitutional guarantees
to give ade=uate protection to the citi/ens 'hen faced 'ith the enormous po'ers
of the *tate, even 'hen 'hat is in issue are only provisional remedies, as in the
case at hand. ,n days of great pressure, it is alluring to ta>e short cuts by
borro'ing dictatorial techni=ues. .ut 'hen 'e do, 'e set in motion an arbitrary
or subversive influence by our o'n design 'hich destroys us from 'ithin. ?et not
the present case dangerously s'ay to'ards that trend.
+or all the foregoing, , vote to dismiss the instant petition for lac> of merit, and to
order the trial court to proceed 'ith Civil Case @o. L5&!5"&7&% 'ith reasonable
dispatch.

PADILLA, J., dissenting(
.ecause of 'hat , humbly perceive to be the crippling, chilling and fatal effects of
the maAority opinion on the po'er of the state to investigate fraudulent tax
evasion in the country, , am constrained to dissent, as vigorously as , can, from
the maAority opinion.
3.- #*-
The main issue in this petition for revie' on certiorari is 'hether or not there are
valid grounds to stop or stay the preliminary investigation of complaints filed by
the .ureau of ,nternal 7evenue 2.,73 'ith the <epartment of 9ustice 2<)93
7evenue Cases Tas> +orce against private respondents for alleged fraudulent
tax evasion for the years "&&%, "&&" and "&&2. *tated differently, the issue is(
did respondent trial court commit grave abuse of discretion amounting to lac> or
excess of Aurisdiction in stopping the subAect preliminary investigationN
3.- C"- "4D 3.- F"C3
)n 7 *eptember "&&$, petitioner Commissioner of ,nternal 7evenue filed a
complaint 'ith the <)9 against private respondents +ortune Tobacco
Corporation 2hereinafter referred to simply as K+ortuneK3, its corporate officers,
nine 2&3 other corporations, and their respective corporate officers, for alleged
fraudulent tax evasion for the year "&&2.
The complaint, doc>eted as ,.*. @o. &$55%#, 'as referred to the <)9 Tas> +orce
on 7evenue Cases 'hich found sufficient grounds to further investigate the
allegation that +ortune fraudulently evaded payment of income, value5added and
ad valorem taxes for the year "&&2 thus depriving the 1overnment of revenue
allegedly in excess of seven and one5half 27 ";23 billion pesos.
The fraudulent scheme allegedly adopted and employed by private respondents,
is described by the .,7 as follo's(
,n order to evade payment of said taxes, H+ortuneI made fictitious and simulated
sales of its cigarette products to non5existent individuals and to entities
incorporated and existing only for the purpose of such fictitious sales by declaring
registered 'holesale prices 'ith the .,7 lo'er than H+ortune8sI actual 'holesale
prices 'hich are re=uired for determination of H+ortune8sI correct ad valorem,
income and value5added tax liabilities. These Kghost 'holesale buyersK then
ostensibly sold the product to consumers and other 'holesalers;retailers at
higher 'holesale prices determined by H+ortuneI. The tax returns and
manufacturer8s s'orn statements filed by H+ortuneI as aforesaid declare the
fictitious sales it made to the conduit corporations and non5existent individual
buyers as its gross sales.
1
.ased on the initial evaluation of the <)9 Tas> +orce, private respondents 'ere
subpoenaed and re=uired to submit their counter5affidavits not later than 2%
*eptember "&&$.
6
,nstead of filing counter5affidavits, private respondents filed a
K4erified -otion to <ismissC Alternatively, -otion to *uspend.K
#
*aid motion 'as
denied by the <)9 Tas> +orce and treated as private respondents8 counter5
affidavit, in an order dated "5 )ctober "&&$.
4
Private respondents sought reconsideration of the aforementioned order of denial
and li>e'ise filed motions to re=uire submission by the .ureau of ,nternal
7evenue 2.,73 of certain documents to support the verified motion to dismiss or
suspend the investigation, and for the inhibition of the state prosecutors assigned
to the case for alleged lac> of impartiality.
5
)n 2% <ecember "&&$, an omnibus order 'as issued by the investigating Tas>
+orce(
"
a. denying reconsiderationC
b. denying suspension of investigationC and
c. denying the motion to inhibit the investigating state prosecutors.
Thereupon, or on ! 9anuary "&&!, private respondents 'ent to court. They filed a
petition for certiorari and prohibition 'ith prayer for preliminary inAunction in the
7egional Trial Court, .ranch ##, Lue/on City, praying that the proceedings
2investigation3 before the <)9 Tas> +orce be stopped. The petition 'as doc>eted
as Civil Case @o. L5&!5"&7&%.
8
)n "7 9anuary "&&!, petitioners filed 'ith the trial court a motion to dismiss the
aforesaid petition.
7
)n 25 9anuary "&&!, the trial court issued instead an order
granting the herein private respondents8 prayer for a 'rit of preliminary inAunction,
9
to stop the preliminary investigation in the <)9 7evenue Cases Tas> +orce.
)n 2 9anuary "&&!, private respondents filed 'ith the trial court a -otion to
Admit *upplemental Petition see>ing this time the issuance of another 'rit of
preliminary inAunction against a second complaint of the .,7 'ith the <)9
doc>eted as ,.*. @o. &$5"7&!2 li>e'ise against herein private respondents for
fraudulent tax evasion for the year "&&%. Private respondents averred in their
aforesaid motion 'ith the trail court that 55
a. no supporting documents nor copies of the complaint 'ere attached to the
subpoena in ,.*. @o. &$5"7&!2C
b. the abovementioned subpoena violates private respondents8 constitutional
rights to due process, e=ual protection and presumption of innocenceC
c. ,.*. @o. &$5"7&!2 is substantially the same as ,.*. @o. &$55%# except that it
concerns the year "&&%C
d. no tax assessment has been issued by the Commissioner of ,nternal 7evenue
and since taxes already paid have not been challenged by the .,7, no tax liability
existsC
e. Assistant Lue/on City Prosecutor ?eopoldo 0. .ara=uia 'as a former
classmate of then Presidential ?egal Counsel Antonio T. Carpio, thus, he cannot
conduct the preliminary investigation in an impartial manner.
