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PADILLA, J., dissenting:

Because of what I humbly perceive to be the crippling, chilling and fatal effects of the majority opinion on the power of the state to investigate fraudulent tax evasion in the country, I am constrained to dissent, as vigorously as I can, from the majority opinion.

THE ISSUE

The main issue in this petition for review on certiorari is whether or not there are valid grounds to stop or stay the preliminary investigation of complaints filed by the Bureau of Internal Revenue (BIR) with the Department of Justice (DOJ) Revenue Cases Task Force against private respondents for alleged fraudulent tax evasion for the years 1990, 1991 and 1992. Stated differently, the issue is: did respondent trial court commit grave abuse of discretion amounting to lack or excess of jurisdiction in stopping the subject preliminary investigation?

THE CASE AND THE FACTS

On 7 September 1993, petitioner Commissioner of Internal Revenue filed a complaint with the DOJ against private respondents Fortune Tobacco Corporation (hereinafter referred to simply as "Fortune"), its corporate officers, nine (9) other corporations, and their respective corporate officers, for alleged fraudulent tax evasion for the year 1992.

The complaint, docketed as I.S. No. 93-508, was referred to the DOJ Task Force on Revenue Cases which found sufficient grounds to further investigate the allegation that Fortune fraudulently evaded payment of income, value-added and ad valorem taxes for the year 1992 thus depriving the Government of revenue allegedly in excess of seven and one-half (7 1/2) billion pesos.

The fraudulent scheme allegedly adopted and employed by private respondents, is described by the BIR as follows:

"In order to evade payment of said taxes, [Fortune] made fictitious and simulated sales of its cigarette products to non-existent individuals and to entities incorporated and existing only for the purpose of such fictitious sales by declaring registered wholesale prices with the BIR lower than [Fortunes] actual wholesale prices which are required for determination of [Fortunes] correct ad valorem, income and value-added tax liabilities. These ghost wholesale buyers then ostensibly sold the product to consumers and other wholesalers/retailers at higher wholesale prices determined by [Fortune]. The tax returns and manufacturers sworn statements filed by [Fortune] as aforesaid declare the fictitious sales it made to the conduit corporations and non-existent individual buyers as its gross sales." 1

Based on the initial evaluation of the DOJ Task Force, private respondents were subpoenaed and required to submit their counter-affidavits not later than 20 September 1993.2 Instead of filing counter-affidavits, private respondents filed a "Verified Motion to Dismiss; Alternatively, Motion to Suspend."3 Said motion was denied by the DOJ Task Force and treated as private respondents counter- affidavit, in an order dated 15 October 1993.4

Private respondents sought reconsideration of the aforementioned order of denial and likewise filed motions to require submission by the Bureau of Internal Revenue (BIR) of certain documents to support the verified motion to dismiss or suspend the investigation, and for the inhibition of the state prosecutors assigned to the case for alleged lack of impartiality.5

On 20 December 1993, an omnibus order was issued by the investigating Task Force:6

a. denying reconsideration;

b. denying suspension of investigation; and

c. denying the motion to inhibit the investigating state prosecutors.

Thereupon, or on 4 January 1994, private respondents went to court. They filed a petition for certiorari and prohibition with prayer for preliminary injunction in the Regional Trial Court, Branch 88, Quezon City, praying that the proceedings (investigation) before the DOJ Task Force be stopped. The petition was docketed as Civil Case No. Q-94-19790.7

On 17 January 1994, petitioners filed with the trial court a motion to dismiss the aforesaid petition.8 On 25 January 1994, the trial court issued instead an order granting the herein private respondents prayer for a writ of preliminary injunction,9 to stop the preliminary investigation in the DOJ Revenue Cases Task Force.

On 26 January 1994, private respondents filed with the trial court a Motion to Admit Supplemental Petition seeking this time the issuance of another writ of preliminary injunction against a second complaint of the BIR with the DOJ docketed as I.S. No. 93-17942 likewise against herein private respondents for fraudulent tax evasion for the year 1990. Private respondents averred in their aforesaid motion with the trial court that -

a. no supporting documents nor copies of the complaint were attached to the subpoena in I.S. No. 93-17942;

b. the abovementioned subpoena violates private respondents constitutional rights to due process, equal protection and presumption of innocence;

c. I.S. No. 93-17942 is substantially the same as I.S. No. 93-508 except that it concerns the year 1990.

d. no tax assessment has been issued by the Commissioner of Internal Revenue and since taxes already paid have not been challenged by the BIR, no tax liability exists;

e. Assistant Quezon City Prosecutor Leopoldo E. Baraquia was a former classmate of then Presidential Legal Counsel Antonio T. Carpio, thus, he cannot conduct the preliminary investigation in an impartial manner.

On 28 January 1994, private respondents file with the trial court a second suplemental petition10 this time seeking to stay the preliminary investigation in I.S. No. 93-548, a third BIR complaint with the DOJ against private respondents for fraudulent tax evasion for the year 1991.

