Republic v. Tuason

[CA No. 33726-R. September 1, 1965.] REPUBLIC OF THE PHILIPPINES , plaintiff and appellee , vs . MOISES B. TUASON , defendant and appellant . Jaime P . Barros for defendant and appellant. Solicitor General Arturo A . Alafriz, Solicitor Alejandro B . Afurong and Special Attorney Balbino Gatdula, Jr . , for plaintiff and appellee. SYLLABUS ACTIONS; RECOVERY OF TAXES; SEC. 308, TAX CODE; COLLECTOR OF INTERNAL REVENUE NEED NOT SIGN COMPLAINT. Section 308 of the Tax Code, which provides that no civil action for recovery of taxes or the enforcement of any fine, penalty, or forfeiture under this Code shall be begun without the approval of the Collector (now Commissioner) of Internal Revenue , does not say that the Collector of Internal Revenue should sign in the complaint itself. It does not specify how and in what manner the Collector of Internal Revenue should manifest or express his approval. Hence, the said approval may take any form or mode, meaning express or implied, written or verbal, by affixing his signature in the complaint itself or by writing his approval in a separate sheet or document. D E C I S I O N LUCERO , J p : This is a civil action for recovery of taxes instituted by the Republic of the Philippines with the CFI of Abra on November 25, 1958 against defendant-appellant Moises B. Tuason, a licensed forest concessionaire. The defenses are ( a ) prescription and ( b ) complaint does not carry the approval of the Collector of Internal Revenue as required by Section 308 of the Tax Code. After due trial during which testimonial and documentary evidences were presented, the lower court rendered judgment on August 12, 1963 sentencing defendant-appellant Tuason to pay plaintiff-appellee the sum of P3,853.03 as his balance for forest surcharges and deficiency sales taxes for the years 1951 to 1953 and the costs of the suit. Defendant taxpayer appealed and assigned three errors, to wit: 1. "The Court erred in the trial of the case notwithstanding the infirmity of the complaint; 2. "The Court erred in not holding that the three causes of action had prescribed under Section 354 of the Tax Code; and 3. "The Court erred in the manner by which section 331 of the Tax Code was applied." With respect to the First Cause of Action: The total amount involved is P1,090.80. In this connection, defendant taxpayer admitted that the assessment received from the Municipal Treasurer of Bangued is dated March 16, 1951 (Exh. C). On April 5, 1951, defendant taxpayer wrote the Collector of Internal Revenue that he be allowed to pay the assessment in 3 installments of P363.60 each, to wit, on April 10, May 10, and June 10, 1951, consecutively (see letter Exh. C). This request was granted by the Collector of Internal Revenue on June 18, 1951 provided that defendant post the necessary bond (Exh. D). Although defendant taxpayer did not file the bond called for, he paid the sums of P363.60 on April 10, 1951 and P500.00 on October 18, 1952, thus reducing the assessment to a balance of P227.20 (see par. 7 of Amended Complaint, RA 46-47). Under Section 331 of the Tax Code, the tax should be assessed within 5 years after the filing of the return. In the case at bar, defendant taxpayer does not claim that the above tax was assessed beyond the 5-year period from the filing of the return. Pursuant to Section 332 (c), Tax Code, such tax due may be collected by judicial action within 5 years after the assessment which, insofar as the First Cause of Action is concerned, would expire on March 16, 1956 . But the running of the prescriptive period on the present action, to quote Article 1155, NCC, "is interrupted . . . when there is any written acknowledgment of the debt by the debtor." With reference to the balance of P227.20 litigated under the First Cause of Action, it appears that herein defendant "has promised to pay the said balance as soon as he arrives from Cagayan where he is at present working" (see Exh. F dated August 28, 1953). As a matter of fact, when a warrant of distraint and levy was issued against him (which includes above balance), defendant taxpayer wrote to the Deputy Provincial Treasurer of Bangued, Abra, on January 28, 1954 praying for a 90-day grace effective as soon as the request is granted (see defendant's letter, Exh. I). This request, he repeated on January 18, 1955 (Exh. K). Computing the 5-year period from the last request, the action for judicial collection would not prescribe until January 18, 1960. But the fact, however, is that the present action was instituted on November 25, 1958. In the case of Republic vs . Arcache, L-15547, February 29, 1964, the Supreme Court ruled that prescription is interrupted by the taxpayer's partial payment and by his repeated requests for extensions to pay. As was observed in the aforecited