)n 2# 9anuary "&&!, private respondents filed 'ith the trial court a second
supplemental petition
10
this time see>ing to stay the preliminary investigation in
,.*. @o. &$55!#, a third .,7 complaint 'ith the <)9 against private respondents
for fraudulent tax evasion for the year "&&".
)n $" 9anuary "&&!, the trial court admitted the t'o 223 supplemental petitions
and issued a temporary restraining order stopping the preliminary investigation of
the t'o 223 later complaints 'ith the <)9 against private respondents for alleged
fraudulent tax evasion for the years "&&% and "&&".
)n 7 +ebruary "&&!, the trial court also issued an order denying herein
petitioners8 motion to dismiss private respondents8 petition see>ing to stay the
preliminary investigation in ,.*. @o. &$55%#. The trial court ruled that the issue of
'hether *ec. "272b3 of the @ational ,nternal 7evenue 2Tax3 Code should be the
basis of herein private respondents8 tax liability, as contended by the .ureau of
,nternal 7evenue, or 'hether it is *ec. "!22c3 of the same code that applies, as
argued by herein private respondents, should first be settled before any criminal
complaint for fraudulent tax evasion can be initiated or maintained.
)n "! +ebruary "&&!, the trial court issued a supplemental 'rit of preliminary
inAunction this time enAoining the preliminary investigations of the t'o 223 other
.,7 complaints 'ith the <)9 for fraudulent tax evasion. The trial court then
denied motions to dismiss the t'o 223 supplemental petitions, filed by therein
respondents Commissioner of ,nternal 7evenue and the <)9 7evenue Cases
Tas> +orce investigators.
)n 7 -arch "&&!, herein petitioners filed 'ith this Court a petition for certiorari
and prohibition 'ith prayer for preliminary inAunction 'hich =uestioned the orders
issued by the trial court granting the private respondents8 prayer for preliminary
inAunction to stop the preliminary investigation in the <)9 of the .,78s complaints
for fraudulent tax evasions against private respondents and denying petitioners8
motions to dismiss private respondents8 various petitions 'ith the trial court. The
petition 'as referred by this Court to the Court of Appeals 'hich has original
concurrent Aurisdiction over the petition.
)n "& <ecember "&&!, the Court of Appeals rendered a decision 'hich, in part,
reads(
,n ma>ing such conclusion the respondent Court 2the 7egional Trial Court of
Lue/on City, .ranch ##3 must have understood from herein petitioner
Commissioner8s letter5complaint of "! pages and the Aoint affidavit of eight
revenue officers of "7 pages attached thereto and its annexes, that the charge
against herein respondents is for tax evasion for non5payment by herein
respondent +ortune of the correct amounts of income tax, ad valorem tax and
value added tax, not necessarily Kfraudulent tax evasionK. Dence, the need for
previous assessment of the correct amount by herein petitioner Commissioner
before herein respondents may be charged criminally. Certiorari 'ill not be
issued to cure errors in proceedings or correct erroneous conclusions of la' or
fact. As long as a Court acts 'ithin its Aurisdiction, any alleged error committed in
the exercise of its Aurisdiction, 'ill amount to nothing more than errors of
Audgment 'hich are revie'able by timely appeal and not by a special civil action
of certiorari.
The =uestioned orders issued after hearing being but interlocutory, revie' thereof
by this court is inappropriate until final Audgment is rendered, absent a sho'ing of
grave abuse of discretion on the part of the issuing court. The factual and legal
issues involved in the main case still before the respondent Court are best
resolved after trial. Petitioners, therefore, instead of resorting to this petition for
certiorari and prohibition should have filed an ans'er to the petition as ordained
in *ection !, 7ule ", in connection 'ith 7ule "" of the 7evised 7ules of Court,
interposing as defense or defenses the obAection or obAections raised in their
motion to dismiss, then proceed to trial in order that thereafter the case may be
decided on the merits by the respondent Court. ,n case of an adverse decision,
they may appeal therefrom by 'hich the entire record of the case 'ould be
elevated for revie'. Therefore, certiorari and prohibition resorted to by herein
petitioners 'ill not lie in vie' of the remedy open to them. Thus, the resulting
delay in the final disposition of the case before the respondent Court 'ould not
have been incurred.
1rave abuse of discretion as a ground for issuance of 'rits of certiorari and
prohibition implies capricious and 'himsical exercise of Audgment as is
e=uivalent to lac> of Aurisdiction, or 'here the po'er is exercised in an arbitrary
or despotic manner by reason of passion, preAudice, or personal hostility,
amounting to an evasion of positive duty or to a virtual refusal to perform the duty
enAoined, or to act at all in contemplation of la'. +or such 'rits to lie, there must
be capricious, arbitrary and 'himsical exercise of po'er, the very antithesis of
the Audicial prerogative in accordance 'ith centuries of both civil la' and
common la' traditions. Certiorari and prohibition are remedies narro' in scope
and inflexible in character. They are not general utility tools in the legal 'or>shop.
Their function is but limited to correction of defects of Aurisdiction solely, not to be
used for any other purpose, such as to cure errors in proceedings or to correct
erroneous conclusions of la' or fact. <ue regard for the foregoing teachings
enunciated in the decision cited can not bring about a decision other than 'hat
has been reached herein.
@eedless to say, the case before the respondent Court involving those against
herein respondents for alleged non5payment of the correct amount due as
income tax, ad valorem tax and value5added tax for the years "&&%, "&&", and
"&&2 is not ended by this decision. The respondent Court is still to try the case
and decide it on the merits. All that is decided here is but the validity of the orders
of the respondent Court granting herein respondents8 application for preliminary
inAunction and denying herein, petitioners8 motion to dismiss. ,f upon the facts
established after trial and the applicable la', dissolution of the 'rit of preliminary
inAunction allo'ed to be issued by the respondent Court is called for and a
Audgment favorable to herein petitioners is demanded, the respondent Court is
duty bound to render Audgment accordingly.
BD070+)70, the instant petition for certiorari and prohibition 'ith application
for issuance of restraining order and 'rit of preliminary inAunction is <,*-,**0<.
