G.R. No. 112497 August 4, 1994 HON. FRANKLIN M. DRILON, in his capacity as SECRETARY OF JUSTICE, petitioner, vs.

MAYOR ALFREDO S. LIM, VICE-MAYOR JOSE L. ATIENZA, CITY TREASURER ANTHONY ACEVEDO, SANGGUNIANG PANGLUNSOD AND THE CITY OF MANILA, respondents. The City Legal Officer for petitioner. Angara, Abello, Concepcion, Regala & Cruz for Caltex (Phils.). Joseph Lopez for Sangguniang Panglunsod of Manila. L.A. Maglaya for Petron Corporation.

CRUZ, J.: The principal issue in this case is the constitutionality of Section 187 of the Local Government Code reading as follows: Procedure For Approval And Effectivity Of Tax Ordinances And Revenue Measures; Mandatory Public Hearings. The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof; Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. Pursuant thereto, the Secretary of Justice had, on appeal to him of four oil companies and a taxpayer, declared Ordinance No. 7794, otherwise known as the Manila Revenue Code, null and void for non-compliance with the prescribed procedure in the enactment of tax ordinances and for containing certain provisions contrary to law and public policy. 1 In a petition for certiorari filed by the City of Manila, the Regional Trial Court of Manila revoked the Secretary's resolution and sustained the ordinance, holding inter alia that the procedural requirements had been observed. More importantly, it declared Section 187 of the Local Government Code as unconstitutional because of its vesture in the Secretary of Justice of the power of control over local governments in violation of the policy of local autonomy mandated in the Constitution and of the specific provision therein conferring on the President of the Philippines only the power of supervision over local governments. 2

The present petition would have us reverse that decision. The Secretary argues that the annulled Section 187 is constitutional and that the procedural requirements for the enactment of tax ordinances as specified in the Local Government Code had indeed not been observed. Parenthetically, this petition was originally dismissed by the Court for non-compliance with Circular 1-88, the Solicitor General having failed to submit a certified true copy of the challenged decision. 3 However, on motion for reconsideration with the required certified true copy of the decision attached, the petition was reinstated in view of the importance of the issues raised therein. We stress at the outset that the lower court had jurisdiction to consider the constitutionality of Section 187, this authority being embraced in the general definition of the judicial power to determine what are the valid and binding laws by the criterion of their conformity to the fundamental law. Specifically, BP 129 vests in the regional trial courts jurisdiction over all civil cases in which the subject of the litigation is incapable of pecuniary estimation, 4even as the accused in a criminal action has the right to question in his defense the constitutionality of a law he is charged with violating and of the proceedings taken against him, particularly as they contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate jurisdiction over final judgments and orders of lower courts in all cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question. In the exercise of this jurisdiction, lower courts are advised to act with the utmost circumspection, bearing in mind the consequences of a declaration of unconstitutionality upon the stability of laws, no less than on the doctrine of separation of powers. As the questioned act is usually the handiwork of the legislative or the executive departments, or both, it will be prudent for such courts, if only out of a becoming modesty, to defer to the higher judgment of this Court in the consideration of its validity, which is better determined after a thorough deliberation by a collegiate body and with the concurrence of the majority of those who participated in its discussion. 5 It is also emphasized that every court, including this Court, is charged with the duty of a purposeful hesitation before declaring a law unconstitutional, on the theory that the measure was first carefully studied by the executive and the legislative departments and determined by them to be in accordance with the fundamental law before it was finally approved. To doubt is to sustain. The presumption of constitutionality can be overcome only by the clearest showing that there was indeed an infraction of the Constitution, and only when such a conclusion is reached by the required majority may the Court pronounce, in the discharge of the duty it cannot escape, that the challenged act must be struck down. In the case before us, Judge Rodolfo C. Palattao declared Section 187 of the Local Government Code unconstitutional insofar as it empowered the Secretary of Justice to review tax ordinances and, inferentially, to annul them. He cited the familiar distinction between control and supervision, the first being "the power of an officer to alter or modify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for the latter," while the second is "the power of a superior officer to see to it that lower officers perform their functions in accordance with law." 6 His conclusion was that the challenged section gave to the Secretary the power of control and not of supervision only as vested by the Constitution in the President of the Philippines. This was, in his view, a violation not only of Article X, specifically Section 4 thereof, 7and of Section 5 on the taxing powers of local governments, 8 and the policy of local autonomy in general. We do not share that view. The lower court was rather hasty in invalidating the provision.

Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the judgment of the local government that enacted the measure. Secretary Drilon did set aside the Manila Revenue Code, but he did not replace it with his own version of what the Code should be. He did not pronounce the ordinance unwise or unreasonable as a basis for its annulment. He did not say that in his judgment it was a bad law. What he found only was that it was illegal. All he did in reviewing the said measure was determine if the petitioners were performing their functions in accordance with law, that is, with the prescribed procedure for the enactment of tax ordinances and the grant of powers to the city government under the Local Government Code. As we see it, that was an act not of control but of mere supervision. An officer in control lays down the rules in the doing of an act. If they are not followed, he may, in his discretion, order the act undone or re-done by his subordinate or he may even decide to do it himself. Supervision does not cover such authority. The supervisor or superintendent merely sees to it that the rules are followed, but he himself does not lay down such rules, nor does he have the discretion to modify or replace them. If the rules are not observed, he may order the work done or redone but only to conform to the prescribed rules. He may not prescribe his own manner for the doing of the act. He has no judgment on this matter except to see to it that the rules are followed. In the opinion of the Court, Secretary Drilon did precisely this, and no more nor less than this, and so performed an act not of control but of mere supervision. The case of Taule v. Santos 9 cited in the decision has no application here because the jurisdiction claimed by the Secretary of Local Governments over election contests in the Katipunan ng Mga Barangay was held to belong to the Commission on Elections by constitutional provision. The conflict was over jurisdiction, not supervision or control. Significantly, a rule similar to Section 187 appeared in the Local Autonomy Act, which provided in its Section 2 as follows: A tax ordinance shall go into effect on the fifteenth day after its passage, unless the ordinance shall provide otherwise: Provided, however, That the Secretary of Finance shall have authority to suspend the effectivity of any ordinance within one hundred and twenty days after receipt by him of a copy thereof, if, in his opinion, the tax or fee therein levied or imposed is unjust, excessive, oppressive, or confiscatory, or when it is contrary to declared national economy policy, and when the said Secretary exercises this authority the effectivity of such ordinance shall be suspended, either in part or as a whole, for a period of thirty days within which period the local legislative body may either modify the tax ordinance to meet the objections thereto, or file an appeal with a court of competent jurisdiction; otherwise, the tax ordinance or the part or parts thereof declared suspended, shall be considered as revoked. Thereafter, the local legislative body may not reimpose the same tax or fee until such time as the grounds for the suspension thereof shall have ceased to exist. That section allowed the Secretary of Finance to suspend the effectivity of a tax ordinance if, in his opinion, the tax or fee levied was unjust, excessive, oppressive or confiscatory. Determination of these flaws would involve the exercise of judgment or discretion and not merely an examination of whether or not the requirements or limitations of the law had been observed; hence, it would smack of control rather than mere supervision. That power was never questioned before this Court but, at any rate, the Secretary of Justice is not given the same latitude under Section 187. All he is permitted to do is ascertain the constitutionality or legality of the tax measure, without the right to declare that, in his opinion, it is unjust, excessive, oppressive or confiscatory. He has no discretion

on this matter. In fact, Secretary Drilon set aside the Manila Revenue Code only on two grounds, to with, the inclusion therein of certain ultra vires provisions and non-compliance with the prescribed procedure in its enactment. These grounds affected the legality, not the wisdom or reasonableness, of the tax measure. The issue of non-compliance with the prescribed procedure in the enactment of the Manila Revenue Code is another matter. In his resolution, Secretary Drilon declared that there were no written notices of public hearings on the proposed Manila Revenue Code that were sent to interested parties as required by Art. 276(b) of the Implementing Rules of the Local Government Code nor were copies of the proposed ordinance published in three successive issues of a newspaper of general circulation pursuant to Art. 276(a). No minutes were submitted to show that the obligatory public hearings had been held. Neither were copies of the measure as approved posted in prominent places in the city in accordance with Sec. 511(a) of the Local Government Code. Finally, the Manila Revenue Code was not translated into Pilipino or Tagalog and disseminated among the people for their information and guidance, conformably to Sec. 59(b) of the Code. Judge Palattao found otherwise. He declared that all the procedural requirements had been observed in the enactment of the Manila Revenue Code and that the City of Manila had not been able to prove such compliance before the Secretary only because he had given it only five days within which to gather and present to him all the evidence (consisting of 25 exhibits) later submitted to the trial court. To get to the bottom of this question, the Court acceded to the motion of the respondents and called for the elevation to it of the said exhibits. We have carefully examined every one of these exhibits and agree with the trial court that the procedural requirements have indeed been observed. Notices of the public hearings were sent to interested parties as evidenced by Exhibits G-1 to 17. The minutes of the hearings are found in Exhibits M, M-1, M-2, and M-3. Exhibits B and C show that the proposed ordinances were published in the Balita and the Manila Standard on April 21 and 25, 1993, respectively, and the approved ordinance was published in the July 3, 4, 5, 1993 issues of the Manila Standard and in the July 6, 1993 issue of Balita, as shown by Exhibits Q, Q-1, Q-2, and Q-3. The only exceptions are the posting of the ordinance as approved but this omission does not affect its validity, considering that its publication in three successive issues of a newspaper of general circulation will satisfy due process. It has also not been shown that the text of the ordinance has been translated and disseminated, but this requirement applies to the approval of local development plans and public investment programs of the local government unit and not to tax ordinances. We make no ruling on the substantive provisions of the Manila Revenue Code as their validity has not been raised in issue in the present petition. WHEREFORE, the judgment is hereby rendered REVERSING the challenged decision of the Regional Trial Court insofar as it declared Section 187 of the Local Government Code unconstitutional but AFFIRMING its finding that the procedural requirements in the enactment of the Manila Revenue Code have been observed. No pronouncement as to costs. SO ORDERED.

