The Supreme Court has dismissed a Petition for Certiorari and Prohibition filed by the Commissioner of Internal Revenue (CIR), which sought to challenge a Court of Tax Appeals (CTA) Division order suspending the Bureau of Internal Revenue's (BIR) tax collection efforts against Nippon. The Court found the petition defective because it was filed without the Office of the Solicitor General's (OSG) authority, and also ruled there was no grave abuse of discretion by the CTA Division.
The Case
The controversy stems from the BIR's assessments for deficiency income tax, value-added tax (VAT), withholding tax on compensation (WTC), expanded withholding tax (EWT), documentary stamps tax (DST), and improperly accumulated earnings tax (IAET) against Nippon for calendar year 2016.
The CIR issued a Formal Letter of Demand (FLD) and Final Assessment Notices (FAN), both dated March 23, 2022, finding Nippon liable for alleged deficiency taxes amounting to PHP 81,345,123.84. Nippon protested the assessments administratively, requesting a reinvestigation.
On October 2, 2023, the CIR issued a Final Decision on Disputed Assessment (FDDA), requiring Nippon to pay the alleged deficiency taxes on or before December 31, 2023. However, before that deadline, a Warrant of Distraint and/or Levy dated October 15, 2023 and a Warrant of Garnishment dated October 18, 2023 were issued against Nippon.
Nippon appealed the FDDA to the CTA, docketed as CTA Case No. 11294, together with an Urgent Application for a Writ of Preliminary Prohibitory Injunction and Urgent Motion for the Issuance of Temporary Suspension Order and/or Temporary Restraining Order and Motion to Lift the Warrant of Garnishment (the Motion to Suspend), to contest the BIR's attempts to collect.
On September 27, 2024, the CTA Division granted Nippon's Motion to Suspend, agreeing that the taxes sought to be collected were not yet delinquent, making the collection measures premature and illegal. After the denial of its motion for reconsideration, the CIR, represented by the BIR Legal Division, brought the matter to the Supreme Court through a Rule 65 petition.
The Issue
The Court addressed whether the CIR's petition, filed without OSG representation, was valid, and whether the CTA Division committed grave abuse of discretion in issuing its Suspension Order and dispensing with the bond requirement.
The Ruling
The Court dismissed the petition. Its final disposition states: "ACCORDINGLY, the present Petition for Certiorari and Prohibition is DISMISSED for lack of merit. SO ORDERED."
The Court observed that the CIR was not represented by the OSG when it filed the case, and there was no showing that the BIR Litigation Division was ever duly authorized by the OSG to represent the CIR. It noted that it is the OSG's statutory mandate to represent the Government and its officers before the Supreme Court and other courts. A petition filed without the OSG's imprimatur, when required, is defective and sufficient ground for dismissal.
By the Numbers
- G.R. No. 280580
- Total alleged deficiency taxes: PHP 81,345,123.84
- FLD and FAN dated: March 23, 2022
- FDDA issued: October 2, 2023, with payment due on or before December 31, 2023
- Warrant of Distraint and/or Levy dated: October 15, 2023
- Warrant of Garnishment dated: October 18, 2023
- CTA Division granted the Motion to Suspend: September 27, 2024
- Preliminary hearing on Motion to Suspend: March 6, 2024
- CTA Case No. 11294
The Court's Reasoning
The Court cited Commissioner of Internal Revenue v. La Suerte Cigar & Cigarette Factory, where the CIR's direct filing of a petition without OSG authority was a procedural defect. This led to a Memorandum of Agreement between the OSG and BIR, communicated through Revenue Memorandum Circular No. 025-10, making it clear that representation of the CIR/BIR before the Court in petitions assailing CTA rulings is exclusive to the OSG. While the OSG may deputize BIR lawyers, that authority does not extend to representation before the Court. The Court found no reason to relax the rule as it had in La Suerte.
The Court further held that the ground cited by the CIR could not be addressed by certiorari and prohibition. The CIR equated grave abuse with the tax court's supposed misinterpretation of the law on the definition of delinquency. Absent caprice, bias, or arbitrariness, such a mistake does not amount to grave abuse. These Rule 65 remedies correct only errors of jurisdiction, not errors in findings and conclusions.
Finding no grave abuse of discretion, the Court noted that the CTA conducted a preliminary hearing on Nippon's Motion to Suspend on March 6, 2024, after which Nippon filed its Formal Offer of Evidence, and the CIR filed its Comment/Opposition, cross-examined Nippon's witness, and commented on the evidence. The CTA ordered the suspension because the warrants were issued prematurely, and such hasty collection is unlawful, so the tax court likewise dispensed with the bond requirement. The Court found the suspension order was adequately explained in accordance with Section 11 of Republic Act No. 1125, as amended, and Rule 10 of the Revised Rules of the CTA.
Source: Supreme Court decision in G.R. No. 280580, penned by Associate Justice Henri Jean Paul B. Inting.
This report summarizes a public Supreme Court decision and is not legal advice.