Costs de officio. 2references to annexes and citations omitted3
11
Petitioners8 motion for reconsideration of the afore=uoted Audgment 'as denied
by respondent appellate court on 2$ +ebruary "&&5, hence, the present petition
for revie' on certiorari based on the follo'ing grounds(
+$0*4D F0$ 3.- !-3#3#04
TD0 70*P)@<0@T C)67T* C)--,TT0< 17A40 A.6*0 )+ <,*C70T,)@
A-)6@T,@1 T) ?ACM )7 0FC0** )+ 967,*<,CT,)@ ,@ D)?<,@1 TDAT(
,. TD070 ,* A P7096<,C,A? A@<;)7 ?01A? L60*T,)@ T) 96*T,+G TD0
*6*P0@*,)@ )+ TD0 P70?,-,@A7G ,@40*T,1AT,)@
,,. P7,4AT0 70*P)@<0@T*8 7,1DT* T) <60 P7)C0**, 0L6A?
P7)T0CT,)@ A@< P70*6-PT,)@ )+ ,@@)C0@C0 B070 4,)?AT0<C )@
TD0 C)@T7A7G, TD0 *TAT0 ,T*0?+ BA* <0P7,40< )+ <60 P7)C0**
,,,. TD0 A<-,**,)@ )+ P7,4AT0 70*P)@<0@T*8 *6PP?0-0@TA?
P0T,T,)@* B070 P7)P07
,4. TD070 BA* *0?0CT,40 P7)*0C6T,)@
4 TD0 +ACT6A? A??01AT,)@* ,@ TD0 P0T,T,)@ A70 DGP)TD0T,CA??G
A<-,TT0< ,@ A -)T,)@ T) <,*-,** .A*0< )@ 967,*<,CT,)@A?
17)6@<*
4,. TD0 ,**6A@C0 )+ TD0 B7,T* )+ ,@96@CT,)@ ,* @)T A <0C,*,)@ )@
TD0 -07,T* )+ TD0 P0T,T,)@ .0+)70 TD0 ?)B07 C)67T
16
D#C*#04
At the outset, it should be pointed out that respondent appellate court8s
observations to the effect that herein petitioners8 recourse to said court through a
special civil action of certiorari and prohibition 'as improper 2as discussed in the
afore=uoted portion of the CA decision3 actually and appropriately apply to
private respondents 'hen they resorted to the remedy of certiorari and
prohibition 'ith application for preliminary inAunction 'ith the respondent
7egional Trial Court to stop the preliminary investigation being conducted by the
<)9 7evenue Cases Tas> +orce of the .,7 complaints for fraudulent tax evasion
against private respondents. ,t is to be noted that the proceedings before the
investigators 2preliminary investigation before the <)9 7evenue Cases Tas>
+orce3 are far from terminated. ,n fact, private respondents 'ere merely
subpoenaed and as>ed to submit counter5affidavits. They instead resorted to the
courts for redress after denial of their motion to dismiss. The proper procedure on
the part of private respondents after their motion to dismiss 'as denied by the
investigating panel, should have been an appeal from such an adverse resolution
to the *ecretary of 9ustice, not a special civil action for certiorari and prohibition
'ith application for preliminary inAunction before the respondent trial court.
As a corollary, the respondent trial court should have desisted from entertaining
private respondents8 original petition for certiorari and prohibition 'ith prayer for
preliminary inAunction because a court order to stop a preliminary investigation is
an act of interference 'ith the investigating officers8 discretion, absent any
sho'ing of grave abuse of discretion on the part of the latter in conducting such
preliminary investigation.
The rule is settled that the fiscal 2prosecutor3 cannot be prohibited from
conducting and finishing his preliminary investigation.
1#
The private respondents8
petition before the trial court in this case 'as clearly premature since the case
did not fall 'ithin any of the exceptions 'hen prohibition lies to stop a preliminary
investigation.
14
The decision of the maAority in this case clearly constitutes an untenable
usurpation of the primary duty and function of the prosecutors to conduct the
preliminary investigation of a criminal offense and the po'er of the *ecretary of
9ustice to revie' the resolution of said prosecutors.
,n +uingona, supra, the Court en banc ruled thus(
KAs a general rule, an inAunction 'ill not be granted to restrain a criminal
prosecutionK. Bith more reason 'ill inAunction not lie 'hen the case is still at the
preliminary investigation stage. This Court should not usurp the primary function
of the City +iscal to conduct the preliminary investigation of the estafa charge
and of the petitioners8 countercharge for perAury, 'hich 'as consolidated 'ith the
estafa charge.
The City +iscal8s office should be allo'ed to finish its investigation and ma>e its
factual findings. This Court should not conduct the preliminary investigation. ,t is
not a trier of facts. 27eference to footnotes omitted3.
.efore resolving the main issue in this petition, as earlier stated in this opinion,
several preliminary issues raised by private respondents in their K4erified -otion
To <ismissC Alternatively, -otion To *uspendK need to be addressed, namely(
A.3 Private respondent +ortune8s right to due process and e=ual protection of the
la's have been violated because of the subAect preliminary investigation before
the <)9 7evenue Cases Tas> +orce.
..3 9urisdiction over +ortune8s tax liability pertains to the Court of Tax Appeals
and not the 7egional Trial Courts, thus, the <epartment of 9ustice, through its
state prosecutors, is 'ithout Aurisdiction to conduct the subAect preliminary
investigation.
C.3 The complaints for fraudulent tax evasion are unsupported by any evidence
to serve as basis for the issuance of a subpoena.
<.3 The lac> of final determination of +ortune8s tax liability precludes criminal
prosecution.
". )n the alleged violation of +ortune8s rights to due process and e=ual protection
of the la's, , fail to see any violation of said rights.
+ortune, its corporate officers, nine 2&3 other corporations and their respective
corporate officers alleged by the .,7 to be mere KdummiesK or conduits of
+ortune in the fraudulent tax evasion on the 1overnment, 'ere given the
opportunity to file their counter5affidavits to refute the allegations in the .,7
complaints, together 'ith their supporting documents. ,t is only after submission
of counter5affidavits that the investigators 'ill determine 'hether or not there is
enough evidence to file in court criminal charges for fraudulent tax evasion
against private respondents or to dismiss the .,7 complaints. At this stage of the
preliminary investigation, the constitutional right of private respondents to due
process is ade=uately protected because they have been given the opportunity to
be heard, i.e., to file counter5affidavits.
