Appeal from the Circuit Court of Cook County; the Hon. Raymond
S. Sarnow, Judge, presiding.
MR. CHIEF JUSTICE UNDERWOOD DELIVERED THE OPINION OF THE COURT:
Illinois Bell Telephone Company (hereinafter Bell) filed in the circuit court of Cook County its complaint seeking a declaratory judgment that certain of its revenues were exempt from taxation under the provisions of "An Act in relation to a tax upon persons engaged in the business of transmitting messages," commonly referred to as the Messages Tax Act (Ill. Rev. Stat. 1971, ch. 120, par. 467.1 et seq.) and the implementing rules and regulations of the Department of Revenue; also sought was an injunction restraining the Director of the Department of Revenue and the Attorney General from attempting to collect the tax. Subsequent amendments to the complaint and the responsive pleadings culminated in a four-count composite amended complaint, a composite answer thereto and a composite reply. Temporary injunction orders were entered as prayed, and defendants moved to vacate those orders and dismiss the action on the ground that plaintiff had failed to pursue its administrative remedies, a ground also asserted as an affirmative defense in defendants' answer. The trial court denied both the motion and the affirmative defense, finding that "no just reason to delay an appeal from this order" existed. Defendants then filed a notice of appeal to the appellate court, and we allowed their motion to transfer that appeal here. 50 Ill.2d R. 302(b).
Bell had filed its original complaint shortly after the Department of Revenue on July 31, 1973, issued a notice of tax liability in the amount of $45,946,086.23 covering an audit period from July, 1967, through November, 1970. A second notice of tax liability, covering an audit conducted in late 1973, was issued on June 21, 1974, in the amount of $60,255,626.56, corrected on June 26 to $63,102,349.08. As a result, amended composite pleadings were filed extending to these notices the allegations and responses relating to the original notice of tax liability. The trial court orders of August 17, 1973, June 27 and July 1, 1974, granting Bell's motions for temporary injunctions and enjoining the Director of Revenue from issuing a final assessment or holding any hearings pursuant to the notices, specifically tolled the 20-day period during which Bell could have filed a protest and requested an administrative hearing before the Department of Revenue, a final decision therein then being judicially reviewable under the provisions of the Administrative Review Act (Ill. Rev. Stat. 1973, ch. 110, par. 264 et seq.). In each instance, the tolling order was entered within 20 days of the issuance of the applicable notice of tax liability.
The 20-day protest period is established by section 5 of the Messages Tax Act (Ill. Rev. Stat. 1971, ch. 120, par. 467.5), incorporating section 4 of the Retailers' Occupation Tax Act, which reads:
"If [the taxpayer] shall within 20 days after such notice of tax liability file a protest to said notice of tax liability and request a hearing thereon, the Department shall give notice * * * of the time and place fixed for such hearing and shall hold a hearing in conformity with the provisions of this Act, and pursuant thereto shall issue to [the taxpayer] a final assessment for the amount found to be due as a result of such hearing.
If a protest to the notice of tax liability and a request for a hearing thereon is not filed within 20 days after such notice, such notice of tax liability shall become final without the necessity of a final assessment being issued and shall be deemed to be a final assessment." (Ill. Rev. Stat. 1971, ch. 120, par. 443.)
A paragraph at the bottom of the notices of tax liability used by the Department of Revenue informs the taxpayer of these provisions and the consequences of a failure to file a protest and request for hearing within the 20-day period.
Bell did not exhaust its administrative remedy available under the Messages Tax Act, which would include subsequent judicial review thereof under the Administrative Review Act. Rather, it asserts that its action is one brought in equity to enjoin the imposition of an illegal, unauthorized and invalid tax and hence proper under the doctrine established by this court in Owens-Illinois Glass Co. v. McKibbin (1943), 385 Ill. 245, in which it was stated:
"From the foregoing resume the enjoining of the collection of illegal taxes constitutes an exception to the general rule that equity will not take jurisdiction of a cause when there is an adequate remedy at law. It is established that where a tax is unauthorized by law, or where it is levied upon property exempt from taxation, equity will take jurisdiction and enjoin the collection of the tax. This constitutes an independent ground of equitable relief, and in such cases it is not necessary that special circumstances exist to authorize issuing an injunction. It is also the rule in such cases that where remedies are provided by statute they are cumulative, and are exclusive only where they have been first invoked by the taxpayer. And it is to be noted this exception to the general rule applies only to the illegal and unauthorized imposition of a tax, and not to irregularities in levying a lawful tax." 385 Ill. 245, 256.)
Owens was decided prior to the adoption of the Administrative Review Act in this State, and its most recent reaffirmance was in a factual context to which the provisions of the Administrative Review Act were not applicable. (See Clarendon Associates v. Korzen (1973), 56 Ill.2d 101.) It was narrowed somewhat by our recent decision in Calderwood Corp. v. Mahin (1974), 57 Ill.2d 216.
In Calderwood, the taxpayer had received a notice of tax liability, assessed in part for taxes, penalties and interest due under the Retailers' Occupation Tax Act, and filed its complaint in the circuit court to enjoin the collection of the portion attributable to its alleged liability under that act. No notice of protest was given the Department of Revenue, nor, although the complaint was filed within 20 days of the issuance of the notice of tax liability, was the court requested to toll the running of the 20-day protest period or enjoin the Department of Revenue from making a final assessment. The trial court did ultimately enjoin the Director of Revenue from collecting the amount owed under the Retailers' Occupation Tax Act because the sales in question were for resale and thus exempt from the provisions of the Act. We reversed and remanded with instructions to dismiss the complaint, holding that injunctive relief under Owens was unavailable because the 20-day period within which a notice of protest could have been filed had expired, the decision of the Department of Revenue had, under the statute, become final and plaintiff was thus obliged to seek relief under the Administrative Review Act:
"The Administrative Review Act provides, inter alia, `This Act shall apply to and govern every action to review judicially a final decision of any administrative agency where the Act creating or conferring power on such agency, by express reference, adopts the provisions of this Act. In all such cases, any other statutory, equitable or common law mode of review of decisions of administrative agencies heretofore available shall not be employed * * *.' (Ill. Rev. Stat. 1969, ch. 110, par. 265.) Section 12 of the Retailers' Occupation Tax Act provides that all proceedings for the judicial review of final administrative decisions of the Department shall be governed by the Administrative Review Act. Ill. Rev. Stat. 1969, ch. 120, par. 451.
It is clear from our decisions that if a proceeding is not brought under the Administrative Review Act for judicial review of the Department's final assessment the assessment will be conclusive as to all questions affecting its merits. A defense as to the merits of the case must be raised through administrative review or it will be considered waived." (57 Ill.2d 216, 220.)
A final assessment existed in Calderwood because the 20-day protest period continued to run and upon expiration of the 20 days the "notice of tax liability [became] final without the necessity of a final assessment being issued and [was] deemed to be a final assessment." (Ill. Rev. Stat. 1971, ch. 120, par. 443.) We held Owens and Baumgardt v. Isaacs (1963), 29 Ill.2d 29, did not apply because neither of those cases "involved a `final administrative decision' of the ...