On 31 January 1994, the trial court admitted the two (2) supplemental petitions and issued a temporary restraining order stopping the preliminary investigation of the two (2) later complaints with the DOJ against private respondents for alleged fraudulent tax evasion for the years 1990 and1991.

On 7 February 1994, the trial court also issued an order denying herein petitioners motion to dismiss private respondents petition seeking to stay the preliminary investigation in I.S. No. 93-508. The trial court ruled that the issue of whether Sec. 127(b) of the National Internal Revenue (Tax) Code should be the basis of herein private respondents tax liability, as contended by the Bureau of Internal Revenue, or whether it is Sec. 142(c) of the same code that applies, as argued by herein private respondents, should first be settled before any criminal complaint for fraudulent tax evasion can be initiated or maintained.

On 14 February 1994, the trial court issued a supplemental writ of preliminary injunction this time enjoining the preliminary investigations of the two (2) other BIR complaints with the DOJ for fraudulent tax evasion. The trial court then denied motions to dismiss the two (2) supplemental petitions, filed by therein respondents Commissioner of Internal Revenue and the DOJ Revenue Cases Task Force investigators.

On 7 March 1994, herein petitioners filed with this Court a petition for certiorari and prohibition with prayer for preliminary injunction which questioned the orders issued by the trial court granting the private respondents prayer for preliminary injunction to stop the preliminary investigation in the DOJ of the BIR s complaints for fraudulent tax evasions against private respondents and denying petitioners motions to dismiss private respondents various petitions with the trial court. The petition was referred by this Court to the Court of Appeals which has original concurrent jurisdiction over the petition.

On 19 December 1994, the Court of Appeals rendered a decision which, in part, reads:

"In making such conclusion the respondent Court (the Regional Trial Court of Quezon City, Branch 88) must have understood from herein petitioner Commissioners letter-complaint of 14 pages and the joint affidavit of eight revenue officers of 17 pages attached thereto and its annexes, that the charge against herein respondents is for tax evasion for non-payment by herein respondent Fortune of the correct amounts of income tax, ad valorem tax and value added tax, not necessarily fraudulent tax evasion. Hence, the need for previous assessment of the correct amount by herein petitioner Commissioner before herein respondents may be charged criminally. Certiorari will not be issued to cure errors in proceedings or correct erroneous conclusions of law or fact. As long as a Court acts within its jurisdiction, any alleged error committed in the exercise of its jurisdiction, will amount to nothing more than errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari.

The questioned orders issued after hearing being but interlocutory, review thereof by this court is inappropriate until final judgment is rendered, absent a showing of grave abuse of discretion on the part of the issuing court. The factual and legal issues involved in the main case still before the respondent Court are best resolved after trial. Petitioners, therefore, instead of resorting to this petition for certiorari and prohibition should have filed an answer to the petition as ordained in Section 4, Rule 16, in connection with Rule 11 of the Revised Rules of Court, interposing as defense or defenses the objection or objections raised in their motion to dismiss, then proceed to trial in order that thereafter the case may be decided on the merits by the respondent Court. In case of an adverse decision, they may appeal therefrom by which the entire record of the case would be elevated for review. Therefore, certiorari and prohibition resorted to by herein petitioners will not lie in view of the remedy open to them. Thus, the resulting delay in the final disposition of the case before the respondent Court would not have been incurred.

Grave abuse of discretion as a ground for issuance of writs of certiorari and prohibition implies capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic manner by reason of passion, prejudice, or personal hostility, amounting to an evasion of positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law. For such writs to lie, there must be capricious, arbitrary and whimsical exercise of power, the very antithesis of the judicial prerogative in accordance with centuries of both civil law and common law traditions. Certiorari and prohibition are remedies narrow in scope and inflexible in character. They are not general utility tools in the legal workshop. Their function is but limited to correction of defects of jurisdiction solely, not to be used for any other purpose, such as to cure errors in proceedings or to correct erroneous conclusions of law or fact. Due regard for the foregoing teachings enunciated in the decision cited can not bring about a decision other than what has been reached herein.

Needless to say, the case before the respondent Court involving those against herein respondents for alleged non-payment of the correct amount due as income tax, ad valorem tax and value-added tax for the years 1990, 1991, and 1992 is not ended by this decision. The respondent Court is still to try the case and decide it on the merits. All that is decided here is but the validity of the orders of the respondent Court granting herein respondents application for preliminary injunction and denying herein petitioners motion to dismiss. If upon the facts established after trial and the applicable law, dissolution of the writ of preliminary injunction allowed to be issued by the respondent Court is called for and a judgment favorable to herein petitioners is demanded, the respondent Court is duty bound to render judgment accordingly.