@or can it be said, as respondents falsely argue, that there 'as no ground or
basis for re=uiring the private respondents to file such counter5affidavits. As
respondent Court of Appeals admitted in its here assailed decision, the .,7
complaint 2"st complaint3 signed by the Commissioner of ,nternal 7evenue
consisted of fourteen 2"!3 pages supported by an annex consisting of seventeen
2"73 pages in the form of a Aoint affidavit of eight 2#3 revenue officers, to 'hich
'ere attached voluminous documents as annexes 'hich, 'hen put together,
constituted a formidable net'or> of evidence tending to sho' fraudulent tax
evasion on the part of private respondents. Bhen, on the basis of such .,7
complaint and its supporting documents, the investigating Tas> +orce sa' a need
to proceed 'ith the in=uiry and, conse=uently, re=uired private respondents to file
their counter5affidavits, grave abuse of discretion could hardly be imputed to said
investigators.
2. )n respondents8 assertions that there is selective prosecution 2no e=ual
protection of the la's3 since other corporations similarly situated as they are, are
not being prosecuted and;or investigated, the argument is =uite ludicrous, to say
the least. As pointed out by the *olicitor 1eneral, more than one thousand
2",%%%3 criminal cases for tax evasion have been filed in -etro -anila alone. This
number, even if it seems to represent but a small fraction of Kcases of actual tax
evasion, undoubtedly sho' that respondents are not being singled out. ,t is of
note that the memorandum issued by the President of the Philippines creating a
tas> force to investigate tax evasion schemes of manufacturers 'as issued three
2$3 months before the complaints against private respondents 'ere filed. This
ma>es any charge of selective prosecution baseless since it could not then be
sho'n, nor has it been sho'n by private respondents that only they
2respondents3 'ere being investigated;prosecuted. ,n fact, up to this time,
respondents have failed to substantiate this allegation of selective prosecution
against them.
-oreover, assuming arguendo that other corporate manufacturers are guilty of
using similar schemes for tax evasion, allegedly used by respondents, the
*olicitor 1eneral correctly points out that the remedy is not dismissal of the
complaints against private respondents or stoppage of the investigations of said
complaints, but investigation and prosecution of other similar violators 2fraudulent
tax evaders3.
$. Private respondents8 allegations that the Assistant Lue/on City Prosecutor
2among those investigating the complaints against them3 lac>s impartiality, are so
unsubstantiated, imaginary, speculative and indeed puerile. They need not be
elaborately refuted as a mere denial 'ould suffice under the circumstances.
!. )n the issue of Aurisdiction, the rule is settled that city and state prosecutors
are authori/ed to conduct preliminary investigations of criminal offenses under
the @ational ,nternal 7evenue Code. *aid criminal offenses are 'ithin the
Aurisdiction of the 7egional Trial Court.
15
5. The issue of 'hether or not the evidence submitted by petitioners is sufficient
to 'arrant the filing of criminal informations for fraudulent tax evasion is
prematurely raised.
1"
To argue, as private respondents do, that one piece of
evidence, i.e. the <aily -anufacturer8s *'orn *tatements, should be produced at
a particular stage of the investigation, in order to determine the probable guilt of
the accused, is to dictate to the investigating officers the procedure by 'hich
evidence should be presented and examined. +urther, Ka preliminary
investigation is not the occasion for the full and exhaustive display of the parties8
evidenceC it is for the presentation of such evidence only as may engender a 'ell
grounded belief that an offense has been committed and that the accused is
probably guilty thereof . . .K
1
8
.esides, the preliminary investigation has not yet been terminated. The proper
procedure then should be to allo' the investigators, 'ho undeniably have
Aurisdiction, to conduct and finish the preliminary investigation and to render a
resolution. The party aggrieved by said resolution can then appeal it to the
*ecretary of 9ustice,
17
as re=uired by the settled doctrine of exhaustion of
administrative remedies. Bhat special =ualification or privilege, , may as>, do
private respondents have, particularly +ortune and ?ucio Tan, as to exempt them
from the operation of this rooted principle and entitle them to immediate Audicial
relief from the respondent trial court in this caseN
. The respondents Court of Appeals and the trial court maintain, as private
respondents do, that a previous assessment of the correct amount of taxes due
is necessary before private respondents may be charged criminally for fraudulent
tax evasion. This vie' is decidedly not supported by la' and Aurisprudence.
The lac> of a final determination of respondent +ortune8s exact or correct tax
liability is not a bar to criminal prosecution for fraudulent tax evasion. Bhile a
precise computation and assessment is re=uired for a civil action to collect a tax
deficiency, the @ational ,nternal 7evenue Code does not re=uire such
computation and assessment prior to criminal prosecution for fraudulent tax
evasion. Thus, as this Court had earlier ruled 55
An assessment of a deficiency is not necessary to a criminal prosecution for
'illful attempt to defeat and evade the income tax. A crime is complete 'hen the
violator has >no'ingly and 'illfully filed a fraudulent return 'ith intent to evade
and defeat the tax. The perpetration of the crime is grounded upon >no'ledge on
the part of the taxpayer that he has made an inaccurate return, and the
government8s failure to discover the error and promptly to assess has no
connections 'ith the commission of the crime.
19
,t follo's that, under the *ngab doctrine, the filing of a criminal complaint for
fraudulent tax evasion 'ould be proper even without a previous assessment of
the correct tax.
The argument that the *ngab doctrine 'ill not apply to the case at bar because it
involves a factual setting different from that of the case at bar, is erroneous. The
*ngab case involved the filing of a fraudulent income tax return because the
defendant failed to report his income derived from sale of banana saplings. ,n the
case at bar, the complaints filed before the <)9 for investigation charge private
'holesale respondents 'ith fraudulent concealment of the actual price of
products sold through declaration of registered 'holesale prices lo'er than the
actual 'holesale prices, resulting in underpayment of income, ad valorem, and
value5added taxes. .oth cases involve, therefore, fraudulent schemes to evade
payment to the 1overnment of correct taxes.
