Case Digest: Republic v. Ericta, 172 SCRA 623, G.R. No. L-35238, April 21, 1989

Taxation | Taxation Distinguished from Other Inherent Powers and Impositions

Facts: 
  • The Philippine Government issued "back pay certificates" after the Pacific War, pursuant to Republic Act No. 304 and Republic Act No. 800, recognizing the right of individuals employed in the civil service and government-owned corporations, as well as those who served in resistance governments during the war, to receive unpaid salaries and wages.
  • Sampaguita Pictures, Inc. incurred tax obligations amounting to P10,268.41 to the Philippine government for percentage, withholding, and amusement taxes.
  • In 1961, Sampaguita tendered 16 back pay negotiable certificates of indebtedness, amounting to P16,763.60 in satisfaction of its tax obligations.
  • The Bureau of Internal Revenue (BIR) deemed the acceptance of these certificates as payment for taxes invalid, because actually said certificates were not acceptable as payments of internal revenue taxes, requesting cash payment instead.
Issue: Whether Sampaguita's tender of back pay certificates constituted payment for tax obligations, and whether the Republic's obligation to redeem the certificates had already expired. NO

Held:

The petitioner's postulations are untenable.

1. The Trial Court ruled that the taxes sought to be collected by the Republic from Sampaguita were still unpaid, its tender of the certificates of indebtedness in question not constituting payment; hence, it ought properly to be sentenced to pay the taxes. It also ruled that even assuming the contrary, legal compensation as a mode of extinguishing an obligation to pay taxes was nonetheless unavailing against the government, conformably with de Borja v. Gella.

On the other hand, according to the Trial Court, at least as of date of judgment, more than 10 years from June 18, 1958, the date when, as expressly stated in the certificates of indebtedness, the same were redeemable, the obligation thereby evidenced was unquestionably already due and payable; hence, Sampaguita was entitled to a judgment against the Republic for the payment of the face value of the certificates, the same having already been presented and surrendered within the said period of ten years (on June 9, 1961) to the Treasurer of the Philippines (thru the Municipal Treasurer of Bocaue, Bulacan ) This is correct. In other words, even if as the Solicitor General points out, "there is no certainty when the certificates are actually redeemable" because the law say "that they are redeemable .. within ten years from the date of issuance " there can be no question that after the lapse of ten (10) years from the declared date of redeemability, payment of the indebtedness was already exigible The Trial Court was saying in effect that while judgment should be rendered in favor of the Republic against Sampaguita for unpaid taxes in the amount of P10,268.41, judgment ought at the same time to issue for Sampaguita commanding payment to it by the Republic of the same sum, representing the face value of the certificates of indebtedness assigned to it and for recovery of which it had specifically prayed in its counterclaim.

2. What has just been said confutes the petitioner's second argument that redemption of the certificates of indebtedness was not yet demandable of it because "there is no certainty when the certificates are actually redeemable, within the meaning of the law." It is true that, as the Solicitor General contends, "the law does not say that they are redeemable from its approval on June 18, 1958 but 'within ten years from the date of issuance' of the certificates, " 13 the ineludible ineluctable fact is that more than ten (10) years have already elapsed since their issuance and demand for payment had been made within said 10-year period. It is useless to quibble about the precise time "within ten years" when an obligation becomes demandable, when that period of ten years has already expired. Whatever inexactitude might inhere in the phrase, "within ten years," as fixing the time of exibility of the obligation in question, there can be no debate about the proposition that the obligation became due and demandable after ten years. It would be absurd and unfair to sanction the theory subsumed in the Republic's petition that its obligation was not demandable within ten years because of inexactitude yet became time-barred upon the lapse of that self-same period.

WHEREFORE, the petition is DENIED, and the judgment subject thereof, being in accord with the facts and the law, is AFFIRMED in toto. No costs.

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