G.R. No. 252189 - Games and Amusements Board vs. Klub Don Juan de Manila, Inc.

Klub Don Juan de Manila, Inc. (Klub Don Juan), an organization of racehorse owners regularly participating in races conducted by various racing clubs, filed a complaint seeking injunctive relief.
The respondents include the Games and Amusement Board (GAB), Bureau of Internal Revenue (BIR), Manila Jockey Club, Inc. (MJCI), Philippine Racing Club, Inc. (PRCI), and Metro Manila Turf Club, Inc. (MMTCI).
The racing clubs, as grantees of legislative franchises, have the authority to construct, maintain, and operate horse racing tracks and are mandated by their franchise laws to withhold and remit documentary stamp taxes (DST) to the BIR.

Under Republic Act No. 8407 (franchise for MJCI), Section 11 requires the collection of a DST of ten centavos (₱0.10) on each horse racing ticket, with an additional tax if the cost exceeds ₱1.00.
Republic Act No. 7953 (franchise for PRCI), Section 8 mandates a similar DST rate, with a special provision for double, forecast/quinella, and trifecta bets whereby the tax is five centavos (₱0.05) per ₱1.00 of the ticket value.
Republic Act No. 7978 (franchise for MMTCI), Section 6 provides analogous provisions as those in the MJCI and PRCI statutes for DST on horse racing tickets.

The enactment of R.A. 10963 – the Tax Reform for Acceleration and Inclusion (TRAIN) Law – effective January 1, 2018, amended the DST on horse race tickets.
Section 63 of the TRAIN Law increased the DST to twenty centavos (₱0.20) on each ticket, with an additional twenty centavos (₱0.20) on every ₱1.00, or fractional part thereof, if the cost exceeds ₱1.00.

Klub Don Juan alleged that the increased DST rate under the TRAIN Law conflicted with the lower DST rates provided in the franchises of the racing clubs, as these were established by special laws.
The organization contended that applying the higher TRAIN Law rate would reduce the dividends granted to winning bettors, thereby driving away patrons and diminishing gross sales.
Klub Don Juan sought to enjoin the GAB and BIR from enforcing the TRAIN Law provision in favor of maintaining the lower franchise-based DST rates.

On May 25, 2018, Klub Don Juan initiated an action for injunctive relief with a prayer for a temporary restraining order (TRO) and/or writ of preliminary injunction.
The RTC granted the motion to dismiss filed by the GAB and the BIR on the basis that it lacked jurisdiction to restrain the collection of DST as provided by Section 218 of the National Internal Revenue Code (NIRC).
A motion for reconsideration filed by Klub Don Juan was denied through a subsequent resolution on September 18, 2018.

On February 28, 2019, the CA reversed the RTC’s dismissal of the main action by holding that while the RTC did not have jurisdiction to grant provisional injunctive relief, the complaint could be rightfully treated as an action for declaratory relief.
The CA reinstated the case and directed that the proceedings continue at the RTC, notably characterizing the dispute as seeking a judicial declaration on which DST rate to apply.

The GAB and the BIR, insisting on the proper dismissal of the case for lack of jurisdiction to enjoin tax collection, filed a Petition for Review on Certiorari under Rule 45 challenging the CA’s decision.

Argued that the RTC is without jurisdiction to enjoin the collection of documentary stamp taxes, citing Section 218 of the NIRC which prohibits any injunction restraining the collection of national internal revenue taxes.
Maintained that the proper forum for questions regarding the constitutionality or validity of tax laws, rules, and regulations is the Court of Tax Appeals (CTA) as established in precedents such as Banco de Oro v. Republic of the Philippines.

Asserted that despite the complaint’s designation as one for injunction, its substance was a request for declaratory relief regarding the applicable DST rate under conflicting laws.
Argued that the TRAIN Law, being a general law, should yield to the special laws embodied in the franchises of the racing clubs.

Whether the Regional Trial Court has jurisdiction to entertain the complaint filed by Klub Don Juan when it seeks injunctive relief, or alternatively, declaratory relief regarding the DST rate.

Whether the TRAIN Law’s increased DST rate should apply universally despite the lower rates provided in the franchise statutes for the racing clubs.
Whether an injunction can be granted to restrain the collection of national internal revenue taxes under Section 218 of the NIRC.

Whether challenges to the constitutionality or validity of tax-related provisions, such as those entrenched in the TRAIN Law, fall exclusively under the jurisdiction of the Court of Tax Appeals.