case, "the tax could have been collected, but the Government withheld action at the specific request of the plaintiff (defendant in this case). He is now estopped and should not be permitted to raise the defense of the Statute of Limitations." We rule in consequence that the first cause of action has not as yet prescribed. As to the Second Cause of Action : This concern forest charges and surcharges from August 20, 1952 up to and including July 8, 1953 to the tune of P1,053.40. The formal assessment, Exh. H, signed by Victor Cabreza, Chief, Assessment Department, BIR, is dated January 20, 1954. Under Section 322 (c), Tax Code, such delinquent tax may be collected by judicial action within 5 years after the assessment. Five (5) years after the assessment (which is dated January 20, 1934) would expire on January 20, 1959. The present action was brought on November 25, 1958, hence within period. cdtech With regard to the Third Cause of Action : The amount involved is P4,590.47 as percentage tax on gross sales of manufactured lumber during the period from 1951 to 1953. The formal assessment, Exh. N, signed by Victor Cabreza, BIR Chief of the Assessment Department, addressed to defendant Moises B. Tuason, Bangued, Abra, bears date December 20, 1954. Pursuant to Sec. 332 (c), Tax Code, the 5-year period for judicial action for collection of taxes shall be counted from the date of the assessment which, in respect to this cause of action, is December 20, 1954. Between the date of the assessment (December 20, 1954) and the date of the filing of the present complaint (November 25, 1958 ) is only 3 years, 11 months and 5 days. It is clear that this cause of action has not as yet prescribed. Deducting payments made and the amount realized from the sale of defendant-appellant's truck, the balance sought to be collected in the amended complaint is P3,853.05 which is exactly the amount adjudged by the lower court. The above discussion amply refutes the second and third assignments of error of defendant-appellant. Coming to the first assignment of error to the effect that the Amended Complaint is invalid because it has not been approved by the Collector of Internal Revenue himself as required by Section 308 of the Tax Code but merely by the Regional Director of District I, we have this to say: Section 308 of the Tax Code provides that " no civil action for recovery of taxes or the enforcement of any fine, penalty, or forfeiture under this Code shall be begun without the approval of the Collector of Internal Revenue . In expressing his approval, Section 308 does not say that the Collector of Internal Revenue should sign in the complaint itself. When, in the Collector's memorandum of March 5, 1957, addressed to the Regional Director of District 1, Baguio City, he says: " You are hereby authorized to institute civil actions or proceedings for the collection of internal revenue taxes from taxpayers within your territorial jurisdiction in cases where the amount involved does not exceed P10,000.00 without necessity of previously referring the matter to me" (Record on Appeal, 51) what he (Collector) means is that he is approving the filing of tax recovery cases within that district of the category above indicated. In the case at bar, the amount sought to be recovered is P3,853.03. How could we claim that the present action was begun "without the approval of the Collector of Internal Revenue"? The dissenting opinion appears to confuse "approving" with "signing." The Collector of Internal Revenue can approve a judicial action taken without the necessity of having to affix his signature in the complaint. The authority granted by the Collector of Internal Revenue to the Regional Director is not to approve the filing of the action but to institute it. Consequently, the Collector of Internal Revenue cannot be charged with having delegated his power to approve. As we see it, he was precisely exercising it. Section 308 of the Tax Code fails to specify how and in what manner the Collector of Internal Revenue should manifest or express his approval. Hence, the said approval may take any form or mode, meaning express or implied, written or verbal, by affixing his signature in the complaint itself or by writing his approval in a separate sheet or document. Thus, Solicitor General Edilberto Barot avers in the Amended Complaint: "19. That this action has been instituted with the approval of the Collector (now Commissioner) of Internal Revenue, as evidenced by his Memorandum to the Regional Director, BIR Regional District No. 1, Baguio City, dated March 5, 1957, a true copy of which is hereto attached and made as an integral part hereof as Annex A. "20. That the foregoing assessments, subject of this complaint have not been contested by defendant in the Court of Tax Appeals, and, the