Injunction by the Tax Court

Preliminary Injunction
A preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment or final order,
requiring a party or a court, agency or a person to refrain from a particular act or acts. It may also require the
performance of a particular act or acts, in which case it shall be known as preliminary mandatory injunction. (Sec. 1,
Rule 58, RC)

SEC. 218. Injunction not Available to Restrain Collection of Tax. - No court shall have the authority to grant an
injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code. (NIRC)

Republic Act No. 9282

"No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the Commissioner of
Customs or the Regional Trial Court; provincial, city or municipal treasurer or the Secretary of Finance; the Secretary of
Trade and Industry; and Secretary of Agriculture, as the case may be, shall suspend the payment, levy, distraint and/or
sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however,
that when in the opinion of the Court, the collection by the aforementioned government agencies may jeopardize the
interest of the Government and/or the taxpayer, the Court, at any stage of the proceeding may suspend the said
collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than
double the amount with the Court.” (Section 9 amendment to Sec. 11 of RA 1125)

Revenue Memorandum Order 42-2010

Prohibits the issuance of TRO on the collection of taxes against the BIR by courts other than the CTA, the issuance of
warrants of distraint and garnishment, and/or levy on final decisions of the BIR on disputed assessments, cases filed
before the CTA, and the sale of property distrained and garnished.

SILVERIO BLAQUERA, as Collector of Internal Revenue vs.

Hon. JOSE S. RODRIGUEZ, in his capacity as Judge of the Court of First Instance of Cebu, and CHENG HOK, doing
business under the firm name "Magallanes Bakery"
Facts:

On May 25, 1956 respondent Cheng Hok, doing business under the firm name "Magallanes Bakery," filed a complaint
in the respondent CFI of Cebu against the petitioner CIR, alleging that notwithstanding the fact that he had paid fully
the percentage tax due on his business for certain periods from 1951 to 1954, the petitioner was demanding from him
the payment of P7,221.74 as deficiency percentage tax, 25% surcharge thereon, and P50 as compromise penalty, or a
total of P9,077.18.

He prayed for a writ enjoining the petitioner CIR, his agents, subordinates and all persons acting on his behalf from
effecting the collection of the aforesaid sum and from levying on any of his property to satisfy it; and after hearing, for
a final writ of injunction.

The respondent Court granted the petition for a writ of preliminary injunction upon the filing of a bond in the sum of
P9,077.18.

The petitioner CIR moved for the dismissal of the complaint and for the discharge of the writ of preliminary injunction
theretofore issued, on the ground that the respondent Court has no jurisdiction on the subject matter of the action,
involving as it does a disputed assessment, surcharge and penalty or other matters arising under the provisions of
the NIRC, which falls within the jurisdiction of the CTA, and that no court has authority to grant a writ of injunction
to restrain the collection of any internal revenue tax, fee, or charge imposed by the same Code. The motion to dismiss
and motion for reconsideration were both denied.
Hence, the petitioner filed this petition in this Court seeking to annul the orders of the respondent Court that granted
the writ of preliminary injunction and the writs issued that denied the petitioner's motion to dismiss and motion for
reconsideration. The petitioner further prayed for a writ of preliminary injunction to restrain the respondent Court from
enforcing the writ of preliminary injunction
Issue

Whether or not the CFI Cebu can issue writ of preliminary injunction? (No)

Ruling
Section 7, RA 1125, which took effect on 16 June 1954, in part provides:
The Court of Tax Appeals shall exercise exclusive appellate jurisdiction, to review by appeal, as herein provided
—
(1) Decisions of the Collector of internal Revenue in cases in disputed assessments, refunds of internal revenue
taxes, or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal
Revenue Code or other law or part of law administered by the Bureau of Internal Revenue.

Section 11 of the same Act provides:

Any person, association or corporation adversely affected by a decision or ruling of the Collector of Internal
Revenue, the Collector of Custom or any Provincial or city Board of Assessment Appeals may file an appeal in the in the
Court of Tax Appeals within thirty days after the receipt of such decision or ruling.

It is clear that the action, involving as it does, a disputed assessment of an internal revenue tax, surcharge and penalty
imposed in relation thereto, or a matter arising under the NIRC, fall, within the exclusive appellate jurisdiction of the
CTA. The claim that the respondent taxpayer had paid fully and timely the tax due is a matter of defense which must
be averred or set up in the proper court. The averment or setting up of such defense in another court would not vest
in the latter court jurisdiction to hear and determine the case.

The contention that the complaint is essentially for collection of damages against the petitioner, over which the Court
of Tax Appeals has no jurisdiction, is without merit. The allegations and prayer of the complaint do not support the
contention. Section 11 of RA 1125 providing for the suspension of tax collection refers to the Court of Tax Appeals
and not to the Courts of First Instance.
Bottomline: It is CTA which can issue Preliminary Injunction, not RTC.

THE COLLECTOR OF INTERNAL REVENUE vs.

