COMMISSIONER OF INTERNAL REVENUE vs. CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS

COMMISSIONER OF INTERNAL REVENUE vs.

CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS

G.R. No. L-29059 December 15, 1987

FACTS:

By virtue of a decision of the Court of Tax Appeals rendered on June 21, 1961, as modified on appeal by the Supreme Court on February 27, 1965, the Commissioner of Internal Revenue was ordered to refund to the Cebu Portland Cement Company the amount of P359,408.98, representing overpayments of ad valorem taxes on cement produced and sold by it after October 1957.

On March 28, 1968, following denial of motions for reconsideration filed by both the petitioner and the private respondent, the latter moved for a writ of execution to enforce the said judgment.

The motion was opposed by the petitioner on the ground that the private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance owing on the sales taxes in the amount of P 4,789,279.85 plus 28% surcharge.

On April 22, 1968, the Court of Tax Appeals granted the motion, holding that the alleged sales tax liability of the private respondent was still being questioned and therefore could not be set-off against the refund.

ISSUE:

            Whether or not the judgment debt can be enforced against private respondent’s sales tax liability, the latter still being questioned.

RULING:

The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the government." If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed.

The Tax Code provides: Sec. 291. Injunction not available to restrain collection of tax. - No court shall have authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code.

It goes without saying that this injunction is available not only when the assessment is already being questioned in a court of justice but more so if, as in the instant case, the challenge to the assessment is still-and only-on the administrative level. There is all the more reason to apply the rule here because it appears that even after crediting of the refund against the tax deficiency, a balance of more than P 4 million is still due from the private respondent.