same has became final, incontestable and executory." Unless disauthorized by the incumbent Collector of Internal Revenue, there is no valid reason to our mind to dismiss the Amended Complaint. The impractical aspects of the dissenting opinion's interpretation of Section 308 of the Tax Code is immediately apparent. Shall we require yet the Collector of Internal Revenue to sign a complaint, say for the collection of delinquent taxes involving P45.00 to be filed in Siasi, Sulu, or in Basco, Batanes? The realities of life urge us to reject an interpretation that would sacrifice substance to form and to rituals of little value. Well known to all is the fact that the Collector of Internal Revenue is a man of multifarious duties and every minute of his time counts. WHEREFORE, the judgment appealed from is hereby affirmed, with costs. aisadc SO ORDERED. Capistrano, Enriquez and Yatco, JJ . , concur. Separate Opinions NARVASA , J . , dissenting : During the periods of time herein mentioned, Moises B. Tuason was a duly licensed forest concessionaire engaged in forestry business. In July, 1950, he was caught cutting logs outside his licensed area at Malaolaoed, Baay, Abra, as a consequence of which there was assessed against him the sum of P555.48 as 300% surcharge on the regular forest charge of P185.16 already paid by him, in accordance with Section 267 of the National Internal Revenue Code. Again, in the same month of July, 1950, he was found committing a similar violation, and as a result, the sum of P535.32 as 300% surcharge on the regular forest charge of P178.44 already paid by him, was assessed against him. On March 16, 1951, the Government, through the Municipal Treasurer of Bangued, Abra, demanded payment from said Moises B. Tuason of the aforesaid two sums, or a total of P1,090.80. By his letter of April 5, 1951, to the then Collector (now Commissioner) of Internal Revenue, Tuason proposed settlement in 3 monthly installments, to begin on or before April 10, 1951. The Collector of Internal Revenue informed Tuason by letter dated June 18, 1951 that his proposition would be accepted if sufficient bond therefor was put up. Tuason did not put up the bond, and just paid to the Municipal Treasurer of Bangued P363.60 on April 10, 1951, and P500.00 on October 18, 1952, leaving a balance unpaid of P227.20. Upon investigation conducted by the Provincial Revenue Agent in Bangued, Abra, on or about November 16, 1953, it was ascertained that from August 20, 1952 to July 8, 1953, Moises B. Tuason had not paid the regular forest charges amounting to P842.74 which, together with the corresponding surcharges in the amount of P210.70, aggregated P1,053.44. Accordingly, on June 30, 1954 letter of demand was sent him for payment of the said sum of P1,053.44 and also the previous unpaid balance of P227.20 or a total of P1,280.64. Tuason did not pay. In another investigation conducted by a BIR representative on May 31, 1954, it was ascertained that Tuason, who was also engaged in the sawmill business, being the owner and operator, from 1950 to 1953, had failed to pay the correct amount of percentage taxes due on his gross sales of manufactured lumber, the same having been underdeclared, for which reason there was assessed against him the sum of P4,590.47 representing total deficiency tax of P3,672.38 plus 25% surcharge of P918.09. Payment of said sum of P4,590.47 was likewise demanded of him by letter of December 20, 1954. Of the total amount of P5,871.11 which he owed the Government, as above stated, Tuason made payments aggregating P1,418.04 leaving an unpaid balance of P4,453.07 of which he was apprised on December 4, 1956, at the same time urging him to pay within 10 days thereafter. On April 21, 1958, through sale at public auction of Tuason's truck which was previously distrained, the sum of P600.00 was realized which was applied to his account, bringing down the balance unpaid to P3,853.07, which he failed and refused to pay despite insistent demands made therefor. Hence, this action brought on November 25, 1958 to enforce collection of the aforesaid amount of P3,853.07. The complaint was filed in the name of the Republic of the Philippines, plaintiff, and signed by the Solicitor General and the Regional Director, BIR Regional District No. 1. Defendant Moises B. Tuason filed a motion to dismiss on the grounds (1) that the causes of action had already prescribed under Sections 51 (d), 331, 332 and 334 of the Tax Code, and (2) that the complaint is not valid for it does not bear the signature of the Collector of Internal Revenue. The lower court sustained the motion on the second ground for "nowhere in the complaint is there any allegation whatsoever or any indication that the institution of the instant action carries the approval of the Collector of