3.1 Commissioner V CA, Lucio Tan

G.R. No.
119322 June 4, 1996
COMMISSIONER ON INTERNAL REVENUE, SENIOR STATE PROSECUTOR AURORA S.

LAGMAN, SENIOR STATE PROSECUTOR BERNELITO R. FERNANDEZ, SENIOR STATE
PROSECUTOR HENRICK P. GINGOYON, ROGELIO F. VISTA, STATE PROSECUTOR
ALFREDO AGCAOILI, PROSECUTING ATTORNEY EMMANUEL VELASCO, CITY
PROSECUTOR CANDIDO V. RIVERA, AND ASSISTANT CITY PROSECUTOR LEOPOLDO E.
BARAQUIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, THE HONORABLE TIRSO D'C VELASCO,
PRESIDING JUDGE, REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 88, FORTUNE
TOBACCO CORPORATION, LUCIO TAN, HARRY C. TAN, CARMEN KAO TAN, FLORENCIO
SANTOS, SALVADOR MISON, CHUNG POE KEE, ROJAS CHUA, MARIANO TANENGLIAN,
JUANITA LEE AND ANTONIO P. ABAYA, respondents.
DAGUPAN COMBINED COMMODITIES, INC., TOWNSMAN COMMERCIALS, INC., LANDMARK

SALES AND MARKETING INC., CRIMSON CROCKER DISTRIBUTORS, INC., MOUNT
MATUTUM MARKETING CORP., FIRST UNION TRADING CORP., CARLSBURG AND SONS,
INC., OMAR ALI DISTRIBUTORS, INC., ORIEL AND COMPANY, NEMESIO TAN, QUINTIN
CALLEJA, YOLANDA MANALILI, CARLOS CHAN, ROMEO TAN, VICENTE CO, WILLIAM YU,
LETICIA LIM, GLORIA LOPEZ, ROBERT TANTAMCO, FELIPE LOY, ROLANDO CHUA,
HONORINA TAN, WILLIE TANTAMCO, HENRY WEECHEE, JESUS LIM, TEODORO TAN,
ANTONIO APOSTOL, DOMINGO TENG, CANDELARIO LI, ERLINDA CRUZ, CARLOS
TUMPALAN, LARRY JOHN SY, ERNESTO ONG, WILFREDO MACROHON, ANTONIO TIU,
ROSARIO LESTER, WILFREDO ONG, BONIFACIO CHUA, GO CHING CHUAN, HENRY CHUA,
LOPE LIM GUAN, EMILIO TAN, FELIPE TAN SEH CHUAN, ANDRES CO, FELIPE KEE, HENRY
GO CO, NARCISO GO, ADOLFO LIM, CO SHU, DANIEL YAO CABIGUN, GABRIELLE.
QUINTELA, NELSON TE, EMILLIO GO, EDWIN LEE, CESAR LEDESMA, JR., JAO CHEP SENG,
ARNULFO TAN, BENJAMIN T. HONG, PHILIP JAO, JOSE P. YU, AND DAVID R.
CORTES, respondents-intervenors.
KAPUNAN, J.:p
The pivotal issue in this petition for review is whether or not respondent Court of Appeals in its decision1 in CA-G.R. SP No. 33599 correctly
ruled that the Regional Trial Court of Quezon City (Branch 88) in Civil Case No. Q-94- 18790 did not commit grave abuse of discretion
amounting to lack of jurisdiction in issuing four (4) orders directing the issuance of writs of preliminary injunction restraining petitioner
prosecutors from continuing with the preliminary injunction of I.S. Nos. 93-508 and 93-584 in the Department of Justice and I.S. No. 93-
17942 in the Office of the City Prosecutors of Quezon City wherein private respondents were respondents and denying petitioners' Motion to
Dismiss said Civil Case No. 94-18790.2
In resolving the issue raised in the petition, the Court may be guided by its definition of what
constitutes grave abuse of discretion. By grave abuse of discretion is meant such capricious and
whimsical exercise of judgment as is equivalent to lack of jurisdiction. 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
enjoined by law, or to act at all in contemplation of law as where the power is exercised in an
arbitrary and despotic manner by reason of passion and hostility. 3
On June 1, 1993, the President issued a Memorandum creating a Task Force to investigate the tax
liabilities of manufacturers engaged in tax evasion scheme, such as selling products through dummy
marketing 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
who may have violated the tax code. The task force was composed of the Commissioner of Internal
Revenue as Chairman, a representative of the Department of Justice and a representative of the
Executive Secretary.
On July 1, 1993, the Commissioner of Internal Revenue issued a Revenue Memorandum Circular
No. 37-93 reclassifying best selling cigarettes bearing the brands "Hope," "More," and "Champion"
as cigarettes of foreign brands subject to a higher rate of tax.
On August 3, 1993, respondent Fortune Tobacco Corporation (Fortune) questioned the validity of
the reclassification of said brands of cigarettes as violative of its right to due process and equal
protection of law. Parenthetically, on September 8, 1993, the Court of Tax Appeals by resolution
ruled that the reclassification made by the Commissioner "is of doubtful legality" and enjoined its
enforcement.
In a letter of August 13, 1993 which was received by Fortune on August 24, 1993, the Commissioner
assessed against Fortune the total amount of P7,685,942,221.66 representing deficiency income, ad
valorem and value-added tax for the year 1992 with the request that the said amount be paid within
thirty (30) days upon receipt thereof. Fortune on September 17, 1993 moved for reconsideration of
4
the assessments.
On September 7, 1993, the Commissioner of Internal Revenue filed a complaint with the Department
of Justice against respondent Fortune, its corporate officers, nine (9) other corporations and their
respective corporate officers for alleged fraudulent tax evasion for supposed non-payment by
Fortune of the correct amount of income tax, ad valorem tax and value-added tax for the year 1992.
The complaint alleged, among others, that:
In the said income tax return, the taxpayer declared a net taxable income of
P183,613,408.00 and an income tax due of P64,264,693.00. Based 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 P1,282,959,399.25.
This underdeclaration which resulted in the evasion of the amount of

P723,773,759.79 as deficiency income tax for the year 1992 is a violation of Section
45 of the Tax Code, penalized under Section 253 in relation to Sections 252(b) and
(d) and 253 thereof, thus: . . .
xxx xxx xxx
Fortune Tobacco Corporation, through its Vice-President for Finance, Roxas Chua,
likewise filed value-added tax returns for the 1st, 2nd, 3rd and 4th quarters of 1992
with the Rev. District Office of Marikina, Metro Manila, declaring therein gross taxable
sales, as follows:
1st Qtr. P 2,924,418,055.00
2nd Qtr. 2,980,335,235.00
3rd Qtr. 2,839,519,325.00
4th Qtr. 2,992,386,005.00
However, contrary to what have been reported in the said value- added tax returns,
and based on documentary evidence obtained from the taxpayer, the total actual
taxable sales of the corporation for the year 1992 amounted to P16,158,575,035.00
instead of P11,929,322,334.52 as declared by the corporation in the said VAT
returns.
These fraudulent underdeclarations which resulted in the evasion of value-added

taxes in the aggregate amount of P1,169,688,645.63 for the entire year 1992 are
violations of Section 110 in relation to Section 100 of the Tax Code, which are
likewise penalized under the aforequoted Section 253, in relation to Section 252,
thereof. Sections 110 and 100 provide:
xxx xxx xxx
Furthermore, based on the corporation's VAT returns, the corporation reported its
taxable sales for 1992 in the amount of P11,736,658,580. This declaration is likewise
false and fraudulent because, based on the daily manufacturer's sworn statements
submitted to the BIR by the taxpayer, its total taxable sales during the year 1992 is
P16,686,372,295.00. As a result thereof, the corporation was able to evade the
payment of ad valorem taxes in the aggregate amount of P5,792,479,816.24 in
violation of Section 127 in relation to Section 142, as amended by R.A. 6956,
penalized under the aforequoted Section 253, in relation to Section 252, all of the
Tax Code. Sections 127 and 142, as amended by R.A. 6956, are quoted as follows: .
..
The complaint docketed as I.S. No. 93-508, was referred to the Department of Justice Task Force on
revenue cases which found sufficient basis to further investigate the allegations that Fortune,
through fraudulent means, evaded payment of income tax, ad valorem tax, and value-added tax for
the year 1992 thus, depriving the government of revenues in the amount of Seven and One-half
(P7.5) Billion Pesos.
The fraudulent scheme allegedly adopted by private respondents consisted of making fictitious and
simulated sales of Fortune's cigarette products to non-existing individuals and to entities
incorporated and existing only for the purpose of such fictitious sales by declaring registered
wholesale prices with the BIR lower than Fortune's actual wholesale prices which are required for
determination of Fortune's correct income, ad valorem, and value-added tax liabilities. The "ghosts
wholesale buyers" then ostensibly sold the products to customers and other wholesalers/retailers at
higher wholesale prices determined by Fortune. The tax returns and manufacturer's sworn
statements filed by Fortune would then declare the fictitious sales it made to the conduit corporators
and non-existing individual buyers as its gross sales. 5
On September 8, 1993, the Department of Justice Task Force issued a subpoena directing private
respondents to submit their counter-affidavits not later than September 20, 1993. 6
Instead of filing their counter-affidavits, the private respondents on October 15, 1993 filed a Verified
Motion to Dismiss; Alternatively Motion to Suspend, based principally on the following grounds:
7
1. The complaint of petitioner Commissioner follows a pattern of prosecution against

private respondents in violation of their right to due process and equal protection of
the law.
2. Petitioner Commissioner and the Court of Tax Appeals have still to determine
Fortune's tax liability for 1992 in question; without any tax liability, there can be no
tax evasion.
3. Exclusive jurisdiction to determine tax liability is vested in the Court of Tax

Appeals; therefore, the DOJ is without jurisdiction to conduct preliminary
investigation.
4. The complaint of petitioner Commissioner is not supported by any evidence to

serve as adequate basis for the issuance of subpoena to private respondents and to
put them to their defense.
At the scheduled preliminary investigation on October 15, 1993, private respondents were asked by
the panel of prosecutors to inform it of the aspects of the Verified Motion to Dismiss which counsel
for private respondents did so briefly. Counsel for the Commissioner of Internal Revenue asked for
fifteen (15) days within which to file a reply in writing to private respondents' Verified Motion to
Dismiss. Thereupon, the panel of prosecutors declared a recess. Upon reconvening, the panel of
prosecutors denied the motion to dismiss and treated the same as private respondents' counter-
affidavits.
8
On October 20, 1993, private respondents filed a motion for reconsideration of the order of October
15, 1993. On October 21, 1993, private respondents filed a motion to require the submission by the
9
Bureau of Internal Revenue of certain documents in further support of their Verified Motion to
Dismiss. Among the documents sought to be produced are the "Daily Manufacturer's Sworn
Statements" which according to petitioner Commissioner in her complaint were submitted by Fortune
to the BIR and which were the basis of her conclusion that Fortune's tax declarations were false and
fraudulent. Fortune claimed that without the "Daily Manufacturer's Sworn Statements," there is no
evidence to support the complaint, hence, warranting its outright dismissal.
On October 26, 1993, private respondents moved for the inhibition of the State prosecutors assigned
to the case for alleged lack of impartiality. Private respondents also sought the production of the
10
"Daily Manufacturer's Sworn Statements" submitted by certain cigarette companies similarly situated
as Fortune but were not proceeded against, thus, private respondents charged that Fortune and its
officers were being singled out for criminal prosecution which is discriminatory and in violation of the
equal protection clause of the Constitution.
On December 20, 1993, the panel of prosecutors issued an Omnibus Order denying private
11
respondents' motion for reconsideration, motion for suspension of investigation, motion to inhibit the
State Prosecutors, and motion to require submission by the BIR of certain documents to further
support private respondents' motion to dismiss.
On January 4, 1994, private respondents filed a petition for certiorari and prohibition with prayer for
preliminary injunction with the Regional Trial Court, Branch 88, Quezon City, docketed as Q-94-
18790, praying that the complaint of the Commissioner of Internal Revenue and the orders of the
prosecutors in I.S. No. 93-508 be dismissed or set aside, alternatively, the proceedings on the
preliminary investigation be suspended pending final determination by the Commissioner of
Fortune's motion for reconsideration/ reinvestigation of the August 13, 1993 assessment of the taxes
due.12
On January 17, 1994, petitioners filed a motion to dismiss the petition on the grounds that (a) the
13
trial court is bereft of jurisdiction to enjoin a criminal prosecution under preliminary investigation; (b)
a criminal prosecution for tax fraud can proceed independently of criminal or administrative action;
(c) there is no prejudicial question to justify suspension of the preliminary investigation; (d) private
respondents' rights to due process was not violated; and (e) selective prosecution is not a valid
defense in this jurisdiction.
On January 19, 1994, at the hearing of the incident for the issuance of a writ of preliminary injunction
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 respondents' application for
the issuance of a writ of preliminary injunction.
On January 25, 1994, the trial court issued an order granting the prayer for the issuance of a
preliminary injunction. The trial court rationalized its order in this wise:
14
a) It is private respondents' claim that the ad valorem tax for the year 1992 was
levied, assessed and collected by the BIR under Section 142(c) of the Tax Code on
the basis of the "manufacturer's registered wholesale price" duly approved by the
BIR. Fortune's taxable sales for 1992 was in the amount of P11,736,658,580.00.
b) On the other hand, it is petitioners' contention that Fortune's declaration was false
and fraudulent because, based on its daily manufacturer's sworn statements
submitted to the BIR, its taxable sales in 1992 were P16,686,372,295.00, as a result
of which, Fortune was able to evade the payment of ad valorem tax in the aggregate
amount of P5,792,479,816.24.
c) At the hearing for preliminary investigation, the "Daily Manufacturer's Sworn

Statements" which, according to petitioners, were submitted to the BIR by private
respondents and made the basis of petitioner Commissioner's complaint that the
total taxable sales of Fortune in 1992 amounted to P16,686,372, 295.00 were not
produced as part of the evidence for petitioners. In fact, private respondents had filed
a motion to require petitioner Commissioner to submit the aforesaid daily
manufacturer's sworn statements before the DOJ panel of prosecutors to show that
Fortune's actual taxable sales totaled P16,686,373,295.00, but the motion was
denied.
d) There is nothing on record in the preliminary investigation before the panel of

investigators which supports the allegation that Fortune made a fraudulent
declaration of its 1992 taxable sales.
e) Since, as alleged by private respondents, the ad valorem tax for the year 1992
should be based on the "manufacturer's registered wholesale price" while, as
claimed by petitioners, the ad valorem taxes should be based on the wholesale price
at which the manufacturer sold the cigarettes, which is a legal issue as admitted by a
BIR lawyer during the hearing for preliminary injunction, the correct interpretation of
the law involved, which is Section 142(c) of the Tax Code, constitutes a prejudicial
question which must first be resolved before criminal proceedings for tax evasion
may be pursued. In other words, the BIR must first make a final determination, which
it has not, of Fortune's tax liability relative to its 1992 ad valorem, value-added and
income taxes before the taxpayer can be made liable for tax evasion.
f) There was a precipitate issuance by the panel of prosecutors of subpoenas to

private respondents, on the very day following the filing of the complaint with the DOJ
consisting of about 600 pages, and the precipitate denial by the panel of prosecutors,
after a recess of about twenty (20) minutes, of private respondents' motion to
dismiss, consisting of one hundred and thirty five (135) pages.
g) Private respondents had been especially targeted by the government for

