CIR V CA

FACTS: IN 1993 THE PRESIDENT ISSUED A MEMORANDUM CREATING A TASK FORCE TO INVESTIGATE
THE TAX LIABILITIES OF MANUFACTURERS. THE CIR THEN ISSUED A MEMORANDUM CIRCULAR
RECLASSIFYING CIGARETTES BEARING BRANDS OF HOPE, MORE, CHAMPION AS CIGARETTES OF
FOREIGN BRANDS SUBJECT TO A HIGHER TAX RATE. FORTUNE THEN QUESTIONED THE VALIDITY OF THE
MEMORANDUM AND THE CTA RULE THAT THE MEMORANDUM IS OF DOUBTFUL LEGALITY. CIR THEN
SENT A LETTER TO FORTUNE FOR DEFICIENCY IN INCOME, AD VALOREN AND VAT FOR THE YEAR 1992,
FORTUNE THEN MOVED FOR THE RECONSIDERATION OF THE ASSESSMENT. THE CIR FILED A COMPLAINT
WITH THE DOJ AGAINST FORTUNE FOR FRAUDULENT TAX EVASION AND IT WAS REFERRED TO THE DOJ
TASK FORCE ON REVENUE CASES WHICH FOUND SUFFICIENT BASIS TO FURTHER INVESTIGATE THE
ALLEGATIONS. THE FRAUDULENT SCHEME ALLEGEDLY ADOPTED BY FORTUNE IS THE "GHOST
WHOLESALE BUYERS". THE TASK FORCE ISSUED A SUBPOENA TO FORTUNE TO SUBMIT COUNTER-
AFFIDAVITS, HOWEVER, FORTUNE FILED A VERIFIED MOTION TO DISMISS, ONE OF THE GROUNDS IS THE
CIR AND CTA HAVE STILL TO DETERMINE FORTUNES TAX LIABILITY FOR 1992; WITHOUT ANY TAX
LIABILITY, THERE CAN BE NO TAX EVASION, THE MOTION TO DISMISS WAS DENIED. FORTUNE FILED A
MOTION FOR RECONSIDERATION AND TO REQUIRE THE BIR TO SUBMIT THE DAILY MANUFACTURERS
SWORN STATEMENTS WHICH IS THE BASIS OF CIR FOR THE ALLEGATIONS. THE MOTIONS FILED BY
FORTUNE HAS BEEN DENIED. FORTUNE THEN FILED A PETITION FOR CERTIORARI AND PROHIBITION
WITH PRELIMINARY INJUNCTION WITH THE RTC. THE RTC GRANT THE PETITION.

ISSUE: WHETHER OR NOT THE BASIS OF FORTUNES TAX LIABILITY FIRST BE SETTLED BEFORE ANY
COMPLAINT FOR TAX EVASION CAN BE INITIATED?

HELD: YES. FRAUD CANNOT BE PRESUMED. THERE WAS FRAUD ON WILLFUL ATTEMPT TO EVADE
PAYMENT BY FORTUNE. BEFORE FORTUNE COULD BE PROSECUTED FOR TAX EVASION THE FACT THAT
THE DEFICIENCY IN INCOME, AD VALOREM AND VAT TAXES WERE DUE FROM FORTUNE FOR THE YEAR
1992 SHOULD FIRST BE ESTABLISHED. UNDER SECTION 229 OF THE TAX CODE, THE TAXPAYER HAS THE
RIGHT TO MOVE FOR RECONSIDERATION OF THE ASSESSMENT ISSUED BY THE CIR WITHIN 30 DAYS
FROM RECEIPT OF THE ASSESSMENT AND IF THE MOTION FOR RECONSIDERATION IS DENIED IT MAY
APPEAL TO THE CA WITHIN 30 DAYS FROM RECEIPT OF THE CIRS DECISION. IN THIS CASE, FORTUNE
RECEIVED THE CIR ASSESSMENT NOTICE ON THE 24TH OF AUGUST AND WITHIN 30 DAYS FROM
RECEIPT, FORTUNE MOVED FOR RECONSIDERATION. THE CIR HAS NOT RESOLVED THE MOTION FOR
RECONSIDERATION.

ISSUE: WHETHER OR NOT THE COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION
IN EXCESS OF JURISDICTION
AS A GENERAL RULE, CRIMINAL PROSECUTIONS CANNOT BE ENJOINED HOWEVER THERE ARE
RECOGNIZED EXCEPTIONS. IN THIS CASE, THE TRIAL COURT BELIEVED THAT THE ISSUANCE OF A WRIT OF
PRELIMINARY INJUNCTION WAS WARRANTED TO AFFORD FORTUNES ADEQUATE PROTECTION OF THEIR
CONSTITUTIONAL RIGHTS AND THAT PRELIMINARY INJUNCTION SHOULD BE ISSUED TO AVOID
OPPRESSION AND THAT THE ACTS OF THE STATE PROSECUTORS WERE WITHOUT OR IN EXCESS OF
AUTHORITY AND FOR THE REASON THAT THERE WAS A PREJUDICIAL QUESTION. THE PURPOSE OF A

FURTHERMORE, THE TRIAL COURT RULED THAT BEFORE THE TAX LIABILITIES OF FORTUNE ARE FIRST
FINALLY DETERMINED, IT CANNOT BE CORRECTLY ASSERTED THAT FORTUNE HAVE WILLFULLY
ATTEMPTED TO EVADE OR DEFEEAT THE TAXES SOUGHT TO BE COLLECTED. THEREFORE, BEFORE ONE
IS PROSECUTED FOR WILFUL ATTEMPT TO EVADE ANY TAX, THE FACT THAT A TAX IS DUE MUST FIRST BE
PROVED.
 PRELIMINARY INJUNCTION IS TO SECURE THE INNOCENT AGAINST HASTY, MALICIOUS AND OPPRESSIVE
PROSECUTION AND TO PROTECT HIM FROM AN OPEN AND PUBLIC ACCUSATION OF CRIME, FROM THE
TROUBLE, EXPENSE AND ANXIETY OF A PUBLIC TRIAL AND ALSO TO PROTECT THE STATE FROM USELESS
ND EXPENSIVE TRIAL. THEREFORE, THERE ARE FACTUAL AND LEGAL BASES FOR THE ISSUANCE OF THE
WRIT AND IT IS THE CIR WHO HAS THE BURDEN TO DEMONSTRATE THAT THE WRIT CONSTITUTES A
WHIMSICAL AND CAPRICIOUS EXERCISE OF JUDGEMENT. THE RTC ACTED CORRECTLY AND JUDICIOUSLY
AND AS DEMANDED BY THE FACTS AND THE LAW.

THE COMPLAINT FILED BY CIR STATES THAT THE PRIMARY EVIDENCE IS THE DAILY MANUFACTURERS
SWORN STATEMENT HOWEVER THEY DID NOT PRESENT THE SAID STATEMENT