Lim Co Chui v. Collector of Internal Revenue
REITERATIONFacts
1. The Antecedents: The petitioner, Lim Co Chui, a Chinese merchant residing in Manila, owned three dry goods stores. For the quarter of July, August, and September 1924, his business transacted amounted to P33,808.34, with a corresponding tax of P507.13. The tax was due on October 20, 1924. 2. Procedural History: Due to riots against Chinese citizens in Manila from October 18 to October 20, 1924, the petitioner and other Chinese merchants were forced to close their businesses and stay home. Consequently, the petitioner was unable to pay his sales tax by the deadline. A representative of the Chinese Chamber of Commerce requested an extension from the Collector of Internal Revenue, which was denied. The petitioner later tendered payment on October 21, 1924, but the Collector refused to accept it without the mandatory 25% penalty, citing lack of authority to waive it. A subsequent request for reconsideration was also denied on the same grounds. 3. The Petition: The petitioner initiated original proceedings in mandamus seeking to compel the Collector of Internal Revenue to remit the 25% penalty imposed for the late payment of sales taxes. The petition argued that the Collector possessed discretionary power under Sections 1458 and 1582 of the Administrative Code to remit penalties, particularly given the circumstances of the riot which made timely payment impossible. The Collector demurred, asserting the complaint failed to state a cause of action as the law provided no discretion in this specific situation.
Issue(s)
Whether the Collector of Internal Revenue has the discretionary power to remit the 25% penalty for late payment of sales taxes imposed by Section 1458 of the Administrative Code. Whether the circumstances of a riot preventing tax payment constitute a valid ground for the remission of the statutory penalty under Section 1582 of the Administrative Code.
Ruling
The demurrer to the complaint was sustained, and the petition was dismissed. The Court held that the Collector of Internal Revenue has no discretion to remit the 25% penalty for late payment of sales taxes, and the circumstances presented do not fall under the exceptions provided for remission of 'unjustly assessed or excessive' taxes.
Ratio Decidendi
On Issue 1: The Court ruled that Section 1458 of the Administrative Code, as amended by Act No. 3074, mandates the automatic imposition of a twenty-five per centum increase on percentage taxes not paid within the prescribed calendar quarter. This provision is described as mandatory and works automatically, conferring no discretion upon the Collector of Internal Revenue. The official cannot disregard the law and substitute his personal judgment for its clear mandate. Therefore, the Collector has no authority to remit this statutory penalty. On Issue 2: The Court clarified that Section 1582 of the Administrative Code, which allows the Collector to remit taxes that appear 'unjustly assessed or excessive,' does not apply to the penalty for non-payment. The twenty-five per centum penalty is not considered 'unjustly assessed' because it is imposed by law for failure to comply with a statutory obligation. It is also not 'excessive' as it is the specific amount fixed by law. While acknowledging the legal maxim 'Impossibilium nulla obligatio est' (there is no obligation to do impossible things), the Court found no allegation that the inability to pay was due to any government order or action, or the fault of the payee. Instead, the complaint alleged that the Chinese closed their businesses 'as a result of a mutual agreement had thereon,' which did not absolve them from the statutory penalty.
Main Doctrine
The Court held that Section 1458 of the Administrative Code, as amended, mandates the automatic increase of percentage taxes by twenty-five per centum if not paid within the prescribed quarter, and this provision confers no discretion upon the Collector of Internal Revenue to waive or remit this penalty. Furthermore, Section 1582, which allows the Collector to remit 'unjustly assessed or excessive' taxes, does not apply to the twenty-five per centum penalty for non-payment, as this penalty is fixed by law and not unjustly assessed or excessive in its statutory imposition.