G.R. No. 119252 August 18, 1997
COMMISSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMS, petitioners, vs. HON. APOLINARIO B. SANTOS, in his capacity as Presiding Judge of the Regional Trial Court, Branch 67, Pasig City; ANTONIO M. MARCO; JEWELRY BY MARCO & CO., INC., and GUILD OF PHILIPPINE JEWELLERS, INC., respondents.

FACTS

The Bureau of Internal Revenue (BIR) conducted surveillance and inventory operations on several jewelry companies, including members of the respondent Guild of Philippine Jewelers, Inc., to verify payment of excise and value-added taxes on imported articles. This led to the preventive embargo of certain inventoried items. In response, the private respondents filed a petition for declaratory relief with the Regional Trial Court (RTC) of Pasig. They sought to declare specific provisions of the Tariff and Customs Code and the National Internal Revenue Code, which imposed customs duties and excise taxes on jewelry and precious stones, as unconstitutional. They argued the taxes were oppressive, confiscatory, and violated due process.
The RTC, presided by Judge Apolinario B. Santos, granted the petition. The trial court declared the cited tax provisions “inoperative and without force and effect,” finding them unconstitutional for being arbitrary and for failing to consider the industry’s economic realities. The court based its decision on a comparative study of tax rates in other Asian countries, which it used to conclude that the Philippine rates were excessive. The Commissioners of Internal Revenue and Customs elevated the case to the Supreme Court via petition for review.

ISSUE

The primary issue is whether a Regional Trial Court has jurisdiction to declare a tax law unconstitutional.

RULING

The Supreme Court REVERSED the RTC decision. It held that Regional Trial Courts do not have jurisdiction to declare a law unconstitutional. The power of judicial review to nullify acts of the legislative and executive branches is vested solely in the Supreme Court. Lower courts are mandated to obey and apply the law, and they cannot invalidate it. The Court emphasized the doctrine of hierarchy of courts, which requires that a direct challenge to the constitutionality of a statute must be brought before the Supreme Court, not a trial court.
Furthermore, the Supreme Court found that the RTC committed grave abuse of discretion by unnecessarily ruling on the constitutional question. The case could have been resolved on non-constitutional grounds, such as whether the BIR’s actions in implementing the tax laws were valid. The Court reiterated the principle of “judicial restraint,” which dictates that courts should avoid constitutional issues when a case can be decided on other grounds. The RTC erred in comparing Philippine tax rates with those of other countries, as the power to tax is a sovereign prerogative. The legislature has the plenary power to select subjects of taxation and set rates, and courts cannot interfere based on claims of inequality or alleged wisdom of the policy. The assailed tax provisions are presumed constitutional, and the RTC’s declaration of their invalidity was void for lack of jurisdiction.