G.R. No. 126232 November 27, 1998 THE PROVINCE OF BULACAN, ROBERTO M. PAGDANGANAN, FLORENCE CHAVES, and MANUEL DJ SIAYNGCO in their capacity as PROVINCIAL GOVERNOR, PROVINCIAL TREASURER, PROVINCIAL LEGAL ADVISER, respectively, petitioners, vs. THE HONORABLE COURT OF APPEALS (FORMER SPECIAL 12TH DIVISION), REPUBLIC CEMENT CORPORATION, respondents.

ROMERO, J.: Before us is a petition for certiorari seeking the reversal of the decision of the Court of Appeals dated September 27, 1995 declaring petitioner without authority to levy taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands, as well as the August 26, 1996 resolution of the appellate court denying its motion for reconsideration. The facts are as follows: On June 26, 1992, the Sangguniang Panlalawigan of Bulacan passed Provincial Ordinance No. 3, known as "An Ordinance Enacting the Revenue Code of the Bulacan Province." which was to take effect on July 1, 1992. Section 21 of the ordinance provides as follows: Sec. 21 Imposition of Tax. There is hereby levied and collected a tax of 10% of the fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth and other quarry resources, such, but not limited to marble, granite, volcanic cinders, basalt, tuff and rock phosphate, extracted from public lands or from beds of seas, lakes, rivers, streams, creeks and other public waters within its territorial jurisdiction (Emphasis ours) Pursuant thereto, the Provincial Treasurer of Bulacan, in a letter dated November 11, 1993, assessed private respondent Republic Cement Corporation (hereafter Republic Cement) P2,524,692.13 for extracting limestone, shale and silica from several parcels of private land in the province during the third quarter of 1992 until the second quarter of 1993. Believing that the province, on the basis of above-said ordinance, had no authority to impose taxes on quarry resources extracted from private lands, Republic Cement formally contested the same on December 23, 1993. The same was, however, denied by the Provincial Treasurer on January 17, 1994. Republic Cement, consequently filed a petition for declaratory relief with the Regional Trial Court of Bulacan on February 14, 1994. The province filed a motion to dismiss Republic Cement's petition, which was granted by the trial court on May 13, 1993, which ruled that declaratory relief was improper, allegedly because a breach of the ordinance had been committed by Republic Cement. On July 11, 1994, Republic Cement filed a petition for certiorari with the Supreme Court seeking to reverse the trial court's dismissal of their petition. The Court, in a resolution dated July 27, 1994, referred the same to the Court of Appeals, where it was docketed as CA G.R. SP No. 34915. The appellate court required petitioners to file a comment, which they did on September 7, 1994. In the interim, the Province of Bulacan issued a warrant of levy against Republic Cement, allegedly because of its unpaid tax liabilities. Negotiations between Republic Cement and petitioners resulted in an agreement and modus vivendi on December 12, 1994, whereby Republic Cement agreed to pay under protest P1,262,346.00, 50% of the tax assessed by petitioner, in exchange for the lifting of

the warrant of levy. Furthermore, Republic Cement and petitioners agreed to limit the issue for resolution by the Court of Appeals to the question as to whether or not the provincial government could impose and/or assess taxes on quarry resources extracted by Republic Cement from private lands pursuant to Section 21 of Provincial Ordinance No. 3. This agreement and modus vivendi were embodied in a joint manifestation and motion signed by Governor Roberto Pagdanganan, on behalf of the Province of Bulacan, by Provincial Treasurer Florence Chavez, and by Provincial Legal Officer Manuel Siayngco, as petitioners' counsel and filed with the Court of Appeals on December 13, 1994. In a resolution dated December 29, 1994, the appellate court approved the same and limited the issue to be resolved to the question of whether or not the provincial government could impose taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands. After due trial, the Court of Appeals, on September 27, 1995, rendered the following judgment: WHEREFORE, judgment is hereby rendered declaring the Province of Bulacan under its Provincial Ordinance No. 3 entitled "An Ordinance Enacting The Revenue Code of Bulacan Province" to be without legal authority to impose and assess taxes on quarry resources extracted by RCC from private lands, hence the interpretation of Respondent Treasurer of Chapter II, Article D, Section 21 of the Ordinance, and the assessment made by the Province of Bulacan against RCC is null and void. Petitioners' motion for reconsideration, as well as their supplemental motion for reconsideration, was denied by the appellate court on August 26, 1996, hence this appeal. Petitioners claim that the Court of Appeals erred in: 1. NOT HAVING OUTRIGHTLY DISMISSED THE SUBJECT PETITION ON THE GROUND THAT THE SAME IS NOT THE APPROPRIATE REMEDY FROM THE TRIAL COURT'S GRANT OF THE PRIVATE RESPONDENTS' (HEREIN PETITIONER) MOTION TO DISMISS; 2. NOT DISMISSING THE SUBJECT PETITION FOR BEING VIOLATIVE OF CIRCULAR 2-90 ISSUED BY THE SUPREME COURT; 3. NOT DISMISSING THE PETITION FOR REVIEW ON THE GROUND THAT THE TRIAL COURT'S ORDER OF MAY 13, 1994 HAD LONG BECOME FINAL AND EXECUTORY; 4. GOING BEYOND THE PARAMETERS OF ITS APPELLATE JURISDICTION IN RENDERING THE SEPTEMBER 27, 1995 DECISION; 5. HOLDING THAT PRIVATE RESPONDENT (HEREIN PETITIONER) ARE ESTOPPED FROM RAISING THE PROCEDURAL ISSUE IN THE MOTION FOR RECONSIDERATION; 6. THE INTERPRETATION OF SECTION 134 OF THE LOCAL GOVERNMENT CODE AS STATED IN THE SECOND TO THE LAST PARAGRAPH OF PAGE 5 OF ITS SEPTEMBER 27, 1995 DECISION;