WHEREFORE, the instant petition for certiorari and prohibition with application for issuance of restraining order and writ of preliminary injunction is DISMISSED. Costs de officio. (references to annexes and citations omitted)11

Petitioners motion for reconsideration of the aforequoted judgment was denied by respondent appellate court on 23 February 1995, hence, the present petition for review on certiorari based on the following grounds:

GROUNDS FOR THE PETITION

"THE RESPONDENT COURTS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT:

I. THERE IS A PREJUDICIAL AND/OR LEGAL QUESTION TO JUSTIFY THE SUSPENSION OF THE PRELIMINARY INVESTIGATION

II. PRIVATE RESPONDENTS RIGHTS TO DUE PROCESS, EQUAL PROTECTION AND PRESUMPTION OF INNOCENCE WERE VIOLATED; ON THE CONTRARY, THE STATE ITSELF WAS DEPRIVED OF DUE PROCESS

III. THE ADMISSION OF PRIVATE RESPONDENTS SUPPLEMENTAL PETITIONS WERE PROPER

IV. THERE WAS SELECTIVE PROSECUTION

V. THE FACTUAL ALLEGATIONS IN THE PETITION ARE HYPOTHETICALLY ADMITTED IN A MOTION TO DISMISS BASED ON JURISDICTIONAL GROUNDS

VI. THE ISSUANCE OF THE WRITS OF INJUNCTION IS NOT A DECISION ON THE MERITS OF THE PETITION BEFORE THE LOWER COURT12

DISCUSSION

At the outset, it should be pointed out that respondent appellate courts observations to the effect that herein petitioners recourse to said Court through a special civil action of certiorari and prohibition was improper (as discussed in the aforequoted portion of the CA decision) actually and appropriately apply to private respondents when they resorted to the remedy of certiorari and prohibition with application for preliminary injunction with the respondent Regional Trial Court to stop the preliminary investigation being conducted by the DOJ Revenue Cases Task Force of the BIR complaints for fraudulent tax evasion against private respondents. It is to be noted that the proceedings before the investigators (preliminary investigation before the DOJ Revenue Cases Task Force) are far from terminated. In fact, private respondents were merely subpoenaed and asked to submit counter-affidavits. They instead resorted to the courts for redress after denial of their motion to dismiss. The proper procedure on the part of private respondents after their motion to dismiss was denied by the investigating panel, should have been an appeal from such an adverse resolution to the Secretary of Justice, not a special civil action for certiorari and prohibition with application for preliminary injunction before the respondent trial court.

As a corollary, the respondent trial court should have desisted from entertaining private respondents original petition for certiorari and prohibition with prayer for preliminary injunction because a court order to stop a preliminary investigation is an act of interference with the investigating officers discretion, absent any showing of grave abuse of discretion on the part of the latter in conducting such preliminary investigation.

The rule is settled that the fiscal (prosecutor) cannot be prohibited from conducting and finishing his preliminary investigation.13 The private respondents petition before the trial court in this case was clearly premature since the case did not fall within any of the exceptions when prohibition lies to stop a preliminary investigation.14

The decision of the majority in this case clearly constitutes an untenable usurpation of the primary duty and function of the prosecutors to conduct the preliminary investigation of a criminal offense and the power of the Secretary of Justice to review the resolution of said prosecutors.

In Guingona, supra, the Court en banc ruled thus:

"As a general rule, an injunction will not be granted to restrain a criminal prosecution." With more reason will injunction not lie when the case is still at the preliminary investigation stage. This Court should not usurp the primary function of the City Fiscal to conduct the preliminary investigation of the estafa charge and of the petitioners countercharge for perjury, which was consolidated with the estafa charge.

The City Fiscals office should be allowed to finish its investigation and make its factual findings. This Court should not conduct the preliminary investigation. It is not a trier of facts. (Reference to footnotes omitted)

Before resolving the main issue in this petition, as earlier stated in this opinion, several preliminary issues raised by private respondents in their "Verified Motion To Dismiss, Alternatively, Motion To Suspend" need to be addressed, namely:

A.) Private respondent Fortunes right to due process and equal protection of the laws have been violated because of the subject preliminary investigation before the DOJ Revenue Cases Task Force.

B.) Jurisdiction over Fortunes tax liability pertains to the Court of Tax Appeals and not the Regional Trial Courts, thus, the Department of Justice, through its state prosecutors, is without jurisdiction to conduct the subject preliminary investigation.

C.) The complaints for fraudulent tax evasion are unsupported by any evidence to serve as basis for the issuance of a subpoena.

D.) The lack of final determination of Fortunes tax liability precludes criminal prosecution.

1. On the alleged violation of Fortunes rights to due process and equal protection of the laws, I fail to see any violation of said rights.

Fortune, its corporate officers, nine (9) other corporations and their respective corporate officers alleged by the BIR to be mere "dummies" or conduits of Fortune in the fraudulent tax evasion on the Government, were given the opportunity to file their counter-affidavits to refute the allegations in the BIR complaints, together with their supporting documents. It is only after submission of counter-affidavits that the investigators will determine whether or not there is enough evidence to file in court criminal charges for fraudulent tax evasion against private respondents or to dismiss the BIR complaints. At this stage of the preliminary investigation, the constitutional right of private respondents to due process is adequately protected because they have been given the opportunity to be heard, i.e., to file counter-affidavits.

