GR L 29059; (December, 1987) (Digest)
G.R. No. L-29059 December 15, 1987
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS, respondents.
FACTS
The Court of Tax Appeals (CTA) ordered the Commissioner of Internal Revenue (CIR) to refund ad valorem tax overpayments to Cebu Portland Cement Company (CEPOC). CEPOC moved for a writ of execution to enforce this final judgment. The CIR opposed, arguing that CEPOC had a substantial outstanding sales tax deficiency. The CIR claimed the judgment debt had been credited against this liability, leaving a large balance still due from CEPOC.
The CTA granted CEPOC’s motion for execution. It ruled that the alleged sales tax liability could not be set off against the refund because it was still being contested by CEPOC and was not yet final. CEPOC disputed the sales tax assessment on the merits, arguing cement is a mineral product exempt from sales tax, and also contended the assessment had prescribed.
ISSUE
Whether the CTA erred in ordering the execution of the refund judgment without allowing the CIR to set it off against CEPOC’s contested sales tax deficiency.
RULING
The Supreme Court granted the CIR’s petition and set aside the CTA’s resolution. The legal logic is twofold. First, on the substantive issue, cement is a manufactured product, not a mineral product, and is therefore subject to sales tax. The Court explicitly overruled prior implications in Cebu Portland Cement Co. v. Collector that suggested otherwise, aligning with its settled pronouncement in Commissioner v. Republic Cement Corporation that cement, as a product of manufacturing, is subject to sales tax under the Tax Code.
Second, and decisively for the execution issue, the contested nature of the sales tax assessment does not preclude its use as a set-off against the refund. The Court emphasized the imperative need for tax collection as the government’s lifeblood. The Tax Code expressly prohibits injunctions to restrain tax collection, a policy that applies with greater force when a challenge is at the administrative level, as here. To require the CIR to physically refund the money only to later distrain it for the undisputed tax deficiency would be an idle ritual. The Court found the CTA erred in ordering this charade, holding that the right to collect the assessed tax, pending final resolution of the protest, justified the set-off.