Commissioner of Internal Revenue v. National Labor Relations Commission

Summary

The Commissioner of Internal Revenue sought to collect P17.28 million in deficiency taxes from Maritime Company of the Philippines through distraint of six barges. When employees obtained a labor judgment for unpaid wages, the deputy sheriff levied and sold four of the same barges at auction. The Labor Arbiter and NLRC denied the Commissioner's motion to annul the sale, ruling the distraint was invalid and employee claims had priority. The Supreme Court reversed, finding the distraint valid based on Coast Guard acknowledgment and holding that government tax liens are superior to employee wage claims under the Civil Code's preferred credit provisions. The Court clarified that Labor Code Article 110's worker preference applies only in bankruptcy cases, not general execution proceedings. The sheriff was ordered to remit the auction proceeds to the Bureau of Internal Revenue.