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)
 NIRC

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.
 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 (CFI of Cebu) 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 it granted.
 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 CIR 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
CIR, 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?

• The posting of a bond is not an absolute

requirement; its imposition lies within the
sound discretion of the tax court.
 Ruling
• A careful analysis of the second paragraph of said
section 11 of RA 1125 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 CTA 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.
• Hence, Compromise can be had even during appeal.
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.
• (At least insofar as the first ground for
compromise is concerned: where the tax
assessment is of doubtful validity)
 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 CFI 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.
End of Report.
Thank You!
Reporter: Legine S. Ramayla