7. SUSTAINING THE ALLEGATIONS OF HEREIN RESPONDENT WHICH UNJUSTLY DEPRIVED PETITIONER THE POWER TO CREATE ITS OWN SOURCES OF REVENUE; 8. DECLARING THAT THE ASSESSMENT MADE BY THE PROVINCE OF BULACAN AGAINST RCC AS NULL AND VOID WHICH IN EFFECT IS A COLLATERAL ATTACK ON PROVINCIAL ORDINANCE NO. 3; AND 9. FAILING TO CONSIDER THE REGALIAN DOCTRINE IN FAVOR OF THE LOCAL GOVERNMENT. The issues raised by petitioners are devoid of merit. The number and diversity of errors raised by appellants impel us, however, to discuss the points raised seriatim. In their first assignment of error, petitioners contend that instead of filing a petition for certiorari with the Supreme Court, Republic Cement should have appealed from the order of the trial court dismissing their petition. CitingMartinez vs. CA, 1 they allege that a motion to dismiss is a final order, the remedy against which is not a petition for certiorari, but an appeal, regardless of the questions sought to be raised on appeal, whether of fact or of law, whether involving jurisdiction or grave abuse of discretion of the trial court. Petitioners' argument is misleading. While it is true that the remedy against a final order is an appeal, and not a petition for certiorari, the petition referred to is a petition for certiorari under Rule 65. As stated in Martinez, the party aggrieved does not have the option to substitute the special civil action of certiorari under Rule 65 for the remedy of appeal. The existence and availability of the right of appeal are antithetical to the availment of the special civil action of certiorari. Republic Cement did not, however, file a petition for certiorari under Rule 65, but an appeal by certiorari under Rule 45. Even law students know that certiorari under Rule 45 is a mode of appeal, an appeal from the Regional Trial Court being taken in either of two ways (a) by writ of error (involving questions of fact and law) and (b) bycertiorari (limited only to issues of law), with an appeal by certiorari being brought to the Supreme Court, there being no provision of law for taking appeals by certiorari to the Court of Appeals. 2 It is thus clearly apparent that Republic Cement correctly contested the trial court's order of dismissal by filing an appeal by certiorari under Rule 45. In fact, petitioners, in their second assignment of error, admit that a petition for review on certiorari under Rule 45 is available to a party aggrieved by an order granting a motion to dismiss. 3 They claim, however, that Republic Cement could not avail of the same allegedly because the latter raised issues of fact, which is prohibited, Rule 45 providing that "(t)he petition shall raise only questions of law which must be distinctly set forth." 4 In this respect, petitioners claim that Republic Cement's petition should have been dismissed by the appellate court, Circular 2-90 providing: 4. Erroneous Appeals. An appeal taken to either the Supreme Court or the Court of Appeals by the wrong or inappropriate mode shall be dismissed. xxx xxx xxx d) No transfer of appeals erroneously taken. No transfers of appeals erroneously taken to the Supreme Court or to the Court of Appeals to whichever of these Tribunals has appropriate appellate jurisdiction will be allowed; continued ignorance or wilful disregard of the law on appeals will not be tolerated.