The Court in *ngab stated further as follo's(
The petitioner also claims that the filing of the informations 'as precipitate and
premature since the Commissioner of ,nternal 7evenue has not yet resolved his
protests against the assessment of the 7evenue <istrict )fficerC and that he 'as
denied recourse to the Court of Tax Appeals.
The contention is 'ithout merit. Bhat is involved here is not the collection of
taxes 'here the assessment of the Commissioner of ,nternal 7evenue may be
revie'ed by the Court of Tax Appeals, but a criminal prosecution for violations of
the @ational ,nternal Code 'hich is 'ithin the cogni/ance of courts of first
instance. Bhile there can be no civil action to enforce collection before the
assessment procedures provided in the Code have been follo'ed, there is no
re=uirement for the precise computation and assessment of the tax before there
can be a criminal prosecution under the Code.
The contention is made, and is here reAected, that an assessment of the
deficiency tax due is necessary before the taxpayer can be prosecuted criminally
for the charges preferred. 3he crime is complete when the violator has, as in this
case, )nowingly and wilfully filed fraudulent returns with intent to evade and
defeat a part or all of the tax. H1u/i> vs. 6.*., 5! +2d "#I 2emphasis supplied3
3he ruling in the *ngab case is undisputably on all fours with, and conclusive to
the case at bar. ,t should be stressed and pointed out that in *ngab the Court
denied the prayer of therein petitioner to =uash informations for tax evasion that
had already been filed in court. ,n other 'ords, the prosecutors in *ngab had
already found probable cause to try therein petitioner for tax evasion. <espite this
fact there 'as no finding by the Court of violation of any of petitioner8s
constitutional rights.
,n the present case, private respondents 'ere merely being re=uired to submit
counter5affidavits to the complaints filed. ,f no violation of constitutional rights
'as committed in *ngab, upon the filing of the criminal informations in Court,
ho' can there no' be a violation of private respondents8 constitutional rights
upon a re=uirement by the investigators that private respondents submit their
counter5affidavits.
The Court has not been presented any compelling or persuasive argument 'hy
the 6ngab doctrine has to be abandoned. ,t is good la' and should be the
nemesis of fraudulent tax evaders. ,t gives teeth to the proper enforcement of our
tax la's.
7. Private respondents argue that a case earlier file before the Court of Tax
Appeals 2CTA3 and no' before this Court
60
involves a preAudicial =uestion
Austifying or re=uiring suspension of the preliminary investigation of the
complaints for fraudulent tax evasion against private respondents. *aid case
involves the validity of .,7 7evenue -emorandum Circular @o. $75&$ dated "
9uly "&&$ 'hich reclassified cigarettes manufactured by respondent +ortune.
The circular subAects cigarettes 'ith brand names KDopeK, K-oreK and
KChampionK to a "%: increase in ad valorem taxes starting 2 9uly "&&$.
7espondent +ortune has assailed the validity of said revenue circular and the
case has yet to be decided 'ith finality.
.ut the foregoing issue is irrelevant to the issue of fraudulent tax evasion
involved in this case. A final decision either upholding or nullifying the
aforementioned revenue circular 'ill not affect private respondents8 criminal
liability for fraudulent tax evasion, for the follo'ing reasons(
a3 The revenue circular involved in the other case pertains to ad valorem taxes
on sales of +ortune8s named cigarette brands after " 9uly "&&$ 'hile the
fraudulent tax evasion involved in the present case pertains to years "&&%, "&&"
and "&&2.
b3 The fraudulent scheme allegedly utili/ed by +ortune and its dummies, as
described in the .,7 complaints pending 'ith the <)9 7evenue Cases Tas>
+orce, 'hich resulted in the misdeclaration;underdeclaration of +ortune8s gross
sales receipts resulting in turn in underpayment of ad valorem, value5added and
income taxes 'as actually a Kbuilt5inK tax evasion device already in place even
before the assailed revenue circular 'as issued. The scheme is particularly
designed to result in the underpayment of ad valorem, value5added and income
taxes regardless of the tax rate fixed by the government on cigarette products.
#. 7espondents also argue that the issue of 'hether *ection "272b3 or *ection
"!22c3 of the @ational ,nternal 7evenue Code is applicable to private
respondents should first be settled before any criminal cases can be filed against
them. This argument is both misleading and erroneous.
The aforementioned provisions read(
*ec. "27. . . .
2b3 Determination of gross selling price of goods sub(ect to ad valorem tax. 55
6nless other'ise provided, the price, excluding the value5added tax, at 'hich the
goods are sold at 'holesale in the place of production or through their sales
agents to the public shall constitute the gross selling price. ,f the manufacturer
also sells or allo's such goods to be sold at 'holesale price in another
establishment of 'hich he is the o'ner or in the profits at 'hich he has an
interest, the 'holesale price in such establishment shall constitute the gross
selling price. *hould such price be less than the cost of manufacture plus
expenses incurred until the goods are finally sold, then a proportionate margin of
profit, not less than "%: of such manufacturing cost and expenses, shall be
added to constitute the gross selling price.
*ec. "!2 . . .
2c3 Cigarettes pac)ed in twenties. 55 There shall be levied, assessed and
collected on cigarettes pac>ed in t'enties an ad valorem tax at the rates
prescribed belo' based on the manufacturer8s registered 'holesale price(
2"3 )n locally manufactured cigarettes bearing a foreign brand, fifty5five percent
255:3( !rovided, That this rate shall apply regardless of 'hether or not the right
to use or title to the foreign brand 'as sold or transferred by its o'ner to the local
manufacturer. Bhenever it has to be determined 'hether or not a cigarette bears
a foreign brand, the listing of brands manufactured in foreign countries appearing
in the current Borld Tobacco <irectory shall govern.
223 )n other locally manufactured cigarettes, forty5five percent 2!5:3.
<uly registered or existing brands of cigarettes pac>ed in t'enties shall not be
allo'ed to be pac>ed in thirties.