Nor can it be said, as respondents falsely argue, that there was no ground or basis for requiring the private respondents to file such counter-affidavits. As respondent Court of Appeals admitted in its here assailed decision, the BIR complaint (1st complaint) signed by the Commissioner of Internal Revenue consisted of fourteen (14) pages supported by an annex consisting of seventeen (17) pages in the form of a joint affidavit of eight (8) revenue officers, to which were attached voluminous documents as annexes which, when put together, constituted a formidable network of evidence tending to show fraudulent tax evasion on the part of private respondents. When, on the basis of such BIR complaint and its supporting documents, the investigating Task Force saw a need to proceed with the inquiry and, consequently, required private respondents to file their counter-affidavits, grave abuse of discretion could hardly be imputed to said investigators.

2. On respondents assertions that there is selective prosecution (no equal protection of the laws) since other corporations similarly situated as they are, are not being prosecuted and/or investigated, the argument is quite ludicrous, to say the least. As pointed out by the Solicitor General, more than one thousand (1,000) criminal cases for tax evasion have been filed in Metro Manila alone. This number, even if it seems to represent but a small fraction of cases of actual tax evasion, undoubtedly show that respondents are not being singled out. It is of note that the memorandum issued by the President of the Philippines creating a task force to investigate tax evasion schemes of manufacturers was issued three (3) months before the complaints against private respondents were filed. This makes any charge of selective prosecution baseless since it could not then be shown, nor has it been shown by private respondents that only they (respondents) were being investigated/prosecuted. In fact, up to this time, respondents have failed to substantiate this allegation of selective prosecution against them.

Moreover, assuming arguendo that other corporate manufacturers are guilty of using similar schemes for tax evasion, allegedly used by respondents, the Solicitor General correctly points out that the remedy is not dismissal of the complaints against private respondents or stoppage of the investigations of said complaints, but investigation and prosecution of other similar violators (fraudulent tax evaders).

3. Private respondents allegations that the Assistant Quezon City Prosecutor (among those investigating the complaints against them) lacks impartiality, are so unsubstantiated, imaginary, speculative and indeed puerile. They need not be elaborately refuted as a mere denial would suffice under the circumstances.

4. On the issue of jurisdiction, the rule is settled that city and state prosecutors are authorized to conduct preliminary investigations of criminal offenses under the National Internal Revenue Code. Said criminal offenses are within the jurisdiction of the Regional Trial Court.15

5. The issue of whether or not the evidence submitted by petitioners is sufficient to warrant the filing of criminal informations for fraudulent tax evasion is prematurely raised.16 To argue, as private respondents do, that one piece of evidence, i.e. the Daily Manufacturers Sworn Statements, should be produced at a particular stage of the investigation, in order to determine the probable guilt of the accused, is to dictate to the investigating officers the procedure by which evidence should be presented and examined. Further, "a preliminary investigation is not the occasion for the full and exhaustive display of the parties evidence; it is for the presentation of such evidence only as may engender a well grounded belief that an offense has been committed and that the accused is probably guilty thereof x x x."17

Besides, the preliminary investigation has not yet been terminated. The proper procedure then should be to allow the investigators, who undeniably have jurisdiction, to conduct and finish the preliminary investigation and to render a resolution. The party aggrieved by said resolution can then appeal it to the Secretary of Justice,18 as required by the settled doctrine of exhaustion of administrative remedies. What special qualification or privilege, I may ask, do private respondents have, particularly Fortune and Lucio Tan, as to exempt them from the operation of this rooted principle and entitle them to immediate judicial relief from the respondent trial court in this case?

6. The respondents Court of Appeals and the trial court maintain, as private respondents do, that a previous assessment of the correct amount of taxes due is necessary before private respondents may be charged criminally for fraudulent tax evasion. This view is decidedly not supported by law and jurisprudence.

The lack of a final determination of respondent Fortunes exact or correct tax liability is not a bar to criminal prosecution for fraudulent tax evasion. While a precise computation and assessment is required for a civil action to collect a tax deficiency, the National Internal Revenue Code does not require such computation and assessment prior to criminal prosecution for fraudulent tax evasion. Thus, as this Court had earlier ruled - "An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat and evade the income tax. A crime is complete when the violator has knowingly and willfully filed a fraudulent return with intent to evade and defeat the tax. The perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate return, and the governments failure to discover the error and promptly to assess has no connections with the commission of the crime."19

It follows that, under the Ungab doctrine, the filing of a criminal complaint for fraudulent tax evasion would be proper even without a previous assessment of the correct tax.