Petitioners even fault the Court for referring Republic Cement's petition to the Court of Appeals, claiming that the same should have been dismissed pursuant to Circular 2-90. Petitioners conveniently overlook the other provisions of Circular 2-90, specifically 4b) thereof, which provides: b) Raising factual issues in appeal by certiorari. Although submission of issues of fact in an appeal by certiorari taken to the Supreme Court from the regional trial court is ordinarily proscribed, the Supreme Court nonetheless retains the option, in the exercise of its sound discretion and considering the attendant circumstances, either itself to take cognizance of and decide such issues or to refer them to the Court of Appeals for determination. As can be clearly adduced from the foregoing, when an appeal by certiorari under Rule 45 erroneously raises factual issues, the Court has the option to refer the petition to the Court of Appeals. The exercise by the Court of this option may not now be questioned by petitioners. As the trial court's order was properly appealed by Republic Cement, the trial court's May 13, 1994 order never became final and executory, rendering petitioner's third assignment of error moot and academic. Petitioners' fourth and fifth assignment of errors are likewise without merit. Petitioners assert that the Court of Appeals could only rule on the propriety of the trial court's dismissal of Republic Cement's petition for declaratory relief, allegedly because that was the sole relief sought by the latter in its petition for certiorari. Petitioners claim that the appellate court overstepped its jurisdiction when it declared null and void the assessment made by the Province of Bulacan against Republic Cement. Petitioners gloss over the fact that, during the proceedings before the Court of Appeals, they entered into an agreement and modus vivendi whereby they limited the issue for resolution to the question as to whether or not the provincial government could impose and/or assess taxes on stones, sand, gravel, earth and other quarry resources extracted by Republic Cement from private lands. This agreement and modus vivendi were approved by the appellate court on December 29, 1994. All throughout the proceedings, petitioners never questioned the authority of the Court of Appeals to decide this issue, an issue which it brought itself within the purview of the appellate court. Only when an adverse decision was rendered by the Court of Appeals did petitioners question the jurisdiction of the former. Petitioners are barred by the doctrine of estoppel from contesting the authority of the Court of Appeals to decide the instant case, as this Court has consistently held that "(a) party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction." 5 The Supreme Court frowns upon the undesirable practice of a party submitting his case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction when adverse. 6 In a desperate attempt to ward off defeat, petitioners now repudiate the above-mentioned agreement and modus vivendi, claiming that the same was not binding on the Province of Bulacan, not having been authorized by theSangguniang Panlalawigan of Bulacan. While it is true that the Provincial Governor can enter into contract and obligate the province only upon authority of the sangguniang panlalawigan, 7 the same is inapplicable to the case at bar. The agreement and modus vivendi may have been signed by petitioner Roberto Pagdanganan, as Governor of the Province of Bulacan, without authorization from the sangguniang panlalawigan, but it was also signed by Manuel Siayngco, the Provincial Legal Officer, in his capacity as such, and as counsel of petitioners.

It is a well-settled rule that all proceedings in court to enforce a remedy, to bring a claim, demand, cause of action or subject matter of a suit to hearing, trial, determination, judgment and execution are within the exclusive control of the attorney. 8 With respect to such matters of ordinary judicial procedure, the attorney needs no special authority to bind his client. 9 Such questions as what action or pleading to file, where and when to file it, what are its formal requirements, what should be the theory of the case, what defenses to raise, how may the claim or defense be proved, when to rest the case, as well as those affecting the competency of a witness, the sufficiency, relevancy, materiality or immateriality of certain evidence and the burden of proof are within the authority of the attorney to decide. 10 Whatever decision an attorney makes on any of these procedural questions, even if it adversely affects a client's case, will generally bind a client. The agreement and modus vivendi signed by petitioners' counsel is binding upon petitioners, even if the Sanggunian had not authorized the same, limitation of issues being a procedural question falling within the exclusive authority of the attorney to decide. In any case, the remaining issues raised by petitioner are likewise devoid of merit, a province having no authority to impose taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands. The pertinent provisions of the Local Government Code are as follows: Sec. 134. Scope of Taxing Powers. Except as otherwise provided in this Code, the province may levy only the taxes, fees, and charges as provided in this Article. Sec. 158. Tax on Sand, Gravel and Other Quarry Resources. The province may levy and collect not more than ten percent (10%) of fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other quarry resources, as defined under the National Internal Revenue Code, as amended, extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks, and other public waters within its territorial jurisdiction. xxx xxx xxx (Emphasis supplied) The appellate court, on the basis of Section 134, ruled that a province was empowered to impose taxes only on sand, gravel, and other quarry resources extracted from public lands, its authority to tax being limited by said provision only to those taxes, fees and charges provided in Article One, Chapter 2, Title One of Book II of the Local Government Code. 11 On the other hand, petitioners claim that Sections 129 12 and 186 13 of the Local Government Code authorizes the province to impose taxes other than those specifically enumerated under the Local Government Code. The Court of Appeals erred in ruling that a province can impose only the taxes specifically mentioned under the Local Government Code. As correctly pointed out by petitioners, Section 186 allows a province to levy taxes other than those specifically enumerated under the Code, subject to the conditions specified therein. This finding, nevertheless, affords cold comfort to petitioners as they are still prohibited from imposing taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands. The tax imposed by the Province of Bulacan is an excise tax, being a tax upon the performance, carrying on, or exercise of an activity. 14The Local Government Code provides: Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx xxx xxx

