G.R. No. L-7992; October 30, 1957
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. LUZON INDUSTRIAL CORPORATION and MANILA SURETY & FIDELITY CO., INC., defendants-appellants.

FACTS

Defendant Luzon Industrial Corporation was obligated to pay the plaintiff the amount of P36,232.93 as sales tax on coconut oil for the period from January 1, 1948, to March 31, 1948, payable on or before April 20, 1948. On April 20, 1948, the defendant issued Check No. E-106782 for the amount, payable to the City Treasurer of Manila. A messenger was sent to the City Treasurer’s Office on that date to pay the check. Due to numerous taxpayers, the messenger, sensing he would not reach his turn before the 4:00 p.m. closing time, mailed the check instead. The City Treasurer received the check on April 22, 1948, applied it to the tax due, and referred the matter to the Collector of Internal Revenue for imposition of the statutory 25% surcharge for delinquency. The Collector imposed the surcharge. Upon the defendant’s refusal to pay, a warrant of distraint and levy was issued. To suspend execution, the defendant furnished a bond jointly with Manila Surety and Fidelity Co., Inc. Demands were made, but defendants refused to pay the surcharge, alleging it was null and void.

ISSUE

Whether the tax payment should be deemed made on April 20, 1948 (the due date, when the check was mailed), or on April 22, 1948 (when it was received), thereby making the taxpayer delinquent and subject to the 25% surcharge.

RULING

The Supreme Court, en banc, affirmed the lower court’s judgment, ruling that the payment was made on April 22, 1948, and the 25% surcharge was properly imposed. The Court held that Executive Order No. 92, issued in 1927, governed the situation. It provided that a remittance by mail is considered received on the day it is actually received by the tax collector, unless the taxpayer proves it was deposited in the mail in ample time to reach the office by the close of business on the due date. Since the check was mailed after office hours on April 20 and received on April 22, the taxpayer was delinquent. The Court rejected the argument that Executive Order No. 92 was obsolete or impliedly repealed by the National Internal Revenue Code, noting it was applied by the Court in Jamora vs. Meer (74 Phil. 22). The Court also ruled that Rule 27, Section 1 of the Rules of Court (which considers the date of mailing as the date of filing/payment for court deposits) applies only to payments in court, not to tax payments to executive departments. Finally, the Court held that the surcharge was mandatory under the law, and the equitable power to modify penalties under Article 1154 (now 1229) of the Civil Code applies only to contractual penalties, not to statutory surcharges. Justice Felix dissented, arguing for the application of the Rules of Court principle or, alternatively, for a nominal penalty due to the taxpayer’s demonstrated good faith and the lack of damage to the government.