G.R. No. 166134 June 29, 2010

ANGELES CITY vs. ANGELES CITY ELECTRIC CORPORATION AND REGIONAL TRIAL COURT BRANCH 57, ANGELES CITY

Facts: Respondent Angeles City Electric Corporation (AEC), which was granted a legislative franchise to generate and distribute electricity in Angeles City, Pampanga, pays a franchise tax of two percent (2%) of its gross receipts to the BIR. When the Local Government Code (LGC) of 1991 was passed into law, the Sangguniang Panlungsod of Angeles City enacted a tax ordinance known as the Revised Revenue Code of Angeles City (RRCAC) which imposed a local franchise tax upon AEC. Metro Angeles Chamber of Commerce and Industry Inc. (MACCI) of which AEC is a member filed a petition seeking the reduction of the tax rates and a review of the provisions of the RRCAC was filed by, claiming that the ordinance is oppressive. The petition was referred to the Bureau of Local Government Finance (BLGF) and an indorsement was issued to the City Treasurer of Angeles City, instructing the latter to make representations with the Sanggunian for the appropriate amendment of the RRCAC.

On 2004, the City Treasurer issued a Notice of Assessment to AEC for payment of business tax, license fee and other charges for the period 1993 to 2004 amounting to P94,861,194.10. AEC protested the assessment but the City Treasurer denied the protest. AEC appealed to the RTC of Angeles City via a Petition for Declaratory Relief. The City Treasurer however levied on the real properties of AEC and a Notice of Auction Sale was published announcing that a public auction of the levied properties would be held. This prompted AEC to file with the RTC an Urgent Motion for Issuance of Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction. After due notice and hearing, the RTC issued a TRO and a Writ of Preliminary Injunction. Angeles City filed a motion for dissolution of preliminary injunction, contending that the RTC cannot enjoin the collection of taxes pursuant to the LGC, but the RTC denied such motion.

Issue: Whether or not the RTC can enjoin the collection of local taxes.

Ruling: No.

The LGC does not specifically prohibit an injunction enjoining the collection of taxes. A principle deeply embedded in our jurisprudence is that taxes being the lifeblood of the government should be collected promptly, without unnecessary hindrance or delay. In line with this principle, the National Internal Revenue Code of 1997 (NIRC) expressly provides that no court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the code. The situation, however, is different in the case of the collection of local taxes as there is no express provision in the LGC prohibiting courts from issuing an injunction to restrain local governments from collecting taxes. Unlike the National Internal Revenue Code, the Local Tax Code does not contain any specific provision prohibiting courts from enjoining the collection of local taxes. Nevertheless, it must be emphasized that although there is no express prohibition in the LGC, injunctions enjoining the collection of local taxes are frowned upon. Courts therefore should exercise extreme caution in issuing such injunctions.

No grave abuse of discretion was committed by the RTC in the issuance of the writ of preliminary injunction because the two requisites to warrant the issuance of such, which are the existence of a clear and unmistakable right that must be protected and an urgent and paramount necessity for the writ to prevent serious damage, have been satisfied. The Court then had no other recourse but to grant the prayer for the issuance of a writ of preliminary injunction considering that if the respondent will not be restrained from doing the acts complained of, it will preempt the Court from properly adjudicating on the merits the various issues between the parties, and will render moot and academic the proceedings before the court. The petition was dismissed

LUZ YAMANE (petitioner) v BA LEPANTO CONDOMINIUM CORPORATION (respondent)October 25 2005 | Tinga, J. | LeighLocal Taxation

SUPERFACTS! The city treasurer imposed taxes on Lepanto, a corporation that owned a condominium, saying that because Lepanto collected assessments for operating expenses for the common areas of the condominium, Lepanto was actually engaged in business. The SC ruled that Lepanto was not organized for profit. The fees it was collecting from the condominium unit owners redound to the owners themselves because the fees collected are being used for the maintenance of the condo. Further, it appears that the assessment issued by the city treasurer did not state the legal basis for the tax being imposed on Lepanto it merely states that Makati is authorized to collect business taxes under the LGC, but no other reference specific reference to specific laws were cited.

FACTS:BA Lepanto Condominium Corporation (Lepanto) owns title over BA-Lepanto Condominium, and is authorized by its by-laws to collect regular assessments from its members for operating expenses, capital expenditures on common areas, and other special assessements. In 1998, it received a tax assessment in the amount of P1,601,013.77 from Luz Yamane, the City Treasurer of Makati, for business taxes for the years 1995-1997. The notice of assessment was silent as to the statutory basis of the business taxes assessed. Lepanto protested the assessment, saying that: The Assessment has no basis as the Corporation is not liable for business taxes and surcharges and interest thereon, under the Makati [Revenue] Code or even under the [Local Government] Code (LGC). The Makati [Revenue] Code and the LGC do not contain any provisions on which the Assessment could be based. One might argue that Sec. 3A.02(m) of the Makati [Revenue] Code imposes business tax on owners or operators of any business not specified in the said code. We submit, however, that this is not applicable to the Corporation as it is not an owner or operator of any business in the contemplation of the Makati [Revenue] Code and even the LGC.

Proceeding from the premise that its tax liability arose from Section 3A.02(m) of the Makati Revenue Code, Lepanto argued that under both the Makati Code and the LGC, business is defined as trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit. It was submitted that Lepanto, as a condominium corporation, was organized not for profit, but to hold title over the common areas of the Condominium, to manage the Condominium for the unit owners, and to hold title to the parcels of land on which the Condominium was located. Neither was Lepanto authorized, under its AOI or by-laws to engage in profit-making activities. The assessments it did collect from the unit owners were for capital expenditures and operating expenses.

Yamane denied the protest, insisting that the assessments were made in view of profit-making, as the assessments which were collected improved the value of the condominiums, which in turn would increase the chances of getting higher prices. Lepanto then appealed the denial to the RTC of Makati. RTC Makati affirmed the decision of Yamane, saying that Lepantos activities fell under the definition of business under Sec. 13(b) of the LGC, and thus subject to local business taxation. Lepanto then filed a petition for review under Rule 42 with the Court of Appeals. The Court of Appeals reversed the RTC, ruling that Lepanto was not engaged in profit. CA also said that the very statutory concept of a condominium corporation showed that it was not a juridical entity intended to make profit, as its sole purpose was to hold title to the common areas in the condominium and to maintain the condominium.

Yamane: Lepanto is engaged in business. The dues collected are used for the beautification and maintenance of the Condominium, resulting in full appreciative living values for the condominium units which would command better market prices should they be sold in the future. Moreover, the rationale for business taxes is not on the profit earned by the business, but the privilege to engage in business.-Also, on a procedural note: Lepanto filed the wrong mode of appeal before the CA when it filed its petition for review under rule 42. The RTC decision was rendered in the courts exercise of original jurisdiction. Thus, with Lepanto pursuing an erroneous mode of appeal, the RTC decision became final and executory.

RULING: petition DENIED

PROCEDURAL ISSUE: Does the RTC, in deciding an appeal taken from a denial of a protest by a local treasurer under Section 195 of the LGC, exercise original jurisdiction or appellate jurisdiction? ORIGINAL, but court still affirmed the jurisdiction exercised of the CA in this case.

There are 2 conflicting views on this issue:1)Position of CA: RTC, in reviewing denials of protests by local treasurers, exercises appellate jurisdiction. This is anchored on the language of Sec. 195 of the LGC which states that the remedy of the taxpayer whose protest is denied by the local treasurer is to appeal with the court of competent jurisdiction. The LGC however does not elaborate on how such appeal should be undertaken.2)Position of City Treasurer: jurisdiction exercised is original in character.

Court affirmed the position of the City Treasurer. The LGC does not expressly confer appellate jurisdiction on the part of RTCs from the denial of a tax protest by a local treasurer. On the other hand, Section 22 of BP 129 expressly delineates the appellate jurisdiction of the RTCs, confining appellate jurisdiction to cases decided by Metropolitan, Municipal, and Municipal Circuit Trial Courts. BP 129 does not confer appellate jurisdiction on RTCs over rulings made by non-judicial entities.

HOWEVER, this pronouncement is subject to two qualifications.-First, in this case there are significant reasons for the Court to overlook the procedural error and ultimately uphold the adjudication of the jurisdiction exercised by the CA.-Second, the doctrinal weight of the pronouncement is confined to cases and controversies that emerged prior to the enactment of RA 9282 (effective April 2004), the law which expanded the jurisdiction of the Court of Tax Appeals (CTA). Under RA 9282, the CTA, not CA, exercises exclusive appellate jurisdiction to review on appeal decisions, orders or resolutions of the RTCs in local tax cases whether originally decided or resolved by them in the exercise of their original or appellate jurisdiction. RA 9282 thus would not apply here because the case arose prior to the effectivity of the law.

Moreover, procedural rules must not be enforced blindly.