Bhen the existing registered 'holesale price, including tax, of cigarettes pac>ed
in t'enties does not exceed P!.%% per pac>, the rate shall be t'enty percent
22%:3.
As the *olicitor 1eneral correctly points out, the t'o 223 afore=uoted provisions of
the Tax Code are both applicable in determining the amount of tax due. *ection
"272b3 provides for the method of determining the gross wholesale price to be
registered with the %#$ 'hile *ection "!22c3 provides for the rate of ad valorem
tax to be paid. *aid rate is expressed as a percentage of the registered gross
selling price 'hich is determined, in turn, based on *ection "272b3.
The aforementioned t'o 223 provisions of the Tax Code are certainly not
determinative of private respondents8 criminal liability, if any. A reading of the .,7
complaints pending 'ith the <)9 7evenue Cases Tas> +orce sho's that private
respondent +ortune is being accused of using KdummyK corporations and
business conduits as 'ell as non5existent individuals and entities to enable the
company 2+ortune3 to report gross receipts from sales of its cigarette brands
lower than gross receipts 'hich are actually derived from such sales. *uch lo'er
gross receipts of the company, as reported by respondent +ortune thus result in
lo'er ad valorem, value5added and income taxes paid to the government. *tated
a little differently, respondent +ortune is accused of selling at 'holesale prices its
cigarette brands through dummy entities in the profits of 'hich it has a controlling
interest. 6nder *ection "272b3, the gross selling price of the goods should be the
'holesale price of such dummy 55 entities to its buyers but it is alleged by the
government that respondent +ortune has purposely made use of such entities to
evade payment of higher but legally correct taxes.
&. As to respondents8 additional claim that 'ith regard to ad valorem tax, they
merely based their liability on the 'holesale price registered 'ith the .ureau of
,nternal 7evenue 2.,73 follo'ing the method used by all cigarette manufacturers,
said claim cannot absolve +ortune and its officers from criminal liability.
61

Payment of ad valorem and other taxes based on the 'holesale price registered
'ith the .,7 presupposes and naturally assumes that the registered wholesale
price correspond to the actual wholesale prices at which the manufacturer sells
the product. ,f a manufacturer ma>es use of a method or device to ma>e it
appear that products are sold at a 'holesale price lo'er than the amounts that
the manufacturer actually reali/es from such 'holesale of its products, as 'hat
respondent +ortune is accused of doing, through the use of dummy entities, then
there arises criminal liability under the penal provisions of the Tax Code. This is
clear from *ection "272b3 afore=uoted in relation to the penal provisions of the
Tax Code.
"%. Private respondents contend that the registration 'ith the .,7 of
manufacturer8s 'holesale price and the corresponding close supervision and
monitoring by .,7 officials of the business operations of cigarette companies,
ensure payment of correct taxes. The argument is baseless. ,t does not follo'
that the cited procedure is a guarantee against fraudulent schemes resorted to
by tax5evading individuals or entities. ,t only indicates that taxpayers bent on
evading payment of taxes 'ould explore more creative devices or mechanisms in
order to defraud the government of its sources of income even under its very
nose. ,t is precisely to avoid and detect cases li>e this that the President issued a
-emorandum on " 9une "&&$ creating a tas> force to investigate tax liabilities of
manufacturers engaged in tax evasion schemes, such as selling products
through dummy mar>eting companies at underdeclared 'holesale prices
registered 'ith the .,7.
-oreover, the -anufacturer8s <eclaration 'hich is the basis for determining the
K-anufacturer8s 7egistered Bholesale PriceK 2'hich in turn becomes the basis
for the imposition of ad valorem tax3, even if verified by revenue officers and
approved by the Commissioner of ,nternal 7evenue, does not necessarily reflect
the actual 'holesale price at 'hich the cigarettes are sold. This is 'hy
manufacturers are still re=uired to file other documents, li>e the Kdaily
manufacturer8s s'orn statementsK in order to assist in determining 'hether or not
correct taxes have been paid. ,n fine, even if .,7 officials may have verified
+ortunes8 .,7 registered 'holesale price for its products, the same does not
estop or preclude the 1overnment from filing criminal complaints for fraudulent
tax evasion based on evidence subse=uently gathered to the effect that such .,7
registered 'holesale prices 'ere a misdeclaration or underdeclaration of the
actual 'holesale price. ,t is hornboo> la' that the 1overnment is not bound or
estopped by the mista>es, inadvertence, and 'hat more, connivance of its
officials and employees 'ith fraudulent schemes to defraud the 1overnment.
66
0ven on the assumption that official duty of .,7 officials and employees has
been regularly performed, the allegations in the complaints are clear enough in
that private respondents allegedly made use of schemes to ma>e it appear that
respondent +ortune8s tax liabilities are far less than 'hat it 2+ortune3 should be
actually liable for under the la'. The very nature of the offense for 'hich
respondents are being investigated, certainly ma>es regularity;irregularity in the
performance of official duties irrelevant.
,t should also be pointed out that the offense allegedly committed by private
respondents8 consists in8 the intentional use of KdummyK entities to ma>e it
appear that respondent +ortune sells its products at lo'er 'holesale prices,
'hich prices 'ould correspond to the 'holesale prices registered by +ortune 'ith
the .,7, but not to the prices at 'hich its products are sold by +ortune8s
dummies. The difference bet'een +ortune8s .,75reported 'holesale prices and
the prices at 'hich its dummies sell +ortune8s products thus constitutes amounts
for 'hich +ortune should actually incur tax liabilities but for 'hich it allegedly
never paid taxes because of the operation of the tax evasion scheme founded on
a combined underdeclaration 'ith the .,7 of +ortune8s 'holesale price of its
products and the sale of such products to is KdummyK corporations or to non5
existing individuals or entities. This is the obvious reason 'hy the government
has sought to investigate the alleged tax evasion scheme purportedly utili/ed by
respondent +ortune and its dummy corporations.
.ased on the foregoing discussions, it follo's that the ans'er to the main issue
formulated earlier in this opinion is in the negative since the private respondents
have not sho'n that there exist, in this case, exceptional grounds removing it
from the general rule that preliminary investigations of criminal offenses and
criminal prosecutions cannot be stayed or enAoined by the courts.