(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; xxx xxx xxx A province may not, therefore, levy excise taxes on articles already taxed by the National Internal Revenue Code. Unfortunately for petitioners, the National Internal Revenue Code provides: Sec. 151. Mineral Products. (A) Rates of Tax. There shall be levied, assessed and collected on minerals, mineral products and quarry resources, excise tax as follows: xxx xxx xxx (2) On all nonmetallic minerals and quarry resources, a tax of two percent (2%) based on the actual market value of the gross output thereof at the time of removal, in case of those locally extracted or produced; or the values used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and valueadded tax, in the case of importation. xxx xxx xxx (B) [Definition of Terms]. for purposes of this Section, the termxxx xxx xxx (4) Quarry resources shall mean any common stone or other common mineral substances as the Director of the Bureau of Mines and Geo-Sciences may declare to be quarry resources such as, but not restricted to, marl, marble, granite, volcanic cinders, basalt, tuff and rock phosphate; Provided, That they contain no metal or metals or other valuable minerals in economically workable quantities. It is clearly apparent from the above provision that the National Internal Revenue Code levies a tax on all quarry resources, regardless of origin, whether extracted from public or private land. Thus, a province may not ordinarily impose taxes on stones, sand, gravel, earth and other quarry resources, as the same are already taxed under the National Internal Revenue Code. The province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources extracted from public land because it is expressly empowered to do so under the Local Government Code. As to stones, sand, gravel, earth and other quarry resources extracted from private land, however, it may not do so, because of the limitation provided by Section 133 of the Code in relation to Section 151 of the National Internal Revenue Code. Given the above disquisition, petitioners cannot claim that the appellate court unjustly deprived them of the power to create their sources of revenue, their assessment of taxes against Republic Cement being ultra vires, traversing as it does the limitations set by the Local Government Code. Petitioners likewise aver that the appellate court' s declaration of nullity of its assessment against Republic Cement is a collateral attack on Provincial Ordinance No. 3, which is prohibited by public

policy. 15 Contrary to petitioners' claim, the legality of the ordinance was never questioned by the Court of Appeals. Rather, what the appellate court questioned was petitioners' assessment of taxes on Republic Cement on the basis of Provincial Ordinance No. 3, not the ordinance itself. Furthermore, Section 21 of Provincial Ordinance No. 3 is practically only a reproduction of Section 138 of the Local Government Code. A cursory reading of both would show that both refer to ordinary sand, stone, gravel, earth and other quarry resources extracted from public lands. Even if we disregard the limitation set by Section 133 of the Local Government Code, petitioners may not, impose taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands on the basis of Section 21 of Provincial Ordinance No. 3 as the latter clearly applies only to quarry resources extracted from public lands. Petitioners may not invoke the Regalian doctrine to extend the coverage of their ordinance to quarry resources extracted from private lands, for taxes, being burdens, are not to be presumed beyond what the applicable statute expressly and clearly declares, tax statutes being construed strictissimi juris against the government. 16 WHEREFORE, premises considered, the instant petition is DISMISSED for lack of merit and the decision of the Court of Appeals is hereby AFFIRMED in toto. Costs against petitioner. SO ORDERED.

G.R. No. 125948 December 29, 1998 FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas, respondents.

MARTINEZ, J.: This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a business tax refund imposed by the City of Batangas. Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 1 and renewed by the Energy Regulatory Board in 1992. 2 Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code 3. The respondent City Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of 1993. On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the pertinent portion of which reads: Please note that our Company (FPIC) is a pipeline operator with a government concession granted under the Petroleum Act. It is engaged in the business of transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is exempt from paying tax on gross receipts under Section 133 of the Local Government Code of 1991 . . . . Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax "on contractors and other independent contractors" under Section 143, Paragraph (e) of the Local Government Code does not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the Local Government Code. The said section limits the imposition of fees and charges on business to such amounts as may be commensurate to the cost of regulation, inspection, and licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on gross receipts is violative of the aforecited provision. The amount of

P956,076.04 (P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection and licensing. The fee is already a revenue raising measure, and not a mere regulatory imposition. 4

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code. 5 On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint 6 for tax refund with prayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the Local Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus meriting the immediate refund of the tax paid. 7 Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the Local Government Code as said exemption applies only to "transportation contractors and persons engaged in the transportation by hire and common carriers by air, land and water." Respondents assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier" under the said code pertains to the mode or manner by which a product is delivered to its destination. 8 On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise: . . . Plaintiff is either a contractor or other independent contractor. . . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to be strictly construed against the taxpayer, taxes being the lifeblood of the government. Exemption may therefore be granted only by clear and unequivocal provisions of law. Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387. (Exhibit A) whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption upon the plaintiff. Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to distinctions or other considerations may be of help: 1. That the exemption granted under Sec. 133 (j) encompasses onlycommon carriers so as not to overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but a special carrier extending its services and facilities

to a single specific or "special customer" under a "special contract."

2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy to local governments than the previous enactments, to make them economically and financially viable to serve the people and discharge their functions with a concomitant obligation to accept certain devolution of powers, . . . So, consistent with this policy even franchise grantees are taxed (Sec. 137) and contractors are also taxed under Sec. 143 (e) and 151 of the Code. 9

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27, 1995, we referred the case to the respondent Court of Appeals for consideration and adjudication. 10On November 29, 1995, the respondent court rendered a decision 11 affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996. 12 Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11, 1996. 13 Petitioner moved for a reconsideration which was granted by this Court in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated. Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not clear under the law. There is merit in the petition. A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally. Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." The test for determining whether a party is a common carrier of goods is: 1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation; 2. He must undertake to carry goods of the kind to which his business is confined; 3. He must undertake to carry by the method by which his business is conducted and over his established roads; and