prosecution. Prior to the filing of the complaint in I.S. No. 93-508, petitioner
Commissioner issued Revenue Memorandum Circular No. 37-93 reclassifying
Fortune's best selling cigarettes, namely "Hope," "More," and "Champion" as
cigarettes bearing a foreign brand, thereby imposing upon them a higher rate of tax
that would price them out of the market.
h) While in petitioner Commissioner's letter of August 13, 1993, she gave Fortune a
period of thirty (30) days from receipt thereof within which to pay the alleged tax
deficiency assessments, she filed the criminal complaint for tax evasion before the
period lapsed.
i) Based on the foregoing, the criminal complaint against private respondents was
filed prematurely and in violation of their constitutional right to equal protection of the
laws.
On January 26, 1994, private respondents filed with the trial court a Motion to Admit Supplemental
Petition and sought the issuance of a writ of preliminary injunction to enjoin the State Prosecutors
from continuing with the preliminary investigation filed by them against private respondents with the
Quezon City Prosecutor's Office, docketed as I.S. 93-17942, for alleged fraudulent tax evasion,
committed by private respondents for the taxable year 1990. Private respondents averred in their
motion that no supporting documents or copies of the complaint were attached to the subpoena in
I.S. 93-17942; that the subpoena violates private respondents' constitutional right to due process,
equal protection and presumption of innocence; that I.S. 93-17942 is substantially the same as I.S.
93-508; that no tax assessment has been issued by the Commission of Internal Revenue and
considering that taxes paid have not been challenged, no tax liability exists; and that since Assistant
City Prosecutor Baraquia was a former classmate of Presidential Legal Counsel Antonio T. Carpio,
the former cannot conduct the preliminary investigation in an impartial manner.
On January 28, 1994, private respondents filed with the trial court a second supplemental
petition, also seeking to stay the preliminary investigation in I.S. 93-584, which was the third
15
complaint filed against private respondents with the DOJ for alleged fraudulent tax evasion for the
taxable year 1991.
On January 31, 1994, the lower court admitted the two (2) supplemental petitions and issued a
temporary restraining order in I.S. 93-17942 and I.S. 93-584. Also, on the same day, petitioners
16
filed an Urgent Motion for Immediate Resolution of petitioners' motion to dismiss.
On February 7, 1994, the trial court issued an order denying petitioners' motion to dismiss private
respondents' petition seeking to stay preliminary investigation in I.S. 93-508, ruling that the issue of
whether Sec. 127(b) of the National Tax Revenue Code should be the basis of private respondents'
tax liability as contended by the Bureau of Internal Revenue, or whether it is Section 142(c) 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. 7 1
On February 14, 1994, the trial court issued an order granting private respondents' petition for a
supplemental writ of preliminary injunction, likewise enjoining the preliminary investigation of the two
(2) other complaints filed with the Quezon City Prosecutor's Office and the DOJ for fraudulent tax
evasion, I.S. 93-17942 and I.S. 93-584, for alleged tax evasion for the taxable years 1990 and 1991
respectively. In granting the supplemental writ, the trial court stated that the two other complaints
18
are the same as in I.S. 93-508, except that the former refer to the taxable years 1990 and 1991.
On March 7, 1994, petitioners filed a petition for certiorari and prohibition with prayer for preliminary
injunction before this Court. However, the petition was referred to the Court of Appeals for
disposition by virtue of its original concurrent jurisdiction over the petition.
On December 19, 1994, the Court of Appeals in CA-G.R No. SP-33599 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 writs of preliminary injunction and in denying petitioners' motion to dismiss.
In upholding the reasons and conclusions given by the trial court in its orders for the issuance of the
questioned writs, the Court of Appeals said in part:
In making such conclusion the respondent Court must have understood from herein
petitioner Commissioner's letter-complaint of 14 pages (pp. 477-490, rollo of this
case) and the joint affidavit of eight revenue officers of 17 pages attached thereto
(pp. 491-507, supra) and its annexes (pp. 508-1077, supra), that the charge against
herein respondents is for tax evasion for non-payment by herein respondent Fortune
of the correct amounts of income tax, ad valorem tax and value added tax, not
necessarily "fraudulent tax evasion." Hence, the need for previous assessment of the
correct amount by herein petitioner Commissioner before herein respondents may be
charged criminally. Certiorari will not be issued to cure errors in proceedings or
correct erroneous conclusions of law or fact. As long as a Court acts within its
jurisdictions, any alleged error committed in the exercise of its jurisdiction, will
amount to nothing more than errors of judgment which are reviewable by timely
appeal and not by a special civil action of certiorari (Santos, Jr. vs. Court of Appeals,
152 SCRA 378; Gold City Integrated Port Services, Inc. vs. Intermediate Appellate
Court, 171 SCRA 579).
The questioned orders issued after hearing (Annexes A, B, C and D, petition) being
but interlocutory, review thereof by this Court is inappropriate until final judgment is
rendered, absent a showing of grave abuse of discretion on the part of the issuing
court (See Van Dorn vs. Romillo, 139 SCRA 139, 141; Newsweek, Inc. vs. IAC, 171,
177; Mendoza vs. Court of Appeals, 201 SCRA 343, 352). 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 answer to the petition as ordained in Section 4, Rule
16, in connection with Rule 11 of the Revised Rules of Court, interposing as defense
or defenses the objection or objections 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. In case of an adverse decision, they may appeal therefrom by
which the entire record of the case would be elevated for review (See Mendoza vs.
Court of Appeals, supra). Therefore, certiorari and prohibition resorted to by herein
petitioners will not lie in view of the remedy open to them. Thus, the resulting delay in
the final disposition of the case before the respondent Court would not have been
incurred.
Grave abuse of discretion as a ground for issuance of writs of certiorari and

prohibition implies capricious and whimsical exercise of judgment as is equivalent to
lack of jurisdiction, or where the power is exercised in an arbitrary or despotic
manner by reason of passion, prejudice, or personal hostility, amounting to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined, or to act
at all in contemplation of law (Confederation of Citizens Labor Union vs. NLRC, 60
SCRA 84; Bustamante vs. Commission on Audit, 216 SCRA 134). For such writs to
lie, there must be capricious, arbitrary and whimsical exercise of power, the very
antithesis of the judicial prerogative in accordance with centuries of both civil law and
common law traditions (Young vs. Sulit, 162 SCRA 659, 664; FCC vs. IAC, 166
SCRA 155; Purefoods Corp. vs. NLRC, 171 SCRA 45). Certiorari and prohibition are
remedies narrow in scope and inflexible in character. They are not general utility
tools in the legal workshop (Vda. de Guia vs. Veloso, 158 SCRA 340, 344). Their
function is but limited to correction of defects of jurisdiction solely, not to be used for
any other purpose (Garcia vs. Ranada, 166 SCRA 9), such as to cure errors in.
proceedings or to correct erroneous conclusions of law or fact (Gold City Integrated
Ports Services vs. IAC, 171 SCRA 579). Due regard for the foregoing teachings
enunciated in the decisions cited can not bring about a decision other than what has
been reached herein.
Needless to say, the case before the respondent court involving those against herein
respondents for alleged non-payment of the correct amounts due as income tax, ad
valorem tax and value added tax for the years 1990, 1991 and 1992 (Civil Case No.
Q-94-18790) 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 respondents' application for
preliminary injunction and denying herein petitioners' motion to dismiss. If upon the
facts established after trial and the applicable law, dissolution of the writ of
preliminary injunction allowed to be issued by the respondent Court is called for and
a judgment favorable to herein petitioners is demanded, the respondent Court is duty
bound to render judgment accordingly.
WHEREFORE, the instant petition for certiorari and prohibition with application for

issuance of restraining order and writ of preliminary injunction is DISMISSED.
Costs de oficio. 19
Their motion for reconsideration having been denied by respondent appellate court on February 23,
1995, petitioners filed the present petition for review based on the following grounds:
THE RESPONDENT COURTS COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT:
I. THERE IS A PREJUDICIAL AND/OR LEGAL QUESTION TO JUSTIFY THE

SUSPENSION OF THE PRELIMINARY INVESTIGATION.
II. PRIVATE RESPONDENTS' RIGHTS TO DUE PROCESS, EQUAL PROTECTION

AND PRESUMPTION OF INNOCENCE WERE VIOLATED; ON THE CONTRARY,
THE STATE ITSELF WAS DEPRIVED OF DUE PROCESS.
III. THE ADMISSION OF PRIVATE RESPONDENTS' SUPPLEMENTAL PETITIONS

WERE PROPER.
IV. THERE WAS SELECTIVE PROSECUTION.
V. THE FACTUAL ALLEGATIONS IN THE PETITION ARE HYPOTHETICALLY

ADMITTED IN A MOTION TO DISMISS BASED ON JURISDICTIONAL GROUNDS.
VI. THE ISSUANCE OF THE WRITS OF INJUNCTION IS NOT A DECISION ON

THE MERITS OF THE PETITION BEFORE THE LOWER COURT. 20
The petition is bereft of merit.
In essence, the complaints in I.S. Nos. 93-508, 93-584 and 93-17942 charged private respondents
with fraudulent tax evasion or wilfully attempting to evade or defeat payment of income tax, ad
valorem tax and value-added tax for the year 1992, as well as for the years 1990-1991.
The pertinent provisions of law involved are Sections 127(b) and 142(c) of the National Internal
Revenue Code which state:
Sec. 127. . . .
(b) Determination of gross selling price of goods subject to ad valorem tax. -- Unless

otherwise provided, the price, excluding the value-added tax, at which the goods are
sold at wholesale in the place of production or through their sales agents to the
public shall constitute the gross selling price. If the manufacturer also sells or allows
such goods to be sold at wholesale price in another establishment of which he is the
owner or in the profits at which he has an interest, the wholesale price in such
establishment shall constitute the gross selling price. Should 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 10% of such manufacturing costs and
expenses, shall be added to constitute the gross selling price.
Sec. 142. . . .
(c) Cigarettes packed in twenties. -- There shall be levied, assessed and collected on
cigarettes packed in twenties an ad valorem tax at the rates prescribed below based
on the manufacturer's registered wholesale price.
x x x x x x x x x
Private respondents contend that per Fortune's VAT returns, correct taxable sales for 1992 was in
the amount of P11,736,658,580.00 which was the "manufacturer's registered wholesale price" in
accordance with Section 142(c) of the Tax Code and paid the amount of P4,805,254,523 as ad
valorem tax.
On the other hand, petitioners allege, as specifically worded in the complaint in I.S. No. 93-508, that
"based on the daily manufacturer's sworn statements submitted to the BIR by the Taxpayer
(Fortune's) total taxable sales during the year 1992 is P16,686,372,295.00," as result of which
Fortune "was able to evade the payment of ad valorem taxes in the aggregate amount of
P5,792,479,816.24 . . ."
Petitioners now argue that Section 127(b) lays down the rule that in determining the gross selling
price of goods subject to ad valorem tax, it is the price, excluding the value-added tax, at which the
goods are sold at wholesale price in the place of production or through their sales agents to the
public. The registered wholesale price shall then be used for computing the ad valorem tax which is
imposable upon removal of the taxable goods from the place of production. However, petitioners
claim that Fortune used the "manufacturer's registered wholesale price" 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 question that under Section 127(b), the ad valorem tax should be based on
the correct price excluding the value-added tax, at which goods are sold at wholesale in the place of
production. It is significant to note that among the goods subject to ad valorem tax, the law --
specifically Section 142(c) -- requires that the corresponding tax on cigarettes shall be levied,
assessed and collected at the rates based on the "manufacturer's registered wholesale price." Why
does the wholesale price need to be registered and what is the purpose of the registration? The
reason is self-evident, which is to ensure the payment of the correct taxes by the manufacturers of
cigarettes through close supervision, monitoring and checking of the business operations of the
cigarette companies. As pointed out by private respondents, no industry is as intensely supervised
by the BIR and also by the National Tobacco Administration (NTA). Thus, the purchase and use of
raw materials are subject to prior authorization and approval by the NTA. Importations of bobbins or
cigarette paper, the manufacture, sale, and utilization of the same, are subject to BIR supervision
and approval. 21
Moreover, as pointed to by private respondents, for purposes of closer supervision by the BIR over
the production of cigarettes, Revenue Enforcement Officers are detailed on a 24-hour basis in the
premises of the manufacturer to secure production and removal of finished products. Composite
Mobile Teams conduct counter-security on the business operations as well as the performance of
the Revenue Enforcement Officers detailed thereat. Every transfer of any raw material is not allowed
unless, in addition to the required permits, accompanied by Revenue Enforcement Officer. For the
purpose of determining the "Manufacturer's Registered Wholesale Price" a cigarette manufacturer is
required to file a Manufacturer's Declaration (BIR Form No. 31.03) for each brand of cigarette
manufactured, stating: a) Materials, b) Labor; c) Overhead; d) Tax Burden and the Wholesale Price
by Case. The data submitted therewith is verified by the Revenue Officers and approved by the
Commission of Internal Revenue. Any change in the manufacturer's registered wholesale price of
any brand cannot be effected without submitting the corresponding Sworn Manufacturer's
Declaration and verified by the Revenue Officer and approved by the Commissioner on Internal
Revenue. The amount of ad valorem tax payments together with the Payment Order and
22
Confirmation Receipt Nos. must be indicated in the sales and delivery invoices and together with the
Manufacturer's Sworn Declarations on (a) the quantity of raw materials used during the day's
operations; (b) the total quantity produced according to brand; and (c) the corresponding quantity
removed during the day, the corresponding wholesale price thereof, and the VAT paid thereon must
be presented to the corresponding BIR representative for authentication before removal.
Thus, as observed by the trial court in its order of January 25, 1994 granting private respondents'
prayer for the issuance of a writ of preliminary injunction, Fortune's registered wholesale price (was)
duly approved by the BIR, which fact is not disputed by petitioners. 23
Now, if every step in the production of cigarettes was closely monitored and supervised by the BIR
personnel specifically assigned to Fortune's premises, and considering that the Manufacturer's
Sworn Declarations on the data required to be submitted by the manufacturer were scrutinized and
verified by the BIR and, further, since the manufacturer's wholesale price was duly approved by the
BIR, then it is presumed that such registered wholesale price is the same as, or approximates "the
price, excluding the value-added tax, at which the goods are sold at wholesale in the place
production," otherwise, the BIR would not have approved the registered wholesale price of the goods
for purposes of imposing the ad valorem tax due. In such case, and in the absence of contrary
evidence, it was precipitate and premature to conclude that private respondents made fraudulent
returns or wilfully attempted to evade payment of taxes due. "Wilful" means "premeditated;
malicious; done with intent, or with bad motive or purpose, or with indifference to the natural
consequence . . ." "Fraud" in its general sense, "is deemed to comprise anything calculated to
24
deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty,
trust or confidence justly reposed, resulting in the damage to another, or by which an undue and
unconscionable advantage taken of another. 25
Fraud cannot be presumed. If there was fraud or wilful attempt to evade payment of ad valorem
taxes by private respondents through the manipulation of the registered wholesale price of the
cigarettes, it must have been with the connivance or cooperation of certain BIR officials and
employees who supervised and monitored Fortune's production activities to see to it that the correct
taxes were paid. But there is no allegation, much less evidence, of BIR personnel's malfeasance. In
the very least, there is the presumption that the BIR personnel performed their duties in the regular
course in ensuing the correct taxes were paid by Fortune. 26
It is the opinion of both the trial court and respondent Court of Appeals, that before Fortune and the
other private respondents could be prosecuted for tax evasion under Sections 253 and 255 of the
Tax Code, the fact that the deficiency income, ad valorem and value-added taxes were due from
Fortune for the year 1992 should first be established. Fortune received form the Commissioner of
Internal Revenue the deficiency assessment notices in the total amount of P7,685,942,221.06 on
August 24, 1993. However, under Section 229 of the Tax Code, the taxpayer has the right to move
for reconsideration of the assessment issued by the Commissioner of Internal Revenue within thirty
(30) days from receipt of the assessment; and if the motion for reconsideration is denied, it may
appeal to the Court of Appeals within thirty (30) days from receipt of the Commissioner's decision.
Here, Fortune received the Commissioner's assessment notice dated August 13, 1993 on August
24, 1993 asking for the payment of the deficiency taxes. Within thirty (30) days from receipt thereof,
Fortune moved for reconsideration. The Commissioner has not resolved the request for
reconsideration up to the present.
We share with the view of both the trial court and court of Appeals that before the tax liabilities of
Fortune are first finally determined, it cannot be correctly asserted that private respondents have
wilfully attempted to evade or defeat the taxes sought to be collected from Fortune. In plain words,
before one is prosecuted for wilful attempt to evade or defeat any tax under Sections 253 and 255 of
the Tax code, the fact that a tax is due must first be proved.
Suppose the Commissioner eventually resolves Fortune's 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 will have no leg to stand on.
In view of the foregoing reasons, we cannot subscribe to the petitioners' thesis citing Ungad
v. Cusi, 7 that the lack of a final determination of Fortune's exact or correct tax liability is not a bar to
2
criminal prosecution, and that while a precise computation and assessment is required for a civil
action to collect tax deficiencies, the Tax Code does not require such computation and assessment
prior to criminal prosecution.
Reading Ungad carefully, the pronouncement therein that deficiency assessment is not necessary

prior to prosecution is pointedly and deliberately qualified by the Court with following statement
quoted from Guzik v. U.S.: "The crime is complete when the violator has knowingly and wilfully filed
28
a fraudulent return with intent to evade and defeat apart or all of the tax." In plain words, for criminal
prosecution to proceed before assessment, there must be a prima facie showing of a wilful
attempt to evade taxes. There was a wilful attempt to evade tax in Ungad because of the taxpayer's
failure to declare in his income tax return "his income derived from banana sapplings." In the mind of
the trial court and the Court of Appeals, Fortune's situation is quite apart factually since the
registered wholesale price of the goods, approved by the BIR, is presumed to be the actual
wholesale price, therefore, not fraudulent and unless and until the BIR has made a final
determination of what is supposed to be the correct taxes, the taxpayer should not be placed in the
crucible of criminal prosecution. Herein lies a whale of difference between Ungad and the case at
bar.
This brings us to the erroneous disquisition that private respondents' recourse to the trial court by
way of special civil action of certiorari and prohibition was improper because: a) the proceedings
before the state prosecutors (preliminary injunction) were far from terminated -- private respondents
were merely subpoenaed and asked to submit counter affidavits, matters that they should have
appealed to the Secretary of Justice; b) it is only after the submission of private respondents' counter
affidavits that the prosecutors will determine whether or not there is enough evidence to file in court
criminal charges for fraudulent tax evasion against private respondents; and c) the proper procedure
is to allow the prosecutors to conduct and finish the preliminary investigation and to render a
resolution, after which the aggrieved party can appeal the resolution to the Secretary of Justice.
We disagree.
As a general rule, criminal prosecutions cannot be enjoined. However, there are recognized
exceptions which, as summarized in Brocka v. Enrile are:29
a. To afford adequate protection to the constitutional rights of the accused