The argument that the Ungab doctrine will not apply to the case at bar because it involves a factual setting different from that of the case at bar, is erroneous. The Ungab case involved the filing of a fraudulent income tax return because the defendant failed to report his income derived from sale of banana saplings. In the case at bar, the complaints filed before the DOJ for investigation charge private respondents with fraudulent concealment of the actual wholesale price of products sold through declaration of registered wholesale prices lower than the actual wholesale prices, resulting in underpayment of income, ad valorem, and value-added taxes. Both cases involve, therefore, fraudulent schemes to evade payment to the Government of correct taxes.

The Court in Ungab stated further as follows:

"The petitioner also claims that the filing of the informations was precipitate and premature since the Commissioner of Internal Revenue has not yet resolved his protests against the assessment of the Revenue District Officer; and that he was denied recourse to the Court of Tax Appeals.

The contention is without merit. What is involved here is not the collection of taxes where the assessment of the Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals, but a criminal prosecution for violations of the National Internal Code which is within the cognizance of courts of first instance. While there can be no civil action to enforce collection before the assessment procedures provided in the Code have been followed, there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution under the Code.

"The contention is made, and is here rejected, that an assessment of the deficiency tax due is necessary before the taxpayer can be prosecuted criminally for the charges preferred. The crime is complete when the violator has, as in this case, knowingly and wilfully filed fraudulent returns with intent to evade and defeat a part or all of the tax. [Guzik vs. U.S., 54 F2d 618.]" (Italics supplied)

The ruling in the Ungab case is undisputably on all fours with, and conclusive to the case at bar. It should be stressed and pointed out that in Ungab the Court denied the prayer of therein petitioner to quash informations for tax evasion that had already been filed in court. In other words, the prosecutors in Ungab had already found probable cause to try therein petitioner for tax evasion. Despite this fact there was no finding by the Court of violation of any of petitioners constitutional rights.

In the present case, private respondents were merely being required to submit counter-affidavits to the complaints filed. If no violation of constitutional rights was committed in Un gab, upon the filing of the criminal informations in Court, how can there now be a violation of private respondents constitutional rights upon a requirement by the investigators that private respondents submit their counter-affidavits?

The Court has not been presented any compelling or persuasive argument why the Ungab doctrine has to be abandoned. It is good law and should be the nemesis of fraudulent tax evaders. It gives teeth to the proper enforcement of our tax laws.

7. Private respondents argue that a case earlier filed before the Court of Tax Appeals (CTA) and now before this Court20 involves a prejudicial question justifying or requiring suspension of the preliminary investigation of the complaints for fraudulent tax evasion against private respondents. Said case involves the validity of BIR Revenue Memorandum Circular No. 37-93 dated 1 July 1993 which reclassified cigarettes manufactured by respondent Fortune. The circular subjects cigarettes with brand names "Hope," "More" and "Champion" to a 10% increase in advalorem taxes starting 2 July 1993. Respondent Fortune has assailed the validity of said revenue circular and the case has yet to be decided with finality.

But the foregoing issue is irrelevant to the issue of fraudulent tax evasion involved in this case. A final decision either upholding or nullifying the aforementioned revenue circular will not affect private respondents criminal liability for fraudulent tax evasion, for the following reasons:

a) The revenue circular involved in the other case pertains to ad valorem taxes on sales of Fortunes named cigarette brands after 1 July 1993 while the fraudulent tax evasion involved in the present case pertains to years 1990, 1991 and 1992.

b) The fraudulent scheme allegedly utilized by Fortune and its dummies, as described in the BIR complaints pending with the DOJ Revenue Cases Task Force, which resulted in the misdeclaration/underdeclaration of Fortunes gross sales receipts resulting in turn in underpayment of ad valorem, value-added and income taxes was actually a "built-in" tax evasion device already in place even before the assailed revenue circular was issued. The scheme is particularly designed to result in the underpayment of ad valorem, value-added and income taxes regardless of the tax rate fixed by the government on cigarette products.

8. Respondents also argue that the issue of whether Section 127(b) or Section 142(c) of the National Internal Revenue Code is applicable to private respondents should first be settled before any criminal cases can be filed against them. This argument is both misleading and erroneous.

The aforementioned provisions read:

"Sec 127 x x x

(b) Determination of gross selling price of goods subject to ad valorem tax. Unless otherwise provided, the price, excluding the value-added tax, at which the goods are sold at wholesale in the place of production or through their sales agents to the public shall constitute the gross selling price. If the manufacturer also sells or allows such goods to be sold at wholesale price in another establishment of which he is the owner or in the profits at which he has an interest, the wholesale price in such establishment shall constitute the gross selling price. Should such price be less than the cost of manufacture plus expenses incurred until the goods are finally sold, then a proportionate margin of profit, not less than 10% of such manufacturing cost and expenses, shall be added to constitute the gross selling price."

"Sec. 142 x x x

(c) Cigarettes packed in twenties. There shall be levied, assessed and collected on cigarettes packed in twenties an ad valorem tax at the rates prescribed below based on the manufacturer s registered wholesale price:

(1) On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%). Provided, That this rate shall apply regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer. Whenever it has to be determined whether or not a cigarette bears a foreign brand, the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern.