SUBSTANTIVE ISSUE: Can a local government unit, under the Local Government code, impel a condominium corporation to pay business taxes? NO

1) The power of local government units to impose taxes within its territorial jurisdiction derives from the Constitution itself, which recognizes the power of these units to create its own sources of revenue and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. These guideline are contained in the Local Government Code of 1991, which provides for instances when and how local government units may impose taxes. The significant limitations are enumerated primarily in Section 133 of the Code, which include among others, a prohibition on the imposition of income taxes except when levied on banks and other financial institutions. None of the other general limitations under Section 133 find application to the case at bar. It is in Art. II, Title II, Book II of the Code, governing municipal taxes, where the provisions on business taxation relevant to this petition may be found.

Sec. 143 enumerates types of business on which municipalities and cities may impose taxes. These include manufacturers, wholesalers, distributors, dealers of any article of commerce of whatever nature; those engaged in the export or commerce of essential commodities; contractors and other independent contractors; banks and financial institutions; and peddlers engaged in the sale of any merchandise or article of commerce. The coverage of business taxation particular to the City of Makati is provided by the Makati Revenue Code (Revenue Code). Article A, Chapter III of the Revenue Code governs business taxes in Makati, and it is quite specific as to the businesses which are covered by business taxes.

The initial inquiry is what provision of the Makati Revenue Code does the City Treasurer rely on to make Lepanto liable for business taxes. Even at this point, there already stands a problem with the City Treasurers cause of action. At no point has the City Treasurer stated in all the records as to what is the statutory basis under the Makati Revenue Code for the levying of the business tax on Lepanto.

The notice of assessment, which stands as the first instance the taxpayer is officially made aware of the pending tax liability, should be sufficiently informative to apprise the taxpayer the legal basis of the tax. Sec. 195 of the LGC does not go as far as to require that the notice of assessment specifically cite the provision of the ordinance involved but it does require that it state the nature of the tax, fee or charge, the amount of deficiency, surcharges, interests and penalties. In this case, the notice of assessment sent to Lepanto did state that the assessment was for business taxes, as well as the amount of the assessment. There may have been prima facie compliance with the requirement under Sec. 195. However, the Revenue Code provides multiple provisions on business taxes. Hence, we could appreciate the Corporations confusion, as expressed in its protest, as to the exact legal basis for the tax. Reference to the local tax ordinance is vital, for the power of local government units to impose local taxes is exercised through the appropriate ordinance enacted by the sanggunian, and not by the LGC alone. What determines tax liability is the tax ordinance, the Local Government Code being the enabling law for the local legislative body. Moreover, a careful examination of the Revenue Code shows that while Section 3A.02(m) seems designed as a catch-all provision, Section 3A.02(f), which provides for a different tax rate from that of the former provision, may be construed to be of similar import. While Section 3A.02(f) is quite exhaustive in enumerating the class of businesses taxed under the provision, the listing, while it does not include condominium-related enterprises, ends with etc. Certainly, we cannot be disposed to uphold any tax imposition that derives its authority from enigmatic and uncertain words such as etc. Yet we cannot even say with definiteness whether the tax imposed on the Corporation in this case is based on that provision. (in other words: walang basis, the court is just citing these to see if the tax imposed could fall under any of these provisions). The City Treasurer has been silent all through out as to the exact basis for the tax imposition which she wishes that this Court uphold.

2) Local tax on businesses is authorized under Sec. 143 of the LGC. The word business is defined under Section 131(d) of the Code as trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit. This definition is importance since Sec. 143 allows local government units to impose local taxes on businesses other than those specified under the provision. It is thus imperative that in order that Lepanto may be subjected to business taxes, its activities must fall within the definition of business. And to hold that they do is to ignore the very statutory nature of a condominium corporation. The creation of the condominium corporation is sanctioned by RA. 4726 (Condominium Act). Under the law, a condominium is an interest in real property consisting of a separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. To enable the orderly administration over these common areas which are jointly owned by the various unit owners, the Condominium Act permits the creation of a condominium corporation, which is specially formed for the purpose of holding title to the common area, in which the holders of separate interests shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units. Thus, it may be authorized in the deed of restrictions to make reasonable assessments to meet authorized expenditures, each condominium unit to be assessed separately for its share of such expenses in proportion (unless otherwise provided) to its owners fractional interest in any common areas. It is the collection of these assessments from unit owners that form the basis of the City Treasurers claim that the Corporation is doing business. The Condominium Act imposes several limitations on the condominium corporation. Under Sec. 10 of the law, the corporate purposes of a condominium corporation are limited to the holding of the common areas, either in ownership or any other interest in real property recognized by law; the management of the project; and such other purposes as may be necessary, incidental or convenient to the accomplishment of such purpose. Further, the same provision prohibits the AOI or by-laws of the condominium corporation from containing any provisions which are contrary to the provisions of the Condominium Act.

None of these corporate purposes are geared towards obtaining a livelihood profit. In the present case, the amounts collected are not intended for the incurrence of profit by Lepanto or its members, but to shoulder the necessary expenses that arise from the maintenance of the Condominium Project. The Court cites with approval the two counterpoints raised by CA in rejecting the contention of the city treasurer that the assessments amounted to profits for Lepanto. First, if any profit is obtained by the sale of the units, it accrues not to the corporation but to the unit owner. Second, if the unit owner does obtain profit from the sale of the corporation, the owner is already required to pay capital gains tax on the appreciated value of the condominium unit. Moreover, by the rationale of the city treasurer, every Makati City car owner may be considered as being engaged in business, since the repairs or improvements on the car may be deemed oriented towards appreciating the value of the car upon resale. There is an evident distinction between persons who spend on repairs and improvements on their personal and real property for the purpose of increasing its resale value, and those who defray such expenses for the purpose of preserving the property.

Besides, we shudder at the thought of upholding tax liability on the basis of the standard of full appreciative living values, a phrase that defies statutory explication, commonsensical meaning, the English language, or even definition from Google (lol). The exercise of the power of taxation constitutes a deprivation of property under the due process clause, and the taxpayers right to due process is violated when arbitrary or oppressive methods are used in assessing and collecting taxes. The City Treasurer also contends that the fact that Lepanto is engaged in business is evinced by the AOI, which specifically empowers Lepanto to acquire, own, hold, enjoy, lease, operate and maintain, and to convey, sell, transfer mortgage or otherwise dispose of real or personal property. What the City Treasurer fails to add is that every corporation organized under the Corporation Code is so specifically empowered, under Sec. 36(7) of the Corporation Code. Again, whatever capacity the Corporation may have pursuant to its power to exercise acts of ownership over personal and real property is limited by its stated corporate purposes, which are by themselves further limited by the Condominium Act. A condominium corporation, while enjoying such powers of ownership, is prohibited by law from transacting its properties for the purpose of gainful profit. Accordingly, we hold that condominium corporations are generally exempt from local business taxation under the LGC, irrespective of any local ordinance that seeks to declare otherwise. Still, we can note a possible exception to the rule. It is not unthinkable that the unit owners of a condominium would band together to engage in activities for profit under the shelter of the condominium corporation. Such activity would be prohibited under the Condominium Act, but if the fact is established, we see no reason why the condominium corporation may be made liable by the local government unit for business taxes. Still, the City Treasurer has not posited the claim that Lepanto is engaged in business activities beyond the statutory purposes of a condominium corporation. The assessment is based solely on the Lepantos collection of assessments from unit owners, such assessments being utilized to defray the necessary expenses for the Condominium Project and the common areas. Hence, the assailed tax assessment has no basis under the LGC or the Makati Revenue Code, and the insistence of the city in its collection of the void tax constitutes an attempt at deprivation of property without due process of law.

JARDINE DAVIES INSURANCE BROKERS INC v. ALISPOSAPursuant to Republic Act No. 7160, otherwise known as the Local Government Code of 1991, the then Sangguniang Bayan of Makati enacted Municipal Ordinance No. 92-072, otherwise known as the Makati Revenue Code, which provides, inter alia, for the schedule of real estate, business and franchise taxes in the Municipality of Makati at rates higher than those in the Metro Manila Revenue Code.

On May 10, 1993, the Philippine Racing Club, Inc. (PRCI for brevity), a taxpayer of Makati, appealed to the Department of Justice (DOJ for brevity) for the nullification of said ordinance, alleging that it was approved without previous public hearings, in violation of the Local Government Code and Article 276 of its Implementing Rules, and that some of the ordinances provisions were unconstitutional:

(2) The in-lieu-of-all-taxes clause of the franchise of the Philippine Racing Club, Inc. exempts it from payment of the real property tax, annual business tax and other new taxes imposed by the ordinance here in question. To withdraw the exemption would impair the obligation of contract in violation of its constitutional right as franchise holder.

