Title
Commissioner of Internal Revenue vs. American Wire and Cable Co., Inc.
Case
G.R. No. 280165
Decision Date
Aug 4, 2025
CIR's petition vs CTA, collection suspension order, OSG representation, grave abuse of discretion.
tax collection
court of tax appeals
value added tax
A

Case Summary (G.R. No. 280165)

Facts and CTA Proceedings on the Urgent Motion to Suspend

After American Wire filed the petition and its urgent motion, the CTA Division initiated proceedings on the motion. It caused the service of summons on the CIR and required the CIR to file an Answer to the Petition for Review. It then ordered the CIR to comment on American Wire’s Urgent Motion to Suspend. The CTA Division conducted a hearing on the Motion to Suspend after receiving the CIR’s comment and opposition. It further required the CIR to comment on American Wire’s formal offer of evidence, and only then submitted the Motion to Suspend for resolution after considering the related submissions.

On December 27, 2024, the CTA Division granted American Wire’s Motion to Suspend. It enjoined the tax authorities from implementing collection measures on the alleged VAT deficiency and, consistent with the condition for suspension, required the taxpayer to comply with the bond requirement. The Resolution ordered the CIR and officers to cease and desist from collecting the alleged deficiency taxes totaling P30,164,500.83, as indicated in the FDDA and WDL, and directed American Wire—within ten days from receipt—to either file a cash bond equal to the principal amount of deficiency taxes or post a surety bond equivalent to 1.5 of the said amount, in accordance with CTA En Banc Resolution No. 02-2015. The CTA Division, meanwhile, held the prayer to lift the WDL in abeyance pending the final determination of the merits of the case.

In explaining why suspension was warranted, the CTA Division articulated two principal considerations. First, it reasoned that while the Tax Code grants the taxpayer a thirty-day period to appeal a disputed assessment to the CTA, the CIR pursued collection measures even before the expiration of that period. According to the CTA Division, this deprived the taxpayer of its statutory remedy of judicial appeal and ran counter to the proper procedure under the Tax Code and relevant revenue rules and regulations. It further stressed that non-compliance by the government with its own implementing rules jeopardized both the government’s and taxpayer’s interests.

Second, the CTA Division relied on Revenue Memorandum Order No. 011-14 and Revenue Memorandum Order No. 035-19 to frame when collection becomes proper. It stated that there are only two instances when a tax due becomes a delinquent account: (a) a self-assessed tax liability, or (b) a deficiency assessment that has become final and executory. It further observed that while the BIR is authorized to proceed with tax collection immediately in certain situations, collection is proper when the assessment has become final and executory. The CTA Division found that the questioned assessment did not yet possess a final and executory character because American Wire had not failed to timely pursue the prescribed remedies: it did not fail to timely request reinvestigation; it did not fail to timely submit supporting documents; and it did file an appeal of the FDDA on March 27, 2024. For that reason, the CTA Division held that the CIR was not yet authorized to implement the administrative and judicial remedies for collection, rendering the WDL issuance premature.

CIR’s Motion for Reconsideration and Filing of the Rule 65 Petition

The CIR sought reconsideration of the December 27, 2024 Resolution, but the CTA Division denied it in a Resolution dated March 14, 2025. In the denial, the CTA Division noted that the CIR’s motion did not meaningfully address the CTA Division’s application of Revenue Memorandum Order Nos. 011-14 and 035-19. It also failed to directly challenge the December 27, 2024 Resolution and the legal reasons supporting the suspension.

The CIR and the BIR LT Collection Enforcement Division, through counsel from the BIR Litigation Division, then filed the present Petition for Certiorari and Prohibition under Rule 65.

Threshold Procedural Issue on Representation Before the Supreme Court

Before reaching the merits, the Court examined a fatal procedural circumstance. The Court noted that the CIR was not represented by the Office of the Solicitor General (OSG) when it filed the present case, and there was no showing that the BIR Litigation Division had been duly authorized by the OSG to represent the CIR and file the instant petition.

The Court invoked the OSG’s statutory mandate to represent the government and its officers in the Supreme Court. It relied on Commissioner of Internal Revenue v. La Suerte Cigar & Cigarette Factory to hold that the CIR’s direct filing of a petition before the Court, absent the requisite authority or representation of the OSG, constituted a procedural defect comparable to non-fulfillment of the mandatory verification requirement. The Court reiterated that the requirement that the Solicitor General represent the Republic remains in force, and that the Solicitor General retains primary responsibility to appear for the government in appellate proceedings.

The Court further referred to a Memorandum of Agreement between the BIR and the OSG and to Revenue Memorandum Circular No. 025-10, which communicated the agreement to revenue officers. The Court underscored that while the OSG may deputize BIR handling lawyers to appear and continue prosecution in certain lower courts and in the CTA En Banc, representation before the Supreme Court remains within OSG authority. Under the agreement, the OSG handling Associate Solicitor is the lead lawyer in Supreme Court cases, and the BIR handling lawyer must turn over case records to the OSG. The Court emphasized that the deputation does not extend to the BIR lawyers’ representation before this Court, and that if the OSG approves an appeal, the OSG remains as lead counsel.

The Court held that the CIR could not proceed to the Supreme Court on its own. It stated that a petition filed without the OSG’s imprimatur, when required, is defective and dismissible on that ground alone. Although La Suerte relaxed the rule in a prior context, the Court found no sufficient reason to relax it in the present case, given the CIR/BIR’s expectation to observe the La Suerte pronouncement and the guidelines from its own agreement with the OSG.

Limitations of Certiorari and Prohibition on the Claimed Errors

Even assuming the Court proceeded beyond the representation defect, it held that the grounds relied upon by the CIR did not justify certiorari or prohibition. The Court observed that the CIR treated the CTA Division’s supposed misinterpretation of law and tax regulations as grave abuse of discretion. The Court stressed that certiorari and prohibition correct errors of jurisdiction and are not proper for ordinary errors of judgment resulting from mistaken legal interpretation or misappreciation of evidence. It required a showing of an arbitrary, capricious, or whimsical exercise of judgment amounting to lack of jurisdiction—described as an abuse that is patent and gross, evading a positive duty or amounting to a virtual refusal to act as contemplated by law.

Substantive Rationale: Absence of Grave Abuse in the CTA’s Suspension Order

The Court nonetheless addressed whether there was grave abuse in the CTA Division’s suspension rulings and found none. The Court stated that the CTA Division’s determinations were supported by facts and law. It pointed to the CTA Division’s reasoning that the tax authorities’ immediate resort to collection measures after issuance of the FDDA but before expiration of the thirty-day appeal period deprived American Wire of its opportunity to dispute the assessment judicially. The Court also noted that the CTA Division’s suspension was conducted after compliance with the statutory and procedural conditions for suspension.

The Court explained that while there is a general rule against injunction of tax collection, Section 11 of Republic Act No. 1125, as amended, creates a specific exception. Under that provision, although an appeal to the CTA does not suspend payment, levy, distraint, and/or sale of property to satisfy tax liability, the CTA may, at any stage of the proceeding, suspend collection and require the taxpayer to either deposit the amount claimed or file a surety bond, when in the Court’s opinion collection may jeopardize the interests of the government and/or taxpayer.

Consistent with this exception, th

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