JOSE C. ZULUETA and THE COURT OF TAX APPEALS

Facts:
On February 10, 1954, respondent Jose C. Zulueta, who had not filed his income tax returns for the years 1945 to 1948
and 1950, received a letter from the Collector of Internal Revenue informing him that his income tax deficiency for the
years 1945 to 1951, inclusive amounted to P550,527.50.
It appearing that respondent Jose C. Zulueta failed to submit a memorandum in support of his contention that the
assessment on his income tax was erroneous, the Collector of Internal Revenue, on June 3, 1954, required said taxpayer
to pay the taxes demanded of him amounting to P616,630.81 not later than June 30, 1954.

For failure to pay the said taxes, On December 29, 1954, the City Treasurer of Manila placed under distraint and levy
certain real properties of the respondent taxpayer to be sold at public auction on February 21, 1955, to meet the
amount of P550,326.50 representing deficiency income taxes for 1945 to 1951, plus the corresponding deficiency
penalties.
Thereafter, respondent filed with the CTA a petition to review the deficiency income tax assessment made by the CIR
and on January 26, 1955, filed an urgent petition to enjoin the CIR and the City Treasurer of Manila from proceeding
with the contemplated sale of his properties.
After proper hearing, the respondent Court declared the proper order of distraint and levy against the properties of
respondent Zulueta to insure the collection of alleged income tax deficiency for 1945, 1946, 1947, 1948 and 1950 null
and void on the ground of prescription, but required Zulueta to file a bond for P116,000 to guarantee the payment of
his income tax and surcharges for the year 1951, before issuing the writ of injunction to restrain the herein petitioner
from proceeding with the scheduled sale of respondent's properties.

After the bond in said amount was posted, the CTA issued its order of February 18, 1955, enjoining the CIR and the City
Treasurer of Manila from selling any real or personal property of Jose C. Zulueta at public auction pending the outcome
of the appeal. Hence, this petition.
Petitioner now asserts that even assuming that the respondent CTA had jurisdiction to order him to desist from
collecting through summary administrative methods the taxes due from respondent Zulueta, yet the Court committed
a grave abuse of discretion in its failure to require the filing of a bond or deposit the amount assessed for the tax years
1945, 1946, 1947, 1948 and 1950.

Issue
Whether or not a bond is a condition precedent for the issuance of injunction?

Ruling
A careful analysis of the second paragraph of said section 11 will lead us to the conclusion that the requirement of the
bond as a condition precedent to the issuance of a writ of injunction applies only in cases where the processes by which
the collection sought to be made by means thereof are carried out in consonance with law for such cases provided and
not when said processes are obviously in violation of the law to the extreme that they have to be SUSPENDED for
jeopardizing the interests of the taxpayer.

In the case at bar, what the respondent Court suspended was the use of the method employed to verify the collection
which was evidently illegal after the lapse of the three-year limitation period. It would certainly be an absurdity on the
part of the Court of Tax Appeals to declare that the collection by the summary methods of distraint and levy was
violative of the law, and then, on the same breath, require the petitioner to deposit or file a bond as a pre-requisite of
the issuance of a writ of injunction.

It is for this reason that the respondent Court in the case at bar required respondent Zulueta to post only a bond for
P116,000 in favor of the Government to guarantee the collection of his income tax deficiency for the year 1951, before
the writ of injunction was issued, and declined to order a similar requirement with respect to the income taxes for the
years 1945, 1946, 1947, 1948 and 1950.

Compromise During Appeal

Compromise
It is an agreement between two or more persons who, amicably settle their differences on such terms and conditions
as they may agree on to avoid any lawsuit between them. It implies the mutual agreement by the parties in regard to
the thing or subject matter which is to be compromised.
COMPROMISE is a contract whereby the parties in interest by giving, promising or retaining something or otherwise
making reciprocal concessions, avoid a litigation or terminate one already commenced.

Requisites for Compromise

1. Tax liability of the taxpayer;
2. An offer of the taxpayer of an amount to be paid by him; and
3. The acceptance of the offer in the settlement of the claim.
AUTHORITY OF THE COMMISSIONER TO COMPROMISE

The authority of the Commissioner to compromise encompasses both civil and criminal liabilities of the taxpayer. The
civil compromise is allowed only in cases (a) where the tax assessment is of doubtful validity, or (b) when the financial
position of the taxpayer demonstrates a clear inability to pay the tax.

All criminal violations except those involving fraud, can be compromised by the Commissioner but only prior to the
filing of the information with the Court.

When to Compromise
General Rule:
The compromise of the tax liability is possible at any stage of litigation and the amount of compromise is left to the
discretion of the Commissioner.

Exception
With respect to final assessments issued against large taxpayers wherein the Commissioner cannot compromise for
less than 50%.

When a case is finally decided by the Supreme Court, it is no longer open for compromise.

TRANQUILINO ROVERO vs.

