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CIR v. STANDARD INSURANCE CO.

FACTS:

This case involves the authority of the Regional Trial Court (RTC) to enjoin the enforcement of certain provisions of the National Internal Revenue Code of 1997 (NIRC) through an original action for declaratory relief. The Commissioner of Internal Revenue filed this appeal to challenge the judgment rendered by the RTC, which permanently enjoined the Commissioner from enforcing certain provisions of the NIRC against the respondent, Standard Insurance Co., Inc., and denied the Commissioner's motion for reconsideration.

The respondent received a Preliminary Assessment Notice (PAN) from the Bureau of Internal Revenue (BIR) regarding its liability for a deficiency in the payment of documentary stamp taxes (DST) in 2011. The respondent contested the PAN, but the Commissioner still sent a formal letter of demand. After receiving the Final Decision on Disputed Assessment, the respondent sought reconsideration and objected to the tax imposed pursuant to Section 184 of the NIRC as violating constitutional limitations on taxation.

The respondent also received demands for the payment of other taxes for taxable year 2012 and 2013. In response, the respondent initiated an action for declaratory relief in the RTC, seeking the constitutionality of certain provisions of the NIRC with respect to taxes to be paid by non-life insurance companies. The RTC issued a temporary restraining order (TRO) and eventually a writ of preliminary injunction.

The RTC rendered a judgment permanently enjoining the Commissioner from implementing or enforcing the provisions of the NIRC against the respondent until a specific bill is enacted into law. The Commissioner moved for reconsideration, but it was denied by the RTC.

ISSUES:

  1. Whether the action for declaratory relief is proper.

  2. Whether the RTC has jurisdiction over the action for declaratory relief.

  3. Whether the action for declaratory relief is the proper remedy to contest tax assessments.

  4. Whether the Regional Trial Court (RTC) has jurisdiction to take cognizance of the action for declaratory relief.

RULING:

  1. The appeal is meritorious. The injunctive relief is not available as a remedy to challenge the collection of a tax. The RTC lacked jurisdiction over the action for declaratory relief.

  2. The action for declaratory relief is not the proper remedy to contest tax assessments. The injunctive relief is not available as a remedy to assail the collection of a tax. Taxes, being the lifeblood of the Government, should be collected promptly and without hindrance or delay, as dictated by law. Section 218 of the National Internal Revenue Code expressly provides that no court shall have jurisdiction to issue injunctions to restrain the collection of any national internal revenue tax, fee, or charge imposed by the NIRC.

  3. The RTC does not have jurisdiction to take cognizance of the action for declaratory relief. The RTC lacks the jurisdiction to restrain the enforcement or implementation of tax laws through an original action for declaratory relief. Such jurisdiction is exclusively vested in the Court of Tax Appeals (CTA) by Republic Act No. 1125.

PRINCIPLES:

  • Taxes should be collected promptly and without hindrance or delay, as they are the lifeblood of the Government.

  • Section 218 of the National Internal Revenue Code expressly provides that no court shall have jurisdiction to issue injunctions to restrain the collection of any national internal revenue tax, fee, or charge imposed by the NIRC.

  • The Court of Tax Appeals (CTA) has jurisdiction to decide controversies involving tax assessments and enforcement of tax laws.