(3) The imposition of the franchise tax is not within the scope of the taxing powers of the Municipality of Makati (Sections 134, 137 and 142 of Republic Act No. 7160 and Articles 223, 226 and 231 of Rule XXX of the Implementing Rules and Regulations of the Local Government Code of 1991). and

(4) The Municipality of Makati already shares 5 of the 25% franchise tax provided for in Section 8 of the franchise of the Philippine Racing Club, Inc. To allow the said municipality to impose another franchise tax and to base the tax on the gross annual receipts, as it does in the ordinance, would certainly be unjust, excessive, oppressive or confiscatory (Section 130 of Republic Act No. 7160 and Article 219 of Rule XXX of the Implementing Rules and Regulations).[1]

Although required by the DOJ to comment on the appeal, respondent Makati failed to do so.

On July 5, 1993, the DOJ came out with a resolution[2] declaring null and void and without legal effect the said ordinance for having been enacted in contravention of Section 187 of the Local Government Code of 1991 and its implementing rules and regulations.[3]

On August 19, 1993, respondent Makati sought a reconsideration of the ruling of the DOJ. Pending resolution of its motion, said respondent filed a petition ad cautelam[4] with the Regional Trial Court (RTC) of Makati, entitled Hon. Jejomar C. Binay and the Municipality of Makati, Petitioners, v. Hon. Franklin M. Drilon, Department of Justice and Philippine Racing Club, Inc., Respondents, and docketed as Case No. 93-2844. The case was raffled to Branch 148 of the Makati RTC. Respondent Makati alleged, inter alia, that public hearings were conducted before the approval of the ordinance and hence the ordinance was valid. It prayed that after due proceedings judgment be rendered in its favor, thus:

WHEREFORE, petitioners respectfully pray that this Honorable Court promulgate judgment:

(a) declaring null and void the DOJ Decision dated July 5, 1993; and

(b) allowing the full implementation of Makati Municipal Ordinance No. 92-072.

Petitioners pray for such further or other reliefs as this Honorable Court may deem just and equitable.[5]

In the meantime, respondent Makati continued to implement the ordinance. Petitioner Jardine Davies Insurance Brokers, Inc., a duly-organized corporation with principal place of business at No. 222 Sen. Gil J. Puyat Avenue, Makati, Metro Manila, was assessed and billed by Makati the amount of P63,822.47 for taxes, fees and charges under the ordinance for the second quarter of 1993. It was again billed by respondent Makati the same amount for the third quarter of 1993 and the same amount for the fourth quarter of 1993. Petitioner did not protest the assessment for its quarterly business taxes for the second, third and fourth quarters of 1993 based on said ordinance effective April 1, 1993. Petitioner, in fact, paid the said amounts on April 26, 1993 (for the second quarter), July 12, 1993 (for the third quarter) and October 19, 1993 (for the fourth quarter), respectively, without any protest. Respondent Makati issued the corresponding receipts in favor of petitioner.[6]

On January 30, 1994, petitioner wrote the municipal treasurer of Makati requesting that respondent Makati compute its business tax liabilities in accordance with the Metro Manila Revenue Code and not under the ordinance considering that said ordinance was already declared by the DOJ null and void. Petitioner likewise requested that respondent Makati credit the overpayment in the total amount of P27,854.91 for the second to fourth quarters of 1993 against its 1994 liabilities for 1994, or in the alternative, for Makati to refund the said amount to petitioner.

In a Letter[7] dated February 4, 1994, respondent Makati, through Maximo L. Paulino Jr., Acting Chief of its Municipal License Division, denied the request of petitioner for tax credit/refund. Respondent Makati insisted that the questioned ordinance code was valid and enforceable pending the final outcome of its petition ad cautelam with the Regional Trial Court of Makati.

In the meantime, on October 26, 1993, the RTC rendered judgment in Case No. 93-2844 granting the petition of Makati and declaring the ordinance valid. On November 9, 1993, the DOJ issued a memorandum to the Chief State Counsel directing the latter to refrain from accepting any appeal or to act on pending appeals on the validity/constitutionality of the ordinance until the same shall have been finally resolved by courts of competent jurisdiction.

When informed of the denial by respondent Makati of its letter-request, petitioner filed a complaint on March 7, 1994 with the RTC of Makati against respondents Makati and its Acting Municipal Treasurer. The case was raffled to Branch 150 of said court. Petitioner alleged in its complaint that in view of the resolution of the DOJ declaring the Makati Revenue Code null and void and without legal effect, the provisions of the Metro Manila Revenue Code continued to remain in full force and effect; however, petitioner was assessed and billed by respondent Makati for taxes, fees and charges for second, third and fourth quarters for 1993 beginning on April 4, 1993 up to October 14, 1994 at rates fixed in the ordinance despite the nullity thereof. Petitioner prayed that after due proceedings judgment be rendered as follows:

1. Declaring as NULL AND VOID Municipal Ordinance No. 92-072, (Makati Revenue Code) of the Municipality of Makati and ordering Defendants to refund or issue as tax credit in favor of Plaintiff the sum of P27,854.91 plus interest.

2. Assuming without admitting that the Municipal Ordinance No. 92-072 (Makati Revenue Code) is valid, declaring that the rates imposed by said ordinance accrue only on July 1, 1993 and ordering Defendants to refund or issue as tax credit in favor of Plaintiff the sum of P9,284.97.[8]

On May 18, 1994, respondents Makati and its Acting Municipal Treasurer filed a motion to dismiss[9] the complaint on the ground of prematurity. They argued that petitioners cause of action was predicated on the appealed resolution of the DOJ, and unless and until nullified by final judgment of a competent court, the ordinance remained in full force and effect.

On May 26, 1994, petitioner opposed the motion to dismiss of respondents, contending that its complaint was not predicated solely on the invalidity and unconstitutionality of the ordinance but also on its claim that the ordinance took effect only in July 1, 1993 but Makati applied the ordinance effective April 1, 1993. Petitioner further averred that under Section 166 of the Local Government Code, new taxes, fees or charges or charges provided for in the ordinance shall accrue on the first day of the quarter following the effectivity of the new ordinance. Hence, assuming that the tax ordinance was valid, the same should have been enforced only from the first (1st) day of the quarter following next the effectivity of the ordinance imposing such new levies or rates as provided for in Section 166 of the Local Government Code.

On August 29, 1994, the RTC issued an order granting the motion to dismiss of respondent and ordering the dismissal of the complaint. The trial court ruled that plaintiffs cause of action, if any, had prescribed. Citing Sections 187 and 195 of the Local Government Code of 1991, the trial court ratiocinated that petitioner failed to file an opposition or protest to the written notice of assessment of Makati for taxes, fees and charges at rates provided for in the ordinance within 60 days from the notice of said assessment as required by Section 195 of the Local Government Code. Hence, petitioner was barred from demanding a refund of its payment or that it be credited for said amounts.

Petitioner received a copy of said order on October 7, 1994. On October 13, 1994, petitioner filed with the trial court a motion for reconsideration[10] of the order of dismissal, arguing that the trial court erred in applying Section 195 of the Local Government Code of 1991 as its complaint did not involve an assessment for deficiency taxes but one for refund/tax credit. Petitioner further claimed that it was never served with any notice of assessment from respondents and hence there was no need for petitioner to protest. Petitioner argued that what was applicable was Section 196 of the Local Government Code in conjunction with Article 286 of its Implementing Rules and Regulations, both of which simply require the filing of a written claim for refund or tax credit within two years from the date of payment.

On December 28, 1994, the trial court issued an order[11] denying the motion for reconsideration of petitioner, a copy of which was served on petitioner on February 13, 1995. The trial court declared that Section 195 of the Local Government Code covers all kinds of assessments and not merely deficiency assessments for taxes, fees or charges. The trial court further ruled that the issue of the validity and constitutionality of the ordinance was still pending resolution by Branch 148 of the RTC in Civil Case No. 93-2844 and until declared null and void, otherwise by final judgment, the ordinance remained valid.

Petitioner filed on February 20, 1995 a petition for review on certiorari under Rule 45 of the Rules of Court, contending that:

RESPONDENT JUDGE ERRED IN HOLDING THAT THE INSTANT CASE IS NOT A CLAIM FOR REFUND UNDER SECTION 196 OF THE LGC IN RELATION TO ARTICLE 286 OF ITS IMPLEMENTING RULES, BUT A DEFICIENCY ASSESSMENT THAT HAS TO BE PROTESTED UNDER SECTION 195 OF THE SAME CODE.

