G.R. No. 113459 - Commissioner of Internal Revenue vs. Leal

The Commissioner of Internal Revenue (petitioner) issued Revenue Memorandum Order (RMO) No. 15-91 on March 11, 1991, imposing a 5% lending investor’s tax on pawnshops based on their gross income.
The issuance was based on the petitioner’s evaluation that the pawnshop business, which involves lending money at interest in addition to receiving pawned personal property as security, is akin to a lending investor’s activity as defined in Section 157(u) of the National Internal Revenue Code of 1977 (Tax Code).
Subsequently, Revenue Memorandum Circular (RMC) No. 43-91 dated May 27, 1992, was issued by the petitioner, subjecting the pawn ticket to the documentary stamp tax in accordance with Title VII of the Tax Code.

Josefina Leal, owner and operator of Josefina’s Pawnshop in San Mateo, Rizal, was adversely affected by these revenue orders.
She sought a reconsideration of both RMO No. 15-91 and RMC No. 43-91; however, her request was denied in the petitioner’s BIR Ruling No. 221-91 dated October 30, 1991.

Respondent filed a petition for prohibition before the Regional Trial Court (RTC), Branch 75, San Mateo, Rizal (Civil Case No. 849-92) on March 18, 1992, aiming to prohibit the implementation of the contested revenue orders.
Petitioner, represented by the Office of the Solicitor General, moved to dismiss the petition on the ground that the RTC lacked jurisdiction over the revenue orders, claiming that such revenue orders were merely rulings or opinions issued under his power to implement internal revenue laws.

The RTC, under Presiding Judge Andres B. Reyes, Jr., denied the motion to dismiss on April 27, 1992, holding that the revenue orders were virtually new taxes (against pawnshops) not provided for under the Tax Code and could only be imposed by Congress.
Petitioner then filed a petition for certiorari and prohibition before the Court of Appeals (CA) under Rule 65 of the Rules of Court, alleging that the RTC acted without or in excess of jurisdiction or with grave abuse of discretion.
The CA dismissed the petition for lack of legal basis, ruling that the RTC order denying the motion to dismiss is subject to direct review before the Supreme Court on issues purely of law.
The CA eventually resolved the merits by sustaining the RTC ruling that the contested revenue orders imposed additional measures which only Congress is empowered to impose.

Petitioner argued that under Section 9(1) of Batas Pambansa Blg. 129, the CA has concurrent original jurisdiction to issue extraordinary writs (e.g., certiorari, mandamus, prohibition) and that his petition was properly filed with the CA.
The dispute centered on whether the petition for certiorari under Rule 65 was the proper remedy against the RTC order and whether jurisdiction over the subject revenue orders lies with the RTC or with the Court of Tax Appeals (CTA) pursuant to Republic Act No. 1125.
The petitioner maintained that since the revenue orders are opinions of the Commissioner on the taxability of pawnshops, and given that such rulings are appealable to the CTA by virtue of Section 7 of Republic Act No. 1125, they should be reviewed by the CTA rather than the RTC or the CA.

Whether the Court of Appeals (CA) has original jurisdiction to entertain a special civil action for certiorari under Rule 65 of the Rules of Court when questioning the authority of the RTC in reviewing the challenged revenue orders.

Whether the proper forum for resolving the dispute over the revenue orders issued by the Commissioner of Internal Revenue is the RTC, or instead lies exclusively with the Court of Tax Appeals (CTA) in light of Republic Act No. 1125.