(Hernandez vs. Albano, et al., L-19272, January 25, 1967, 19 SCRA 95);
b. When necessary for the orderly administration of justice or to avoid oppression or

multiplicity of actions (Dimayuga, et al. vs. Fernandez, 43 Phil. 304; Hernandez vs.
Albano, supra; Fortun vs. Labang, et al., L-38383, May 27, 1981, 104 SCRA 607);
c. When there is a prejudicial question which is sub judice (De Leon vs. Mabanag, 70
Phil 202);
d. When the acts of the officer are without or in excess of authority (Planas vs. Gil, 67
Phil 62);
e. Where the prosecution is under an invalid law, ordinance or regulation (Young vs.
Rafferty, 33 Phil. 556; Yu Cong Eng vs. Trinidad, 47 Phil. 385, 389);
f. When double jeopardy is clearly apparent (Sangalang vs. People and Alvendia,
109 Phil. 1140);
g. Where the court had no jurisdiction over the offense (Lopez vs. City Judge, L-
25795, October 29, 1966, 18 SCRA 616);
h. Where it is a case of persecution rather than prosecution (Rustia vs. Ocampo, CA-
G.R. No. 4760, March 25, 1960);
i. Where the charges are manifestly false and motivated by the lust for vengeance
(Recto vs. Castelo, 18 L.J. [1953], cited in Rano vs. Alvenia, CA-G.R. No. 30720-R,
October 8, 1962; Cf. Guingona, et al. vs. City Fiscal, L-60033, April 4, 1984, 128
SCRA 577); and
j. When there is clearly no prima facie case against the accused and a motion to
quash on that ground has been denied (Salonga vs. Pane, et al., L-59524, February
18, 1985, 134 SCRA 438).
In issuing the questioned orders granting the issuance of a writ of preliminary injunction, the trial
court believed that said orders were warranted to afford private respondents adequate protection of
their constitutional rights, particularly in reference to presumption of innocence, due process and
equal protection of the laws. The trial court also found merit in private respondents' contention that
preliminary injunction should be issued to avoid oppression and because the acts of the state
prosecutors were without or in excess of authority and for the reason that there was a prejudicial
question.
Contrary to petitioners' submission, preliminary investigation may be enjoined where exceptional

circumstances so warrant. In Hernandez v. Albano and Fortun v. Labang, injunction was issued to
30 31
enjoin a preliminary investigation. In 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 which is that the complaint of the
Commissioner is not supported by any evidence to serve as adequate basis for the issuance of the
subpoena to them and put them to their defense.
Indeed, the purpose of a preliminary injunction 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. Thus, the pertinent provisions of Rule 112 of the Rules of Court state:
32
Sec. 3. Procedure. -- Except as provided for in Section 7 hereof, no complaint or

information for an offense cognizable by the Regional Trial Court shall be filed
without a preliminary investigation having been first conducted in the following
manner:
(a) The complaint shall state the known address of the respondent and be
accompanied by affidavits of the complainant and his witnesses as well as other
supporting documents, in such number of copies as there are respondents, plus two
(2) copies for the official file. The said affidavits shall be sworn to before any fiscal,
state prosecutor or government official authorized to administer oath, or, in their
absence or unavailability, a notary public, who must certify that he personally
examined the affiants and that he is satisfied that they voluntarily executed and
understood their affidavits.
(b) Within ten (10) days after the filing of the complaint, the investigating officer shall
either dismiss the same if he finds no ground to continue with the inquiry, or issue a
subpoena to the respondent, attaching thereto a copy of the complaint, affidavits and
other supporting documents. Within ten (10) days from receipt thereof, the
respondent shall submit counter-affidavits and other supporting documents. He shall
have the right to examine all other evidence submitted by the complainant.
(c) Such counter-affidavits and other supporting evidence submitted by the

respondent shall also be sworn to and certified as prescribed in paragraph (a) hereof
and copies thereof shall be furnished by him to the complainant.
(d) If the respondent cannot be subpoenaed, or if subpoenaed, does not submit

counter-affidavits within the ten (10) day period, the investigating officer shall base
his resolution on the evidence presented by the complainant.
(e) If the investigating officer believes that there are matters to be clarified, he may
set a hearing to propound clarificatory questions to the parties or their witnesses,
during which the parties shall be afforded an opportunity to be present but without
the right to examine or cross-examine. If the parties so desire, they may submit
questions to the investigating officer which the latter may propound to the parties or
witnesses concerned.
(f) Thereafter, the investigation shall be deemed concluded, and the investigating
officer shall resolve the case within ten (10) days therefrom. Upon the evidence thus
adduced, the investigating officer shall determine whether or not there is sufficient
ground to hold the respondent for trial.
As found by the Court of Appeals, there was obvious haste by which the subpoena was issued to
private respondents, just the day after the complaint was filed, hence, without 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
justified private respondents' misgivings regarding the objectivity 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 adequate protection to private respondents'
constitutional rights and to avoid oppression does not constitute grave abuse of discretion amounting
to lack of jurisdiction.
The complaint filed by the Commissioner on Internal Revenue states itself that the primary evidence
establishing the falsity of the declared taxable sales in 1992 in the amount of P11,736,658,580.00
were the "daily Manufacturer's Sworn Statements" submitted by the taxpayer which would show that
the total taxable sales in 1992 are in the amount of P16,686,372,295.00. However, the
Commissioner did not present the "Daily Manufacturer's Sworn Statements" supposedly submitted to
the BIR by the taxpayer, prompting private respondents to move for their production in order to verify
the basis of petitioners' computation. Still, the Commissioner failed to produce the declarations.
In Borja v. Moreno, it was held that the act of the investigator in proceeding with the hearing without
33
first acting on respondents' motion to dismiss is a manifest disregard of the requirement of due
process. Implicit in the opinion of the trial court and the Court of Appeals is that, if upon the
examination of the complaint, it was clear that there was no ground to continue, with the inquiry, the
investigating prosecutor was duty bound to dismiss the case. On this point, the trial court stressed
that the prosecutor conducting the preliminary investigation should have allowed the production of
the "Daily Manufacturer's Sworn Statements" submitted by Fortune without which there was no valid
basis for the allegation that private respondents wilfully attempted to evade payment of the correct
taxes. The prosecutors should also have produced the "Daily Manufacturer's Sworn Statements" by
other cigarette companies, as sought by private respondents, to show that these companies which
had paid the ad valorem taxes on the same basis and in the same manner as Fortune were not
similarly criminally charged. But the investigating prosecutors denied private respondents' motion,
thus, indicating that only Fortune was singled out for prosecution. The trial court and the Court of
Appeals maintained that at that stage of the preliminary investigation, where the complaint and the
accompanying affidavits and supporting documents did not show any violation of the Tax Code
providing penal sanctions, the prosecutors should have dismissed the complaint outright because of
total lack of evidence, instead of requiring private respondents to submit their counter affidavits
under Section 3(b) of Rule 112.
We believe that the trial court in issuing its questioned orders, which are interlocutory in nature,
committed no grave abuse of discretion amounting to lack of jurisdiction. There are factual and legal
bases for the assailed orders. On the other hand, the burden is upon the petitioners to demonstrate
that the questioned orders constitute a whimsical and capricious exercise of judgment, which they
have not. For certiorari will not be issued to cure errors in proceedings or correct erroneous
conclusions of law or fact. As long as a court acts within its jurisdiction, any alleged errors committed
in the exercise of its jurisdiction will amount to nothing more than errors of judgment which are
reviewable by timely appeal and not by a special civil action of certiorari. Consequently, the
34
Regional Trial Court acted correctly and judiciously, and as demanded by the facts and the law, in
issuing the orders granting the writs of preliminary injunction, in denying petitioners' motion to
dismiss and in admitting the supplemental petitions. What petitioners should have done was to file
an answer to the petition filed in the trial court, proceed to the hearing and appeal the decision of the
court if adverse to them.
WHEREFORE, the instant petition is hereby DISMISSED.
SO ORDERED.
Hermosisima, Jr., J., concurs.
Separate Opinions

BELLOSILLO, J., concurring and dissenting:
I am in full accord with the conclusion of the majority that the trial court committed no grave abuse of
discretion in issuing the assailed injunctive writs. But I am constrained to dissent insofar as it finds
that there was "selective prosecution" in charging private respondents.
Let me first touch on "selective prosecution." There is no showing that petitioner Commissioner of
Internal Revenue is not going after others who 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 Solicitor General, 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. In this regard,
in the absence of willful or malicious prosecution, or so-called "selective prosecution," the choice on
whom to prosecute ahead of the others belongs legitimately, and rightly so, to the public
prosecutors.
But, I share the view of the majority that the trial court did not commit grave abuse of discretion
amounting to lack of jurisdiction. At once it must be pointed out that the trial court merely issued writs
of preliminary injunction. However to grant the prayer of herein petitioners would effectively dismiss
the petition for certiorari and prohibition filed by private respondents with the trial court even before
the issues in the main case could be joined, which seems to me to be a procedural lapse since the
main case is already being resolved when the only issue before the Court is the propriety of the
ancillary or provisional remedy.
The trial court granted the writs of preliminary injunction upon finding, after hearing for the purpose,
that private respondents sufficiently established that "they are entitled to certain constitutional rights
and that these rights have been violated," and that they have complied with the requirements of
1
Sec. 3, Rule 58, Rules of Court. In support of its conclusion, the trial court enumerated its
2
reasons: first, inspite of the motion of respondent Fortune Tobacco Corporation, petitioner

Commissioner of Internal Revenue failed to present the "daily manufacturer's sworn statements
submitted to the BIR by the taxpayer," supposedly stating that the total taxable sales of respondent
Corporation for the year 1992 is P16,686,372,295.00, which is the basis of petitioner
Commissioner's allegation that private respondents failed to pay the correct taxes since it declared in
its VAT returns that its total taxable sales in 1992 was only P11,736,658.580.00; second, the proper
application of Sec. 142, par. (c), of the National Internal Revenue Code is a prejudicial question
which must first be resolved by the Court of Tax Appeals to determine whether a tax liability which is
an essential element of tax evasion exists before criminal proceedings may be pursued; third, from
the evidence submitted, it appears that the Bureau of Internal Revenue has not yet made a final
determination of the tax liability of private respondents with respect to its ad valorem, value added
and income taxes for 1992; and, fourth, the precipitate issuance by the prosecutors of subpoenas to
private respondents one (1) day after the filing of the complaint, consisting of about 600 pages,
inclusive of the 14-page complaint, 17-page joint affidavit of eight (8) revenue officers and the
annexes attached thereto, and their hasty denial of private respondents' 135-page motion to dismiss,
after a recess of only about 20 minutes, show that private respondents' constitutional rights may
have been violated.
These circumstances as well as the other traces of discrimination mentioned by the trial court, i.e.,
the announcement by the PCGG that it would take over the various corporations associated with
respondent Lucio C. Tan; the creation of the Task Force on Revenue Cases among the functions of
which is to "[i]nvestigate the tax liabilities of manufacturers that engage in well-known tax evasion
schemes, such as selling products through dummy marketing companies to evade the payment of
the correct internal revenue taxes," the very charge against respondent Tan; the reclassification of
respondent corporation's best selling cigarettes as foreign brands thereby imposing upon them a
higher tax rate that would price them out of the market without notice and hearing; the singling out of
private respondents as subjects of a complaint for tax evasion when other cigarette manufacturers
have been using the same basis private respondents are using in paying ad valorem, value added
and income taxes; and, the failure of petitioner Commissioner to wait for the expiration of the 30-day
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 writ of preliminary injunction.
Practically the same grounds were found by the trial court when it provisionally restrained the
investigation of the two (2) other complaints, i.e., tax evasion complaints for FYs 1990 and 1991.
On the basis of the findings of the trial court, it indeed appears that private respondents'
constitutional rights to due process of law and equal protection of the laws may have been for the
moment set aside, if not outright violated. The trial court was convinced that the tell-tale signs of
malice and partiality were indications that the constitutional rights of private respondents may not
have been afforded adequate protection. Accordingly I see no manifest abuse, much less grave, on
the part of the trial court in issuing the injunctive writs. Thus it is my opinion that the trial court did not
commit grave abuse of discretion in granting the assailed writs.
Well entrenched is the rule that the issuance of the writ of preliminary injunction 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 judicial discretion by the trial court in injunctive matters
should not be interfered with except in case of manifest abuse, which is not true in the case before
3
us. Equally well settled is that under Sec. 7, Rule 58, Rules of Court, a wide latitude is given to the
4
trial court. This is because the conflicting claims in an application for a provisional writ more often
5
than not involves a factual determination which 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 within the competence of the trial
court before which the parties have raised the very same issue in the main case. The truth or falsity
of the divergent statements that there was deliberate haste in issuing the subpoenas and in denying
private respondents' motion to dismiss may be confirmed not by this Court but by the trial court
during that hearing on the merits.
In fine, no grave abuse of discretion can be attributed to a judge or body in the issuance of a writ of
preliminary injunction where a party was not deprived of its day in court as it was heard and had
exhaustively presented all its arguments and defenses. It is undisputed that in the case before us
6
petitioners and private respondents were given sufficient time and opportunity to present their
respective pieces of evidence as well as arguments in support of their positions.
Consequently, I concur with the finding of the majority that the trial court committed no grave abuse
of discretion. As respondent appellate court said, "[g]rave abuse of discretion as a ground for
issuance of writs of certiorari and prohibition implies capricious and whimsical exercise of judgment
as is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic
manner by reason of passion, prejudice or personal hostility amounting to an evasion of positive duty
or to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law. For such
7
writs to lie there must be capricious, arbitrary and whimsical exercise of power, the very antithesis of
the judicial prerogative in accordance with centuries of both civil and common law traditions." The
8
trial court, to my mind, is not guilty of any of these. Thus I accord respect to the exercise of the trial
court's sound judicial discretion and hold that the same should not be interfered with.
To permanently enjoin the trial court from proceeding in any manner in Civil Case No. Q-94-19790
and allow the preliminary investigation of the complaints docketed as I.S. Nos. 93-508, 93-17942
and 93-584 with the Department of Justice to resume until their final conclusion and
completion would go against the prevailing rule that courts should avoid issuing a writ or preliminary
injunction which would in effect dispose of the main case without trial. Due process considerations
9
dictate that the assailed injunctive writs are not judgments on the merits but merely orders for the
grant of a provisional and ancillary remedy to preserve the status quo until the merits of the case can
be heard. The hearing on the application for issuance of a writ of preliminary injunction is separate
and distinct from the trial on the merits of the main case. The quantum of evidence required for one
is different from that for the other, so that it does not necessarily follow that if the court grants and
issues the temporary writ applied for the same court will now have to rule in favor of the petition for
prohibition and ipso facto make the provisional injunction permanent.
If grave abuse of discretion attended the issuance of the writ of preliminary injunction, then by all
means nullify the abusive act -- but only that. The main case should be allowed to proceed according
to due process. The trial court should receive the evidence from the contending parties, weigh and
evaluate the same and then make its findings. Clearly, the dismissal of the main case as a result of a
mere incident relative to the issuance of an ancillary writ is procedurally awkward and violates due
process, as it deprives private respondents of their right to present their case in court and support it
with its evidence.
In resolving the fundamental issue at hand, i.e., whether the trial court committed grave abuse of
discretion in issuing the subject writs of preliminary injunction, we cannot avoid balancing on the
scales the power of the State to tax and its inherent right to prosecute perceived transgressors of the
law on one side, and the constitutional rights of a citizen to due process of law and the equal
protection of the laws on the other. Obviously the scales must tilt in favor of the individual, for a
citizen's right is amply protected by the Bill of Rights of the Constitution. Thus while "taxes are the
lifeblood of the government," the power to tax has its limits, inspite of all its plenitude. Hence
in Commissioner of Internal Revenue v. Algue, Inc., we said --
10
Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason for government
itself. It is therefore necessary to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose of taxation, which is the
promotion of the common good, may be achieved.
xxx xxx xxx
It is said that taxes are what we pay for civilized society. Without taxes, the
government would be paralyzed for the lack of the motive power to activate and
operate it. Hence, despite the natural reluctance to surrender part of one's hard-
earned income to taxing authorities, every person who 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 power.
But even as we concede the inevitability and indispensability of taxation, it is a