Internal Revenue," and dismissed the complaint. Upon plaintiff's motion for reconsideration, opposed by the defendant, the lower court reconsidered its Order and allowed the plaintiff "to amend the complaint accordingly within a period of ten (10) days from receipt of a copy of this Order." An amended complaint was filed, signed as before, but containing additional allegations that the action was instituted "with the approval of the Collector (now Commissioner) of Internal Revenue, as evidenced by his memorandum to the Regional Director, B.I.R. Regional District No. 1, Baguio City, dated March 5, 1957, a true copy of which is hereto attached and made as an integral part hereof as Annex A," and that "the foregoing assessments, subject of this complaint have not been contested by defendant in the Court of Tax Appeals and, therefore, the same have become final, incontestable and executory." The defendant filed another motion to dismiss the amended complaint, insisting that "under Sec. 308 of the Tax Code, the approval of the Collector of Internal Revenue is necessary for any civil complaint filed by the Bureau." The motion, opposed by plaintiff, was denied by the lower court, "the ground relied upon . . . not being indubitable." The defendant filed answer, alleging, by way of affirmative defenses that the three causes of action alleged in the amended complaint had already prescribed, and that "the complaint does not carry the approval of the Collector of Internal Revenue and therefore . . . does not rise to the category of a valid complaint contemplated by Sec. 308 of the Tax Code." cdt After the trial of the case, the lower court rendered decision on November 21, 1963, the dispositive part whereof reading as follows: "FOR ALL THE FOREGOING CONSIDERATIONS, the Court enters judgment against the defendant and hereby orders him to pay the plaintiff the sum of P3,853.03 as his balance account for forest charges, surcharges and deficiency sales taxes for the years 1951 to 1953, and to pay the costs." The case is now before us on appeal taken by the defendant from the decision of the lower court, based upon the following supposed errors of the lower court: (1) in trying the case notwithstanding the infirmity of the complaint; (2) in not holding that the three causes of action had prescribed under Section 354 of the Tax Code, and (3) in the manner by which Section 331 of the Tax Code was applied. In connection with the first error assigned by him, defendant-appellant quotes Section 308 of the National Internal Revenue Code, the pertinent last clause of which reading as follows: ". . ., but no civil action for recovery of taxes or the enforcement of any fine, penalty, or forfeiture under this Code shall be begun without the approval of the Collector of Internal Revenue." and then states: "It is clear from the law aforecited that a civil complaint filed by the Bureau of Internal Revenue, like the one now under consideration, requires the approval of the Collector of Internal Revenue as a condition sine qua non . However, in spite of a motion to dismiss timely interposed, appellee in amending its complaint to cure the defect, simply annexed a 'Memorandum' of the Collector . . . dated March 5, 1957, authorizing Regional Directors to institute civil complaints. The Regional Director of Baguio City did, in fact, approve the complaint instead of the Collector. The question is: Can a simple memorandum like Annex A, negate the mandatory provision of Sec. 308 of the Tax Code by investing on Regional Director the power to approve complaints. We subscribe to the negative." Upon his part, the Solicitor General, as counsel for the plaintiff, states the following in his brief: "Appellant argues that in order to be valid, the complaint filed by appellee should have been approved by the Commissioner of Internal Revenue himself as required by the above-quoted provision of Section 308 of the Tax Code and not by a mere Regional Director. This argument is without merit. "It is true that under said Section 308 of the Tax Code, the approval of the Commissioner of Internal Revenue is necessary in beginning any civil action for the recovery of taxes, such as the instant case. However, we respectfully submit that this authority to approve the filing of civil actions for recovery of taxes has been delegated by the Commissioner of Internal Revenue upon the creation of ten (10) BIR Regional Directors, as provided in Revenue Regulations Nos. V-60 dated March 10, 1958 (Official Gazette, Vol. 54, No. 8, April 30, 1958). Under said regulations, 'the main objective sought to be realized in the creation of regional districts and inspection units is to effect the decentralization of the Bureau of Internal Revenue for the purpose of intensifying tax assessment and collection, and enforcement