Secretary of Finance vs. Muñez

When a supervening revenue regulation restores the VAT-exempt status that the challenged regulation had withdrawn, the main action for declaratory relief and the ancillary writ of injunction become moot and academic; the SC will not resolve the no-injunction rule in an advisory opinion. The dismissal of the main action for mootness carries with it the ancillary relief of injunction and all related incidents.

Petitioners are the Secretary of Finance, Commissioner of Internal Revenue, and BIR Revenue Regional Director for Region 12, Bacolod City. Respondents are sugar planter associations and Antonio G. Tamon. The regulatory backdrop is the NIRC, as amended by RA No. 9337, which exempts from VAT the sale of agricultural food products in their original state, including raw cane sugar, and the BIR's revenue regulations defining raw sugar for internal revenue purposes.

On September 19, 2008, the Bureau of Internal Revenue issued RR 13-2008, prescribing the updated and consolidated policies and procedures for the advance payment of VAT on the sale of refined sugar pursuant to Republic Act No. 9337. Under Section 2(b) thereof, raw sugar referred to sugar whose content of sucrose by weight in dry state corresponded to a polarimeter reading of less than 99.5°, and cane sugar produced each production year was classified, for internal revenue purposes, as (a) “A” raw sugar intended for export to the United States Market; (b) “B” raw sugar intended for the Domestic Market; (c) “C” raw sugar reserved for, but not yet matured for release to, the Domestic Market; (d) “D” raw sugar intended for export to the World Market; and (e) “E” reclassified “D” sugar for sale to Food Processors/Exporters operating Customs Bonded Warehouse or to an enterprise located within the special processing export zone.

On September 20, 2013, then Department of Finance Secretary Cesar Antonio V. Purisima, upon the recommendation of Commissioner of Internal Revenue Kim S. Jacinto-Henares, issued RR 13-2013, amending Section 2(b) of RR 13-08. The new definition provided that raw sugar referred to sugar produced by simple process of conversion of sugar cane without a need of any mechanical or similar device such as muscovado, and that for this purpose raw sugar referred only to muscovado sugar. It further stated that centrifugal process of producing sugar is not in itself a simple process and that any type of sugar produced therefrom is not exempt from VAT. The regulation was to take effect after fifteen days following publication in a newspaper of general circulation; the trial court noted October 9, 2013 as the effectivity date.

On October 3, 2013, respondents Rural Sugar Planters' Association, Inc., Northern Negros Planters Association, Inc., Confederation of Sugar Producers Associations, Inc., United Sugar Producers Federation of the Philippines, Inc., and National Federation of Sugar Producers (NFSP), Inc. initiated a petition for declaratory relief to declare RR 13-2013 unconstitutional. They asserted that RR 13-2013 violated the due process clause because its issuance was not preceded by notice, hearing, and publication, and that the definition of raw sugar violated the rule on uniformity of taxation and went against the intent of paragraph 2, Section 109(1)(A) of the NIRC, as amended, as well as the technical meaning of raw sugar as commonly understood in the industry and as borne in the Tariff and Customs Code of the Philippines and the old RR 13-2008. The case was docketed as SCA No. 88-C and raffled to RTC-Branch 60, Cadiz City. The trial court issued a temporary restraining order for seventy-two hours under Order dated October 3, 2013; after a summary hearing, on October 7, 2013, two days before the effectivity of RR 13-2013, the TRO was extended to seventeen days or until October 23, 2013. Petitioners filed a Motion for Reconsideration with Urgent Motion for Dissolution of TRO on October 9, 2013, and an Urgent Motion for Early Resolution dated October 14, 2013; respondents filed a Comment/Opposition dated October 17, 2013, and petitioners filed an Urgent Motion to Dissolve TRO and Opposition to the Application for Writ of Preliminary Injunction dated October 18, 2013. Antonio G. Tamon was included as respondent after a motion for intervention was granted in the Consolidated Orders dated October 22, 2013.