RESPONDENT JUDGE ERRED IN DISMISSING THE CASE ON THE GROUND OF PENDENCY OF ANOTHER ACTION CONTESTING THE LEGALITY OR CONSTITUTIONALITY OF THE MAKATI REVENUE CODE IS STILL BEING DETERMINED IN BRANCH 148 OF THE REGIONAL TRIAL COURT OF MAKATI.[12]

Anent the first assignment of errors, petitioner avers that its action in the RTC was one for a refund of its overpayments governed by Article 196 of the Local Government Code implemented by Article 286 of the Implementing Rules and Regulations of the Code and not one involving an assessment for deficiency taxes governed by Section 195 of the said Code. Petitioner contends that it was not mandated to first file a protest with respondents before instituting its action for a refund of its overpayments or for it to be credited for said overpayments. For its part, respondent Makati avers that petitioner was proscribed from filing its complaint with the RTC and for a refund of its alleged overpayment, petitioner having paid without any protest the taxes due to respondent Makati under the ordinance. It is further asserted by respondent Makati that until declared null and void by a competent court, the ordinance was valid and should be enforced.

The petition has no merit.

The Court agrees with petitioner that as a general precept, a taxpayer may file a complaint assailing the validity of the ordinance and praying for a refund of its perceived overpayments without first filing a protest to the payment of taxes due under the ordinance. This was our ruling in Ty v. Judge Trampe:[13]

. . . Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax assessment, he is required to first pay the tax under protest. Otherwise, the city or municipal treasurer will not act on his protest. In the case at bench, however, the petitioners are questioning the very authority and power of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax. These are not questions merely of amounts of the increase in the tax but attacks on the very validity of any increase.

In this case, petitioner, relying on the resolution of the Secretary of Justice in The Philippine Racing Club, Inc. v. Municipality of Makati case, posited in its complaint that the ordinance which was the basis of respondent Makati for the collection of taxes from petitioner was null and void. However, the Court agrees with the contention of respondents that petitioner was proscribed from filing its complaint with the RTC of Makati for the reason that petitioner failed to appeal to the Secretary of Justice within 30 days from the effectivity date of the ordinance as mandated by Section 187 of the Local Government Code which reads:

Sec. 187-Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory Public Hearings.- The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction.

In Reyes v. Court of Appeals,[14] we ruled that failure of a taxpayer to interpose the requisite appeal to the Secretary of Justice is fatal to its complaint for a refund:

Clearly, the law requires that the dissatisfied taxpayer who questions the validity or legality of a tax ordinance must file his appeal to the Secretary of Justice, within 30 days from effectivity thereof. In case the Secretary decides the appeal, a period also of 30 days is allowed for an aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60 days, a party could already proceed to seek relief in court. These three separate periods are clearly given for compliance as a prerequisite before seeking redress in a competent court. Such statutory periods are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions. For this reason the courts construe these provisions of statutes as mandatory.

A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax is the most effective instrument to raise needed revenues to finance and support the myriad activities of local government units for the delivery of basic services essential to the promotion of the general welfare and enhancement of peace, progress, and prosperity of the people. Consequently, any delay in implementing tax measures would be to the detriment of the public. It is for this reason that protests over tax ordinances are required to be done within certain time frames. In the instant case, it is our view that the failure of petitioners to appeal to the Secretary of Justice within 30 days as required by Sec. 187 of R.A. 7160 is fatal to their cause.

Moreover, petitioner even paid without any protest the amounts of taxes assessed by respondents Makati and Acting Treasurer as provided for in the ordinance. Evidently, the complaint of petitioner with the Regional Trial Court was merely an afterthought.

In view of our foregoing disquisitions, the Court no longer deems it necessary to resolve other issues posed by petitioner.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The order of the Regional Trial Court dismissing the complaint of petitioner is AFFIRMED.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Quisumbing and Austria-Martinez, JJ., concur.

SAN JUAN vs CASTRO G.R. No. 174617 December 27, 2007FACTS:Petitioner, registered owners of real properties in Marikina City, with consent of his wife, conveyed bydeed of assignment, the properties to the Saints and Angels Realty Corp. (SARC), by virtue of incorporations, inexchange for shares of stock therein with a par value of P2,000,000.0, placed in San Juans name and theremaining par value in the name of his wife. Respondents representatives went to the City Treasurers Office of Marikina to pay the transfer tax based on the consideration stated in the deed of assignment. City TreasurerCastro informed him however that the tax due is based on the fair market value of the property.Petitioner protested the basis of the tax due. To which, the respondent replied stating that in cases of transfer or real property not involving monetary consideration, it is certain that the fair market value or the zonal value of the property is the basis of the tax rate.Petitioner filed before the RTC of Marikina a petition for mandamus and damages against respondent in hiscapacity as City Treasurer, among others, praying that respondent be compelled to perform a ministerial duty toaccept payment of transfer tax based on the actual consideration of the transfer and assignment, citing Section135 of the LGC.ISSUE:When can a protest of assessment be availed of?RULING:Under Section 195 of the Local Government Code, a taxpayer who disagrees with a tax assessmentmade by a local treasurer may file a written protest thereof:SECTION 195. Protest of Assessment . When the local treasurer or his duly authorized representative finds thatthe correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) daysfrom the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurercontesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shalldecide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to bewholly or partly meritorious, he shall issue a notice cancelling wholly or partially the assessment. However, if thelocal treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly withnotice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest orfrom the lapse of the sixty-day (60) period prescribed herein within which to appeal with the court of competent jurisdiction, otherwise the assessment becomes conclusive and unappealable. That petitioner protested in writing against the assessment of tax due and the basis thereof is on record as in fact it was on that account that respondent sent him the above-quoted July 15, 2005 letter which operated as a denialof petitioners written protest. Petitioner should thus have, following the earlier above-quoted Section 195 of the Local Government Code,either appealed the assessment before the court of competent jurisdiction[15] or paid the tax and then sought arefund. Petitioner did not observe any of these remedies available to him, however. He instead opted to file a petitionfor mandamus to compel respondent to accept payment of transfer tax as computed by him.

Team Pacific Corporation v. Daza G.R. No. 167732. July 11, 2012.Second Division; Perez, J. Facts:Team Pacific Corporation (TPC), a domestic corporation engaged in the business of assembling and exporting semiconductor devices, conducts its business at the FTI Complex in the then Municipality of Taguig. It appears that since the start of its operations in 1999, TPC had beenpaying local business taxes assessed at 1/2 rate pursuant to Section 75 (c) of the Taguig RevenueCode (TRC). When it renewed itsbusiness license in 2004, however, TPCs business tax for the firstquarter of the same year was computed by Josephine Daza, in her capacity as then Municipal Treasurer of Taguig, by applying the full value of the rates provided under Section 75 of the TRC,instead of the 1/2 rate provided under paragraph (c) because, according to her, Section 75 (c) of the TRC applies only to exporters of essential commodities e.g., (1) rice and corn; (2) wheat or cassavaflour, meat, dairy products, locally manufactured, processed or preserved food, sugar, salt and otheragricultural, marine, and fresh water products, whether in their original state or not; (3) cooking oiland cooking gas; (4) laundry soap, detergents, and medicine; (5) agricultural implements, equipmentand post- harvest facilities, fertilizers, pesticides, insecticides, herbicides and other farm inputs; (6)poultry feeds and other animal feeds; (7) school supplies; and (8) cement. Constrained to pay the assessed business tax on January 19, 2004 in view of its being a precondition for the renewal of its business permit, TPC filed on the same day a written protest with Daza, insisting on the 1/2 rate on which its business tax was previously assessed. Subsequent to its demand for the refund and/or issuance of a tax credit for the sum of P104,054.88 which it considered as an overpayment of its business taxes for the same year, TPC filed s Rule 65 petitionfor certiorari before a Regional Trial Court (RTC).Issue: Whether or not TPC availed of the correct remedy against Dazas illegal assessment when itfiled its petition for certiorari before the RTC? Held:No. The rule is settled that, as a special civil action, certiorari is available only if the following essential requisites concur: (1) it must be directed against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have acted without or inexcess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction;and, (3) there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law. Judicial function entails the power to determine what the law is and what the legal rights of theparties are, and then undertakes to determine these questions and adjudicate upon the rights of theparties. Quasi-judicial function, on the other hand, refers to the action and discretion of publicadministrative officers or bodies, which are required to investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their official action and toexercise discretion of a judicial nature.Gauged from the foregoing definitions, Daza cannot be said to be performing a judicial orquasi-judicial function in assessing TPCs businesstax and/or effectively denying its protest as thenMunicipal Treasurer of Taguig. For this reason, Dazas actions are not the proper subjects of a Rule 65 petition for certiorari which is the appropriate remedy in cases where a the tribunal, board, orofficer exercising judicial or quasi-judicial functions acted without or in grave abuse of discretionamounting to lack or excess of jurisdiction and there is no appeal or any plain, speedy, and adequateremedy in law. Narrow in scope and inflexible in character, certiorari is an extraordinary remedy designed for the correction of errors of jurisdiction and not errors of judgment. It is likewiseconsidered mutually exclusive with appeal like the one provided by Article 195 of the LocalGovernmentCode for a local treasurers denial of or inaction on a protest.