of revenue laws and regulations.' In other words, with the decentralization of the Bureau of Internal Revenue and the creation of the Regional Districts, some of the functions entrusted by law to the Commissioner of Internal Revenue, such as that prescribed in Section 308 of the Code, have been delegated to the Regional Director, he being the official having the direct charge and supervision of a regional district (Sec. 12, Revenue Regulation V-60.) (See L-11536, Villamin vs . Court of Tax Appeals, Oct. 31, 1960; L-13099 & L-13462, Collector of Internal Revenue vs . Bohol Land Transp. Co., April 29, 1960.)" We believe that this assigned error is meritorious. It is a recognized doctrine on "Officers" that in the absence of statutory authority a public officer cannot delegate his powers (67 CJS 373). The last clause of Section 308 of the Tax Code above quoted, which provides for the approval of the Collector of Internal Revenue before civil action for recovery of taxes or the enforcement of any administrative fine, penalty or forfeiture under the Code shall be begun, is mandatory in character, and pursuant to Article 7 of our Civil Code (new), laws are repealed only by subsequent ones, and administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws. The aforementioned Revenue Regulations No. V-60, dated March 10, 1958, were issued by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, in pursuance of Sections 8 and 338 of the Internal Revenue Code, which authorize the promulgation of needful rules and regulations dividing the Philippines into inspection districts for administrative purposes, which shall be under the supervision of the provincial revenue agents. There is nothing in said Revenue Regulations that may be construed as delegating to the regional directors thereunder appointed, the abovementioned function entrusted by Section 308 of the Tax Code to the Collector of Internal Revenue to approve civil actions instituted in accordance therewith. It is in his Memorandum for the Regional Director, BIR Regional District No. 1, Baguio City, dated March 5, 1957, that the Collector thereby authorized said Regional Director to institute civil actions of proceedings for the collection of internal revenue taxes in cases where the amount involved does not exceed P10,000.00, "without the necessity of previously referring the matter to the undersigned," and in such cases the Collector's Office "should invariably be furnished with two copies of the important pleadings filed, such as complaint, answer, memorandum, etc."; but this memorandum not only does not appear to have been approved by the Department Head, but cannot have valid effect as an amendment to or modification of the aforesaid mandatory provisions of Section 308 of the Tax Code, the same being not within the authority of the Collector to issue. The requirement provided for in Section 308 of the Tax Code that no civil action for the recovery of taxes or the enforcement of administrative fine, penalty or forfeiture shall be begun without the approval of the Collector of Internal Revenue is not only mandatory but jurisdictional in order that the courts may acquire jurisdiction over the case. It is true that in the amended complaint it is alleged that the action was instituted with the approval of the Collector of Internal Revenue and such approval was evidenced by the aforementioned Memorandum dated March 5, 1957 attached to the complaint, but as correctly stated by appellant, it was the Regional Director of Baguio City that did, in fact, approve the complaint instead of the Collector, and this is a fatal omission. Plaintiffs counsel cites also the case of Gibbs et al. vs . Collector of Internal Revenue, G.R. No. L-13453, February 29, 1960; but the portion of the decision referred to concerned the action of the Deputy Collector of Internal Revenue taken under Section 309 of the Code, which was ruled as "final and binding unless revoked by the Collector", the Collector and Deputy Collector of Internal Revenue being the Chief officials of the Bureau of Internal Revenue (Sec. 2). Having arrived at the above-mentioned conclusion, we do not deem it necessary to discuss the other errors assigned by the appellant for, as well stated by the trial court in its Order of March 4, 1959, sustaining defendant's motion to dismiss, and dismissing the complaint, "a discussion of the issue of prescription would be academic if the mandatory provisions of Section 308 of the National Internal Revenue Code in respect to the approval of the Collector of Internal Revenue of the filing of the instant action have not been complied with as a prerequisite thereof". LLjur WHEREFORE, the appealed decision is hereby (should be) set aside, and another, entered, dismissing the amended complaint. No costs. SO ORDERED.