6#
"". The trial court8s ruling that private respondents8 constitutional rights have
been violated, rests on untenable grounds. ,t must be remembered, in this
connection, that exceptions to a settled rule, by their nature, must be strictly
applied. And any claim to an exception must be fully substantiated. ,n other
'ords, it must have real basis for existing.
The exceptions to the general rule against restraining orders or inAunctions to
stop preliminary investigations or criminal prosecutions are enumerated in
%roc)a vs. -nrile.
64
)ne specific exception is 'hen an inAunction is needed for
the ade=uate protection of the accused8s constitutional rights. The exception
definitely does not apply in the case at bar.
.efore proceeding to illustrate this point, it is important to stress that in a
preliminary investigation, the investigating officers8 sole duty is to determine,
before the presentation of evidence by the prosecution and by the defense, if the
latter should 'ish to present any, 'hether or not there are reasonable grounds
for proceeding formally against the accused.
65
This is in conformity 'ith the
purpose of a preliminary investigation 'hich is to secure the innocent against
hasty, malicious, and oppressive prosecutions, and to protect him from an open
and public accusation of crime, from the trouble, expense and anxiety of public
trial, and also to protect the state from useless and expensive trials.
6"
As restated
by the illustrious late Chief 9ustice -anuel 4. -oran 55
. . . the purpose of a preliminary investigation is to afford the accused an
opportunity to sho' by his o'n evidence that there is no reasonable ground to
believe that he is guilty of the offense charged and that, therefore, there is no
good reason for further holding him to a'ait trial in the Court of +irst ,nstance.
6
8
Prescinding from the tenets above5discussed, it is clear from the inception that
there had been no violation of private respondents8 constitutional rights to
presumption of innocence, due process and e=ual protection of the la's. The
preliminary investigation, , repeat, has not yet been terminated. At this stage,
only the complainant has finished presenting its affidavits and supporting
documents. )bviously then, the investigating panel found that there 'ere
grounds to continue 'ith the in=uiry, hence, the issuance of subpoena and an
order for the submission of counter5affidavits by private respondents. ,nstead of
filing counter5affidavits, private respondents filed a 4erified -otion to <ismissC
Alternatively, -otion to *uspend. At this point, it may be as>ed, ho' could private
respondents8 constitutional right to presumption of innocence be violated 'hen, in
all stages of the preliminary investigation, they 'ere presumed innocentN
<eclaring that there are reasonable grounds to continue 'ith the in=uiry is not
the same as pronouncing that a respondent is guilty or probably guilty of the
offense charged.
"2. Private respondents cannot also claim that they 'ere not afforded due
process and e=ual protection of the la's. ,n fact, the investigating panel 'as
concerned 'ith Aust that 'hen it ordered the submission of private respondents8
counter5affidavits. This procedure afforded private respondents the opportunity to
sho' by their o'n evidence that no reasonable grounds exist for the filing of
informations against them. +urthermore, contrary to the findings of the trial court
and the Court of Appeals, the alleged haste by 'hich the subpoena 'as issued
to private respondents 2the day after the filing of the %%5page annexed
complaint3 does not lessen the investigating panel8s ability to study and examine
the complainant8s evidence. @either does such act merit the conclusion that the
investigating panel 'as less than obAective in conducting the preliminary
investigation. Conse=uently, the general and settled rule must apply that the
courts cannot interfere 'ith the discretion of the investigating officer to determine
the specificity and ade=uacy of the averments in the complaint filed, except in
very exceptional circumstances,
67
'hich do not obtain here.
Therefore, private respondents8 act of filing a petition for certiorari and prohibition
before the 7egional Trial Court 'as rather untimely and uncalled for, not only
because private respondents failed to exhaust their administrative remedies but
also because the grounds cited in their petition before the trial court 'ere highly
speculative 55 more fancied than real.
+inally, .ernande, v. "lbano 2"& *C7A &53, cited by the maAority to support the
conclusion that preliminary investigation can be stayed by the courts, clearly
states that preliminary investigation can be stayed by court order only in extreme
cases. .ernande, also states that(
.y statute, the prosecuting officer of the City of -anila and his assistants are
empo'ered to investigate crimes committed 'ithin the city8s territorial Aurisdiction.
@ot a mere privilege, it is the s'orn duty of a +iscal to conduct an investigation of
a criminal charge filed 'ith his office. The po'er to investigate postulates the
other obligation on the part of the +iscal to investigate promptly and file the case
of as speedily. Public interest 55 the protection of society 55 so demands.
Agreeably to the foregoing, a
rule 55 no' of long standing and fre=uent application 55 'as formulated that
ordinarily criminal prosecution may not be bloc>ed by court prohibition or
inAunction. 7eally, if at every turn investigation of a crime 'ill be halted by a court
order, the administration of criminal Austice 'ill meet 'ith an undue setbac>.
,ndeed, the investigative po'er of the +iscal may suffer such a tremendous
shrin>age that it may end up in hollo' sound rather than as a part and parcel of
the machinery of criminal Austice.
,t should be noted that 'hile .ernande, lays do'n the extreme grounds 'hen
preliminary investigation of criminal offenses may be restrained by the courts, the
dispositive portion of the decision affirmed the decision of the trial court
dismissing a petition for certiorari and prohibition 'ith prayer for preliminary
inAunction filed to stay the preliminary investigation of criminal complaints against
petitioner Dernande/.
The other case cited by the maAority to support its decision in this case, Fortun v.
'abang
69
involves criminal complaints filed against a Audge of the Court of +irst
,nstance by disgruntled la'yers 'ho had lost their cases in the Audge8s sala.
Clearly, the basis for the Court to stay preliminary investigation in Fortun 'as a
finding that said complaints 'ere filed merely as a form of harassment against
the Audge and 'hich Kcould have no other purpose than to place petitioner5Audge
in contempt and disreputeK. The factual situation in the case at bar is poles apart
from the factual situation in Fortun.