requirement in all democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure. If it is not, then the taxpayer has a right to
complain and the courts will then came to his succor. For all the awesome power of
the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate
. . . that the law has not been observed.
In the instant case, it seems that due to the overzealousness in collecting taxes from private
respondents and to some accident of immediate overwhelming interest which distressingly
impassions and distorts judgment, the State has unwittingly ignored the citizens' constitutional rights.
Thus even the rule that injunction will not lie to prevent a criminal prosecution has admitted
exceptions, which we enumerated in Brocka v. Enrile and in Ocampo IV v. Ombudsman -- (a) to
11 12
afford adequate protection to the constitutional rights of the accused; (b) when necessary for the
orderly administration of justice or to avoid oppression or multiplicity of actions; (c) when there is a
prejudicial question which is sub-judice; (d) when the acts of the officer are without or in excess of
authority; (e) where the prosecution is under an invalid law, ordinance or regulation; (f) when double
jeopardy is clearly apparent; (g) when the court has no jurisdiction over the offense; (h) where it is a
case of persecution rather than prosecution; (i) where the charges are manifestly false and
motivated by lust for vengeance; (j) when there is clearly no prima facie case against the accused
and a motion to quash on that ground has been denied; and, (k) to prevent a threatened unlawful
arrest.
Finally, courts indeed should not hesitate to invoke the constitutional guarantees to give adequate
protection to the citizens when faced with the enormous powers of the State, even when what is in
issue are only provisional remedies, as in the case at hand. In days of great pressure, it is alluring to
take short cuts by borrowing dictatorial techniques. But when we do, we set in motion an arbitrary or
subversive influence by our own design which destroys us from within. Let not the present case
dangerously sway towards that trend.
For all the foregoing, I vote to dismiss the instant petition for lack of merit, and to order the trial court
to proceed with Civil Case No. Q-94-19790 with reasonable dispatch.
PADILLA, J., dissenting:
Because of what I humbly perceive to be the crippling, chilling and fatal effects of the majority
opinion on the power of the state to investigate fraudulent tax evasion in the country, I am
constrained to dissent, as vigorously as I can, from the majority opinion.
THE ISSUE
The main issue in this petition for review on certiorari is whether or not there are valid grounds to
stop or stay the preliminary investigation of complaints filed by the Bureau of Internal Revenue (BIR)
with the Department of Justice (DOJ) Revenue Cases Task Force against private respondents for
alleged fraudulent tax evasion for the years 1990, 1991 and 1992. Stated differently, the issue is: did
respondent trial court commit grave abuse of discretion amounting to lack or excess of jurisdiction in
stopping the subject preliminary investigation?
THE CASE AND THE FACTS
On 7 September 1993, petitioner Commissioner of Internal Revenue filed a complaint with the DOJ
against private respondents Fortune Tobacco Corporation (hereinafter referred to simply as
"Fortune"), its corporate officers, nine (9) other corporations, and their respective corporate officers,
for alleged fraudulent tax evasion for the year 1992.
The complaint, docketed as I.S. No. 93-508, was referred to the DOJ Task Force on Revenue Cases
which found sufficient grounds to further investigate the allegation that Fortune fraudulently evaded
payment of income, value-added and ad valorem taxes for the year 1992 thus depriving the
Government of revenue allegedly in excess of seven and one-half (7 1/2) billion pesos.
The fraudulent scheme allegedly adopted and employed by private respondents, is described by the
BIR as follows:
In order to evade payment of said taxes, [Fortune] made fictitious and simulated
sales of its cigarette products to non-existent individuals and to entities incorporated
and existing only for the purpose of such fictitious sales by declaring registered
wholesale prices with the BIR lower than [Fortune's] actual wholesale prices which
are required for determination of [Fortune's] correct ad valorem, income and value-
added tax liabilities. These "ghost wholesale buyers" then ostensibly sold the product
to consumers and other wholesalers/retailers at higher wholesale prices determined
by [Fortune]. The tax returns and manufacturer's sworn statements filed by [Fortune]
as aforesaid declare the fictitious sales it made to the conduit corporations and non-
existent individual buyers as its gross sales. 1
Based on the initial evaluation of the DOJ Task Force, private respondents were subpoenaed and
required to submit their counter-affidavits not later than 20 September 1993. Instead of filing
2
counter-affidavits, private respondents filed a "Verified Motion to Dismiss; Alternatively, Motion to

Suspend." Said motion was denied by the DOJ Task Force and treated as private respondents'
3
counter-affidavit, in an order dated 15 October 1993. 4
Private respondents sought reconsideration of the aforementioned order of denial and likewise filed
motions to require submission by the Bureau of Internal Revenue (BIR) 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 lack of impartiality. 5
On 20 December 1993, an omnibus order was issued by the investigating Task Force: 6
a. denying reconsideration;
b. denying suspension of investigation; and
c. denying the motion to inhibit the investigating state prosecutors.
Thereupon, or on 4 January 1994, private respondents went to court. They filed a petition
for certiorari and prohibition with prayer for preliminary injunction in the Regional Trial Court, Branch
88, Quezon City, praying that the proceedings (investigation) before the DOJ Task Force be
stopped. The petition was docketed as Civil Case No. Q-94-19790. 7
On 17 January 1994, petitioners filed with the trial court a motion to dismiss the aforesaid
petition. On 25 January 1994, the trial court issued instead an order granting the herein private
8
respondents' prayer for a writ of preliminary injunction, to stop the preliminary investigation in the
9
DOJ Revenue Cases Task Force.
On 26 January 1994, private respondents filed with the trial court a Motion to Admit Supplemental
Petition seeking this time the issuance of another writ of preliminary injunction against a second
complaint of the BIR with the DOJ docketed as I.S. No. 93-17942 likewise against herein private
respondents for fraudulent tax evasion for the year 1990. Private respondents averred in their
aforesaid motion with the trail court that --
a. no supporting documents nor copies of the complaint were attached to the subpoena in I.S. No.
93-17942;
b. the abovementioned subpoena violates private respondents' constitutional rights to due process,
equal protection and presumption of innocence;
c. I.S. No. 93-17942 is substantially the same as I.S. No. 93-508 except that it concerns the year
1990;
d. no tax assessment has been issued by the Commissioner of Internal Revenue and since taxes
already paid have not been challenged by the BIR, no tax liability exists;
e. Assistant Quezon City Prosecutor Leopoldo E. Baraquia was a former classmate of then
Presidential Legal Counsel Antonio T. Carpio, thus, he cannot conduct the preliminary investigation
in an impartial manner.
On 28 January 1994, private respondents filed with the trial court a second supplemental
petition this time seeking to stay the preliminary investigation in I.S. No. 93-548, a third BIR
10
complaint with the DOJ against private respondents for fraudulent tax evasion for the year 1991.
On 31 January 1994, the trial court admitted the two (2) supplemental petitions and issued a
temporary restraining order stopping the preliminary investigation of the two (2) later complaints with
the DOJ against private respondents for alleged fraudulent tax evasion for the years 1990 and 1991.
On 7 February 1994, the trial court also issued an order denying herein petitioners' motion to dismiss
private respondents' petition seeking to stay the preliminary investigation in I.S. No. 93-508. The trial
court ruled that the issue of whether Sec. 127(b) of the National Internal Revenue (Tax) Code should
be the basis of herein private respondents' tax liability, as contended by the Bureau of Internal
Revenue, or whether it is Sec. 142(c) 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.
On 14 February 1994, the trial court issued a supplemental writ of preliminary injunction this time
enjoining the preliminary investigations of the two (2) other BIR complaints with the DOJ for
fraudulent tax evasion. The trial court then denied motions to dismiss the two (2) supplemental
petitions, filed by therein respondents Commissioner of Internal Revenue and the DOJ Revenue
Cases Task Force investigators.
On 7 March 1994, herein petitioners filed with this Court a petition for certiorari and prohibition with
prayer for preliminary injunction which questioned the orders issued by the trial court granting the
private respondents' prayer for preliminary injunction to stop the preliminary investigation in the DOJ
of the BIR's complaints for fraudulent tax evasions against private respondents and denying
petitioners' motions to dismiss private respondents' various petitions with the trial court. The petition
was referred by this Court to the Court of Appeals which has original concurrent jurisdiction over the
petition.
On 19 December 1994, the Court of Appeals rendered a decision which, in part, reads:
In making such conclusion the respondent Court (the Regional Trial Court of Quezon
City, Branch 88) must have understood from herein petitioner Commissioner's letter-
complaint of 14 pages and the joint affidavit of eight revenue officers of 17 pages
attached thereto and its annexes, that the charge against herein respondents is for
tax evasion for non-payment by herein respondent Fortune of the correct amounts of
income tax, ad valorem tax and value added tax, not necessarily "fraudulent tax
evasion". Hence, the need for previous assessment of the correct amount by herein
petitioner Commissioner before herein respondents may be charged
criminally. Certiorari will not be issued to cure errors in proceedings or correct
erroneous conclusions of law or fact. As long as a Court acts within its jurisdiction,
any alleged error committed in the exercise of its jurisdiction, will amount to nothing
more than errors of judgment which are reviewable by timely appeal and not by a
special civil action of certiorari.
The questioned orders issued after hearing being but interlocutory, review thereof by
this court is inappropriate until final judgment is rendered, absent a showing 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
which the entire record of the case would be elevated for review.
Therefore, certiorari and prohibition resorted to by herein petitioners will not lie in
view of the remedy open to them. Thus, the resulting delay in the final disposition of
the case before the respondent Court would not have been incurred.

at all in contemplation of law. For such writs to lie, there must be capricious, arbitrary
and whimsical exercise of power, the very antithesis of the judicial prerogative in
accordance with centuries of both civil law and common law traditions. Certiorari and
prohibition are remedies narrow in scope and inflexible in character. They are not
general utility tools in the legal workshop. Their function is but limited to correction of
defects of jurisdiction solely, not to be used for any other purpose, such as to cure
errors in proceedings or to correct erroneous conclusions of law or fact. Due regard
for the foregoing teachings enunciated in the decision cited can not bring about a
decision other than what has been reached herein.
Needless to say, the case before the respondent Court involving those against herein
respondents for alleged non-payment of the correct amount due as income tax, ad
valorem tax and value-added tax for the years 1990, 1991, and 1992 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 respondents' application for preliminary injunction and denying
herein, petitioners' motion to dismiss. If upon the facts established after trial and the
applicable law, dissolution of the writ of preliminary injunction allowed to be issued by
the respondent Court is called for and a judgment favorable to herein petitioners is
demanded, the respondent Court is duty bound to render judgment accordingly.

Costs de officio. (references to annexes and citations omitted) 11
Petitioners' motion for reconsideration of the aforequoted judgment was denied by respondent
appellate court on 23 February 1995, hence, the present petition for review on certiorari based on
the following grounds:
GROUNDS FOR THE PETITION


SUSPENSION OF THE PRELIMINARY INVESTIGATION

THE STATE ITSELF WAS DEPRIVED OF DUE PROCESS

WERE PROPER
IV. THERE WAS SELECTIVE PROSECUTION
V THE FACTUAL ALLEGATIONS IN THE PETITION ARE HYPOTHETICALLY

ADMITTED IN A MOTION TO DISMISS BASED ON JURISDICTIONAL GROUNDS

THE MERITS OF THE PETITION BEFORE THE LOWER COURT 12
DISCUSSION
At the outset, it should be pointed out that respondent appellate court's observations to the effect
that herein petitioners' recourse to said court through a special civil action of certiorari and
prohibition was improper (as discussed in the aforequoted portion of the CA decision) actually and
appropriately apply to private respondents when they resorted to the remedy of certiorari and
prohibition with application for preliminary injunction with the respondent Regional Trial Court to stop
the preliminary investigation being conducted by the DOJ Revenue Cases Task Force of the BIR
complaints for fraudulent tax evasion against private respondents. It is to be noted that the
proceedings before the investigators (preliminary investigation before the DOJ Revenue Cases Task
Force) are far from terminated. In fact, private respondents were merely subpoenaed and asked to
submit counter-affidavits. 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 was
denied by the investigating panel, should have been an appeal from such an adverse resolution to
the Secretary of Justice, not a special civil action for certiorari and prohibition with application for
preliminary injunction before the respondent trial court.
As a corollary, the respondent trial court should have desisted from entertaining private respondents'
original petition for certiorari and prohibition with prayer for preliminary injunction because a court
order to stop a preliminary investigation is an act of interference with the investigating officers'
discretion, absent any showing of grave abuse of discretion on the part of the latter in conducting
such preliminary investigation.
The rule is settled that the fiscal (prosecutor) cannot be prohibited from conducting and finishing his
preliminary investigation. The private respondents' petition before the trial court in this case was
13
clearly premature since the case did not fall within any of the exceptions when prohibition lies to stop
a preliminary investigation. 14
The decision of the majority 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 power of the Secretary of Justice to review the resolution of said prosecutors.
In Guingona, supra, the Court en banc ruled thus:
"As a general rule, an injunction will not be granted to restrain a criminal

prosecution". With more reason will injunction not lie when the case is still at the
preliminary investigation stage. This Court should not usurp the primary function of
the City Fiscal to conduct the preliminary investigation of the estafa charge and of the
petitioners' countercharge for perjury, which was consolidated with the estafa charge.
The City Fiscal's office should be allowed to finish its investigation and make its
factual findings. This Court should not conduct the preliminary investigation. It is not
a trier of facts. (Reference to footnotes omitted).
Before resolving the main issue in this petition, as earlier stated in this opinion, several preliminary
issues raised by private respondents in their "Verified Motion To Dismiss; Alternatively, Motion To
Suspend" need to be addressed, namely:
A.) Private respondent Fortune's right to due process and equal protection of the laws have been
violated because of the subject preliminary investigation before the DOJ Revenue Cases Task
Force.
B.) Jurisdiction over Fortune's tax liability pertains to the Court of Tax Appeals and not the Regional
Trial Courts, thus, the Department of Justice, through its state prosecutors, is without jurisdiction to
conduct the subject preliminary investigation.
C.) The complaints for fraudulent tax evasion are unsupported by any evidence to serve as basis for
the issuance of a subpoena.
D.) The lack of final determination of Fortune's tax liability precludes criminal prosecution.
1. On the alleged violation of Fortune's rights to due process and equal protection of the laws, I fail to
see any violation of said rights.
Fortune, its corporate officers, nine (9) other corporations and their respective corporate officers
alleged by the BIR to be mere "dummies" or conduits of Fortune in the fraudulent tax evasion on the
Government, were given the opportunity to file their counter-affidavits to refute the allegations in the
BIR complaints, together with their supporting documents. It is only after submission of counter-
affidavits that the investigators will determine whether or not there is enough evidence to file in court
criminal charges for fraudulent tax evasion against private respondents or to dismiss the BIR
complaints. At this stage of the preliminary investigation, the constitutional right of private
respondents to due process is adequately protected because they have been given the opportunity
to be heard, i.e., to file counter-affidavits.
Nor can it be said, as respondents falsely argue, that there was no ground or basis for requiring the
private respondents to file such counter-affidavits. As respondent Court of Appeals admitted in its
here assailed decision, the BIR complaint (1st complaint) signed by the Commissioner of Internal
Revenue consisted of fourteen (14) pages supported by an annex consisting of seventeen (17)
pages in the form of a joint affidavit of eight (8) revenue officers, to which were attached voluminous
documents as annexes which, when put together, constituted a formidable network of evidence
tending to show fraudulent tax evasion on the part of private respondents. When, on the basis of
such BIR complaint and its supporting documents, the investigating Task Force saw a need to
proceed with the inquiry and, consequently, required private respondents to file their counter-
affidavits, grave abuse of discretion could hardly be imputed to said investigators.
2. On respondents' assertions that there is selective prosecution (no equal protection of the laws)
since other corporations similarly situated as they are, are not being prosecuted and/or investigated,
the argument is quite ludicrous, to say the least. As pointed out by the Solicitor General, more than
one thousand (1,000) criminal cases for tax evasion have been filed in Metro Manila alone. This
number, even if it seems to represent but a small fraction of "cases of actual tax evasion,
undoubtedly show that respondents are not being singled out. It is of note that the memorandum
issued by the President of the Philippines creating a task force to investigate tax evasion schemes of
manufacturers was issued three (3) months before the complaints against private respondents were
filed. This makes any charge of selective prosecution baseless since it could not then be shown, nor
has it been shown by private respondents that only they (respondents) were being
investigated/prosecuted. In fact, up to this time, respondents have failed to substantiate this
allegation of selective prosecution against them.
Moreover, assuming arguendo that other corporate manufacturers are guilty of using similar

schemes for tax evasion, allegedly used by respondents, the Solicitor General 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
(fraudulent tax evaders).
3. Private respondents' allegations that the Assistant Quezon City Prosecutor (among those
investigating the complaints against them) lacks impartiality, are so unsubstantiated, imaginary,
speculative and indeed puerile. They need not be elaborately refuted as a mere denial would suffice
under the circumstances.
4. On the issue of jurisdiction, the rule is settled that city and state prosecutors are authorized to
conduct preliminary investigations of criminal offenses under the National Internal Revenue Code.
Said criminal offenses are within the jurisdiction of the Regional Trial Court. 15
5. The issue of whether or not the evidence submitted by petitioners is sufficient to warrant the filing
of criminal informations for fraudulent tax evasion is prematurely raised. To argue, as private
16
respondents do, that one piece of evidence, i.e. the Daily Manufacturer's Sworn Statements, 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 which evidence should be
presented and examined. Further, "a preliminary investigation is not the occasion for the full and
exhaustive display of the parties' evidence; it is for the presentation of such evidence only as may
engender a well grounded belief that an offense has been committed and that the accused is
probably guilty thereof . . ." 7
1
Besides, the preliminary investigation has not yet been terminated. The proper procedure then
should be to allow the investigators, who undeniably have jurisdiction, to conduct and finish the
preliminary investigation and to render a resolution. The party aggrieved by said resolution can then
appeal it to the Secretary of Justice, as required by the settled doctrine of exhaustion of
18
administrative remedies. What special qualification or privilege, I may ask, do private respondents
have, particularly Fortune and Lucio Tan, as to exempt them from the operation of this rooted
principle and entitle them to immediate judicial relief from the respondent trial court in this case?
6. 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 view is decidedly not supported by law
and jurisprudence.
The lack of a final determination of respondent Fortune's exact or correct tax liability is not a bar to
criminal prosecution for fraudulent tax evasion. While a precise computation and assessment is
required for a civil action to collect a tax deficiency, the National Internal Revenue Code does not
require such computation and assessment prior to criminal prosecution for fraudulent tax evasion.
Thus, as this Court had earlier ruled --
An assessment of a deficiency is not necessary to a criminal prosecution for willful

