G.R. No. 219340, November 07, 2018
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. STANDARD INSURANCE CO., INC., RESPONDENT.
FACTS:
The respondent on Feb. 13, 2014 received from the Bureau of Internal Revenue (BIR) a Preliminary Assessment Notice (PAN) regarding its liability arising from a deficiency in the payment of documentary stamp taxes (DST. They contested the PAN through its letter dated February 27, 2014, but the petitioner nonetheless sent to it a formal letter of demand dated March 27, 2014.
Although the respondent requested reconsideration on April 22, 2014 it received on December 4, 2014 the Final Decision on Disputed Assessment (FDDA) dated November 25, 2014, declaring its liability for the DST deficiency, including interest and compromise penalty, totaling P418,830,567.46.
On December 11, 2014, it 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. 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,[7] and deficiency DST for taxable year 2013.
On December 19, 2014, the respondent commenced Civil Case No. 14-1330 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. 1000 I 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.
On May 8, 2015, the RTC rendered the assailed judgment wherein it opined that although taxes were self-assessing, the tax system merely created liability on the part of the taxpayers who still retained the right to contest the particular application of the tax laws; and hol ding that the exercise of such right to contest was not considered a breach of the provision itself as to deter the action for declaratory relief
ISSUE:
WHETHER OR NOT THE DECLARATORY RELIEF IS APPLICABLE TO CONTEST TAX ASSESSMENTS.
WHETHER OR NOT THE DECLARATORY RELIEF IS A PROPER REMEDY
RULING:
Under the law, injunctive relief is not available as a remedy to assail the collection of a tax. An action for declaratory relief is governed by Section 1, Rule 63 of the Rules of Court.Under Section 218 of the NIRC, it 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]."
On the other hand, the action for declaratory relief is governed by Section 1, Rule 63 of the Rules of Court. It is predicated on the attendance of several requisites, specifically: (1) the subject matter of the controversy must be a deed, will, contract or other written instrument, statute, executive order or regulation, or ordinance; (2) the terms of said documents and the validity thereof are doubtful and require judicial construction; (3) there must have been no breach of the documents in question; (4) there must be an actual justiciable controversy or the "ripening seeds" of one between persons whose interests are adverse; (5) the issue must be ripe for judicial determination; and (6) adequate relief is not available through other means or other forms of action or proceeding. The third, fourth, fifth and sixth requisites were patently wanting.
Firstly, the third requisite was not met due to the subject of the action (i.e. statute) having been infringed or transgressed prior to the institution of the action.The RTC's belief was absolutely devoid of legal foundation, however, simply because internal revenue taxes, being self-assessing, required no further assessment to give rise to the liability of the taxpayer.
The assessments for DST deficiencies of the respondent for the years 2011, 2012 and 2013, as imposed pursuant to Section 184 of the NIRC were the subject of the respondent's petition for declaratory relief.
The violation of Section 184 of the NIRC occurred upon the taxpayer's failure or refusal to pay the correct DST due at the time of issuing the non-life insurance policies. Inasmuch as the cause of action for the payment of the DSTs pursuant to Section 108[20] and Section 184 of the NIRC accrued upon the respondent's failure to pay the DST at least for taxable year 2011 despite notice and demand, the RTC could not procedurally take cognizance of the action for declaratory relief.
Secondly, the apprehension of the respondent that it could be rendered technically insolvent through the imposition of the iniquitous taxes imposed by Section 108 and Section 184 of the NIRC,[21] laws that were valid and binding, did not render the action for declaratory relief fall within the purview of an actual controversy that was ripe for judicial determination.
The respondent was engaging in speculation or conjecture, or arguing on probabilities, not actualities. Therein lay the prematurity of its action, for a justiciable controversy refers to an existing case or controversy that is appropriate or ripe for judicial determination, not one that is conjectural or merely anticipatory.
Lastly, the respondent's adequate remedy upon receipt of the FDDA for the DST deficiency for taxable year 2011 was not the action for declaratory relief but an appeal taken in due course to the Court of Tax Appeals. Instead of appealing in due course to the CTA, however, it resorted to the RTC to seek and obtain declaratory relief. By choosing the wrong remedy, the respondent lost its proper and true recourse. With not all the requisites for the remedy of declaratory relief being present, the respondent's petition for declaratory relief had no legal support and should have been dismissed by the RTC.
Digested by Giselle Saguin
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