+urther, in Fortun there 'as an express finding by the Court that complaints
against Audges of the Courts of +irst ,nstance are properly filed 'ith the *upreme
Court under 0xecutive )rder @o. 2! 2"&7%3 since the Court is considered as the
department head of the Audiciary. ,n the present case it cannot be disputed that
Aurisdiction to conduct preliminary investigation over fraudulent tax evasion cases
lies 'ith the state prosecutors 2fiscals3.
,t cannot therefore be denied that neither .ernande, nor Fortun supports 'ith
any plausibility the maAority8s disposition of the issues in the present case. )n the
other hand, it appears to me all too clearly that the maAority opinion, in this case,
has altered the entire rationale and concept of preliminary investigation of alleged
criminal offenses. That alteration has, of course, served the purposes of
distinguished private respondents. .ut , 'ill have no part in the shoc>ing process
especially in light of the fact that 1overnment cries out that the people have been
cheated and defrauded of their taxes to the tune allegedly of P25. billion pesos,
and yet, it is not given by this Court even a beggar8s chance to prove itO
"$. There is great and vital public interest in the successful investigation and
prosecution of criminal offenses involving fraudulent tax evasion. *aid public
interest is much more compelling in the present case since private respondents
are not only accused of violating tax and penal la's but are also, as a
conse=uence of such violations, possibly depriving the government of a primary
source of revenue so essential to the life, gro'th and development of the nation
and for the prestation of essential services to the people.
"!. ,t should be made clear, at this point, ho'ever, that this opinion is not a pre5
Audgment or pre5determination of private respondents8 guilt of the offense
charged. @o one, not even the prosecutors investigating the cases for fraudulent
tax evasion, is, at this stage of the proceedings, 'hen private respondents have
yet to file their counter5affidavits, in a position to determine and state 'ith finality
or conclusiveness 'hether or not private respondents are guilty of the offense
charged in the .,7 complaints, no' 'ith the <)9 7evenue Cases Tas> +orce. ,t
is precisely through the preliminary investigation that the <)9 Tas> +orce on
7evenue Cases can determine 'hether or not there are grounds to file
informations in court or to dismiss the .,7 complaints.
"5. , see no grave abuse of discretion committed by the state prosecutors in
re=uiring private respondents to submit counter5affidavits to the complaints for
fraudulent tax evasion and to determine the existence or absence of probable
criminal liability.
The 7ules on Criminal Procedure do not even re=uire, as a condition sine /ua
non to the validity of a preliminary investigation, the presence of the respondent
as long as efforts to reach him are made and an opportunity to controvert the
complainant8s evidence is accorded him. The purpose of the rule is to chec>
attempts of unscrupulous respondents to th'art criminal investigations by not
appearing or employing dilatory tactics.
#0
". *ince the preliminary investigation in the <)9 7evenue Cases Tas> +orce
against private respondents for alleged fraudulent tax evasion is 'ell 'ithin its
Aurisdiction and constitutes no grave abuse of discretion, it 'as in fact the
respondent trial court that committed grave abuse of discretion, amounting to
lac> or excess of Aurisdiction, 'hen it stayed such preliminary investigation.
"7. The successful prosecution of criminal offenders is not only a right but the
duty of the state. )nly 'hen the state8s acts clearly violate constitutional rights
can the courts step in to interfere 'ith the state8s exercise of such right and
performance of such duty. , am indubitably impressed that there is no violation of
private respondents8 constitutional rights in this case.
"#. ?astly, the consolidation of the three 2$3 complaints in the <)9 against private
respondents should be allo'ed since they all involve the same scheme allegedly
used by private respondents to fraudulently evade payment of taxes.
Consolidation 'ill not only avoid multiplicity of suits but 'ill also enable private
respondents to more conveniently prepare 'hatever responsive pleadings are
re=uired or expected of them.
,t is, therefore, my considered vie' that the decision of the Court of Appeals of "&
<ecember "&&! in CA 1.7. *P @o. $$5&& should be *0T A*,<0. The
respondent trial court should be 0@9),@0< from proceeding in any manner in
Civil Case @o. L5&!5"&7&%, or at least until further orders from this Court.
The preliminary investigation of the .,7 complaints doc>eted as ,.*. @os. &$55%#,
&$5"7&!2 and &$55#! 'ith the <epartment of 9ustice 7evenue Cases Tas>
+orce, being constitutionally and legally in order, should be allo'ed to resume
until their final conclusion or completion, 'ith private respondents given a non5
extendible period of ten 2"%3 days from notice to submit to the investigating panel
their respective counter5affidavits and supporting documents, if any.

VITUG, J., dissenting(
, see in the petition the overriding issue of 'hether or not Audicial relief could be
resorted to in order to stop state prosecutors from going through 'ith their
investigation of complaints lodged against private respondents. Almost invariably,
this Court has resolved not to unduly interfere, let alone to peremptorily prevent,
the prosecuting agencies or offices of the government in their investigatorial 'or>
or in their o'n evaluation of the results of investigation. ,t 'ould indeed be, in my
vie', an act precipitate for the courts to ta>e on a case even before the complaint
or information is filed by the prosecution. )f course, one cannot preclude the
possibility that at times compelling reasons may dictate other'iseC , do not thin>,
ho'ever, that the instant case could be the right occasion for it.
Bhile , do understand the concern expressed by some of my colleagues, i.e.,
that stopping the trial court from no' proceeding 'ith Civil Case @o. L5&!5&"7%
'ould, effectively, mean a disposition of the main case 'ithout its merits having
first been fully heard in the court belo', in this particular situation before the
Court, ho'ever, the parties have since exhaustively and ade=uately presented
their respective cases. ,n the interest of good order, the practical measure of
enAoining the trial court from ta>ing further cogni/ance of the case 'ould not thus
appear to be really all that un'arranted.
A final 'ord( The matter affecting the civil liability for the due payment of internal
revenue taxes, including the applicable remedies and proceedings in the
determination thereof, must be considered apart from and technically
independent of the criminal aspect that may be brought to bear in appropriate
cases. A recourse in one is not necessarily preclusive of, nor 'ould the results
thereof be conclusive on, the other.
Accordingly, , vote to grant the petition.