attempt to defeat and evade the income tax. A crime is complete when the violator
has knowingly and willfully filed a fraudulent return with intent to evade and defeat
the tax. The perpetration of the crime is grounded upon knowledge on the part of the
taxpayer that he has made an inaccurate return, and the government's failure to
discover the error and promptly to assess has no connections with the commission of
the crime.19
It follows that, under the Ungab doctrine, the filing of a criminal complaint for fraudulent tax evasion
would be proper even without a previous assessment of the correct tax.
The argument that the Ungab doctrine will not apply to the case at bar because it involves a factual
setting different from that of the case at bar, is erroneous. The Ungab case involved the filing of a
fraudulent income tax return because the defendant failed to report his income derived from sale of
banana saplings. In the case at bar, the complaints filed before the DOJ for investigation charge
private wholesale respondents with fraudulent concealment of the actual price of products sold
through declaration of registered wholesale prices lower than the actual wholesale prices, resulting
in underpayment of income, ad valorem, and value-added taxes. Both cases involve, therefore,
fraudulent schemes to evade payment to the Government of correct taxes.
The Court in Ungab stated further as follows:
The petitioner also claims that the filing of the informations was precipitate and
premature since the Commissioner of Internal Revenue has not yet resolved his
protests against the assessment of the Revenue District Officer; and that he was
denied recourse to the Court of Tax Appeals.
The contention is without merit. What is involved here is not the collection of taxes
where the assessment of the Commissioner of Internal Revenue may be reviewed by
the Court of Tax Appeals, but a criminal prosecution for violations of the National
Internal Code which is within the cognizance of courts of first instance. While there
can be no civil action to enforce collection before the assessment procedures
provided in the Code have been followed, there is no requirement 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 rejected, that an assessment of the deficiency
tax due is necessary before the taxpayer can be prosecuted criminally for the
charges preferred. The crime is complete when the violator has, as in this case,
knowingly and wilfully filed fraudulent returns with intent to evade and defeat a part or
all of the tax. [Guzik vs. U.S., 54 F2d 618] (emphasis supplied)
The ruling in the Ungab case is undisputably on all fours with, and conclusive to the case at bar. It
should be stressed and pointed out that in Ungab the Court denied the prayer of therein petitioner to
quash informations for tax evasion that had already been filed in court. In other words, the
prosecutors in Ungab had already found probable cause to try therein petitioner for tax evasion.
Despite this fact there was no finding by the Court of violation of any of petitioner's constitutional
rights.
In the present case, private respondents were merely being required to submit counter-affidavits to
the complaints filed. If no violation of constitutional rights was committed in Ungab, upon the filing of
the criminal informations in Court, how can there now be a violation of private respondents'
constitutional rights upon a requirement by the investigators that private respondents submit their
counter-affidavits.
The Court has not been presented any compelling or persuasive argument why the Ungab doctrine
has to be abandoned. It is good law and should be the nemesis of fraudulent tax evaders. It gives
teeth to the proper enforcement of our tax laws.
7. Private respondents argue that a case earlier file before the Court of Tax Appeals (CTA) and now
before this Court involves a prejudicial question justifying or requiring suspension of the preliminary
20
investigation of the complaints for fraudulent tax evasion against private respondents. Said case
involves the validity of BIR Revenue Memorandum Circular No. 37-93 dated 1 July 1993 which
reclassified cigarettes manufactured by respondent Fortune. The circular subjects cigarettes with
brand names "Hope", "More" and "Champion" to a 10% increase in ad valorem taxes starting 2 July
1993. Respondent Fortune has assailed the validity of said revenue circular and the case has yet to
be decided with finality.
But 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 will not affect private
respondents' criminal liability for fraudulent tax evasion, for the following reasons:
a) The revenue circular involved in the other case pertains to ad valorem taxes on sales of Fortune's
named cigarette brands after 1 July 1993 while the fraudulent tax evasion involved in the present
case pertains to years 1990, 1991 and 1992.
b) The fraudulent scheme allegedly utilized by Fortune and its dummies, as described in the BIR
complaints pending with the DOJ Revenue Cases Task Force, which resulted in the
misdeclaration/underdeclaration of Fortune's gross sales receipts resulting in turn in underpayment
of ad valorem, value-added and income taxes was actually a "built-in" tax evasion device already in
place even before the assailed revenue circular was issued. The scheme is particularly designed to
result in the underpayment of ad valorem, value-added and income taxes regardless of the tax rate
fixed by the government on cigarette products.
8. Respondents also argue that the issue of whether Section 127(b) or Section 142(c) of the National
Internal Revenue 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:
Sec. 127. . . .

the cost of manufacture plus expenses incurred until the goods are finally sold, then
a proportionate margin of profit, not less than 10% of such manufacturing cost and
Sec. 142 . . .
on the manufacturer's registered wholesale price:
(1) On locally manufactured cigarettes bearing a foreign brand, fifty-five percent

(55%): Provided, That this rate shall apply regardless of whether or not the right to
use or title to the foreign brand was sold or transferred by its owner to the local
manufacturer. Whenever it has to be determined whether or not a cigarette bears a
foreign brand, the listing of brands manufactured in foreign countries appearing in the
current World Tobacco Directory shall govern.
(2) On other locally manufactured cigarettes, forty-five percent (45%).
Duly registered or existing brands of cigarettes packed in twenties shall not be

allowed to be packed in thirties.
When the existing registered wholesale price, including tax, of cigarettes packed in
twenties does not exceed P4.00 per pack, the rate shall be twenty percent (20%).
As the Solicitor General correctly points out, the two (2) aforequoted provisions of the Tax Code are
both applicable in determining the amount of tax due. Section 127(b) provides for the method of
determining the gross wholesale price to be registered with the BIR while Section 142(c) provides
for the rate of ad valorem tax to be paid. Said rate is expressed as a percentage of the registered
gross selling price which is determined, in turn, based on Section 127(b).
The aforementioned two (2) provisions of the Tax Code are certainly not determinative of private
respondents' criminal liability, if any. A reading of the BIR complaints pending with the DOJ Revenue
Cases Task Force shows that private respondent Fortune is being accused of using "dummy"
corporations and business conduits as well as non-existent individuals and entities to enable the
company (Fortune) to report gross receipts from sales of its cigarette brands lower than gross
receipts which are actually derived from such sales. Such lower gross receipts of the company, as
reported by respondent Fortune thus result in lower ad valorem, value-added and income taxes paid
to the government. Stated a little differently, respondent Fortune is accused of selling at wholesale
prices its cigarette brands through dummy entities in the profits of which it has a controlling interest.
Under Section 127(b), the gross selling price of the goods should be the wholesale price of such
dummy -- entities to its buyers but it is alleged by the government that respondent Fortune has
purposely made use of such entities to evade payment of higher but legally correct taxes.
9. As to respondents' additional claim that with regard to ad valorem tax, they merely based their
liability on the wholesale price registered with the Bureau of Internal Revenue (BIR) following the
method used by all cigarette manufacturers, said claim cannot absolve Fortune and its officers from
criminal liability. Payment of ad valorem and other taxes based on the wholesale price registered
21
with the BIR presupposes and naturally assumes that the registered wholesale price correspond to
the actual wholesale prices at which the manufacturer sells the product. If a manufacturer makes
use of a method or device to make it appear that products are sold at a wholesale price lower than
the amounts that the manufacturer actually realizes from such wholesale of its products, as what
respondent Fortune 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 Section 127(b)
aforequoted in relation to the penal provisions of the Tax Code.
10. Private respondents contend that the registration with the BIR of manufacturer's wholesale price
and the corresponding close supervision and monitoring by BIR officials of the business operations
of cigarette companies, ensure payment of correct taxes. The argument is baseless. It does not
follow that the cited procedure is a guarantee against fraudulent schemes resorted to by tax-evading
individuals or entities. It only indicates that taxpayers bent on evading payment of taxes would
explore more creative devices or mechanisms in order to defraud the government of its sources of
income even under its very nose. It is precisely to avoid and detect cases like this that the President
issued a Memorandum on 1 June 1993 creating a task force to investigate tax liabilities of
manufacturers engaged in tax evasion schemes, such as selling products through dummy marketing
companies at underdeclared wholesale prices registered with the BIR.
Moreover, the Manufacturer's Declaration which is the basis for determining the "Manufacturer's
Registered Wholesale Price" (which in turn becomes the basis for the imposition of ad valorem tax),
even if verified by revenue officers and approved by the Commissioner of Internal Revenue, does
not necessarily reflect the actual wholesale price at which the cigarettes are sold. This is why
manufacturers are still required to file other documents, like the "daily manufacturer's sworn
statements" in order to assist in determining whether or not correct taxes have been paid. In fine,
even if BIR officials may have verified Fortunes' BIR registered wholesale price for its products, the
same does not estop or preclude the Government from filing criminal complaints for fraudulent tax
evasion based on evidence subsequently gathered to the effect that such BIR registered wholesale
prices were a misdeclaration or underdeclaration of the actual wholesale price. It is hornbook law
that the Government is not bound or estopped by the mistakes, inadvertence, and what more,
connivance of its officials and employees with fraudulent schemes to defraud the Government. 22
Even on the assumption that official duty of BIR 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 make it appear that respondent Fortune's tax liabilities are far less than
what it (Fortune) should be actually liable for under the law. The very nature of the offense for which
respondents are being investigated, certainly makes regularity/irregularity in the performance of
official duties irrelevant.
It should also be pointed out that the offense allegedly committed by private respondents' consists in'
the intentional use of "dummy" entities to make it appear that respondent Fortune sells its products
at lower wholesale prices, which prices would correspond to the wholesale prices registered by
Fortune with the BIR, but not to the prices at which its products are sold by Fortune's dummies. The
difference between Fortune's BIR-reported wholesale prices and the prices at which its dummies sell
Fortune's products thus constitutes amounts for which Fortune should actually incur tax liabilities but
for which it allegedly never paid taxes because of the operation of the tax evasion scheme founded
on a combined underdeclaration with the BIR of Fortune's wholesale price of its products and the
sale of such products to is "dummy" corporations or to non- existing individuals or entities. This is the
obvious reason why the government has sought to investigate the alleged tax evasion scheme
purportedly utilized by respondent Fortune and its dummy corporations.
Based on the foregoing discussions, it follows that the answer to the main issue formulated earlier in
this opinion is in the negative since the private respondents have not shown 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 enjoined by the courts. 23
11. The trial court's ruling that private respondents' constitutional rights have been violated, rests on
untenable grounds. It 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. In
other words, it must have real basis for existing.
The exceptions to the general rule against restraining orders or injunctions to stop preliminary
investigations or criminal prosecutions are enumerated in Brocka vs. Enrile. One specific exception
24
is when an injunction is needed for the adequate protection of the accused's constitutional rights.
The exception definitely does not apply in the case at bar.
Before proceeding to illustrate this point, it is important to stress that in a preliminary investigation,
the investigating officers' sole duty is to determine, before the presentation of evidence by the
prosecution and by the defense, if the latter should wish to present any, whether or not there are
reasonable grounds for proceeding formally against the accused. This is in conformity with the
25
purpose of a preliminary investigation which 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. As restated by the illustrious late Chief Justice Manuel V. Moran --
26
. . . the purpose of a preliminary investigation is to afford the accused an opportunity

to show by his own 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 await trial in the Court of First Instance. 7
2
Prescinding from the tenets above-discussed, it is clear from the inception that there had been no
violation of private respondents' constitutional rights to presumption of innocence, due process and
equal protection of the laws. The preliminary investigation, I repeat, has not yet been terminated. At
this stage, only the complainant has finished presenting its affidavits and supporting documents.
Obviously then, the investigating panel found that there were grounds to continue with the inquiry,
hence, the issuance of subpoena and an order for the submission of counter-affidavits by private
respondents. Instead of filing counter-affidavits, private respondents filed a Verified Motion to
Dismiss; Alternatively, Motion to Suspend. At this point, it may be asked, how could private
respondents' constitutional right to presumption of innocence be violated when, in all stages of the
preliminary investigation, they were presumed innocent? Declaring that there are reasonable
grounds to continue with the inquiry is not the same as pronouncing that a respondent is guilty or
probably guilty of the offense charged.
12. Private respondents cannot also claim that they were not afforded due process and equal
protection of the laws. In fact, the investigating panel was concerned with just that when it ordered
the submission of private respondents' counter-affidavits. This procedure afforded private
respondents the opportunity to show by their own evidence that no reasonable grounds exist for the
filing of informations against them. Furthermore, contrary to the findings of the trial court and the
Court of Appeals, the alleged haste by which the subpoena was issued to private respondents (the
day after the filing of the 600-page annexed complaint) does not lessen the investigating panel's
ability to study and examine the complainant's evidence. Neither does such act merit the conclusion
that the investigating panel was less than objective in conducting the preliminary investigation.
Consequently, the general and settled rule must apply that the courts cannot interfere with the
discretion of the investigating officer to determine the specificity and adequacy of the averments in
the complaint filed, except in very exceptional circumstances, which do not obtain here.
28
Therefore, private respondents' act of filing a petition for certiorari and prohibition before the
Regional Trial Court was 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 were highly speculative -- more fancied than real.
Finally, Hernandez v. Albano (19 SCRA 95), cited by the majority 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. Hernandez also states that:
By statute, the prosecuting officer of the City of Manila and his assistants are
empowered to investigate crimes committed within the city's territorial jurisdiction.
Not a mere privilege, it is the sworn duty of a Fiscal to conduct an investigation of a
criminal charge filed with his office. The power to investigate postulates the other
obligation on the part of the Fiscal to investigate promptly and file the case of as
speedily. Public interest -- the protection of society -- so demands. Agreeably to the
foregoing, a
rule -- now of long standing and frequent application -- was formulated that ordinarily
criminal prosecution may not be blocked by court prohibition or injunction. Really, if
at every turn investigation of a crime will be halted by a court order, the
administration of criminal justice will meet with an undue setback. Indeed, the
investigative power of the Fiscal may suffer such a tremendous shrinkage that it may
end up in hollow sound rather than as a part and parcel of the machinery of criminal
justice.
It should be noted that while Hernandez lays down the extreme grounds when 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 with
prayer for preliminary injunction filed to stay the preliminary investigation of criminal complaints
against petitioner Hernandez.
The other case cited by the majority to support its decision in this case, Fortun v. Labang involves
29
criminal complaints filed against a judge of the Court of First Instance by disgruntled lawyers who
had lost their cases in the judge's sala. Clearly, the basis for the Court to stay preliminary
investigation in Fortun was a finding that said complaints were filed merely as a form of harassment
against the judge and which "could have no other purpose than to place petitioner-judge in contempt
and disrepute". The factual situation in the case at bar is poles apart from the factual situation
in Fortun.
Further, in Fortun there was an express finding by the Court that complaints against judges of the
Courts of First Instance are properly filed with the Supreme Court under Executive Order No. 264
(1970) since the Court is considered as the department head of the judiciary. In the present case it
cannot be disputed that jurisdiction to conduct preliminary investigation over fraudulent tax evasion
cases lies with the state prosecutors (fiscals).
It cannot therefore be denied that neither Hernandez nor Fortun supports with any plausibility the
majority's disposition of the issues in the present case. On the other hand, it appears to me all too
clearly that the majority 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. But I will have no part in the shocking process
especially in light of the fact that Government cries out that the people have
been cheated and defrauded of their taxes to the tune allegedly of P25.6 billion pesos, and yet, it is
not given by this Court even a beggar's chance to prove it!
13. There is great and vital public interest in the successful investigation and prosecution of criminal
offenses involving fraudulent tax evasion. Said public interest is much more compelling in the
present case since private respondents are not only accused of violating tax and penal laws but are
also, as a consequence of such violations, possibly depriving the government of a primary source of
revenue so essential to the life, growth and development of the nation and for the prestation of
essential services to the people.
14. It should be made clear, at this point, however, that this opinion is not a pre-judgment or pre-
determination of private respondents' guilt of the offense charged. No one, not even the prosecutors
investigating the cases for fraudulent tax evasion, is, at this stage of the proceedings, when private
respondents have yet to file their counter-affidavits, in a position to determine and state with finality
or conclusiveness whether or not private respondents are guilty of the offense charged in the BIR
complaints, now with the DOJ Revenue Cases Task Force. It is precisely through the preliminary
investigation that the DOJ Task Force on Revenue Cases can determine whether or not there are
grounds to file informations in court or to dismiss the BIR complaints.
15. I see no grave abuse of discretion committed by the state prosecutors in requiring private
respondents to submit counter-affidavits to the complaints for fraudulent tax evasion and to
determine the existence or absence of probable criminal liability.
The Rules on Criminal Procedure do not even require, as a condition sine qua 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 complainant's evidence is accorded him. The purpose of the
rule is to check attempts of unscrupulous respondents to thwart criminal investigations by not
appearing or employing dilatory tactics. 30
16. Since the preliminary investigation in the DOJ Revenue Cases Task Force against private
respondents for alleged fraudulent tax evasion is well within its jurisdiction and constitutes no grave
abuse of discretion, it was in fact the respondent trial court that committed grave abuse of discretion,
amounting to lack or excess of jurisdiction, when it stayed such preliminary investigation.
17. The successful prosecution of criminal offenders is not only a right but the duty of the state. Only
when the state's acts clearly violate constitutional rights can the courts step in to interfere with the
state's exercise of such right and performance of such duty. I am indubitably impressed that there is
no violation of private respondents' constitutional rights in this case.
18. Lastly, the consolidation of the three (3) complaints in the DOJ against private respondents
should be allowed since they all involve the same scheme allegedly used by private respondents to
fraudulently evade payment of taxes. Consolidation will not only avoid multiplicity of suits but will
also enable private respondents to more conveniently prepare whatever responsive pleadings are
required or expected of them.
It is, therefore, my considered view that the decision of the Court of Appeals of 19 December 1994 in
CA G.R. SP No. 33599 should be SET ASIDE. The respondent trial court should be ENJOINED from
proceeding in any manner in Civil Case No. Q-94-19790, or at least until further orders from this
Court.
The preliminary investigation of the BIR complaints docketed as I.S. Nos. 93-508, 93-17942 and 93-
584 with the Department of Justice Revenue Cases Task Force, being constitutionally and legally in
order, should be allowed to resume until their final conclusion or completion, with private
respondents given a non-extendible period of ten (10) days from notice to submit to the investigating
panel their respective counter-affidavits and supporting documents, if any.