RAFAEL AMPARO as Judge of the Court of First Instance of Manila, Branch III, THE REPUBLIC OF THE PHILIPPINES
and THE SHERIFF OF THE CITY OF MANILA
Facts:

The petitioner Tranquilino Rovero in the evening of April 25, 1947, arrived at the Makati Air Port on board a PAL plane
which came from Bangkok, Siam. He brought with him several pieces of baggage, among which was a Chinese vase
which he declared and valued at P15. The vase together with some of the baggage were retained by the Customs
officials for they suspected that they contained merchandise not declared which should pay customs duty.

In the course of the examination of said Chinese vase, it was found that it had a false bottom which upon being broken
open was seen to hold a tin can containing 259 pieces of jewelry with precious stones, which the Customs officials
appraised at P23,736. Rovero never mentioned to said Customs officials the presence of said pieces of jewelry in the
Chinese vase. The jewelry was, therefore, seized as property subject to forfeiture

Rovero was found guilty of violating section 2703 of the Revised Administrative Code and sentenced to pay a fine of
P2,500, with subsidiary imprisonment in case of insolvency, plus costs. Rovero was also fined by the Commissioner of
Customs in an amount equal to three times the customs duty due on a piece of jewelry which was not declared in his
baggage declaration and which was found concealed in his wallet.

Not satisfied with that decision Rovero appealed the case to the Court of First Instance of Manila which later affirmed
the decision of the Commissioner of Customs, with costs. The decision appealed from was also affirmed, with costs by
the Supreme Court.

After promulgation of the decision of the Supreme Court, Rovero wrote to the Commissioner of Customs a letter, stating
that the case of the 259 pieces of jewelry was still pending and petitioning for a reappraisal of said jewelry. Acting upon
said petition the Collector of Customs created a Committee on Reappraisement composed of three members. The
Committee filed its report wherein the said 259 pieces of jewelry were reappraised at P9,880 (original appraisal was
P23,736).

The Commissioner of Customs forwarded the papers to the Secretary of Finance requesting informations as to whether
the original appraisement of P23,736 of the jewelry involved, which appraisal the Commissioner found to be excessive,
may be set aside and the reappraisement made by the Committee considered in the determination of the duties and
fines that Rovero had to pay in accordance with the decision of the case.

The Secretary of Finance granted authority "for the setting aside of the original appraisement and for the collection of
the fine imposed by the Supreme Court and of the customs duties and charges based on the reappraisement value of
P9,800." In other words, the officials approved the relatively small amount of the reappraisal which is less than one-
half of the original appraisal.

To justify the reappraisal made by the Customs officials after the decision of this Court had become final, the provisions
of section 1368 is invoked which provides for the power of supervision and control of the Commisioner over judicial
proceedings.

Issue
Whether or not the commissioner can enter into compromise when the case is finally decided by the Supreme Court.
(No)

Ruling
Compromise is resorted to, to avoid a litigation or to end a suit already instituted. It contemplates mutual concessions
and mutual gains to avoid expenses and trouble of litigation or, when litigation has already been begun, to end it
because of the uncertainty of the result thereof.

The contention that parties to a case may enter into a compromise about even a final judgment rendered by a court is
correct only as regards private parties who are the owners of the property subject-matter of the litigation, and who are
therefore free to do with what they own or what is awarded to them, as they please, even to the extent of renouncing
the award, or condoning the obligation imposed by the judgment of the adverse party.

Here, the Commissioner of Customs is not a private party and is not the owner of the money involved in the fine based
on the original appraisal. He is a mere agent of the Government and acts as a trustee of the money or property in his
hands or coming thereto by virtue of a favorable judgment. Unless expressly authorized by his principal or by law, he is
not authorized to accept anything different from or anything less than what is adjudicated in favor of the Government.

The Republic of the Philippines won the case in court by virtue of a final judgment and has acquired a vested right to
the money represented by the fine based on the original appraisement of the jewelry in question.

Here, as far as the Republic is concerned, the period for compromise had definitely ended. The original controversy
about the legality of the seizure of the jewelry, the imposition of the fine treble the appraised value of P23,736 has not
only been taken to court, but it has been finally decided by the highest Tribunal. There is no longer any uncertainty as
to the result of the litigation because the Government has definitely and finally won it. In other words, there is nothing
more to compromise. By the attempted so-called compromise in the form of reappraisal, the Government had nothing
to gain but much to lose in the form of several thousand pesos.

In a nutshell, the court rules that:

Once the court decision becomes final, neither the Secretary of Finance nor the Commissioner of Customs may have
the goods reappraised for the purpose of reducing the amount of the fine.
Said officials, under the law have no authority to remit fines or forfeitures after the courts, on appeal and in final
decisions have sanctioned said fines or forfeitures;

The power of the Commissioner of Customs under Section 1369 of the Revised Administrative Code, to compromise
any case or proceeding arising under the customs laws, refers only to cases appealed to the courts and finally decided
by them; and
The supervision and control over judicial proceedings given by Section 1368 of the Revised Administrative Code to the
Commissioner of Customs, does not extend to modifying final decisions of the Court, in the sense that he may accept
on behalf of the Government anything different or less than what is awarded to said Government in the decision.