(2) On other locally manufactured cigarettes, forty-five percent (45%).

Duly registered or existing brands of cigarettes packed in twenties shall not be allowed to be packed in thirties.

When the existing registered wholesale price, including tax, of cigarettes packed in twenties does not exceed P4.00 per pack, the rate shall be twenty percent (20%)."

As the Solicitor General correctly points out, the two (2) aforequoted provisions of the Tax Code are both applicable in determining the amount of tax due. Section 127(b) provides for the method of determining the gross wholesale price to be registered with the BIR while Section 142(c) provides for the rate of ad valorem tax to be paid. Said rate is expressed as a percentage of the registered gross selling price which is determined, in turn, based on Section 127(b).

The aforementioned two (2) provisions of the Tax Code are certainly not determinative of private respondents criminal liability, if any. A reading of the BIR complaints pending with the DOJ Revenue Cases Task Force shows that private respondent Fortune is being accused of using "dummy" corporations and business conduits as well as non-existent individuals and entities to enable the company (Fortune) to report gross receipts from sales of its cigarette brands lower than gross receipts which are actually derived from such sales. Such lower gross receipts of the company, as reported by respondent Fortune thus result in lower ad valorem, value-added and income taxes paid to the government. Stated a little differently, respondent Fortune is accused of selling at wholesale prices its cigarette brands through dummy entities in the profits of which it has a controlling interest. Under Section 127(b), the gross selling price of the goods should be the wholesale price of such dummy entities to its buyers but it is alleged by the government that respondent Fortune has purposely made use of such entities to evade payment of higher but legally correct taxes.

9. As to respondents additional claim that with regard to ad valorem tax, they merely based their liability on the wholesale price registered with the Bureau of Internal Revenue (BIR) following the method used by all cigarette manufacturers, said claim cannot absolve Fortune and its officers from criminal liability.21 Payment of ad valorem and other taxes based on the wholesale price registered with the BIR presupposes and naturally assumes that the registered wholesale prices correspond to the actual wholesale prices at which the manufacturer sells the product. If a manufacturer makes use of a method or device to make it appear that products are sold at a wholesale price lower than the amounts that the manufacturer actually realizes from such wholesale of its products, as what respondent Fortune is accused of doing, through the use of dummy entities, then there arises criminal liability under the penal provisions of the Tax Code. This is clear from Section 127(b) aforequoted in relation to the penal provisions of the Tax Code.

10. Private respondents contend that the registration with the BIR of manufacturers wholesale price and the corresponding close supervision and monitoring by BIR officials of the business operations of cigarette companies, ensure payment of correct taxes. The argument is baseless. It does not follow that the cited procedure is a guarantee against fraudulent schemes resorted to by tax-evading individuals or entities. It only indicates that taxpayers bent on evading payment of taxes would explore more creative devices or mechanisms in order to defraud the government of its sources of income even under its very nose. It is precisely to avoid and detect cases like this that the President issued a Memorandum on 1 June 1993 creating a task force to investigate tax liabilities of manufacturers engaged in tax evasion schemes, such as selling products through dummy marketing companies at underdeclared wholesale prices registered with the BIR.

Moreover, the Manufacturers Declaration which is the basis for determining the "Manufacturers Registered Wholesale Price" (which in turn becomes the basis for the imposition of ad valorem tax), even if verified by revenue officers and approved by the Commissioner of Internal Revenue, does not necessarily reflect the actual wholesale price at which the cigarettes are sold. This is why manufacturers are still required to file other documents, like the "daily manufacturers sworn statements" in order to assist in determining whether or not correct taxes have been paid. In fine, even if BIR officials may have verified Fortunes BIR registered wholesale price for its products, the same does not estop or preclude the Government from filing criminal complaints for fraudulent tax evasion based on evidence subsequently gathered to the effect that such BIR registered wholesale prices were a misdeclaration or underdeclaration of the actual wholesale price. It is hornbook law that the Government is not bound or estopped by the mistakes, inadvertence, and what more, connivance of its officials and employees with fraudulent schemes to defraud the Government.22

Even on the assumption that official duty of BIR officials and employees has been regularly performed, the allegations in the complaints are clear enough in that private respondents allegedly made use of schemes to make it appear that respondent Fortunes tax liabilities are far less than what it (Fortune) should be actually liable for under the law. The very nature of the offense for which respondents are being investigated, certainly makes regularity/irregularity in the performance of official duties irrelevant.