VITUG, J., dissenting:
I see in the petition the overriding issue of whether or not judicial relief could be resorted to in order
to stop state prosecutors from going through with 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
work or in their own evaluation of the results of investigation. It would indeed be, in my view, an act
precipitate for the courts to take on a case even before the complaint or information is filed by the
prosecution. Of course, one cannot preclude the possibility that at times compelling reasons may
dictate otherwise; I do not think, however, that the instant case could be the right occasion for it.
While I do understand the concern expressed by some of my colleagues, i.e., that stopping the trial
court from now proceeding with Civil Case No. Q-94-9170 would, effectively, mean a disposition of
the main case without its merits having first been fully heard in the court below, in this particular
situation before the Court, however, the parties have since exhaustively and adequately presented
their respective cases. In the interest of good order, the practical measure of enjoining the trial court
from taking further cognizance of the case would not thus appear to be really all that unwarranted.
A final word: 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 would the results thereof
be conclusive on, the other.
Accordingly, I vote to grant the petition.
Separate Opinions
BELLOSILLO, J., concurring and dissenting:
I am in full accord with the conclusion of the majority that the trial court committed no grave abuse of
discretion in issuing the assailed injunctive writs. But I am constrained to dissent insofar as it finds
that there was "selective prosecution" in charging private respondents.
Let me first touch on "selective prosecution." There is no showing that petitioner Commissioner of
Internal Revenue is not going after others who 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 Solicitor General, 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. In this regard,
in the absence of willful or malicious prosecution, or so-called "selective prosecution," the choice on
whom to prosecute ahead of the others belongs legitimately, and rightly so, to the public
prosecutors.
But, I share the view of the majority that the trial court did not commit grave abuse of discretion
amounting to lack of jurisdiction. At once it must be pointed out that the trial court merely issued writs
of preliminary injunction. However to grant the prayer of herein petitioners would effectively dismiss
the petition for certiorari and prohibition filed by private respondents with the trial court even before
the issues in the main case could be joined, which seems to me to be a procedural lapse since the
main case is already being resolved when the only issue before the Court is the propriety of the
ancillary or provisional remedy.
The trial court granted the writs of preliminary injunction upon finding, after hearing for the purpose,
that private respondents sufficiently established that "they are entitled to certain constitutional rights
and that these rights have been violated," and that they have complied with the requirements of
1
Sec. 3, Rule 58, Rules of Court. In support of its conclusion, the trial court enumerated its
2
reasons: first, inspite of the motion of respondent Fortune Tobacco Corporation, petitioner

Commissioner of Internal Revenue failed to present the "daily manufacturer's sworn statements
submitted to the BIR by the taxpayer," supposedly stating that the total taxable sales of respondent
Corporation for the year 1992 is P16,686,372,295.00, which is the basis of petitioner
Commissioner's allegation that private respondents failed to pay the correct taxes since it declared in
its VAT returns that its total taxable sales in 1992 was only P11,736,658.580.00; second, the proper
application of Sec. 142, par. (c), of the National Internal Revenue Code is a prejudicial question
which must first be resolved by the Court of Tax Appeals to determine whether a tax liability which is
an essential element of tax evasion exists before criminal proceedings may be pursued; third, from
the evidence submitted, it appears that the Bureau of Internal Revenue has not yet made a final
determination of the tax liability of private respondents with respect to its ad valorem, value added
and income taxes for 1992; and, fourth, the precipitate issuance by the prosecutors of subpoenas to
private respondents one (1) day after the filing of the complaint, consisting of about 600 pages,
inclusive of the 14-page complaint, 17-page joint affidavit of eight (8) revenue officers and the
annexes attached thereto, and their hasty denial of private respondents' 135-page motion to dismiss,
after a recess of only about 20 minutes, show that private respondents' constitutional rights may
have been violated.
These circumstances as well as the other traces of discrimination mentioned by the trial court, i.e.,
the announcement by the PCGG that it would take over the various corporations associated with
respondent Lucio C. Tan; the creation of the Task Force on Revenue Cases among the functions of
which is to "[i]nvestigate the tax liabilities of manufacturers that engage in well-known tax evasion
schemes, such as selling products through dummy marketing companies to evade the payment of
the correct internal revenue taxes," the very charge against respondent Tan; the reclassification of
respondent corporation's best selling cigarettes as foreign brands thereby imposing upon them a
higher tax rate that would price them out of the market without notice and hearing; the singling out of
private respondents as subjects of a complaint for tax evasion when other cigarette manufacturers
have been using the same basis private respondents are using in paying ad valorem, value added
and income taxes; and, the failure of petitioner Commissioner to wait for the expiration of the 30-day
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 writ of preliminary injunction.
Practically the same grounds were found by the trial court when it provisionally restrained the
investigation of the two (2) other complaints, i.e., tax evasion complaints for FYs 1990 and 1991.
On the basis of the findings of the trial court, it indeed appears that private respondents'
constitutional rights to due process of law and equal protection of the laws may have been for the
moment set aside, if not outright violated. The trial court was convinced that the tell-tale signs of
malice and partiality were indications that the constitutional rights of private respondents may not
have been afforded adequate protection. Accordingly I see no manifest abuse, much less grave, on
the part of the trial court in issuing the injunctive writs. Thus it is my opinion that the trial court did not
commit grave abuse of discretion in granting the assailed writs.
Well entrenched is the rule that the issuance of the writ of preliminary injunction 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 judicial discretion by the trial court in injunctive matters
should not be interfered with except in case of manifest abuse, which is not true in the case before
3
us. Equally well settled is that under Sec. 7, Rule 58, Rules of Court, a wide latitude is given to the
4
trial court. This is because the conflicting claims in an application for a provisional writ more often
5
than not involves a factual determination which 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 within the competence of the trial
court before which the parties have raised the very same issue in the main case. The truth or falsity
of the divergent statements that there was deliberate haste in issuing the subpoenas and in denying
private respondents' motion to dismiss may be confirmed not by this Court but by the trial court
during that hearing on the merits.
In fine, no grave abuse of discretion can be attributed to a judge or body in the issuance of a writ of
preliminary injunction where a party was not deprived of its day in court as it was heard and had
exhaustively presented all its arguments and defenses. It is undisputed that in the case before us
6
petitioners and private respondents were given sufficient time and opportunity to present their
respective pieces of evidence as well as arguments in support of their positions.
Consequently, I concur with the finding of the majority that the trial court committed no grave abuse
of discretion. As respondent appellate court said, "[g]rave abuse of discretion as a ground for
issuance of writs of certiorari and prohibition implies capricious and whimsical exercise of judgment
as is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic
manner by reason of passion, prejudice or personal hostility amounting to an evasion of positive duty
or to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law. For such
7
writs to lie there must be capricious, arbitrary and whimsical exercise of power, the very antithesis of
the judicial prerogative in accordance with centuries of both civil and common law traditions." The
8
trial court, to my mind, is not guilty of any of these. Thus I accord respect to the exercise of the trial
court's sound judicial discretion and hold that the same should not be interfered with.
To permanently enjoin the trial court from proceeding in any manner in Civil Case No. Q-94-19790
and allow the preliminary investigation of the complaints docketed as I.S. Nos. 93-508, 93-17942
and 93-584 with the Department of Justice to resume until their final conclusion and
completion would go against the prevailing rule that courts should avoid issuing a writ or preliminary
injunction which would in effect dispose of the main case without trial. Due process considerations
9
dictate that the assailed injunctive writs are not judgments on the merits but merely orders for the
grant of a provisional and ancillary remedy to preserve the status quo until the merits of the case can
be heard. The hearing on the application for issuance of a writ of preliminary injunction is separate
and distinct from the trial on the merits of the main case. The quantum of evidence required for one
is different from that for the other, so that it does not necessarily follow that if the court grants and
issues the temporary writ applied for the same court will now have to rule in favor of the petition for
prohibition and ipso facto make the provisional injunction permanent.
If grave abuse of discretion attended the issuance of the writ of preliminary injunction, then by all
means nullify the abusive act -- but only that. The main case should be allowed to proceed according
to due process. The trial court should receive the evidence from the contending parties, weigh and
evaluate the same and then make its findings. Clearly, the dismissal of the main case as a result of a
mere incident relative to the issuance of an ancillary writ is procedurally awkward and violates due
process, as it deprives private respondents of their right to present their case in court and support it
with its evidence.
In resolving the fundamental issue at hand, i.e., whether the trial court committed grave abuse of
discretion in issuing the subject writs of preliminary injunction, we cannot avoid balancing on the
scales the power of the State to tax and its inherent right to prosecute perceived transgressors of the
law on one side, and the constitutional rights of a citizen to due process of law and the equal
protection of the laws on the other. Obviously the scales must tilt in favor of the individual, for a
citizen's right is amply protected by the Bill of Rights of the Constitution. Thus while "taxes are the
lifeblood of the government," the power to tax has its limits, inspite of all its plenitude. Hence
in Commissioner of Internal Revenue v. Algue, Inc., we said --
10
Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason for government
itself. It is therefore necessary to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose of taxation, which is the
promotion of the common good, may be achieved.
xxx xxx xxx
It is said that taxes are what we pay for civilized society. Without taxes, the
government would be paralyzed for the lack of the motive power to activate and
operate it. Hence, despite the natural reluctance to surrender part of one's hard-
earned income to taxing authorities, every person who 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 power.
But even as we concede the inevitability and indispensability of taxation, it is a

requirement in all democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure. If it is not, then the taxpayer has a right to
complain and the courts will then came to his succor. For all the awesome power of
the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate
. . . that the law has not been observed.
In the instant case, it seems that due to the overzealousness in collecting taxes from private
respondents and to some accident of immediate overwhelming interest which distressingly
impassions and distorts judgment, the State has unwittingly ignored the citizens' constitutional rights.
Thus even the rule that injunction will not lie to prevent a criminal prosecution has admitted
exceptions, which we enumerated in Brocka v. Enrile and in Ocampo IV v. Ombudsman -- (a) to
11 12
afford adequate protection to the constitutional rights of the accused; (b) when necessary for the
orderly administration of justice or to avoid oppression or multiplicity of actions; (c) when there is a
prejudicial question which is sub-judice; (d) when the acts of the officer are without or in excess of
authority; (e) where the prosecution is under an invalid law, ordinance or regulation; (f) when double
jeopardy is clearly apparent; (g) when the court has no jurisdiction over the offense; (h) where it is a
case of persecution rather than prosecution; (i) where the charges are manifestly false and
motivated by lust for vengeance; (j) when there is clearly no prima facie case against the accused
and a motion to quash on that ground has been denied; and, (k) to prevent a threatened unlawful
arrest.
Finally, courts indeed should not hesitate to invoke the constitutional guarantees to give adequate
protection to the citizens when faced with the enormous powers of the State, even when what is in
issue are only provisional remedies, as in the case at hand. In days of great pressure, it is alluring to
take short cuts by borrowing dictatorial techniques. But when we do, we set in motion an arbitrary or
subversive influence by our own design which destroys us from within. Let not the present case
dangerously sway towards that trend.
For all the foregoing, I vote to dismiss the instant petition for lack of merit, and to order the trial court
to proceed with Civil Case No. Q-94-19790 with reasonable dispatch.
PADILLA, J., dissenting:
Because of what I humbly perceive to be the crippling, chilling and fatal effects of the majority
opinion on the power of the state to investigate fraudulent tax evasion in the country, I am
constrained to dissent, as vigorously as I can, from the majority opinion.
THE ISSUE
The main issue in this petition for review on certiorari is whether or not there are valid grounds to
stop or stay the preliminary investigation of complaints filed by the Bureau of Internal Revenue (BIR)
with the Department of Justice (DOJ) Revenue Cases Task Force against private respondents for
alleged fraudulent tax evasion for the years 1990, 1991 and 1992. Stated differently, the issue is: did
respondent trial court commit grave abuse of discretion amounting to lack or excess of jurisdiction in
stopping the subject preliminary investigation?
THE CASE AND THE FACTS
On 7 September 1993, petitioner Commissioner of Internal Revenue filed a complaint with the DOJ
against private respondents Fortune Tobacco Corporation (hereinafter referred to simply as
"Fortune"), its corporate officers, nine (9) other corporations, and their respective corporate officers,
for alleged fraudulent tax evasion for the year 1992.
The complaint, docketed as I.S. No. 93-508, was referred to the DOJ Task Force on Revenue Cases
which found sufficient grounds to further investigate the allegation that Fortune fraudulently evaded
payment of income, value-added and ad valorem taxes for the year 1992 thus depriving the
Government of revenue allegedly in excess of seven and one-half (7 1/2) billion pesos.
The fraudulent scheme allegedly adopted and employed by private respondents, is described by the
BIR as follows:
In order to evade payment of said taxes, [Fortune] made fictitious and simulated
sales of its cigarette products to non-existent individuals and to entities incorporated
and existing only for the purpose of such fictitious sales by declaring registered
wholesale prices with the BIR lower than [Fortune's] actual wholesale prices which
are required for determination of [Fortune's] correct ad valorem, income and value-
added tax liabilities. These "ghost wholesale buyers" then ostensibly sold the product
to consumers and other wholesalers/retailers at higher wholesale prices determined
by [Fortune]. The tax returns and manufacturer's sworn statements filed by [Fortune]
as aforesaid declare the fictitious sales it made to the conduit corporations and non-
existent individual buyers as its gross sales. 1
Based on the initial evaluation of the DOJ Task Force, private respondents were subpoenaed and
required to submit their counter-affidavits not later than 20 September 1993. Instead of filing
2
counter-affidavits, private respondents filed a "Verified Motion to Dismiss; Alternatively, Motion to

