GR L 14595; (October, 1919) (Digest)
G.R. No. L-14595; October 11, 1919
GREGORIO SARASOLA, plaintiff-appellant, vs. WENCESLAO TRINIDAD, Collector of Internal Revenue of the Philippine Islands, defendant-appellee.
FACTS:
Gregorio Sarasola filed a complaint in the Court of First Instance of Manila seeking an injunction to restrain the Collector of Internal Revenue from collecting internal revenue taxes amounting to P11,739.29, which he alleged were illegally assessed. The Collector demurred to the complaint, arguing that the court had no jurisdiction to grant an injunction to restrain tax collection under Section 1578 of the Administrative Code of 1917, and that the facts did not entitle Sarasola to relief. The trial court sustained the demurrer and dismissed the complaint, relying on the Supreme Court’s precedent in Churchill and Tait vs. Rafferty. Sarasola appealed.
ISSUE:
Whether the trial court correctly dismissed the complaint, thereby upholding the constitutionality and application of Sections 1578 and 1579 of the Administrative Code of 1917, which prohibit courts from issuing injunctions to restrain the collection of internal revenue taxes and provide that any recovery of illegally collected taxes shall be “without interest.”
RULING:
The Supreme Court affirmed the trial court’s order dismissing the complaint. The Court held that Sections 1578 and 1579 of the Administrative Code of 1917 are constitutional and provide an adequate and exclusive legal remedy for a taxpayer contesting a tax assessment. The law requires the taxpayer to pay the tax under protest and then file an action to recover the amount paid, albeit without interest. This statutory scheme is a valid exercise of legislative power to prescribe the conditions under which the government may be sued for tax collection. The Court found that this remedy is adequate at law and that Sarasola failed to demonstrate any exceptional circumstance, such as irreparable injury, that would warrant equitable intervention by injunction. The prohibition against injunctions merely confirms a universal principle and does not diminish the jurisdiction of the courts, as they historically lacked the power to enjoin tax collection. The disallowance of interest on recovery is a condition attached by the legislature to the remedy it provided.