2nd issue: whether or not, as an exporter of semiconductor devices, it should be assessed business taxes at the full rate instead of the one-half (1/2) rates provided under Section 75 (c) of the Taguig Revenue Code and 143 (c) of the Local Government Code.

HELD: A taxpayer dissatisfied with a local treasurers denial of or inaction on his protest over an assessment has thirty (30) days within which to appeal to the court of competent jurisdiction. Under the law, said period is to be reckoned from the taxpayers receipt of the denial of his protest or the lapse of the sixty (60) day period within which the local treasurer is required to Decide the protest, from the moment of its filing. This much is clear from Section 195 of the Local Government CodeAbsent any showing of the formal denial of the protest by Atty. Miranda, then Chief of the Taguig Business Permit and Licensing Office, we find that TPCs filing of its petition before the RTC on 19 April 2004 still timely. Reckoned from the filing of the letter protest on 19 January 2004, Daza had sixty (60) days or until 19 March 2004 within which to resolve the same in view of the fact that 2004 was a leap year. From the lapse of said period, TPC, in turn, had thirty (30) days or until 18 March 2004 within which to file its appeal to the RTC. Since the latter date fell on a Sunday, the RTC correctly ruled that TPCs filing of its petition on 19 April 2004 was still within the period prescribed under the above quoted provision.

G.R. No. 111223October 6, 1995

NARCISO O. JAO and BERNARDO M. EMPEYNADO, petitioners, vs.THE HONORABLE OMBUDSMAN CONRADO M. VASQUEZ, and SINDULFO SEBASTIAN, JAIME MAGLIPON; JOSE YUCHONGCO; RICARDO CORONADO; VICTOR BARROS; DENNIS BANTIGUE; ROY LARA; BENJAMIN SANTOS; RODOLFO GONDA; ADONIS REJOSO; DANIEL PENAS; NICANOR BONES; ABUNDIO JUMAMOY; ARTEMIO CASTILLO; ANDRESITO ABAYON; RUBEN TAGUBA; JAIME JAVIER; HERBERT DOLLANO, all with the Bureau of Customs; JOVY GUTIERREZ of the Makati police, and 'JOHN DOES', respondents.

FACTS:Office of the Director, Enforcement and Security Services (ESS), Bureau of Customs, received information regarding the presence of allegedly untaxed vehicles and parts in the premises owned by a certain Pat Hao located along Quirino Avenue, Paranaque and Honduras St., Makati. After conducting a surveillance of the two places, respondent Major Jaime Maglipon, Chief of Operations and Intelligence of the ESS, recommended the issuance of warrants of seizure and detention against the articles stored in the premises.

On August 13, 1990, District Collector of Customs Titus Villanueva issued the warrants of seizure and detention.

On the same date, respondent Maglipon coordinated with the local police substations to assist them in the execution of the respective warrants of seizure and detention. Thereafter, the team searched the two premises.

In Makati, they were barred from entering the place, but some members of the team were able to force themselves inside. They were able to inspect the premises and noted that some articles were present which were not included in the list contained in the warrant.. Hence, on August 15, 1990, amended warrants of seizure and detention were issued by Villanueva.

On August 25, 1990, customs personnel started hauling the articles pursuant to the amended warrants. This prompted petitioners Narciso Jao and Bernardo Empeynado to file a case for Injunction and Damages, docketed as Civil Case No. 90-2382 with prayer for Restraining Order and Preliminary Injunction before the Regional Trial Court of Makati Branch 56 on August 27, 1990 against respondents. On the same date, the trial court issued a Temporary Restraining Order.

On September 7, 1990, respondents filed a Motion to Dismiss on the ground that the Regional Trial Court has no jurisdiction over the subject matter of the complaint, claiming that it was the Bureau of Customs that had exclusive jurisdiction over it.

On November 20, 1990, the trial court denied respondents' motion to dismiss.

On November 29, 1990, petitioners' application for preliminary prohibitory and mandatory injunction was granted conditioned upon the filing of a one million peso bond.

The Court also prohibited respondents from seizing, detaining, transporting and selling at public auction petitioners' vehicles, spare parts, accessories and other properties located at No. 2663 Honduras St., San Isidro, Makati and at No. 240 Quirino Avenue, Tambo, Paranaque, Metro Manila. Respondents were further prohibited from disturbing petitioners' constitutional and proprietary rights over their properties located at the aforesaid premises. Lastly, respondents were ordered to return the seized items and to render an accounting and inventory thereof.

On December 13, 1990, respondents filed a motion for reconsideration based on the following grounds:

a)the lower court having no jurisdiction over the subject matter of the complaint, it has no recourse but to dismiss the same; and

(b)the lower court had no legal authority to issue an injunction therein.

On January 3, 1991 the motion for reconsideration was denied. Respondents then went to the Court of Appeals on the ground that the judge acted with grave abuse of discretion in denying their motion to dismiss and in granting petitioners' application for preliminary injunction. They argued that the Regional Trial Court had no jurisdiction over seizure and forfeiture proceedings, such jurisdiction being exclusively vested in the Bureau of Customs.

The Court of Appeals set aside the questioned orders of the trial court and enjoined it from further proceeding with Civil Case No. 90-2382. The appellate court also dismissed the said civil case.

On May 2, 1992, petitioners filed a petition with this Court to review the decision of the Court of Appeals docketed as G.R. No. 104604.

As regards G.R. No. 111223, petitioners filed criminal charges against respondents, other officers and employees of the Bureau of Customs and members of the Makati Police before the Office of the Ombudsman for Robbery, Violation of Domicile and Violation of Republic Act No. 3019, docketed as OMB Case No. 0-90-2027.

Respondent Ombudsman summarized the case before it as follows:

This is an affidavit-complaint filed by the complainants against the respondents, Officers and Employees of the Bureau of Customs and members of the Makati Police allegedly for violation of Domicile and Robbery defined and penalized under Articles 128, 293 and 294 of the Revised Penal Code and for violation of R.A. 3019 committed as follows, to wit:

That on August 11, 1990, after receiving intelligence information of the presence of smuggled goods, some of the respondents headed by Jaime Maglipon posed themselves as Meralco inspectors and entered complainants' stockyards and residence located at 2663 Honduras Street, Makati, Metro Manila and at 240 Quirino Avenue, Tambo Paranaque for the purpose of searching smuggled goods found therein without the consent of the owner thereof;

That after the search, respondents on August 13, 1990 up to August 25, 1990, this time clothed with a Warrant of Seizure and Detention, with the aid of the Makati Police and several heavily armed men entered complainants stockyard located at 2663 Honduras St., Makati, Metro Manila, and pulled out therefrom several machineries and truck spare parts without issuing the corresponding receipts to the complainants to cover all the items taken.

Respondents claimed in their consolidated and verified comment that they are not liable for violation of domicile because the places entered and searched by them appear not to be the residences of the complainants but only their warehouses. As proof of this allegation, the respondents presented the pictures of said warehouses, which are attached to their comment as Annexes "6", "6-A" to "6-C" and the Sheriff's return likewise attached to their verified comments as Annex "7". According to the respondents, a charge for violation of domicile may apply only if the place entered into against the will of the owner is used exclusively for dwelling. In the case at bar, the place entered into was used more of a warehouse than a dwelling place.

Further respondents also claimed not liable for robbery (sic) because the complainants appear not to be the owners of the properties taken. Moreover, the respondents claimed that the taking is lawful because the same proceeded from a warrant of Seizures and Detention; there was no violence or intimidation of person committed and that there was no intent to gain on the part of the respondents, the purpose of the seizure of the subject goods being to collect customs duties and taxes due the government.

Lastly, the respondents disclaimed liability for a violation of R.A. 3019 because they deny having demanded from the complainants the sum of P100,000.00. Instead according to the respondents, it was the complainants who offered them P70,000.00 to delay the hauling of the seized goods as attested to in the joint affidavit of CPSGT, Ricardo Coronado and Dennis Bantequi.

A preliminary investigation was conducted and on May 31, 1991, another hearing was held to give the parties a chance to submit further evidence to support their respective claims.

On March 15, 1993 respondent Ombudsman issued a Resolution recommending that the case be dismissed for lack of merit.

On May 17, 1993, petitioners moved for the reconsideration of said resolution, but the same was denied on July 8, 1993.

Hence, the petition in G.R. No. 111223, which was filed on August 16, 1993.

In G.R. No. 111223, petitioners claim that respondent Ombudsman gravely abused his discretion in dismissing the case and in denying petitioners' motion for reconsideration.

They allege that respondent Ombudsman ignored evidence incriminatory to the raiders; that the receipts did not tally with petitioners' receipts nor with the Commission on Audit's inventory; that the respondents are guilty of robbery and of violating petitioners' constitutional right against violation of domicile. For these reasons, petitioners pray that the Ombudsman's resolution be reversed and that the Court direct the Ombudsman to cause the filing of criminal charges as may be warranted against respondents.

