G.R. No. L-4300; October 31, 1951
SATURNINO DAVID, in his capacity as Collector of Internal Revenue, petitioner, vs. THE HONORABLE SIMEON RAMOS, in his capacity as Judge of the Court of First Instance of Manila and MARIA B. CASTRO, respondents.

FACTS

Respondent Maria B. Castro filed a complaint in the Court of First Instance of Manila against petitioner Saturnino David, the Collector of Internal Revenue. She alleged that she had been acquitted in a criminal case for non-payment of the war profit tax due to insufficiency of evidence. Despite this acquittal, the Collector announced the sale at public auction of her properties to satisfy the assessed war profits tax. She claimed the sale was an abuse of authority, would cause irreparable injury, and that Republic Act No. 55 (the War Profits Tax Law) was unconstitutional. She sought a preliminary and permanent injunction to stop the sale. The Collector, in his answer, objected to the court’s jurisdiction, arguing the court could not restrain tax collection and that Castro’s remedy was to pay the tax first and then sue for recovery. The lower court issued an order declaring it had authority to proceed with the case but denied the preliminary injunction. Consequently, the Collector proceeded with the distraint, levy, and sale of Castro’s properties. The Collector then petitioned the Supreme Court for certiorari, prohibition, and injunction to restrain the respondent judge from proceeding with the civil case, leading to the issuance of a preliminary injunction by the Supreme Court.

ISSUE

Whether the courts can restrain the collection of taxes on the ground that their validity is disputed by the taxpayer.

RULING

No. The Supreme Court ruled that the Court of First Instance had no jurisdiction to entertain the action for injunction to restrain the collection of the war profits tax. The Court held that under Section 305 of the National Internal Revenue Code, no court has authority to grant an injunction to restrain the collection of any internal revenue tax. This prohibition applies even if the tax is disputed or alleged to be illegal. The exclusive remedy for a taxpayer is to pay the tax first and then file a claim for refund or credit with the Collector of Internal Revenue, and if denied, to bring a suit for recovery, as provided under Section 306 of the National Internal Revenue Code. The Court cited its uniform holdings, including Churchill vs. Rafferty and Sarasola vs. Trinidad, that no suit to enjoin tax collection can be brought, emphasizing the policy of prompt tax collection. The Court found no extraordinary or exceptional circumstances in this case to warrant an exception to the rule. The acquittal in the criminal case and the constitutional challenge to the tax law are matters to be raised in a recovery suit after payment, not in an injunction proceeding. The order of the lower court was set aside, and it was declared without jurisdiction to proceed with the trial.