4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals 16 we ruled that: The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . . avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1877 deliberately refrained from making such distinctions. So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes: every person that now or hereafter may own, operate. manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system gas, electric light heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. (Emphasis Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous. As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. 17 Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus, Article 86 thereof provides that: Art. 86. Pipe line concessionaire as common carrier. A pipe line shall have the preferential right to utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining transportation capacity pro rata for the transportation of such other petroleum as may be offered by others for transport, and to charge without discrimination such rates as may have been approved by the Secretary of Agriculture and Natural Resources. Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides: that everything relating to the exploration for and exploitation of petroleum . . . and everything relating to the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared to be a public utility. (Emphasis Supplied) The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared: . . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier under Republic Act No. 387 . . . . Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended. From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit: Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx xxx xxx

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code. The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are illuminating: MR. AQUINO (A). Thank you, Mr. Speaker. Mr. Speaker, we would like to proceed to page 95, line 1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the Taxing Powers of Local Government Units." . . . MR. AQUINO (A.). Thank you Mr. Speaker. Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those being deemed to be exempted from the taxing powers of the local government units. May we know the reason why the transportation business is being excluded from the taxing powers of the local government units? MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph 5. It states that local government units may not impose taxes on the business of transportation, except as otherwise provided in this code. Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces have the power to impose a tax on business enjoying a franchise at the rate of not more than one-half of 1 percent of the gross annual receipts. So, transportation contractors who are enjoying a franchise would be subject to tax by the province. That is the exception, Mr. Speaker. What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on the carrier business. Local government units may impose taxes on top of what is already being imposed by the National Internal Revenue Code which is the so-called "common carriers tax." We do not want a duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . .
18

It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against common carriers is to prevent a duplication of the so-called "common carrier's tax." Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue Code. 19 To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code. WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE. SO ORDERED.

G.R. No. 127708 March 25, 1999 CITY GOVERNMENT OF SAN PABLO, LAGUNA, CITY TREASURER OF SAN PABLO, LAGUNA and THE SANGGUNIANG PANGLUNSOD OF SAN PABLO, LAGUNA, petitioners, vs. HONORABLE BIENVENIDO V. REYES, in his capacity as Presiding Judge, Regional Trial Court, Branch 29, San Pablo City and the MANILA ELECTRIC COMPANY, respondents.

GONZAGA-REYES, J.: This is a petition under Rule 45 of the Rules of Court to review on a pure question of law the decision of the Regional Trial Court (RTC) of San Pablo City, Branch 29 in Civil Case No. SP4359(96), entitled "Manila Electric Company vs. City of San Pablo, Laguna, City Treasurer of San Pablo Laguna, and the Sangguniang Panglunsod of San Pablo City, Laguna." The RTC declared the imposition of a franchise tax under Section 2.09 Article D of Ordinance No. 56 otherwise known as the Revenue Code of the City of San Pablo as ineffective and void insofar as the respondent MERALCO is concerned for being violative of Act No. 3648, Republic Act No. 2340 and PD 551. The RTC also granted MERALCO'S claim for refund of franchise taxes paid under protest. The following antecedent facts are undisputed: Act No. 3648 granted the Escudero Electric Service Company a legislative franchise to maintain and operate an electric light and power system in the City of San Pablo and nearby municipalities. Section 10 of Act No. 3648 provides: . . . In consideration of the franchise and rights hereby granted, the grantee shall pay unto the municipal treasury of each municipality in which it is supplying electric current to the public under this franchise, a tax equal to two percentum of the gross earnings from electric current sold or supplied under this franchise in each said municipality. Said tax shall be due and payable quarterly and shall be in lieu of any and all taxes of any kind nature or description levied, established or collected by any authority whatsoever, municipal, provincial or insular, now or in the future, on its poles, wires, insulator, switches, transformers, and structures, installations, conductors, and accessories placed in and over and under all public property, including public streets and highways, provincial roads, bridges and public squares, and on its franchise, rights. privileges, receipts, revenues and profits from which taxes the grantee is hereby expressly exempted. Escudero's franchise was transferred to the plaintiff (herein respondent) MERALCO under Republic Act No. 2340. Presidential Decree No. 551 was enacted on September 11, 1974. Section 1 thereof provides the following: Sec. 1. Any provision of law or local ordinance to the contrary notwithstanding, the franchise tax payable by all grantees of franchise to generate, distribute and sell electric current for light, heat and power shall be two percent (2%) of their gross receipts received from the sale of electric current and from transactions incident to the generation, distribution and sale of electric current.

