COMMISSIONER OF INTERNAL REVENUE v. STANDARD INSURANCE CO., INC. (Tax 2)

G.R. No. 219340, November 07, 2018

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. STANDARD INSURANCE CO., INC., Respondent.

FACTS:

Respondent Standard Insurance Co., Inc. received from the Bureau of Internal Revenue (BIR) a Preliminary Assessment Notice (PAN) regarding its liability amounting to P377,038,679.55 arising from a deficiency in the payment of documentary stamp taxes (DST) for taxable year 2011. 

The respondent contested the PAN through its letter but the petitioner nonetheless sent to it a formal letter of demand. Although the respondent requested reconsideration, it received the Final Decision on Disputed Assessment (FDDA) declaring its liability for the DST deficiency, including interest and compromise penalty, totaling P418,830,567.46.

Respondent sought reconsideration of the FDDA, and objected to the tax imposed pursuant to Section 184 of the NIRC as violative of the constitutional limitations on taxation.

Meanwhile, the respondent also received a demand for the payment of its deficiency income tax, value-added tax, premium tax, DST, expanded withholding tax, and fringe benefit tax for taxable year 2012, and deficiency DST for taxable year 2013.

The respondent commenced civil case in the RTC (with prayer for issuance of a temporary restraining order (TRO) or of a writ of preliminary injunction) for the judicial determination of the constitutionality of Section 108 and Section 184 of the NIRC with respect to the taxes to be paid by non-life insurance companies. 

In its petition, the respondent contended that the facts of the case must be appreciated in light of the effectivity of Republic Act (R.A.) No. 10001 entitled An Act Reducing the Taxes on Life Insurance Policies, whereby the tax rate for life insurance premiums was reduced from 5% to 2%; and the pendency of deliberations on House Bill (H.B.) No. 3235 entitled An Act Rationalizing the Taxes Imposed on Non-Life Insurance Policies, whereby an equal treatment for both life and non-life companies was being sought as a response to the supposed inequality generated by the enactment of R.A. No. 10001.

The RTC issued the TRO prayed for by enjoining the BIR, its agents, representatives, assignees, or any persons acting for and in its behalf from implementing the provisions of the NIRC adverted to with respect to the FDDA for the respondent's taxable year 2011, and to the pending assessments for taxable years 2012 and 2013.

Later, the RTC issued the writ of preliminary injunction.

Then RTC rendered the assailed judgment, the respondent, its agents, representatives, or any persons acting on its behalf is hereby permanently enjoined from proceeding with the implementation or enforcement of Sections 108 and 184 of the National Internal Revenue Code against petitioner Standard Insurance Co., Inc. until the Congress shall have enacted and passed into law House Bill No. 3235 in conformity with the provisions of the Constitution.

The petitioner moved for reconsideration of the judgment, however RTC denied the motion for reconsideration.

Hence, the petitioner has appealed directly to the Court.

ISSUE:

WHETHER THE TRIAL COURT GRAVELY ERRED IN GRANTING INJUNCTIVE RELIEF IN FAVOR OF RESPONDENT, THE SAME (I) BEING SPECIFICALLY PROHIBITED BY SECTION 218 OF THE NIRC; AND (II} HAVING BEEN GRANTED WITHOUT FACTUAL OR LEGAL BASIS.

RULING:

Yes. The injunctive relief is not available as a remedy to assail the collection of a tax

The inflexible policy that taxes, being the lifeblood of the Government, should be collected promptly and without hindrance or delay. 

Obeisance to this policy is unquestionably dictated by law itself. Indeed, Section 218 of the NIRC expressly provides that "[n]o court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by th[e] [NIRC]."

Also, pursuant to Section 1115 of R.A. No. 1125, as amended, the decisions or rulings of the Commissioner of Internal Revenue, among others, assessing any tax, or levying, or distraining, or selling any property of taxpayers for the satisfaction of their tax liabilities are immediately executory, and their enforcement is not to be suspended by any appeals thereof to the Court of Tax Appeals unless "in the opinion of the Court [of Tax Appeals] the collection by the Bureau of Internal Revenue or the Commissioner of Customs may jeopardize the interest of the Government and/or the taxpayer," in which case the Court of Tax Appeals "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."

In view of the foregoing, the RTC not only grossly erred in giving due course to the petition for declaratory relief, and in ultimately deciding to permanently enjoin the enforcement of the specified provisions of the NIRC against the respondent, but even worse acted without jurisdiction.