We find the petition in G.R. No. 111223 devoid of merit.

The Court, recognizing the investigatory and prosecutory powers granted by the Constitution to the Office of the Ombudsman and for reasons of practicality, declared, in an En Banc resolution dated August 30, 1993, issued in G.R. Nos. 103446-47 3 that the Court will not interfere nor pass upon findings of public respondent Ombudsman to avoid its being hampered by innumerable petitions assailing the dismissal of investigatory proceedings conducted by the Office of the Ombudsman with regard to complaints filed before it, and that it will not review the exercise of discretion on the part of the fiscals or prosecuting attorneys each time they decide to file an information in court or dismiss a complaint by a private complainant. The dismissal by the Ombudsman of petitioners' complaint, therefore, stands.

We will now discuss G.R. No. 104604.

Petitioners contend: (1) that the Court of Appeals erred in not holding that the Collector of Customs could no longer order the seizure for the second time of items previously seized and released after amnesty payments of duties and taxes; (2) that the Bureau of Customs has lost jurisdiction to order the seizure of the items because the importation had ceased; (3) that the seizure of the items deprived the petitioners of their properties without due process of law; and (4) that there is no need to exhaust administrative remedies.HELD:COURT RULED IN FAVOR OF RESPONDENTSWe find no merit in petitioners' contentions.

There is no question that Regional Trial Courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings 4 The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus. 5

It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act No. 1125, as amended, otherwise known as "An Act Creating the Court of Tax Appeals," specify the proper fora and procedure for the ventilation of any legal objections or issues raised concerning these proceedings. Thus, actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals and from there to the Court of Appeals.

The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon the policy of placing no unnecessary hindrance on the government's drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform. 6

Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, we have said that such act does not deprive the Bureau of Customs of jurisdiction thereon.

Respondents assert that respondent Judge could entertain the replevin suit as the seizure is illegal, allegedly because the warrant issued is invalid and the seizing officer likewise was devoid of authority. This is to lose sight of the distinction between the existence of the power and the regularity of the proceeding taken under it. The governmental agency concerned, the Bureau of Customs, is vested with exclusive authority. Even if it be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may oust it of such jurisdiction. It does not mean however that correspondingly a court of first instance is vested with competence when clearly in the light of the decisions the law has not seen fit to do so. 7

The allegations of petitioners regarding the propriety of the seizure should properly be ventilated before the Collector of Customs. We have had occasion to declare:

The Collector of Customs when sitting in forfeiture proceedings constitutes a tribunal expressly vested by law with jurisdiction to hear and determine the subject matter of such proceedings without any interference from the Court of First Instance. (Auyong Hian v. Court of Tax Appeals, et al., 19 SCRA 10). The Collector of Customs of Sual-Dagupan in Seizure Identification No. 14-F-72 constituted itself as a tribunal to hear and determine among other things, the question of whether or not the M/V Lucky Star I was seized within the territorial waters of the Philippines. If the private respondents believe that the seizure was made outside the territorial jurisdiction of the Philippines, it should raise the same as a defense before the Collector of Customs and if not satisfied, follow the correct appellate procedures. A separate action before the Court of First Instance is not the remedy. 8

WHEREFORE, the petitions in G.R. No. 104604 and in G.R. No. 111223 are hereby DISMISSED for lack of merit.

SO ORDERED.

Feliciano, Padilla, Regalado, Davide, Jr., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Francisco and Hermosisima, Jr., JJ., concur.

SBMA v. RODRIGUEZ ET. ALSHORT DIGEST:FACTS: On September 29, 2001, a shipment described as agricultural product arrived at Subic Bay Freeport Zone. The BOC issued a Memorandum stating that upon examination the shipment was found to contain rice. The representative of the importer then stated that there was a misshipment and manifested willingness to pay appropriate duties and taxes. Later on, the BOC thenissued a Hold Order. Despite several certifications for its clearance, Petitioner SBMA refused to allow the release of the rice shipment. Hence, the respondent-importers filed with RTC Olongapo a complaint for Injunction and Damages against SBMA.

ISSUE: Did the RTC have jurisdiction over the case?

HELD: NO. The Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings and the regular courts cannot interfere nor can it enjoin these proceedings. This is the rule from the moment the imported goods are in the possession or control of the Customs authorities even if no warrant for seizure or detention had previously been issued. The actions of the BOC are then only appealed to the CTA. The Court also said that this rule, which is anchored upon the policy of placing no unnecessary hindrance on the governments drive to prevent smuggling and fraud and to collect correct duties, is absolute.

DETAILED DIGEST:FACTS:1. A cargo shipment described as agricultural product and valued at US$6,000 arrived at the Port of Subic. On the basis of its declared value, the shipment was assessed customs duties and taxes totaling P57,101 which were paid by respondent WIRA, the shipments consignee.2. BOC Subic Port later on issued a Memorandum addressed to the BOC Subic Port District Collector, stating that upon examination, the subject shipment was found to contain rice. 3. The Memorandum further stated as follows: that the importer claimed there was a misshipment since it also had a pending order for rice; that the warehousing entry was amended to reflect the change in description from agricultural product to rice; that the shipment, as a warehoused cargo inside the freeport zone, was duty and tax free, and was not recommended for any imposition of penalty and surcharge; that the consumption entry was changed to reflect a shipment of rice; and that the consumption entry, together with supporting documents belatedly received by the importer, was submitted to the bank although not yet filed with the BOC.4. Hilda Bacani (respondents authorized representative) wrote BOC Subic Port District Collector Billy Bibit, claiming that she was the representative of Metro Star Rice Mill (Metro Star), the importer of the subject cargo. She stated that there was a misshipment of cargo which actually contained rice, and that Metro Star is an authorized importer of rice as provided in the permits issued by the National Food Authority (NFA). Bacani requested that the misshipment be upgraded from agricultural product to a shipment of rice, and at the same time manifested willingness to pay the appropriate duties and taxes. 5. The following day, the BOC issued Hold directing BOC Subic Port officers to (1) hold the delivery of the shipment, and (2) to cause its transfer to the security warehouse. 6. Respondent WIRA, as the consignee of the shipment, paid the amount of P259,874 to the BOC representing additional duties and taxes for the upgraded shipment.7. BOC Commissioner Titus Villanueva issued a directive stating as follows: Accordingly, the same may be released subject to payment of duties and taxes based on an upgraded value as provided for by the National Food Authority at $153.00/MT and compliance with all existing rules and regulations.8. In accordance with the shipment upgrade, respondent WIRA paid a further amount of P206,212 as customs duties and taxes.9. BOC Subic Port issued a certification/letter addressed to Mr. Augusto Canlas, General Manager of the Seaport Department, stating that the Collecting Officer validated a revenue of Php 523,187.00 from above-mentioned importation. And a Gate Pass was issued with signature of Mr. Percito V. Lozada, Chief Assessment in behalf of the District Collector Billy C. Bibit.10. Despite the above certification/letter, petitioner SBMA refused to allow the release of the rice shipment. 11. Hence, respondents filed with the RTC Olongapo a complaint for Injunction and Damages with prayer for issuance of Writ of Preliminary Prohibitory and Mandatory Injunction and/or Temporary Restraining Order against petitioner SBMA and Augusto L. Canlas.RTC: Order was issued by the Executive Judge where granted plaintiffs/petitioners application for injunctive relief. The following day, Sheriffs went back to defendants/respondents' office to determine whether or not the TRO issued by Branch 72 and served by them was followed. They were however, met by defendants/respondents Attys. Abella and Katalbas, in the office of defendant/respondent Canlas, who after much discussion, refused to honor the TRO issued by Branch 72 alleging among other[s], that said Order was illegal. On the same day also, plaintiffs/petitioners-movants filed in the instant case a verified indirect contempt charge. Defendants/respondents filed a manifestation with formal offer of evidence in the indirect contempt case essentially alleging that it is the Bureau of Customs that has jurisdiction over this case. Therefore, the indirect contempt case has no legal leg. RTC issued an Order on the indirect contempt case finding all of the defendants/respondents guilty of indirect contempt of court. RTC issued another Order considering the pending incidents in the injunction case. The RTC held that there should be prior determination by the BOC on whether the 2,000 bags of imported rice were smuggled.CA: CA rendered a Decision dismissing the petition for lack of merit and affirming the Orders issued by the RTC. ISSUE: Whether the CA erred in affirming the RTC Orders - YESHELD: We find the appeal meritorious.