Suspend." Said motion was denied by the DOJ Task Force and treated as private respondents'
3
counter-affidavit, in an order dated 15 October 1993. 4
Private respondents sought reconsideration of the aforementioned order of denial and likewise filed
motions to require submission by the Bureau of Internal Revenue (BIR) 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 lack of impartiality. 5
On 20 December 1993, an omnibus order was issued by the investigating Task Force: 6
a. denying reconsideration;
b. denying suspension of investigation; and
c. denying the motion to inhibit the investigating state prosecutors.
Thereupon, or on 4 January 1994, private respondents went to court. They filed a petition
for certiorari and prohibition with prayer for preliminary injunction in the Regional Trial Court, Branch
88, Quezon City, praying that the proceedings (investigation) before the DOJ Task Force be
stopped. The petition was docketed as Civil Case No. Q-94-19790. 7
On 17 January 1994, petitioners filed with the trial court a motion to dismiss the aforesaid
petition. On 25 January 1994, the trial court issued instead an order granting the herein private
8
respondents' prayer for a writ of preliminary injunction, to stop the preliminary investigation in the
9
DOJ Revenue Cases Task Force.
On 26 January 1994, private respondents filed with the trial court a Motion to Admit Supplemental
Petition seeking this time the issuance of another writ of preliminary injunction against a second
complaint of the BIR with the DOJ docketed as I.S. No. 93-17942 likewise against herein private
respondents for fraudulent tax evasion for the year 1990. Private respondents averred in their
aforesaid motion with the trail court that --
a. no supporting documents nor copies of the complaint were attached to the subpoena in I.S. No.
93-17942;
b. the abovementioned subpoena violates private respondents' constitutional rights to due process,
equal protection and presumption of innocence;
c. I.S. No. 93-17942 is substantially the same as I.S. No. 93-508 except that it concerns the year
1990;
d. no tax assessment has been issued by the Commissioner of Internal Revenue and since taxes
already paid have not been challenged by the BIR, no tax liability exists;
e. Assistant Quezon City Prosecutor Leopoldo E. Baraquia was a former classmate of then
Presidential Legal Counsel Antonio T. Carpio, thus, he cannot conduct the preliminary investigation
in an impartial manner.
On 28 January 1994, private respondents filed with the trial court a second supplemental
petition this time seeking to stay the preliminary investigation in I.S. No. 93-548, a third BIR
10
complaint with the DOJ against private respondents for fraudulent tax evasion for the year 1991.
On 31 January 1994, the trial court admitted the two (2) supplemental petitions and issued a
temporary restraining order stopping the preliminary investigation of the two (2) later complaints with
the DOJ against private respondents for alleged fraudulent tax evasion for the years 1990 and 1991.
On 7 February 1994, the trial court also issued an order denying herein petitioners' motion to dismiss
private respondents' petition seeking to stay the preliminary investigation in I.S. No. 93-508. The trial
court ruled that the issue of whether Sec. 127(b) of the National Internal Revenue (Tax) Code should
be the basis of herein private respondents' tax liability, as contended by the Bureau of Internal
Revenue, or whether it is Sec. 142(c) 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.
On 14 February 1994, the trial court issued a supplemental writ of preliminary injunction this time
enjoining the preliminary investigations of the two (2) other BIR complaints with the DOJ for
fraudulent tax evasion. The trial court then denied motions to dismiss the two (2) supplemental
petitions, filed by therein respondents Commissioner of Internal Revenue and the DOJ Revenue
Cases Task Force investigators.
On 7 March 1994, herein petitioners filed with this Court a petition for certiorari and prohibition with
prayer for preliminary injunction which questioned the orders issued by the trial court granting the
private respondents' prayer for preliminary injunction to stop the preliminary investigation in the DOJ
of the BIR's complaints for fraudulent tax evasions against private respondents and denying
petitioners' motions to dismiss private respondents' various petitions with the trial court. The petition
was referred by this Court to the Court of Appeals which has original concurrent jurisdiction over the
petition.
On 19 December 1994, the Court of Appeals rendered a decision which, in part, reads:
In making such conclusion the respondent Court (the Regional Trial Court of Quezon
City, Branch 88) must have understood from herein petitioner Commissioner's letter-
complaint of 14 pages and the joint affidavit of eight revenue officers of 17 pages
attached thereto and its annexes, that the charge against herein respondents is for
tax evasion for non-payment by herein respondent Fortune of the correct amounts of
income tax, ad valorem tax and value added tax, not necessarily "fraudulent tax
evasion". Hence, the need for previous assessment of the correct amount by herein
petitioner Commissioner before herein respondents may be charged
criminally. Certiorari will not be issued to cure errors in proceedings or correct
erroneous conclusions of law or fact. As long as a Court acts within its jurisdiction,
any alleged error committed in the exercise of its jurisdiction, will amount to nothing
more than errors of judgment which are reviewable by timely appeal and not by a
special civil action of certiorari.
The questioned orders issued after hearing being but interlocutory, review thereof by
this court is inappropriate until final judgment is rendered, absent a showing 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
which the entire record of the case would be elevated for review.
Therefore, certiorari and prohibition resorted to by herein petitioners will not lie in
view of the remedy open to them. Thus, the resulting delay in the final disposition of
the case before the respondent Court would not have been incurred.

at all in contemplation of law. For such writs to lie, there must be capricious, arbitrary
and whimsical exercise of power, the very antithesis of the judicial prerogative in
accordance with centuries of both civil law and common law traditions. Certiorari and
prohibition are remedies narrow in scope and inflexible in character. They are not
general utility tools in the legal workshop. Their function is but limited to correction of
defects of jurisdiction solely, not to be used for any other purpose, such as to cure
errors in proceedings or to correct erroneous conclusions of law or fact. Due regard
for the foregoing teachings enunciated in the decision cited can not bring about a
decision other than what has been reached herein.
Needless to say, the case before the respondent Court involving those against herein
respondents for alleged non-payment of the correct amount due as income tax, ad
valorem tax and value-added tax for the years 1990, 1991, and 1992 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 respondents' application for preliminary injunction and denying
herein, petitioners' motion to dismiss. If upon the facts established after trial and the
applicable law, dissolution of the writ of preliminary injunction allowed to be issued by
the respondent Court is called for and a judgment favorable to herein petitioners is
demanded, the respondent Court is duty bound to render judgment accordingly.

Costs de officio. (references to annexes and citations omitted) 11
Petitioners' motion for reconsideration of the aforequoted judgment was denied by respondent
appellate court on 23 February 1995, hence, the present petition for review on certiorari based on
the following grounds:
GROUNDS FOR THE PETITION


SUSPENSION OF THE PRELIMINARY INVESTIGATION

THE STATE ITSELF WAS DEPRIVED OF DUE PROCESS

WERE PROPER
IV. THERE WAS SELECTIVE PROSECUTION
V THE FACTUAL ALLEGATIONS IN THE PETITION ARE HYPOTHETICALLY

ADMITTED IN A MOTION TO DISMISS BASED ON JURISDICTIONAL GROUNDS

THE MERITS OF THE PETITION BEFORE THE LOWER COURT 12
DISCUSSION
At the outset, it should be pointed out that respondent appellate court's observations to the effect
that herein petitioners' recourse to said court through a special civil action of certiorari and
prohibition was improper (as discussed in the aforequoted portion of the CA decision) actually and
appropriately apply to private respondents when they resorted to the remedy of certiorari and
prohibition with application for preliminary injunction with the respondent Regional Trial Court to stop
the preliminary investigation being conducted by the DOJ Revenue Cases Task Force of the BIR
complaints for fraudulent tax evasion against private respondents. It is to be noted that the
proceedings before the investigators (preliminary investigation before the DOJ Revenue Cases Task
Force) are far from terminated. In fact, private respondents were merely subpoenaed and asked to
submit counter-affidavits. 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 was
denied by the investigating panel, should have been an appeal from such an adverse resolution to
the Secretary of Justice, not a special civil action for certiorari and prohibition with application for
preliminary injunction before the respondent trial court.
As a corollary, the respondent trial court should have desisted from entertaining private respondents'
original petition for certiorari and prohibition with prayer for preliminary injunction because a court
order to stop a preliminary investigation is an act of interference with the investigating officers'
discretion, absent any showing of grave abuse of discretion on the part of the latter in conducting
such preliminary investigation.
The rule is settled that the fiscal (prosecutor) cannot be prohibited from conducting and finishing his
preliminary investigation. The private respondents' petition before the trial court in this case was
13
clearly premature since the case did not fall within any of the exceptions when prohibition lies to stop
a preliminary investigation. 14
The decision of the majority 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 power of the Secretary of Justice to review the resolution of said prosecutors.
In Guingona, supra, the Court en banc ruled thus:
"As a general rule, an injunction will not be granted to restrain a criminal

prosecution". With more reason will injunction not lie when the case is still at the
preliminary investigation stage. This Court should not usurp the primary function of
the City Fiscal to conduct the preliminary investigation of the estafa charge and of the
petitioners' countercharge for perjury, which was consolidated with the estafa charge.
The City Fiscal's office should be allowed to finish its investigation and make its
factual findings. This Court should not conduct the preliminary investigation. It is not
a trier of facts. (Reference to footnotes omitted).
Before resolving the main issue in this petition, as earlier stated in this opinion, several preliminary
issues raised by private respondents in their "Verified Motion To Dismiss; Alternatively, Motion To
Suspend" need to be addressed, namely:
A.) Private respondent Fortune's right to due process and equal protection of the laws have been
violated because of the subject preliminary investigation before the DOJ Revenue Cases Task
Force.
B.) Jurisdiction over Fortune's tax liability pertains to the Court of Tax Appeals and not the Regional
Trial Courts, thus, the Department of Justice, through its state prosecutors, is without jurisdiction to
conduct the subject preliminary investigation.
C.) The complaints for fraudulent tax evasion are unsupported by any evidence to serve as basis for
the issuance of a subpoena.
D.) The lack of final determination of Fortune's tax liability precludes criminal prosecution.
1. On the alleged violation of Fortune's rights to due process and equal protection of the laws, I fail to
see any violation of said rights.
Fortune, its corporate officers, nine (9) other corporations and their respective corporate officers
alleged by the BIR to be mere "dummies" or conduits of Fortune in the fraudulent tax evasion on the
Government, were given the opportunity to file their counter-affidavits to refute the allegations in the
BIR complaints, together with their supporting documents. It is only after submission of counter-
affidavits that the investigators will determine whether or not there is enough evidence to file in court
criminal charges for fraudulent tax evasion against private respondents or to dismiss the BIR
complaints. At this stage of the preliminary investigation, the constitutional right of private
respondents to due process is adequately protected because they have been given the opportunity
to be heard, i.e., to file counter-affidavits.
Nor can it be said, as respondents falsely argue, that there was no ground or basis for requiring the
private respondents to file such counter-affidavits. As respondent Court of Appeals admitted in its
here assailed decision, the BIR complaint (1st complaint) signed by the Commissioner of Internal
Revenue consisted of fourteen (14) pages supported by an annex consisting of seventeen (17)
pages in the form of a joint affidavit of eight (8) revenue officers, to which were attached voluminous
documents as annexes which, when put together, constituted a formidable network of evidence
tending to show fraudulent tax evasion on the part of private respondents. When, on the basis of
such BIR complaint and its supporting documents, the investigating Task Force saw a need to
proceed with the inquiry and, consequently, required private respondents to file their counter-
affidavits, grave abuse of discretion could hardly be imputed to said investigators.
2. On respondents' assertions that there is selective prosecution (no equal protection of the laws)
since other corporations similarly situated as they are, are not being prosecuted and/or investigated,
the argument is quite ludicrous, to say the least. As pointed out by the Solicitor General, more than
one thousand (1,000) criminal cases for tax evasion have been filed in Metro Manila alone. This
number, even if it seems to represent but a small fraction of "cases of actual tax evasion,
undoubtedly show that respondents are not being singled out. It is of note that the memorandum
issued by the President of the Philippines creating a task force to investigate tax evasion schemes of
manufacturers was issued three (3) months before the complaints against private respondents were
filed. This makes any charge of selective prosecution baseless since it could not then be shown, nor
has it been shown by private respondents that only they (respondents) were being
investigated/prosecuted. In fact, up to this time, respondents have failed to substantiate this
allegation of selective prosecution against them.
Moreover, assuming arguendo that other corporate manufacturers are guilty of using similar

schemes for tax evasion, allegedly used by respondents, the Solicitor General 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
(fraudulent tax evaders).
3. Private respondents' allegations that the Assistant Quezon City Prosecutor (among those
investigating the complaints against them) lacks impartiality, are so unsubstantiated, imaginary,
speculative and indeed puerile. They need not be elaborately refuted as a mere denial would suffice
under the circumstances.
4. On the issue of jurisdiction, the rule is settled that city and state prosecutors are authorized to
conduct preliminary investigations of criminal offenses under the National Internal Revenue Code.
Said criminal offenses are within the jurisdiction of the Regional Trial Court. 15
5. The issue of whether or not the evidence submitted by petitioners is sufficient to warrant the filing
of criminal informations for fraudulent tax evasion is prematurely raised. To argue, as private
16
respondents do, that one piece of evidence, i.e. the Daily Manufacturer's Sworn Statements, 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 which evidence should be
presented and examined. Further, "a preliminary investigation is not the occasion for the full and
exhaustive display of the parties' evidence; it is for the presentation of such evidence only as may
engender a well grounded belief that an offense has been committed and that the accused is
probably guilty thereof . . ." 7
1
Besides, the preliminary investigation has not yet been terminated. The proper procedure then
should be to allow the investigators, who undeniably have jurisdiction, to conduct and finish the
preliminary investigation and to render a resolution. The party aggrieved by said resolution can then
appeal it to the Secretary of Justice, as required by the settled doctrine of exhaustion of
18
administrative remedies. What special qualification or privilege, I may ask, do private respondents
have, particularly Fortune and Lucio Tan, as to exempt them from the operation of this rooted
principle and entitle them to immediate judicial relief from the respondent trial court in this case?
6. 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 view is decidedly not supported by law
and jurisprudence.
The lack of a final determination of respondent Fortune's exact or correct tax liability is not a bar to
criminal prosecution for fraudulent tax evasion. While a precise computation and assessment is
required for a civil action to collect a tax deficiency, the National Internal Revenue Code does not
require such computation and assessment prior to criminal prosecution for fraudulent tax evasion.
Thus, as this Court had earlier ruled --
An assessment of a deficiency is not necessary to a criminal prosecution for willful

attempt to defeat and evade the income tax. A crime is complete when the violator
has knowingly and willfully filed a fraudulent return with intent to evade and defeat
the tax. The perpetration of the crime is grounded upon knowledge on the part of the
taxpayer that he has made an inaccurate return, and the government's failure to
discover the error and promptly to assess has no connections with the commission of
the crime.19
It follows that, under the Ungab doctrine, the filing of a criminal complaint for fraudulent tax evasion
would be proper even without a previous assessment of the correct tax.
The argument that the Ungab doctrine will not apply to the case at bar because it involves a factual
setting different from that of the case at bar, is erroneous. The Ungab case involved the filing of a
fraudulent income tax return because the defendant failed to report his income derived from sale of
banana saplings. In the case at bar, the complaints filed before the DOJ for investigation charge
private wholesale respondents with fraudulent concealment of the actual price of products sold
through declaration of registered wholesale prices lower than the actual wholesale prices, resulting
in underpayment of income, ad valorem, and value-added taxes. Both cases involve, therefore,
fraudulent schemes to evade payment to the Government of correct taxes.
The Court in Ungab stated further as follows:
The petitioner also claims that the filing of the informations was precipitate and
premature since the Commissioner of Internal Revenue has not yet resolved his
protests against the assessment of the Revenue District Officer; and that he was
denied recourse to the Court of Tax Appeals.
The contention is without merit. What is involved here is not the collection of taxes
where the assessment of the Commissioner of Internal Revenue may be reviewed by
the Court of Tax Appeals, but a criminal prosecution for violations of the National
Internal Code which is within the cognizance of courts of first instance. While there
can be no civil action to enforce collection before the assessment procedures
provided in the Code have been followed, there is no requirement 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 rejected, that an assessment of the deficiency
tax due is necessary before the taxpayer can be prosecuted criminally for the
charges preferred. The crime is complete when the violator has, as in this case,
knowingly and wilfully filed fraudulent returns with intent to evade and defeat a part or
all of the tax. [Guzik vs. U.S., 54 F2d 618] (emphasis supplied)
The ruling in the Ungab case is undisputably on all fours with, and conclusive to the case at bar. It
should be stressed and pointed out that in Ungab the Court denied the prayer of therein petitioner to
quash informations for tax evasion that had already been filed in court. In other words, the
prosecutors in Ungab had already found probable cause to try therein petitioner for tax evasion.
Despite this fact there was no finding by the Court of violation of any of petitioner's constitutional
rights.
In the present case, private respondents were merely being required to submit counter-affidavits to
the complaints filed. If no violation of constitutional rights was committed in Ungab, upon the filing of
the criminal informations in Court, how can there now be a violation of private respondents'
constitutional rights upon a requirement by the investigators that private respondents submit their
counter-affidavits.
The Court has not been presented any compelling or persuasive argument why the Ungab doctrine
has to be abandoned. It is good law and should be the nemesis of fraudulent tax evaders. It gives
teeth to the proper enforcement of our tax laws.
7. Private respondents argue that a case earlier file before the Court of Tax Appeals (CTA) and now
before this Court involves a prejudicial question justifying or requiring suspension of the preliminary
20
investigation of the complaints for fraudulent tax evasion against private respondents. Said case
involves the validity of BIR Revenue Memorandum Circular No. 37-93 dated 1 July 1993 which
reclassified cigarettes manufactured by respondent Fortune. The circular subjects cigarettes with
brand names "Hope", "More" and "Champion" to a 10% increase in ad valorem taxes starting 2 July
1993. Respondent Fortune has assailed the validity of said revenue circular and the case has yet to
be decided with finality.
But 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 will not affect private
respondents' criminal liability for fraudulent tax evasion, for the following reasons:
a) The revenue circular involved in the other case pertains to ad valorem taxes on sales of Fortune's
named cigarette brands after 1 July 1993 while the fraudulent tax evasion involved in the present
case pertains to years 1990, 1991 and 1992.
b) The fraudulent scheme allegedly utilized by Fortune and its dummies, as described in the BIR
complaints pending with the DOJ Revenue Cases Task Force, which resulted in the
misdeclaration/underdeclaration of Fortune's gross sales receipts resulting in turn in underpayment
of ad valorem, value-added and income taxes was actually a "built-in" tax evasion device already in
place even before the assailed revenue circular was issued. The scheme is particularly designed to
result in the underpayment of ad valorem, value-added and income taxes regardless of the tax rate
fixed by the government on cigarette products.
8. Respondents also argue that the issue of whether Section 127(b) or Section 142(c) of the National
Internal Revenue 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:
Sec. 127. . . .

the cost of manufacture plus expenses incurred until the goods are finally sold, then
a proportionate margin of profit, not less than 10% of such manufacturing cost and
Sec. 142 . . .

on the manufacturer's registered wholesale price:
(1) On locally manufactured cigarettes bearing a foreign brand, fifty-five percent

