CTA suspends court order for collection of P401-M taxes from Sagittarius Mines
THE Court of Tax Appeals (CA) has suspended the implementation of an order issued by the Regional Trial Court (RTC) of Koronadal City, South Cotabato, which upheld the bid of the municipality of Tampakan, South Cotabato to collect more than P400 million alleged deficiency taxes from Sagittarius Mines Inc. (SMI).
In a 19-page resolution, the CTA’s Second Division granted the urgent motion filed by SMI for the issuance of a suspension order (with prayer for issuance of a preliminary injunction and/or immediate issuance of a temporary restraining order) preventing the Tampakan municipal government from shutting down SMI’s operations in the province.
The suspension order covers the collection of SMI’s supposed deficiency business taxes, mayor’s permit fees, and other regulatory fees as contractor for taxable years 2013 to 2022 amounting to P401.45 million.
The CTA also directed the respondent municipal government to desist from issuing, and implementing a warrant of distraint and levy, and/or a warrant of garnishment on the properties of SMI and from collecting the assessed deficiency taxes.
Furthermore, the CTA granted the plea of SMI to restrain the Tampakan municipal government from enforcing any assessment based on Municipal Ordinance No. 66 pending the resolution of the main case.
The CTA also enjoined the implementation of the order dated October 14, 2022 issued by the Koronadal RTC, which affirmed the municipal government’s collection of taxes against SMI under Municipal Ordinance No. 66.
It sided with the company and held that the evidence contradicts the allegation of the Tampakan municipality that SMI committed fraud and misrepresentation.
It also ruled that the tax assessment issued by Tampakan local government unit (LGU) violated the procedural and substantive right to due process of SMI and called the amount crippling enough to cause damage to the project, its host communities and the Philippine government.
The CTA noted that if a collection of the deficiency assessment were made, petitioners would not be able to operate.
“In other words, should the municipal respondents enforce their collection despite the alleged invalidity of the deficiency assessments and surcharges and interests imposed, petitioner would not just be irreparably damaged, but would be crippled even before it all begins its operations,” the CTA declared.
It noted that SMI’s cash is only P52.7 million while its total current assets only amount to P154.9 million.
The CTA held that the closure of SMI’s business operations would prevent it from complying with its obligations.
“In this case municipal respondents are enjoined from interfering, impeding or otherwise closing down petitioner’s operations pending resolution of whether or not petitioner was validly assessed under Municipal Ordinance No. 66,” the CTA declared.
The SMI claimed that the Tampakan LGU, through its mayor and municipal treasurer, issued the tax assessment on the company after the examination of its submitted returns where a single entry on the sale and disposal of fully depreciated equipment, including office computers was the basis for determining the company as a contractor.
It added that the Tampakan LGU also declared the company as a contractor because it holds the contract over the mine site under the Financial and Technical Assistance Agreement (FTAA).
However, SMI explained that the respondent LGU failed to distinguish that a contract holder and a contractor are two very different concepts, especially under the law and taxation.
In fact, the petitioner added, as a contracting party together with the national government, the company has yet to operate and earn revenues after it has been stalled several years due to changes in the regulatory environment.
Furthermore, the SMI said the collection of its alleged deficiency taxes is void for being based on a provision of Municipal Ordinance No. 66, which has already been repealed by Municipal Ordinance No. 67.
However, the Tampakan LGU assailed the validity of Municipal Ordinance No. 67, insisting that it is not a duly enacted law since it did not undergo a public hearing and was not published in newspapers of general circulation.
On this issue, the CTA gave credence to the argument of SMI as the latter presented a duly signed certified copy of Municipal Ordinance No. 67 in contrast to the municipal government’s mere assertion that the latter is invalid due to lack of public hearing and publication.
“In the absence of any irregularities on its face, or the presentation of proper evidence to assail the validity of Municipal Ordinance No. 67, this Court is inclined to assume the validity of the assailed Ordinance without prejudice to the final determination of the case,” the CTA ruled.
By: JOEL R. SAN JUAN
FEBRUARY 27, 2023