By Consolidated Order dated October 22, 2013, the trial court granted the Writ of Preliminary Injunction against the implementation of RR 13-2013 and required respondents to procure a surety bond equivalent to ₱1,000,000.00. On October 23, 2013, the trial court approved the surety bond and issued the Writ of Preliminary Injunction, enjoining petitioners from implementing RR 13-2013 and preserving the status quo ante bellum pending determination of the case on the merits. Petitioners' Motion for Reconsideration was denied under Order dated January 14, 2014. Meantime, on May 22, 2015, DoF Sec. Purisima, upon the recommendation of CIR Henares, issued RR 8-2015, amending RR 13-2008 insofar as the definition of raw sugar is concerned. RR 8-2015 defined Raw Cane Sugar as the natural sugar extracted from sugarcane through simple mechanical process by pressing for the juice, boiled to crystallize, filtered using centrifuge to separate the crystals, and dried, resulting in crystallized brown sugar, provided that it referred to raw cane sugar produced from conducting only one stage of filtering and centrifugal without any other further process, with color greater than 800 ICU and sucrose content by weight in dry state corresponding to a polarimeter reading of less than 99.5°; it included muscovado with standard specifications of Powder Class A polarization of 86° minimum, Powder Class B polarization of 77° minimum, and Lump polarization of 57° minimum. It stated that only those falling under the definition of Raw Cane Sugar, including muscovado, are exempt from VAT or Percentage Tax pursuant to Section 109(1)(A) of the Tax Code. On June 8, 2015, respondents filed a Manifestation informing the Court of RR 8-2015; in their Compliance dated May 14, 2021, petitioners confirmed its issuance, which had the consequent effect of restoring the VAT exempt status of raw sugar, while asserting that the real core issue pertained to the no injunction rule.

• Grave Abuse of Discretion: Petitioners charged the trial court with grave abuse of discretion amounting to excess or lack of jurisdiction for issuing the writ of preliminary injunction.
• No Injunction Rule: Petitioners argued that Section 218 of the NIRC, as amended, explicitly prohibits the issuance of a writ of injunction against collection of taxes.
• Main Case Disposition: Petitioners argued that the issuance of the writ of injunction would, in effect, dispose of the main case without trial.
• Requisites for Injunction: Petitioners argued that the writ was issued despite respondents' utter failure to prove the essential requisites for its issuance.
• Inadequacy of Surety Bond: Petitioners argued that the amount of surety bond required and posted was grossly inadequate to the extent of damage to be suffered by the government in terms of lost revenues; in their Reply, they claimed the injunction would cause loss of over three billion pesos in VAT collections.
• TRO Extension: Petitioners argued that the TRO should not have been extended for 17 days as the original TRO had already expired.
• Territorial Jurisdiction: Petitioners argued that the writ was issued not only against Regional Director of BIR Region XII Perfecto L. Aranas but also against DoF Sec. Purisima and CIR Henares, who all hold office outside the trial court's territorial jurisdiction, in violation of Section 21(1), Batas Pambansa Blg. 129, as amended.

• No Injunction Rule: Respondents countered that the "no injunction rule" only lies against collection of taxes; what was being restrained was the imposition, not the collection, of taxes. They added that although the effect of the injunction was to hold the implementation of RR 13-2013 in abeyance, petitioners still retained the right to make a tax assessment within three years.
• Requisites for Injunction: Respondents countered that the essential requisites for the issuance of a writ of injunction were complied with.
• Inadequacy of Surety Bond: Respondents countered that petitioners should have established the extent of damage it will allegedly suffer before it can truly claim that the surety bond posted was grossly inadequate.
• Territorial Jurisdiction: Respondents countered that when the trial court enjoined the other parties from implementing RR 13-2013, the same was only effective as far as the trial court's territorial jurisdiction goes.

• Mootness: Whether the petition challenging the writ of preliminary injunction has become moot and academic with the issuance of RR 8-2015, which restored the VAT-exempt status of raw sugar, thereby rendering the main action for declaratory relief academic.
• Advisory Opinion / No Injunction Rule: Whether the SC should still resolve petitioners' claim that the trial court violated the no injunction rule despite the main action having become moot.

• Mootness: Yes. RR 8-2015 restored the VAT-exempt status of raw sugar, a supervening event that rendered the main declaratory relief academic; the ancillary injunction and all related incidents also became moot.
• Advisory Opinion / No Injunction Rule: No. Resolving the no injunction rule after the main action became moot would be an advisory opinion on a hypothetical or academic question, beyond the SC's power of review.