It should also be pointed out that the offense allegedly committed by private respondents consists in the intentional use of "dummy" entities to make it appear that respondent Fortune sells its products at lower wholesale prices, which prices would correspond to the wholesale prices registered by Fortune with the BIR, but not to the prices at which its products are sold by Fortunes dummies. The difference between Fortunes BIR-reported wholesale prices and the prices at which its dummies sell Fortunes products thus constitutes amounts for which Fortune should actually incur tax liabilities but for which it allegedly never paid taxes because of the operation of the tax evasion scheme founded on a combined underdeclaration with the BIR of Fortunes wholesale price of its products and the sale of such products to its "dummy" corporations or to non-existing individuals or entities. This is the obvious reason why the government has sought to investigate the alleged tax evasion scheme purportedly utilized by respondent Fortune and its dummy corporations.

Based on the foregoing discussions, it follows that the answer to the main issue formulated earlier in this opinion is in the negative since the private respondents have not shown that there exist, in this case, exceptional grounds removing it from the general rule that preliminary investigations of criminal offenses and criminal prosecutions cannot be stayed or enjoined by the courts.23

11. The trial courts ruling that private respondents constitutional rights have been violated, rests on untenable grounds. It must be remembered, in this connection, that exceptions to a settled rule, by their nature, must be strictly applied. And any claim to an exception must be fully substantiated. In other words, it must have real basis for existing.

The exceptions to the general rule against restraining orders or injunctions to stop preliminary investigations or criminal prosecutions are enumerated in Brocka vs. Enrile. 24 One specific exception is when an injunction is needed for the adequate protection of the accuseds constitutional rights. The exception definitely does not apply in the case at bar.

Before proceeding to illustrate this point, it is important to stress that in a preliminary investigation, the investigating officers sole duty is to determine, before the presentation of evidence by the prosecution and by the defense, if the latter should wish to present any, whether or not there are reasonable grounds for proceeding formally against the accused.25 This is in conformity with the purpose of a preliminary investigation which is to secure the innocent against hasty, malicious, and oppressive prosecutions, and to protect him from an open and public accusation of crime, from the trouble, expense and anxiety of public trial, and also to protect the state from useless and expensive trials.26 As restated by the illustrious late Chief Justice Manuel V. Moran -

"x x x the purpose of a preliminary investigation is to afford the accused an opportunity to show by his own evidence that there is no reasonable ground to believe that he is guilty of the offense charged and that, therefore, there is no good reason for further holding him to await trial in the Court of First Instance." 27

Prescinding from the tenets above-discussed, it is clear from the inception that there had been no violation of private respondents constitutional rights to presumption of innocence, due process and equal protection of the laws. The preliminary investigation, I repeat, has not yet been terminated. At this stage, only the complainant has finished presenting its affidavits and supporting documents. Obviously then, the investigating panel found that there were grounds to continue with the inquiry, hence, the issuance of subpoena and an order for the submission of counter-affidavits by private respondents. Instead of filing counter-affidavits, private respondents filed a Verified Motion to Dismiss; Alternatively, Motion to Suspend. At this point, it may be asked, how could private respondents constitutional right to presumption of innocence be violated when, in all stages of the preliminary investigation, they were presumed innocent? Declaring that there are reasonable grounds to continue with the inquiry is not the same as pronouncing that a respondent is guilty or probably guilty of the offense charged.

12. Private respondents cannot also claim that they were not afforded due process and equal protection of the laws. In fact, the investigating panel was concerned with just that when it ordered the submission of private respondents counter-affidavits. This procedure afforded private respondents the opportunity to show by their own evidence that no reasonable grounds exist for the filing of informations against them. Furthermore, contrary to the findings of the trial court and the Court of Appeals, the alleged haste by which the subpoena was issued to private respondents (the day after the filing of the 600-page annexed complaint) does not lessen the investigating panels ability to study and examine the complainants evidence. Neither does such act merit the conclusion that the investigating panel was less than objective in conducting the preliminary investigation. Consequently, the general and settled rule must apply that the courts cannot interfere with the discretion of the investigating officer to determine the specificity and adequacy of the averments in the complaint filed, except in very exceptional circumstances,28 which do not obtain here.

Therefore, private respondents act of filing a petition for certiorari and prohibition before the Regional Trial Court was rather untimely and uncalled for, not only because private respondents failed to exhaust their administrative remedies but also because the grounds cited in their petition before the trial court were highly speculative more fancied than real.

Finally, Hernandez v. Albano (19 SCRA 95), cited by the majority to support the conclusion that preliminary investigation can be stayed by the courts, clearly states that preliminary investigation can be stayed by court order only in extreme cases. Hernandez also states that:

"By statute, the prosecuting officer of the City of Manila and his assistants are empowered to investigate crimes committed within the citys territorial jurisdiction. Not a mere privilege, it is the sworn duty of a Fiscal to conduct an investigation of a criminal charge filed with his office. The power to investigate postulates the other obligation on the part of the Fiscal to investigate promptly and file the case of as speedily. Public interest - the protection of society - so demands. Agreeably to the foregoing, a rule - now of long standing and frequent application was formulated that ordinarily criminal prosecution may not be blocked by court prohibition or injunction. Really, if at every turn investigation of a crime will be halted by a court order, the administration of criminal justice will meet with an undue setback. Indeed, the investigative power of the Fiscal may suffer such a tremendous shrinkage that it may end up in hollow sound rather than as a part and parcel of the machinery of criminal justice."