1. As a rule, actions for injunction and damages lie within the jurisdiction of the RTC pursuant to Section 19 of BP 129.2. An action for injunction is a suit which has for its purpose the enjoinment of the defendant, perpetually or for a particular time, from the commission or continuance of a specific act, or his compulsion to continue performance of a particular act. It has an independent existence, and is distinct from the ancillary remedy of preliminary injunction which cannot exist except only as a part or an incident of an independent action or proceeding. In an action for injunction, the auxiliary remedy of preliminary injunction, prohibitory or mandatory, may issue.3. Until the propriety of granting an injunction, temporary or perpetual, is determined, the court (i.e., the RTC in this case) may issue a temporary restraining order. A TRO is an interlocutory order or writ issued by the court as a restraint on the defendant until the propriety of granting an injunction can be determined, thus going no further in its operation than to preserve the status quo until that determination. A TRO is not intended to operate as an injunction pendente lite, and should not in effect determine the issues involved before the parties can have their day in court.4. Petitioner alleges that the RTC of Olongapo City has no jurisdiction over the action for injunction as said action is within the exclusive original jurisdiction of the BOC pursuant to Section 602 of Republic Act No. 1937, otherwise known as the Tariff and Customs Code of the Philippines. Petitioner contends that the imported 2,000 bags of rice were in the actual physical control and possession of the BOC as early as 25 October 2001, by virtue of the BOC Subic Port Hold Order of even date, and of the BOC Warrant of Seizure and Detention dated 22 May 2002. As such, the BOC had acquired exclusive original jurisdiction over the subject shipment, to the exclusion of the RTC.a. We agree with petitioner.b. It is well settled that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise thereof or stifle or put it at naught. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods.5. The rule is that from the moment imported goods are actually in the possession or control of the Customs authorities, even if no warrant for seizure or detention had previously been issued by the Collector of Customs in connection with the seizure and forfeiture proceedings, the BOC acquires exclusive jurisdiction over such imported goods for the purpose of enforcing the customs laws, subject to appeal to the Court of Tax Appeals whose decisions are appealable to this Court.6. Here, the BOC Subic Port issued a Hold Order against the subject rice shipment. However, BOC Commissioner Titus Villanueva issued a directive to the BOC District Collector stating that the shipment may be released subject to payment of duties and taxes based on an upgraded value x x x and compliance with all existing rules and regulations. Accordingly, respondents made additional payments of customs duties and taxes for the upgraded shipment. Consequently, on 4 December 2001, the Officer-in-Charge of the BOC Subic Port Cash Division issued a certification/letter addressed to Augusto Canlas, the General Manager of the Subic Seaport Department, stating that respondents have already paid the customs taxes and duties due on the shipment, and a Gate Pass was issued on December 3, 2001 with signature of Mr. Percito V. Lozada, Chief Assessment (sic) in behalf of the District Collector Billy C. Bibit.[35] Thus, the Hold Order previously issued by the BOC[36] had been superseded, and made ineffective, by the succeeding BOC issuances. However, BOC Subic Port District Collector Felipe A. Bartolome subsequently issued a Warrant of Seizure and Detention dated 22 May 2002 against the subject rice shipment. The warrant was issued upon recommendation made by Atty. Baltazar Morales of the Customs Intelligence and Investigation Service (CIIS) on 29 April 2002.[37] 7. With the issuance of the warrant of seizure and detention, exclusive jurisdiction over the subject shipment was regained by the BOC.8. We note that the appellate court found suspicious the existence of the warrant of seizure and detention at the time of filing of the injunction and damages case with the RTC by respondents. The CA pointed out that petitioner did not mention the existence of the warrant in its Answer and only mentioned the warrant in its Consolidated Motion to Dismiss [the Complaint for Injunction and Damages, and the Petition for Indirect Contempt], filed on 1 August 2002. 9. We do not agree with the appellate court. Petitioner's apparent neglect to mention the warrant of seizure and detention in its Answer is insufficient to cast doubt on the existence of said warrant.

RE INDIRECT CONTEMPT10. Respondents filed a case for indirect contempt against Augusto L. Canlas, Atty. Francisco A. Abella, Jr., and Atty. Rizal V. Katalbas, Jr. for allegedly defying the TRO issued by the RTC in connection with the complaint for injunction and damages previously filed by respondents.11. Contempt constitutes disobedience to the court by setting up an opposition to its authority, justice and dignity. There are two kinds of contempt punishable by law: direct contempt and indirect contempt.12. When the TRO issued by the RTC was served upon the SBMA officers on 13 June 2002, there was already an existing warrant of seizure and detention (dated 22 May 2002) issued by the BOC against the subject rice shipment. Thus, as far as the SBMA officers were concerned, exclusive jurisdiction over the subject shipment remained with the BOC, and the RTC had no jurisdiction over cases involving said shipment. Consequently, the SBMA officers refused to comply with the TRO issued by the RTC.13. Considering the foregoing circumstances, we believe that the SBMA officers may be considered to have acted in good faith when they refused to follow the TRO issued by the RTC. Accordingly, these SBMA officers should not be held accountable for their acts which were done in good faith and not without legal basis. Thus, we hold that the RTC Order which found the SBMA officers guilty of indirect contempt should be invalidated. 14. Finally, the RTC stated in its Order that based on the records, there is a pending case with the Bureau of Customs District XIII, Port of Subic, Olongapo City, and involving the same 2,000 bags of imported rice that is also the subject matter of the case herein. The existence and pendency of said case before the Bureau of Customs have in fact been admitted by the parties.RE DIRECTIVE ON BOC TO RESOLVE SEIZURE CASE: The RTC then proceeded to order the suspension of court proceedings, and directed the BOC Subic Port Chief of the Law Division and Deputy Collector for Administration, Atty. Titus Sangil, to resolve the seizure case and submit to the RTC. We find the issuance of the RTC Order improper. The pendency of the BOC seizure proceedings which was madeknown to the RTC through petitioner's consolidated motion to dismiss should have prompted said court to dismiss the case before it. As previously discussed, the BOC has exclusive original jurisdiction over seizure cases under Section 602 of the Tariff and Customs Code. The rule that the RTC must defer to the exclusive original jurisdiction of the BOC in cases involving seizure and forfeiture of goods is absolute. Thus, the RTC had no jurisdiction to issue its Order dated 27 November 2002.DISPOSITIVE: WHEREFORE, we GRANT the petition. We REVERSE the Court of Appeals Decision dated 20 June 2003 and Resolution dated 8 October 2003 in CA-G.R. SP No. 74989. We declare VOID the Regional Trial Court Orders dated 21 November 2002 and 27 November 2002.HON. JUAN PONCE ENRILE, Commissioner of Customs and LT. GENERAL PELAGIO A. CRUZ, (Ret.) Chairman, Anti-Smuggling Action Center (ASAC),petitioners,vs.ANDRES M. VINUYA and HON. WALFRIDO DE LOS ANGELES, presiding judge of Branch IV, Court of First Instance of Rizal (sitting at Quezon City),respondents. Upon the application of the ASAC, then Collector of Customs of the Port of Manila issued a warrant of seizure and detention against the Cadillac Car herein. Owner-claimant is Rodolfo Ceadoza. Taxes and duties had not been paid Warrant was served and enforced, even before a complaint for replevin was filed against Judge de los Angeles (respondent judge) The circumstances for failure to pay were alleged in the petition: INFORMAL ENTRY AND CERTIFICATE of payment was for a 1961 Fiat car, and not the Cadillac in dispute. Also, the person who paid taxes was Pablo Cruz, not a party herein Ceadoza is the predecessor in interest of herein respondent Andres Vinuya Claiming to be aggrieved by such seizure, Vinuya filed a complaint for replevin in the sala of Judge. After filing a 60,000 bond, Judge issued an ex-parte order to a special sheriff to take possession of the Cadillac. On the very same day, Judge gave due course to the replevin complaint and required petitioners to file an answer Petitioners filed MTD as well as to lift ex-parte order. For MTD, petitioners claim the fact that forfeiture proceedings had already been instituted before the COC who has sole jurisdiction to determine questions affecting disposition of property under seizure Judge denied MTD, claiminf that such is without merit. A preliminary injunction was issued. In the answer filed by respondents, they admitted that the COC issued a warrant of seizure and detention against the Cadillac, but they denied that the registration covered the card was illegally secured. Vinuya allegedly relied on a public document which was valid and regular on its face. As their defense, they posture that the warrant is invalid and the seizing officer was devoid of authority. Hence, they assert that an illegal seizure cannot confer jurisdiction on the COC.ISSUE: W Judge de los Angeles has jurisdiction to entertain a replevin complaint filed by Vinuya for recovery of a Cadillac car which is subject of a seizure and forfeiture proceeding? NO1. The prevailing doctrine is that the exclusive jurisdiction in seizure and forfeiture cases vested in the Collector of Customs prevents a CFI from assuming cognizance over such a matter. (Pacis v. Averia) The Collector's decision is appealable to the Commissioner of Customs whose decision is in turn appealable to the CTA. An aggrieved party may appeal from a judgment of the Court of Tax Appeals directly to this Court. On the other hand, 44(c) of the Judiciary Act of 1948 lodges in the CFI original jurisdiction in all cases in which the value of the property in controversy amounts to more than ten thousand pesos. Such cannot be applicable to Tax cases, because when exercised in an action for recovery of personal property which is a subject of a forfeiture proceeding in the Bureau of Customs; such will encroach upon, and to render futile, the jurisdiction of the Collector of Customs in seizure and forfeiture proceedings. The judicial recourse of the property owner is not in the Court of First Instance but in the Court of Tax Appeals, and only after exhausting administrative remedies in the Bureau of Customs."112. Respondents, however, notwithstanding the compelling force of the above doctrines, would assert that respondent Judge could entertain the replevin suit as the seizure is illegal, allegedly because the warrant issued is invalid and the seizing officer likewise was devoid of authority. This is to lose sight of the distinction, as earlier made mention of, between the existence of the power and the regularity of the proceeding taken under it. The governmental agency concerned, the Bureau of Customs, is vested with exclusive authority. Even if it be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may oust it of such jurisdiction. It does not mean however that correspondingly a court of first instance is vested with competence when clearly in the light of the above decisions the law has not seen fit to do so. The proceeding before the Collector of Customs is not final. An appeal lies to the Commissioner of Customs and thereafter to the Court of Tax Appeals. It may even reach this Court through the appropriate petition for review. The proper ventilation of the legal issues raised is thus indicated. Certainly a court of first instance is not therein included. It is devoid of jurisdiction.WHEREFORE, the writ of certiorari prayed for is granted, respondent Judge being clearly without jurisdiction. As a result whereof, the orders complained of are set aside and declared to be without any force or effect. The writ of prohibition is likewise granted restraining respondent Judge from otherwise proceeding and continuing in any manner whatsoever in said Civil Case No. Q-12025 pending in his sala which he is required to dismiss. The writ of preliminary injunction issued by this Court is made permanent.

