GR 119322; (June, 1996) (Digest)
G.R. No. 119322 . June 4, 1996.
COMMISSIONER ON INTERNAL REVENUE, ET AL., petitioners, vs. THE HONORABLE COURT OF APPEALS, THE HONORABLE TIRSO D.C. VELASCO, PRESIDING JUDGE, REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 88, FORTUNE TOBACCO CORPORATION, ET AL., respondents.
FACTS
The Commissioner of Internal Revenue (CIR) issued Revenue Memorandum Circular No. 37-93, reclassifying certain cigarette brands of Fortune Tobacco Corporation as foreign brands subject to higher tax. The CIR subsequently assessed Fortune for massive deficiency taxes for 1992 and filed a criminal complaint for tax evasion with the Department of Justice. Fortune challenged the tax assessment before the Court of Tax Appeals and, in a separate action before the Regional Trial Court (RTC) of Quezon City, sought to enjoin the preliminary investigation of the criminal complaint. The RTC issued orders granting a writ of preliminary injunction to halt the preliminary investigation and denied the prosecutors’ motion to dismiss. The prosecutors elevated the matter to the Court of Appeals via certiorari, arguing the RTC committed grave abuse of discretion.
ISSUE
Whether the Court of Appeals correctly ruled that the RTC did not commit grave abuse of discretion in issuing the writ of preliminary injunction to restrain the preliminary investigation of the tax evasion complaint.
RULING
No. The Supreme Court reversed the Court of Appeals and held that the RTC committed grave abuse of discretion. The legal logic is anchored on the principle of non-interference with the executive branch’s preliminary investigation authority, absent a clear showing of a jurisdictional defect. A preliminary investigation is an executive function, and courts cannot ordinarily enjoin its progress. For an injunction to lie, there must be a clear showing that the prosecutors have no jurisdiction or have committed a flagrant, whimsical, and oppressive abuse of authority. The mere existence of a pending challenge to the validity of the tax assessment before the Court of Tax Appeals does not, by itself, divest the prosecutors of their jurisdiction to investigate a criminal complaint for tax evasion. The criminal liability for tax evasion is separate from civil liability, and the determination of the correctness of an assessment is not a prejudicial question that justifies halting a criminal investigation. The RTC’s orders effectively paralyzed the executive function of preliminary investigation based on an incorrect legal premise, constituting a capricious and arbitrary exercise of power equivalent to an evasion of a positive duty. Thus, the issuance of the injunction was a patent and gross abuse of discretion.