Case Summary (G.R. No. 215950)
CTA Orders Bond for Suspension of Collection
Petitioner appealed to the CTA and moved to suspend collection. The CTA granted suspension but required a surety bond equivalent to 150% of the assessed IT and VAT (₱6.701 billion) within 15 days, citing petitioner’s equity (₱916 million) and potential irreparable injury. It later reduced the bond to ₱4.467 billion (100%).
Petition for Certiorari and Issue Framing
Alleging grave abuse of discretion, petitioner filed a Rule 65 petition before the Supreme Court. It contended the CTA ignored the “patent illegality” of the assessment and imposed an unprocurable, oppressive bond exceeding net worth, effectively denying access to judicial remedy.
Scope of Supreme Court Review
Under Rule 65, the Supreme Court reviews whether the CTA acted with grave abuse of discretion amounting to lack or excess of jurisdiction in setting bond conditions. It does not pass on the correctness of the tax assessment itself, which remains within the CTA’s primary jurisdiction.
Interpretation of Section 11, RA 1125 (as amended)
Section 11 allows suspension of collection when continued enforcement may jeopardize government or taxpayer interests, on condition of deposit or surety bond up to double the assessment. The statute grants wide discretion to the CTA but requires consideration of taxpayer’s ability to comply and the equities involved.
Abuse of Discretion in Bond Amount
The Supreme Court found that fixing a bond nearly five times the petitioner’s net worth without a preliminary hearing deprived petitioner of meaningful relief. The CTA failed to ascertain (a) whether collection would indeed jeopardize petitioner’s interests, and (b) whether the assessment procedures were patently illegal. Requiring such an excessive bond contradicted the principle that the power to tax is not the power to destroy and unduly endangered petitioner’s business.
Remand for Preliminary Hearing
Relying on precedent (Pacquiao v. CTA), the Court held that factual questions regarding patent illegality and jeopardy must be heard by the CTA in a preliminary hearing. The Supreme Court remanded CTA Case No. 8833, directing the C
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Facts
- On August 16, 2013, the petitioner received a Preliminary Assessment Notice (PAN) from the BIR assessing deficiency income tax (IT), value-added tax (VAT), withholding tax on compensation (WTC), expanded withholding tax (EWT), and documentary stamp tax (DST) totaling P4,640,394,039.97, inclusive of surcharge and interest.
- A substantial portion of the deficiency IT and VAT stemmed from the BIR’s complete disallowance of petitioner’s 2010 purchases from Etheria Trading amounting to P4,942,937,053.82.
- Petitioner replied to the PAN on August 30, 2013, and on September 23, 2013, received a Formal Letter of Demand assessing it with P4,697,696,275.25 in deficiency taxes; it filed a protest and complied with the CIR’s request for additional documents.
- On February 28, 2014, the petitioner was served a Final Decision on Disputed Assessment totaling P4,473,228,667.87, broken down as follows:
• IT – basic tax P1,527,100,903.98; surcharge P763,550,451.99; interest P878,605,999.55 (total P3,169,257,355.52)
• VAT – basic tax P612,723,525.25; surcharge P306,361,762.63; interest P379,049,238.36 (total P1,298,134,526.24)
• WHT – total P2,727,550.98
• DST – total P871,004.58
• EWT – total P2,238,230.54 - The petitioner’s Request for Reconsideration was denied by the CIR on May 26, 2014. Prior thereto, petitioner paid the WTC, DST, and EWT deficiencies (P5,836,786.10) and offered to compromise the IT and VAT assessments.
Procedural History
- June 13, 2014: Petitioner filed a Petition for Review with Motion to Suspend Collection of Tax in CTA Case No. 8833, also moving to suspend collection of the IT and VAT deficiencies.
- July 8, 2014: CTA Second Division granted suspension of collection of P4,467,391,881.76, conditioned on posting a surety bond of P6,701,087,822.64 (150% of the assessment) and compliance with corporate surety bond guidelines (A.M. No. 04-7-02-SC).
- December 22, 2014: On partial reconsiderat