DIGEST/Krizabel Martinez/DIAZ vs. SEC. OF FINANCE & CIR

 

RENATO V. DIAZ and AURORA MA. F. TIMBOL, Petitioners,
vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, Respondents.

FACTS

Petitioners Renato V. Diaz and Aurora Ma. F. Timbol filed the petition for declaratory relief assailing the validity of the impending imposition of VAT by the BIR on the collections of tollway operators. They allege that BIR attempted during the administration of President Gloria Macapagal-Arroyo to impose VAT on toll fees. The imposition was deferred, however, in view of the consistent opposition of Diaz and other sectors to such move. But, upon President Benigno C. Aquino III’s assumption of office in 2010, the BIR revived the idea and would impose the challenged tax on toll fees beginning August 16, 2010 unless judicially enjoined.

The Court issued a TRO, enjoining the implementation of the VAT. Later, the Court issued another resolution treating the petition as one for prohibition.

The government argues that petitioners have no right to invoke the non-impairment of contracts clause since they clearly have no personal interest in existing toll operating agreements (TOAs) between the government and tollway operators. At any rate, the non-impairment clause cannot limit the State’s sovereign taxing power which is generally read into contracts.

 

ISSUE

 Whether or not the Court may treat the petition for declaratory relief as one for prohibition

 

RULING

The court held that there are precedents for treating a petition for declaratory relief as one for prohibition if the case has far-reaching implications and raises questions that need to be resolved for the public good. The Court has also held that a petition for prohibition is a proper remedy to prohibit or nullify acts of executive officials that amount to usurpation of legislative authority.

Here, the imposition of VAT on toll fees has far-reaching implications. Its imposition would impact, not only on the more than half a million motorists who use the tollways everyday, but more so on the government’s effort to raise revenue for funding various projects and for reducing budgetary deficits.

To dismiss the petition and resolve the issues later, after the challenged VAT has been imposed, could cause more mischief both to the tax-paying public and the government. A belated declaration of nullity of the BIR action would make any attempt to refund to the motorists what they paid an administrative nightmare with no solution. Consequently, it is not only the right, but the duty of the Court to take cognizance of and resolve the issues that the petition raises.

Although the petition does not strictly comply with the requirements of Rule 65, the Court has ample power to waive such technical requirements when the legal questions to be resolved are of great importance to the public. The same may be said of the requirement of locus standi which is a mere procedural requisite.