(55%): Provided, That this rate shall apply regardless of whether or not the right to
use or title to the foreign brand was sold or transferred by its owner to the local
manufacturer. Whenever it has to be determined whether or not a cigarette bears a
foreign brand, the listing of brands manufactured in foreign countries appearing in the
current World Tobacco Directory shall govern.
(2) On other locally manufactured cigarettes, forty-five percent (45%).
Duly registered or existing brands of cigarettes packed in twenties shall not be

allowed to be packed in thirties.
When the existing registered wholesale price, including tax, of cigarettes packed in
twenties does not exceed P4.00 per pack, the rate shall be twenty percent (20%).
As the Solicitor General correctly points out, the two (2) aforequoted provisions of the Tax Code are
both applicable in determining the amount of tax due. Section 127(b) provides for the method of
determining the gross wholesale price to be registered with the BIR while Section 142(c) provides
for the rate of ad valorem tax to be paid. Said rate is expressed as a percentage of the registered
gross selling price which is determined, in turn, based on Section 127(b).
The aforementioned two (2) provisions of the Tax Code are certainly not determinative of private
respondents' criminal liability, if any. A reading of the BIR complaints pending with the DOJ Revenue
Cases Task Force shows that private respondent Fortune is being accused of using "dummy"
corporations and business conduits as well as non-existent individuals and entities to enable the
company (Fortune) to report gross receipts from sales of its cigarette brands lower than gross
receipts which are actually derived from such sales. Such lower gross receipts of the company, as
reported by respondent Fortune thus result in lower ad valorem, value-added and income taxes paid
to the government. Stated a little differently, respondent Fortune is accused of selling at wholesale
prices its cigarette brands through dummy entities in the profits of which it has a controlling interest.
Under Section 127(b), the gross selling price of the goods should be the wholesale price of such
dummy -- entities to its buyers but it is alleged by the government that respondent Fortune has
purposely made use of such entities to evade payment of higher but legally correct taxes.
9. As to respondents' additional claim that with regard to ad valorem tax, they merely based their
liability on the wholesale price registered with the Bureau of Internal Revenue (BIR) following the
method used by all cigarette manufacturers, said claim cannot absolve Fortune and its officers from
criminal liability. Payment of ad valorem and other taxes based on the wholesale price registered
21
with the BIR presupposes and naturally assumes that the registered wholesale price correspond to
the actual wholesale prices at which the manufacturer sells the product. If a manufacturer makes
use of a method or device to make it appear that products are sold at a wholesale price lower than
the amounts that the manufacturer actually realizes from such wholesale of its products, as what
respondent Fortune 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 Section 127(b)
aforequoted in relation to the penal provisions of the Tax Code.
10. Private respondents contend that the registration with the BIR of manufacturer's wholesale price
and the corresponding close supervision and monitoring by BIR officials of the business operations
of cigarette companies, ensure payment of correct taxes. The argument is baseless. It does not
follow that the cited procedure is a guarantee against fraudulent schemes resorted to by tax-evading
individuals or entities. It only indicates that taxpayers bent on evading payment of taxes would
explore more creative devices or mechanisms in order to defraud the government of its sources of
income even under its very nose. It is precisely to avoid and detect cases like this that the President
issued a Memorandum on 1 June 1993 creating a task force to investigate tax liabilities of
manufacturers engaged in tax evasion schemes, such as selling products through dummy marketing
companies at underdeclared wholesale prices registered with the BIR.
Moreover, the Manufacturer's Declaration which is the basis for determining the "Manufacturer's
Registered Wholesale Price" (which in turn becomes the basis for the imposition of ad valorem tax),
even if verified by revenue officers and approved by the Commissioner of Internal Revenue, does
not necessarily reflect the actual wholesale price at which the cigarettes are sold. This is why
manufacturers are still required to file other documents, like the "daily manufacturer's sworn
statements" in order to assist in determining whether or not correct taxes have been paid. In fine,
even if BIR officials may have verified Fortunes' BIR registered wholesale price for its products, the
same does not estop or preclude the Government from filing criminal complaints for fraudulent tax
evasion based on evidence subsequently gathered to the effect that such BIR registered wholesale
prices were a misdeclaration or underdeclaration of the actual wholesale price. It is hornbook law
that the Government is not bound or estopped by the mistakes, inadvertence, and what more,
connivance of its officials and employees with fraudulent schemes to defraud the Government. 22
Even on the assumption that official duty of BIR 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 make it appear that respondent Fortune's tax liabilities are far less than
what it (Fortune) should be actually liable for under the law. The very nature of the offense for which
respondents are being investigated, certainly makes regularity/irregularity in the performance of
official duties irrelevant.
It should also be pointed out that the offense allegedly committed by private respondents' consists in'
the intentional use of "dummy" entities to make it appear that respondent Fortune sells its products
at lower wholesale prices, which prices would correspond to the wholesale prices registered by
Fortune with the BIR, but not to the prices at which its products are sold by Fortune's dummies. The
difference between Fortune's BIR-reported wholesale prices and the prices at which its dummies sell
Fortune's products thus constitutes amounts for which Fortune should actually incur tax liabilities but
for which it allegedly never paid taxes because of the operation of the tax evasion scheme founded
on a combined underdeclaration with the BIR of Fortune's wholesale price of its products and the
sale of such products to is "dummy" corporations or to non- existing individuals or entities. This is the
obvious reason why the government has sought to investigate the alleged tax evasion scheme
purportedly utilized by respondent Fortune and its dummy corporations.
Based on the foregoing discussions, it follows that the answer to the main issue formulated earlier in
this opinion is in the negative since the private respondents have not shown 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 enjoined by the courts. 23
11. The trial court's ruling that private respondents' constitutional rights have been violated, rests on
untenable grounds. It 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. In
other words, it must have real basis for existing.
The exceptions to the general rule against restraining orders or injunctions to stop preliminary
investigations or criminal prosecutions are enumerated in Brocka vs. Enrile. One specific exception
24
is when an injunction is needed for the adequate protection of the accused's constitutional rights.
The exception definitely does not apply in the case at bar.
Before proceeding to illustrate this point, it is important to stress that in a preliminary investigation,
the investigating officers' sole duty is to determine, before the presentation of evidence by the
prosecution and by the defense, if the latter should wish to present any, whether or not there are
reasonable grounds for proceeding formally against the accused. This is in conformity with the
25
purpose of a preliminary investigation which 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. As restated by the illustrious late Chief Justice Manuel V. Moran --
26
. . . the purpose of a preliminary investigation is to afford the accused an opportunity

to show by his own 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 await trial in the Court of First Instance. 7
2
Prescinding from the tenets above-discussed, it is clear from the inception that there had been no
violation of private respondents' constitutional rights to presumption of innocence, due process and
equal protection of the laws. The preliminary investigation, I repeat, has not yet been terminated. At
this stage, only the complainant has finished presenting its affidavits and supporting documents.
Obviously then, the investigating panel found that there were grounds to continue with the inquiry,
hence, the issuance of subpoena and an order for the submission of counter-affidavits by private
respondents. Instead of filing counter-affidavits, private respondents filed a Verified Motion to
Dismiss; Alternatively, Motion to Suspend. At this point, it may be asked, how could private
respondents' constitutional right to presumption of innocence be violated when, in all stages of the
preliminary investigation, they were presumed innocent? Declaring that there are reasonable
grounds to continue with the inquiry is not the same as pronouncing that a respondent is guilty or
probably guilty of the offense charged.
12. Private respondents cannot also claim that they were not afforded due process and equal
protection of the laws. In fact, the investigating panel was concerned with just that when it ordered
the submission of private respondents' counter-affidavits. This procedure afforded private
respondents the opportunity to show by their own evidence that no reasonable grounds exist for the
filing of informations against them. Furthermore, contrary to the findings of the trial court and the
Court of Appeals, the alleged haste by which the subpoena was issued to private respondents (the
day after the filing of the 600-page annexed complaint) does not lessen the investigating panel's
ability to study and examine the complainant's evidence. Neither does such act merit the conclusion
that the investigating panel was less than objective in conducting the preliminary investigation.
Consequently, the general and settled rule must apply that the courts cannot interfere with the
discretion of the investigating officer to determine the specificity and adequacy of the averments in
the complaint filed, except in very exceptional circumstances, which do not obtain here.
28
Therefore, private respondents' act of filing a petition for certiorari and prohibition before the
Regional Trial Court was 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 were highly speculative -- more fancied than real.
Finally, Hernandez v. Albano (19 SCRA 95), cited by the majority 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. Hernandez also states that:
By statute, the prosecuting officer of the City of Manila and his assistants are
empowered to investigate crimes committed within the city's territorial jurisdiction.
Not a mere privilege, it is the sworn duty of a Fiscal to conduct an investigation of a
criminal charge filed with his office. The power to investigate postulates the other
obligation on the part of the Fiscal to investigate promptly and file the case of as
speedily. Public interest -- the protection of society -- so demands. Agreeably to the
foregoing, a
rule -- now of long standing and frequent application -- was formulated that ordinarily
criminal prosecution may not be blocked by court prohibition or injunction. Really, if
at every turn investigation of a crime will be halted by a court order, the
administration of criminal justice will meet with an undue setback. Indeed, the
investigative power of the Fiscal may suffer such a tremendous shrinkage that it may
end up in hollow sound rather than as a part and parcel of the machinery of criminal
justice.
It should be noted that while Hernandez lays down the extreme grounds when 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 with
prayer for preliminary injunction filed to stay the preliminary investigation of criminal complaints
against petitioner Hernandez.
The other case cited by the majority to support its decision in this case, Fortun v. Labang involves
29
criminal complaints filed against a judge of the Court of First Instance by disgruntled lawyers who
had lost their cases in the judge's sala. Clearly, the basis for the Court to stay preliminary
investigation in Fortun was a finding that said complaints were filed merely as a form of harassment
against the judge and which "could have no other purpose than to place petitioner-judge in contempt
and disrepute". The factual situation in the case at bar is poles apart from the factual situation
in Fortun.
Further, in Fortun there was an express finding by the Court that complaints against judges of the
Courts of First Instance are properly filed with the Supreme Court under Executive Order No. 264
(1970) since the Court is considered as the department head of the judiciary. In the present case it
cannot be disputed that jurisdiction to conduct preliminary investigation over fraudulent tax evasion
cases lies with the state prosecutors (fiscals).
It cannot therefore be denied that neither Hernandez nor Fortun supports with any plausibility the

majority's disposition of the issues in the present case. On the other hand, it appears to me all too
clearly that the majority 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. But I will have no part in the shocking process
especially in light of the fact that Government cries out that the people have
been cheated and defrauded of their taxes to the tune allegedly of P25.6 billion pesos, and yet, it is
not given by this Court even a beggar's chance to prove it!
13. There is great and vital public interest in the successful investigation and prosecution of criminal
offenses involving fraudulent tax evasion. Said public interest is much more compelling in the
present case since private respondents are not only accused of violating tax and penal laws but are
also, as a consequence of such violations, possibly depriving the government of a primary source of
revenue so essential to the life, growth and development of the nation and for the prestation of
essential services to the people.
14. It should be made clear, at this point, however, that this opinion is not a pre-judgment or pre-
determination of private respondents' guilt of the offense charged. No one, not even the prosecutors
investigating the cases for fraudulent tax evasion, is, at this stage of the proceedings, when private
respondents have yet to file their counter-affidavits, in a position to determine and state with finality
or conclusiveness whether or not private respondents are guilty of the offense charged in the BIR
complaints, now with the DOJ Revenue Cases Task Force. It is precisely through the preliminary
investigation that the DOJ Task Force on Revenue Cases can determine whether or not there are
grounds to file informations in court or to dismiss the BIR complaints.
15. I see no grave abuse of discretion committed by the state prosecutors in requiring private
respondents to submit counter-affidavits to the complaints for fraudulent tax evasion and to
determine the existence or absence of probable criminal liability.
The Rules on Criminal Procedure do not even require, as a condition sine qua 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 complainant's evidence is accorded him. The purpose of the
rule is to check attempts of unscrupulous respondents to thwart criminal investigations by not
appearing or employing dilatory tactics.30
16. Since the preliminary investigation in the DOJ Revenue Cases Task Force against private
respondents for alleged fraudulent tax evasion is well within its jurisdiction and constitutes no grave
abuse of discretion, it was in fact the respondent trial court that committed grave abuse of discretion,
amounting to lack or excess of jurisdiction, when it stayed such preliminary investigation.
17. The successful prosecution of criminal offenders is not only a right but the duty of the state. Only
when the state's acts clearly violate constitutional rights can the courts step in to interfere with the
state's exercise of such right and performance of such duty. I am indubitably impressed that there is
no violation of private respondents' constitutional rights in this case.
18. Lastly, the consolidation of the three (3) complaints in the DOJ against private respondents
should be allowed since they all involve the same scheme allegedly used by private respondents to
fraudulently evade payment of taxes. Consolidation will not only avoid multiplicity of suits but will
also enable private respondents to more conveniently prepare whatever responsive pleadings are
required or expected of them.
It is, therefore, my considered view that the decision of the Court of Appeals of 19 December 1994 in
CA G.R. SP No. 33599 should be SET ASIDE. The respondent trial court should be ENJOINED from
proceeding in any manner in Civil Case No. Q-94-19790, or at least until further orders from this
Court.
The preliminary investigation of the BIR complaints docketed as I.S. Nos. 93-508, 93-17942 and 93-
584 with the Department of Justice Revenue Cases Task Force, being constitutionally and legally in
order, should be allowed to resume until their final conclusion or completion, with private
respondents given a non-extendible period of ten (10) days from notice to submit to the investigating
panel their respective counter-affidavits and supporting documents, if any.

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3.1 Commissioner V CA, Lucio Tan

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G.R. No.

119322 June 4, 1996

COMMISSIONER ON INTERNAL REVENUE, SENIOR STATE PROSECUTOR AURORA S.

DAGUPAN COMBINED COMMODITIES, INC., TOWNSMAN COMMERCIALS, INC., LANDMARK

This underdeclaration which resulted in the evasion of the amount of

xxx xxx xxx

1st Qtr. P 2,924,418,055.00

2nd Qtr. 2,980,335,235.00

3rd Qtr. 2,839,519,325.00

4th Qtr. 2,992,386,005.00

These fraudulent underdeclarations which resulted in the evasion of value-added

xxx xxx xxx

1. The complaint of petitioner Commissioner follows a pattern of prosecution against

3. Exclusive jurisdiction to determine tax liability is vested in the Court of Tax

4. The complaint of petitioner Commissioner is not supported by any evidence to

c) At the hearing for preliminary investigation, the "Daily Manufacturer's Sworn

d) There is nothing on record in the preliminary investigation before the panel of

f) There was a precipitate issuance by the panel of prosecutors of subpoenas to

g) Private respondents had been especially targeted by the government for

filed an Urgent Motion for Immediate Resolution of petitioners' motion to dismiss.

Grave abuse of discretion as a ground for issuance of writs of certiorari and

WHEREFORE, the instant petition for certiorari and prohibition with application for

THE RESPONDENT COURTS COMMITTED GRAVE ABUSE OF DISCRETION

I. THERE IS A PREJUDICIAL AND/OR LEGAL QUESTION TO JUSTIFY THE

II. PRIVATE RESPONDENTS' RIGHTS TO DUE PROCESS, EQUAL PROTECTION

III. THE ADMISSION OF PRIVATE RESPONDENTS' SUPPLEMENTAL PETITIONS

IV. THERE WAS SELECTIVE PROSECUTION.

V. THE FACTUAL ALLEGATIONS IN THE PETITION ARE HYPOTHETICALLY

VI. THE ISSUANCE OF THE WRITS OF INJUNCTION IS NOT A DECISION ON

The petition is bereft of merit.

(b) Determination of gross selling price of goods subject to ad valorem tax. -- Unless

Reading Ungad carefully, the pronouncement therein that deficiency assessment is not necessary

a. To afford adequate protection to the constitutional rights of the accused

b. When necessary for the orderly administration of justice or to avoid oppression or

Contrary to petitioners' submission, preliminary investigation may be enjoined where exceptional

Sec. 3. Procedure. -- Except as provided for in Section 7 hereof, no complaint or

(c) Such counter-affidavits and other supporting evidence submitted by the

(d) If the respondent cannot be subpoenaed, or if subpoenaed, does not submit

WHEREFORE, the instant petition is hereby DISMISSED.

Hermosisima, Jr., J., concurs.

reasons: first, inspite of the motion of respondent Fortune Tobacco Corporation, petitioner

xxx xxx xxx

But even as we concede the inevitability and indispensability of taxation, it is a

THE CASE AND THE FACTS

counter-affidavits, private respondents filed a "Verified Motion to Dismiss; Alternatively, Motion to

counter-affidavit, in an order dated 15 October 1993. 4

b. denying suspension of investigation; and

c. denying the motion to inhibit the investigating state prosecutors.

DOJ Revenue Cases Task Force.

Grave abuse of discretion as a ground for issuance of writs of certiorari and

WHEREFORE, the instant petition for certiorari and prohibition with application for

GROUNDS FOR THE PETITION

THE RESPONDENT COURTS COMMITTED GRAVE ABUSE OF DISCRETION

I. THERE IS A PREJUDICIAL AND/OR LEGAL QUESTION TO JUSTIFY THE

II. PRIVATE RESPONDENTS' RIGHTS TO DUE PROCESS, EQUAL PROTECTION

III. THE ADMISSION OF PRIVATE RESPONDENTS' SUPPLEMENTAL PETITIONS

V THE FACTUAL ALLEGATIONS IN THE PETITION ARE HYPOTHETICALLY