G.R. No. L-24348 July 30, 1968

FELIClDAD VIERNEZA, petitioner, vs.THE COMMISSIONER OF CUSTOMS, respondent.

Juan T. David for petitioner. Office of the Solicitor General for respondent.

REYES, J.B.L., J.:

An appeal from the decision of the Court of Tax Appeals (C.T.A. Case No. 762) sustaining a decision of respondent Commissioner of Customs forfeiting, in favor of the Government, 760 cartons of Chesterfield and Camel cigarettes with blue seals but without internal revenue strip stamps.

Reproduced below are the undisputed findings of facts in the decision appealed from: 1wph1.t

At about 2:00 a.m. on September 16, 1957 the M/V "Legaspi" a coastwise vessel coming from Jolo docked at the port of Cebu on her way to Manila. Acting upon a confidential telegraphic report from an informer in Jolo that the said vessel was carrying a substantial quantity of smuggled foreign cigarettes, the Customs authorities of the port of Cebu conducted a search of the vessel which eventually led to the discovery of eight cases containing SIX HUNDRED FIFTY (650) CARTONS of Chesterfield cigarettes and ONE HUNDRED TEN (110) CARTONS of Camel cigarettes without the required Internal Revenue strip stamps. Upon investigation it was also discovered that the subject merchandise was covered by Bill of Lading No. 24-A (Exhibit B) with "personal belongings" as its declaration and correspondingly entered into the manifest of the vessel likewise with "personal belongings" as the noted description, and with Sultan Pula of Jolo as the consignor and a certain Carlos Valdez as the consignee in Manila. Upon further investigation, however, it was found that a woman passenger was accompanying the subject merchandise appearing later to be Mrs. Felicidad Vierneza, the present claimant, who all the while holds the bill of lading. It should be noted that when Mrs. Vierneza was questioned during the course of the search she disclaimed under oath (Exhibit H) ownership of the merchandise.

Believing that there is a strong evidence of violations of Customs laws, the Collector of Customs of Cebu seized the merchandise and instituted the forfeiture proceedings for violation of Section 2530 (f), (g) and (m-4) of the Tariff and Customs Code of the Philippines and Section 174 of the Internal Revenue Code. After complying with the procedural requirement, of the law, the Collector of Customs of Cebu conducted a hearing of the case ... (and) on February 5, 1958, ... rendered his decision forfeiting the subject merchandise in favor of the Government ... (pp. 42-43, Customs records.)

The claimant of the merchandise, petitioner herein, appealed in due time from the decision of the Collector of Customs of Cebu to the Commissioner of Customs who affirmed the decision of the Collector, with the modification that the forfeiture was sustained, among others, under paragraph (m-1) of Section 2530 of the Tariff and Customs Code instead of under paragraph (m-4) of the same section. ...

Elevated to the Court of Tax Appeals, the decision of respondent Commissioner of Customs was affirmed, the court "(f)inding that the Collector of Customs of Cebu had jurisdiction to order the seizure and forfeiture of said cigarettes and that the forfeiture of the same is in accordance with Section 2530 (f) of the Tariff and Customs Code". Thus, petitioner, who claimed to have merely purchased the cigarettes in the open market in Jolo, now turns to us for relief, advancing the following assignment of errors:ISSUE/S:1. The Court of Tax Appeals erred in affirming the decision of the respondent finding that the Collector of Customs for the port of Cebu acted with jurisdiction in instituting seizure proceedings against the merchandise herein involved.

2. The Court of Tax Appeals erred in affirming the decision of the respondent finding that the merchandise involved are liable to the penalty of forfeiture (under Section 2530 (f) of the Tariff and Customs Code).

3. The Court of Tax Appeals erred in not finding that the merchandise involved which were seized and libeled for alleged violation of particular provisions of law can not be legally forfeited for violation of any other provision of law.

All three assigned errors are untenable.

1. Petitioner argues that the Collector of Customs of Jolo, who has "jurisdiction over all matters arising from the enforcement of tariff and customs laws within his collection district", as provided for in Section 703 of the Tariff and Customs Code, is exclusively authorized to proceed against the cigarettes in question inasmuch as the smuggling was allegedly perpetrated in his collection district. Hence, petitioner concludes that the seizure and forfeiture thereof by the Collector of Customs of Cebu is irregular and illegal for lack of jurisdiction.

We do not agree. First, because Section 703, on which petitioner's conclusion is premised, is legally non-existent, the same having been vetoed by the President.1 Secondly, the Tariff and Customs Code clearly empowers the Bureau of Customs to prevent and suppress smuggling and other frauds upon the Customs [Sec. 602 (b)] over all seas within the jurisdiction of the Philippines and over all coasts, ports, airports, harbors, bays, rivers and inland waters navigable from the sea and, in case of "hot pursuit", even beyond the maritime zone (Sec. 603). For the due enforcement of this function, a Collector, among others, is authorized to search and seize (Sec. 2203), at any place within the jurisdiction of the said Bureau (Sec. 2204, sec. par.), any vessel, aircraft, cargo, article, animal or other movable property when the same is subject to forfeiture or liable for any fine imposed under customs and tariff laws (Sec. 2205). It is of no moment where the introduction of the property subject to forfeiture took place. For, to our mind, "(i)t is the right of an officer of the customs to seize goods which are suspected to have been introduced into the country in violation of the revenue laws not only in his own district, but also in any other district than his own". [Taylor vs. U.S., 44 U.S. (3 How.) 197, 11 L. ed. 559]. Any other construction of the Tariff and Customs Code, such as the one proposed by petitioner, would virtually place the Collector of Customs in a straitjacket and render inutile his police power of search and seizure, thereby frustrating effective enforcement of the measures provided in the Code to prevent and suppress smuggling and other frauds upon the Customs. This we can not sanction by subscribing to petitioner's conclusion. The Code, as a revenue law, is to be construed to carry out the intention of Congress in enacting it and as would most effectually accomplish its objects (15 Am. Jur. 304).

Petitioner also attacks the jurisdiction of the Collector of Customs of Cebu on the ground that the forfeiture of the cigarettes is not in accordance with Section 2531 of the Code, as the same were, at the time of seizure, no longer in the custody and control of the Bureau of Customs nor in the hands, or subject to control, of the importer, original owner, consignee, agent or person with knowledge that the same were imported contrary to law.

Again, we disagree. The forfeiture is effected precisely in accordance with Section 2531 afore-cited, which plainly provides "that forfeiture shall be effected when and while the article is in the custody or within the jurisdiction of the customs authority ... or in the hands or subject to the control of ... some person who shall receive, conceal, buy, sell or transport the same ... with knowledge that the article was imported ... contrary to law" (Emphasis supplied). There can be no question that the cigarettes involved were seized and forfeited at the port of Cebu which is within the jurisdiction of the Bureau of Customs and, as will be shown later, while the cigarettes were subject to the control of petitioner, who bought, concealed, and transported the same aboard the M/V "Legaspi" with knowledge that they were imported contrary t