• Mootness: The SC applied the rule that an actual case or controversy is a condition precedent for judicial adjudication. A moot and academic case is one that ceases to present a justiciable controversy by virtue of supervening events, so that a declaration thereon would be of no practical value. Courts generally decline jurisdiction over such a case or dismiss it on the ground of mootness; otherwise, they would render an advisory opinion on what the law would be upon a hypothetical state of facts. A case becomes moot and academic when the conflicting issue that may be resolved by the court ceases to exist as a result of supervening events. The SC may assume jurisdiction over a moot case only in the following instances: (1) grave constitutional violations; (2) exceptional character of the case; (3) paramount public interest; (4) the case presents an opportunity to guide the bench, the bar, and the public; or (5) the case is capable of repetition yet evading review. Here, RR 8-2015 restored the VAT exempt status of raw sugar previously withdrawn under RR 13-2013. This development is a supervening event which rendered the main action for declaratory relief against the constitutionality of RR 13-2013 academic. Petitioners did not refute this. Where the main action has become academic, so have the ancillary relief for TRO or writ of injunction and all related incidents, including petitioners' opposition to its issuance and the present petition seeking to nullify the writ of injunction issued by the trial court. The SC cited Limkaichong vs. Land Bank for the principle that the spring cannot rise above its source.
• Advisory Opinion / No Injunction Rule: The SC held that petitioners' insistence on resolving how the no injunction rule was supposedly violated when the trial court issued the writ is actually asking the Court to render an advisory opinion, resolve a hypothetical or feigned problem, or a mere academic answer, which is beyond the Court's power of review. It cited Province of North Cotabato vs. The Government of the Republic of the Philippines for the rule that the power of judicial review is limited to actual cases or controversies. Courts decline to issue advisory opinions or to resolve hypothetical or feigned problems, or mere academic questions. An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims susceptible of judicial resolution, as distinguished from a hypothetical or abstract difference or dispute. There must be a contrariety of legal rights that can be interpreted and enforced on the basis of existing law and jurisprudence. The Court can decide the constitutionality of an act or treaty only when a proper case between opposing parties is submitted for judicial determination.

• Moot and Academic Principle — A case is moot and academic when a supervening event extinguishes the conflicting issue, leaving no justiciable controversy and making a declaration thereon of no practical value. Courts generally dismiss it to avoid advisory opinions. The SC may assume jurisdiction only in the following instances: (1) grave constitutional violations; (2) exceptional character of the case; (3) paramount public interest; (4) the case presents an opportunity to guide the bench, the bar, and the public; or (5) the case is capable of repetition yet evading review. The SC applied this doctrine because RR 8-2015 restored the VAT-exempt status of raw sugar, rendering the main declaratory relief against RR 13-2013 academic.
• Ancillary Relief Follows the Main Action — When the main action becomes moot, the ancillary relief of injunction and all related incidents necessarily become moot; the spring cannot rise above its source. The SC applied this to hold that the writ of preliminary injunction, petitioners' opposition, and the certiorari petition challenging it were also dismissed with the moot main case.
• Judicial Review Limited to Actual Cases or Controversies; No Advisory Opinions — Courts decline to issue advisory opinions or resolve hypothetical or feigned problems or mere academic questions. The SC applied this by refusing to resolve the no injunction rule after the main action became moot, because doing so would be an advisory opinion beyond its power of review.

• "A case becomes moot and academic when tire conflicting issue that may be resolved by the court ceases to exist as a result of supervening events." — The SC quoted this formulation in defining when a case is moot and academic.
• "Where the main action has become academic, so have the ancillary relief for TRO or writ of injunction and all related incidents, including petitioners' opposition to its issuance and the present petition seeking to nullify the writ of injunction issued by the trial court." — The SC applied this to hold that the injunction and the certiorari petition challenging it were also moot.
• "'For petitioners to insist on the resolution of how the "no injunction rule" was supposedly violated when the trial court issued the assailed writ of injunction is actually asking the Court to render an advisory opinion, resolve a hypothetical or feigned problem, or a mere academic answer, which is beyond the Court's power of review'" — The SC used this passage to decline resolving the no-injunction issue after the main action became moot.

• Oclarino vs. Navarro, G.R. No. 220514, September 25, 2019 — Cited for the rule on actual case or controversy, moot and academic cases, and the exceptions allowing judicial review of moot cases.
• Province of North Cotabato, et al. vs. The Government of the Republic of the Philippines, et al., 589 Phil. 387, 480-481 (2008) — Cited for the limitation of judicial review to actual cases or controversies and the prohibition against advisory opinions.
• Limkaichong vs. Land Bank of the Philippines, et al., 792 Phil. 133, 180 (2016) — Cited for the principle that the ancillary relief cannot rise above its source, used to hold that the injunction and related incidents became moot with the main action.

• Section 218, National Internal Revenue Code of 1997 — Petitioners invoked the "no injunction rule" against collection of taxes; the SC did not resolve its applicability because the petition was dismissed as moot.
• Section 109(1)(A), National Internal Revenue Code of 1997, as amended by Republic Act No. 9337 — Exempts the sale or importation of agricultural and marine food products in their original state, including raw cane sugar; the main declaratory relief challenged RR 13-2013's definition of raw sugar against this exemption, but RR 8-2015 restored raw sugar's VAT-exempt status and mooted the case.
• Rule 65, Rules of Court — The petition for certiorari was filed under Rule 65; the SC dismissed it on mootness.
• Section 21(1), Batas Pambansa Blg. 129 — Petitioners invoked the territorial jurisdiction limit on RTC-issued injunctions; the SC did not reach it because of mootness.