Posted by: Vincent Albien V. Arnado on 31 July 2018
FACTS:
Congress enacted Republic Act (R.A.) No. 7227 creating the Subic Special Economic Zone (SSEZ) and extending a number of economic or tax incentives therein. Section 12 of the law provides:
(a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local Government Code, the [SSEZ] shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments;
(b) The [SSEZ] shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the [SSEZ], as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;
(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed within the [SSEZ]. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprise within the [SSEZ] shall be remitted to the National Government, one percent (1%) each to the local government units affected by the declaration of the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one percent (1%) of the gross income earned by all business and enterprise within the [SSEZ] to be utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic, and other municipalities contiguous to the base areas.
In case of conflict between national and local laws with respect to tax exemption privileges in the [SSEZ], the same shall be resolved in favor of the latter;
(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and future shall be allowed and maintained in the [SSEZ]
On June 3, 2003, then CIR Guillermo L. Parayno, Jr. issued Revenue Memorandum Circular (RMC) No. 31-2003 setting the "Uniform Guidelines on the Taxation of Imported Motor Vehicles through the Subic Free Port Zone and Other Freeport Zones that are Sold at Public Auction.
Petitioners Asia International Auctioneers, Inc. (AIAI) and Subic Bay Motors Corporation are corporations organized under Philippine laws with principal place of business within the SSEZ. They are engaged in the importation of mainly secondhand or used motor vehicles and heavy transportation or construction equipment which they sell to the public through auction.
Petitioners filed a complaint before the RTC of Olongapo City, praying for the nullification of RMC No. 31-2003 for being unconstitutional and an ultra vires act.
RTC granted the petitioners' application for the issuance of a writ of preliminary injunction.
Court of Appeals Regional Trial Court, On March 31, 2004,said that Branch 74, of Olongapo City is hereby declared bereft of jurisdiction to take cognizance of Civil Case.
ISSUE:
Whether or not a petition for certiorari under Rule 65 of the New Rules is proper where the issue raised therein has not yet been resolved at the first instance by the Court where the original action was filed, and, necessarily, without first filing a motion for reconsideration; and
Which Court- the regular courts of justice established under Batas Pambansa Blg. 129 or the Court of Tax Appeals – is the proper court of jurisdiction to hear a case to declare Revenue Memorandum Circulars unconstitutional and against an existing law where the challenge does not involve the rate and figures of the imposed taxes?
HELD:
The arguments are unmeritorious.
Jurisdiction is defined as the power and authority of a court to hear, try and decide a case.23 The issue is so basic that it may be raised at any stage of the proceedings, even on appeal.24 In fact, courts may take cognizance of the issue even if not raised by the parties themselves.25 There is thus no reason to preclude the CA from ruling on this issue even if allegedly, the same has not yet been resolved by the trial court.
As to the second issue, petitioners' arguments do not sway. R.A. No. 1125, as amended, states:
Sec. 7. Jurisdiction.—The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided—
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue; x x x (emphases supplied)
We have held that RMCs are considered administrative rulings which are issued from time to time by the CIR. In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually rulings or opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ to implement Section 12 of R.A. No. 7227 which provides that "exportation or removal of goods from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines." They were issued pursuant to the power of the CIR under Section 4 of the National Internal Revenue Code.
Petitioners' insistence for this Court to rule on the merits of the case would only prove futile. Having declared the court a quo without jurisdiction over the subject matter of the instant case, any further disquisition would be obiter dictum.IN VIEW WHEREOF, the petition is DENIED.
(b) The [SSEZ] shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the [SSEZ], as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;
(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed within the [SSEZ]. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprise within the [SSEZ] shall be remitted to the National Government, one percent (1%) each to the local government units affected by the declaration of the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one percent (1%) of the gross income earned by all business and enterprise within the [SSEZ] to be utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic, and other municipalities contiguous to the base areas.
In case of conflict between national and local laws with respect to tax exemption privileges in the [SSEZ], the same shall be resolved in favor of the latter;
(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and future shall be allowed and maintained in the [SSEZ]
On June 3, 2003, then CIR Guillermo L. Parayno, Jr. issued Revenue Memorandum Circular (RMC) No. 31-2003 setting the "Uniform Guidelines on the Taxation of Imported Motor Vehicles through the Subic Free Port Zone and Other Freeport Zones that are Sold at Public Auction.
Petitioners Asia International Auctioneers, Inc. (AIAI) and Subic Bay Motors Corporation are corporations organized under Philippine laws with principal place of business within the SSEZ. They are engaged in the importation of mainly secondhand or used motor vehicles and heavy transportation or construction equipment which they sell to the public through auction.
Petitioners filed a complaint before the RTC of Olongapo City, praying for the nullification of RMC No. 31-2003 for being unconstitutional and an ultra vires act.
RTC granted the petitioners' application for the issuance of a writ of preliminary injunction.
Court of Appeals Regional Trial Court, On March 31, 2004,said that Branch 74, of Olongapo City is hereby declared bereft of jurisdiction to take cognizance of Civil Case.
ISSUE:
Whether or not a petition for certiorari under Rule 65 of the New Rules is proper where the issue raised therein has not yet been resolved at the first instance by the Court where the original action was filed, and, necessarily, without first filing a motion for reconsideration; and
Which Court- the regular courts of justice established under Batas Pambansa Blg. 129 or the Court of Tax Appeals – is the proper court of jurisdiction to hear a case to declare Revenue Memorandum Circulars unconstitutional and against an existing law where the challenge does not involve the rate and figures of the imposed taxes?
HELD:
The arguments are unmeritorious.
Jurisdiction is defined as the power and authority of a court to hear, try and decide a case.23 The issue is so basic that it may be raised at any stage of the proceedings, even on appeal.24 In fact, courts may take cognizance of the issue even if not raised by the parties themselves.25 There is thus no reason to preclude the CA from ruling on this issue even if allegedly, the same has not yet been resolved by the trial court.
As to the second issue, petitioners' arguments do not sway. R.A. No. 1125, as amended, states:
Sec. 7. Jurisdiction.—The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided—
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue; x x x (emphases supplied)
We have held that RMCs are considered administrative rulings which are issued from time to time by the CIR. In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually rulings or opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ to implement Section 12 of R.A. No. 7227 which provides that "exportation or removal of goods from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines." They were issued pursuant to the power of the CIR under Section 4 of the National Internal Revenue Code.
Petitioners' insistence for this Court to rule on the merits of the case would only prove futile. Having declared the court a quo without jurisdiction over the subject matter of the instant case, any further disquisition would be obiter dictum.IN VIEW WHEREOF, the petition is DENIED.
