27.

CIR vs CA preliminary injunction to enjoin the preliminary

GR No. 119322; June 4, 1996
Facts:
A task force was created on June 1, 1993 to
investigate tax liabilities of manufacturers engaged in
tax evasion schemes. On July 1, 1993, the CIR issued
Rev. Memo Circ. No. 37-93 which reclassified certain
cigarette brands manufactured by private respondent
Fortune Tobacco Corp. (Fortune) as foreign brands
subject to a higher tax rate. On August 3, 1993,
Fortune questioned the validity of said reclassification
as being violative of the right to due process and equal
protection of laws. The CTA, on September 8, 1993
resolved that said reclassification was of doubtful
legality and enjoined its enforcement.
In the meantime, on August 3, 1993, Fortune was
assessed deficiency income, ad valorem and VAT for
1992 with payment due within 30 days from receipt.
On September 12, 1993, private respondent moved for
reconsideration of said assessment. Meanwhile on
September 7, 1993, the Commissioner filed
a complaint with the DOJ against private respondent
Fortune, its corporate officers and 9 malfeasance at the very least, there is the presumption
other corporations and their respective corporate
officers for alleged fraudulent tax evasion for
non-payment of the correct income, ad valorem and
VAT for 1992. Thecomplaint was referred to the DOJ
Task Force on revenue cases which found sufficient
basis to further investigate the charges against Fortune.
A subpoena was issued on September 8, 1993
directing private respondent to submit their
counter-affidavits. But it filed a verified motion to
dismiss or alternatively, a motion to suspend but was
denied and thus treated as their counter-affidavit. All
motions filed thereafter were denied.
investigation on the complaint for tax evasion
pending before the DOJ, ruling that the tax liability of
private respondents first be settled before
any complaint for fraudulent tax evasion can be
initiated.
Issue:
Whether or not the basis of private respondent’s tax
liability first be settled before any complaint for
fraudulent tax evasion can be initiated.
Held:
Yes.
Fraud cannot be presumed. If there was fraud on
willful attempt to evade payment of ad valorem taxes
by private respondent through the manipulation of the
registered wholesale price of thecigarettes, it must
have been with the connivance of 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
that BIR personnel performed their duties in the
regular course in ensuring that the correct taxes were
paid by Fortune.
Before the tax liabilities of Fortune are
finally determined, it cannot be correctly asserted that
private respondents have willfully attempted to evade
or defeat any tax under Secs. 254 and 256, 1997
NIRC, the fact that a tax is due must first be proved.

January 4, 1994, private respondents filed a petition

for certiorari and prohibition with prayer for
preliminary injunction praying the
CIR’scomplaint and prosecutor’s orders be
dismissed/set aside or alternatively, that the
preliminary investigation be suspended
pending determination by CIR of Fortune’s motion
for reconsideration/reinvestigation of the August 13,
1993 assessment of taxes due.

The trial court granted the petition for a writ of