It should be noted that while Hernandez lays down the extreme grounds when preliminary investigation of criminal offenses may be restrained by the courts, the dispositive portion of the decision affirmed the decision of the trial court dismissing a petition for certiorari and prohibition with prayer for preliminary injunction filed to stay the preliminary investigation of criminal complaints against petitioner Hernandez.

The other case cited by the majority to support its decision in this case, Fortun v. Labang 29 involves criminal complaints filed against a judge of the Court of First Instance by disgruntled lawyers who had lost their cases in the judges sala. Clearly, the basis for the Court to stay preliminary investigation in Fortun was a finding that said complaints were filed merely as a form of harassment against the judge and which "could have no other purpose than to place petitioner-judge in contempt and disrepute." The factual situation in the case at bar is poles apart from the factual situation in Fortun.

Further, in Fortun there was an express finding by the Court that complaints against judges of the Courts of First Instance are properly filed with the Supreme Court under Executive Order No. 264 (1970) since the Court is considered as the department head of the judiciary. In the present case it cannot be disputed that jurisdiction to conduct preliminary investigation over fraudulent tax evasion cases lies with the state prosecutors (fiscals).

It cannot therefore be denied that neither Hernandez nor Fortun supports with any plausibility the majoritys disposition of the issues in the present case. On the other hand, it appears to me all too clearly that the majority opinion, in this case, has altered the entire rationale and concept of preliminary investigation of alleged criminal offenses. That alteration has, of course, served the purposes of distinguished private respondents. But I will have no part in the shocking process especially in light of the fact that Government cries out that the people have been cheated and defrauded of their taxes to the tune allegedly of P25.6 billion pesos, and yet, it is not given by this Court even a beggars chance to prove it!

13. There is great and vital public interest in the successful investigation and prosecution of criminal offenses involving fraudulent tax evasion. Said public interest is much more compelling in the present case since private respondents are not only accused of violating tax and penal laws but are also, as a consequence of such violations, possibly depriving the government of a primary source of revenue so essential to the life, growth and development of the nation and for the prestation of essential services to the people.

14. It should be made clear, at this point, however, that this opinion is not a pre-judgment or pre-determination of private respondents guilt of the offense charged. No one, not even the prosecutors investigating the cases for fraudulent tax evasion, is, at this stage of the proceedings, when private respondents have yet to file their counter-affidavits, in a position to determine and state with finality or conclusiveness whether or not private respondents are guilty of the offense charged in the BIR complaints, now with the DOJ Revenue Cases Task Force. It is precisely through the preliminary investigation that the DOJ Task Force on Revenue Cases can determine whether or not there are grounds to file informations in court or to dismiss the complaints.

15. I see no grave abuse of discretion committed by the state prosecutors in requiring private respondents to submit counter-affidavits to the complaints for fraudulent tax evasion and to determine the existence or absence of probable criminal liability.

The Rules on Criminal Procedure do not even require, as a condition sine qua non to the validity of a preliminary investigation, the presence of the respondent as long as efforts to reach him are made and an opportunity to controvert the complainants evidence is accorded him. The purpose of the rule is to check attempts of unscrupulous respondents to thwart criminal investigations by not appearing or employing dilatory tactics. 30

16. Since the preliminary investigation in the DOJ Revenue Cases Task Force against private respondents for alleged fraudulent tax evasion is well within its jurisdiction and constitutes no grave abuse of discretion, it was in fact the respondent trial court that committed grave abuse of discretion, amounting to lack or excess of jurisdiction, when it stayed such preliminary investigation.

17. The successful prosecution of criminal offenders is not only a right but the duty of the state. Only when the states acts clearly violate constitutional rights can the courts step in to interfere with the states exercise of such right and performance of such duty. I am indubitably impressed that there is no violation of private respondents constitutional rights in this case.

18. Lastly, the consolidation of the three (3) complaints in the DOJ against private respondents should be allowed since they all involve the same scheme allegedly used by private respondents to fraudulently evade payment of taxes. Consolidation will not only avoid multiplicity of suits but will also enable private respondents to more conveniently prepare whatever responsive pleadings are required or expected of them.

It is, therefore, my considered view that the decision of the Court of Appeals of 19 December 1994 in CA G.R. SP No. 33599 should be SET ASIDE. The respondent trial court should be ENJOINED from proceeding in any manner in Civil Case No. Q-94-19790, or at least until further orders from this Court.

The preliminary investigation of the BIR complaints docketed as I.S. Nos. 93-508, 93-17942 and 93-584 with the Department of Justice Revenue Cases Task Force, being constitutionally and legally in order, should be allowed to resume until their final conclusion or completion, with private respondents given a non-extendible period of ten (10) days from notice to submit to the investigating panel their respective counter-affidavits and supporting documents, if any.