Such franchise tax shall be payable to the Commissioner of Internal Revenue of his duly authorized representative on or before the twentieth day of the month following the end of each calendar quarter or month as may be provided in the respective franchise or pertinent municipal regulation and shall, any provision of the Local Tax Code or any other law to the contrary notwithstanding, be in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on earnings, receipts, income and privilege of generation, distribution and sale of electric current. Republic Act No. 7160, otherwise known as the "Local Government Code of 1991" (hereinafter referred to as LGC) took effect on January 1, 1992. The said Code authorizes the province/city to impose a tax on business enjoying a franchise at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year realized within its jurisdiction. On October 5, 1992, the Sangguniang Panglunsod of San Pablo City enacted Ordinance No. 56, otherwise known as the Revenue Code of the City of San Pablo. The said Ordinance took effect on October 30, 1992. 1 Sec. 2.09, Article D of said Ordinance provides: Sec. 2.09. Franchise Tax There is hereby imposed a tax on business enjoying a franchise, at a rate of fifty percent (50%) of one percent (1%) of the cross annual receipts, which shall include both cash sales and sales on account realized during the preceding calendar year within the city. Pursuant to the above-quoted Section 2.09, the petitioner City Treasurer sent to private respondent a letter demanding payment of the aforesaid franchise tax. From 1994 to 1996, private respondent paid "under protest" a total amount of P1,857,711.67. 2 The private respondent subsequently filed this action before the Regional Trial Court to declare Ordinance No. 56 null and void insofar as it imposes the franchise tax upon private respondent MERALCO 3 and to claim for a refund of the taxes paid. The Court ruled in favor of MERALCO and upheld its argument that the LGC did not expressly or impliedly repeal the tax exemption/incentive enjoyed by it under its charter The dispositive portion of the decision reads:
WHEREFORE, the imposition of a franchise tax under Sec. 2.09, Article D of Ordinance No. 56 otherwise known as the Revenue Code of the City of San Pablo, is declared ineffective and null and void insofar as the plaintiff MERALCO is concerned for being of Republic Act. No. 2340, PD 551, and Republic Act No. 7160 and defendants are ordered to refund to the plaintiff the amount of ONE MILLION EIGHT HUNDRED FIFTY SEVEN THOUSAND SEVEN HUNDRED ELEVEN & 67/100 (P1,857,711.67) and such other amounts as may have been paid by the plaintiff under said Revenue Ordinance No. 56 after the filling of the complaint. 4

SO ORDERED. Its motion for records for reconsideration having been denied by the trial court. 5 the petitioners filed the instant petition with this Court raising pure question of law based on the following grounds:

I. RESPONDENT JUDGE GRAVELY ERRED IN HOLDING THAT ACT NO. 3648, REPUBLIC ACT NO 2340 AND PRESIDENTIAL DECREE NO. 551, AS AMENDED, INSOFAR AS THEY GRANT TAX INCENTIVES, PRIVILEGES AND IMMUNITIES TO PRIVATE RESPONDENT, HAVE NOT BEEN REPEALED BY REPUBLIC ACT NO. 7160. II. RESPONDENT JUDGE GRAVELY ERRED IN RULING THAT SECTION 193 OF REPUBLIC ACT NO. 7160 HAS NOT WITHDRAWN THE TAX INCENTIVES, PRIVILEGES AND IMMUNITIES BEING ENJOYED BY THE PRIVATE RESPONDENT UNDER ACT NO. 3648 REPUBLIC ACT NO. 2340 AND PRESIDENTIAL DECREE NO. 551 AS AMENDED. III. RESPONDENT JUDGE GRAVELY ERRED IN HOLDING THAT THE FRANCHISE TAX IN QUESTION CONSTITUTES AN IMPAIRMENT OF THE CONTRACT BETWEEN THE GOVERNMENT AND PRIVATE RESPONDENT. Petitioners' position is that RA 7160 (LGC) expressly repealed Act No. 3648, Republic Act No. 2340 and Presidential Decree 551 and that pursuant to the provisions of Sections 137 and 193 of the LGC, the province or city now has the power to impose a franchise tax on a business enjoying a franchise. Petitioners rely on the ruling in the case of Mactan Cebu International Airport Authority vs. Marcos 6 where the Supreme Court held that the exemption from real property tax granted to Mactan Cebu International Airport Authority under its charter has been withdrawn upon the effectivity of the LGC. In addition, the petitioners cite in their Memorandum dated December 8, 1993 an administrative interpretation made by the Bureau of Local Government Finance of the Department of Finance in its 3rd indorsement dated February 15, 1994 to the effect that the earlier ruling of the Department of Finance that holders of franchise which contain the phrase "in lieu of all taxes" proviso are exempt from the payment of any kind of tax is no longer applicable upon the effectivity of the LGC in view of the withdrawal of tax exemption privileges as provided in Sections 193 and 234 thereof. We resolve to reverse the court a quo. The pivotal issue is whether the City of San Pablo may impose a local franchise tax pursuant to the LGC upon the Manila Electric Company which pays a tax equal to two percent of its gross receipts in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on savings or income. It is necessary to reproduce the pertinent provisions of the LGC. Sec. 137 Franchise Tax Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on business enjoying a franchise, at a rate not exceeding fifty percent 50% of one percent 1% of the gross annual receipts for the preceding calendar year based on the incoming receipts, or realized, within its territorial jurisdiction. . . . Sec. 151 Scope of Taxing Powers Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and

collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code. The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes. Sec. 193 Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, non- stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. Sec. 534 (f) Repealing Clause All general and special law, acts, city charters, decrees, executive orders, proclamation and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this code are hereby repealed or modified accordingly. Sec. 534 (f), the repealing clause of the LGC, provides that all general and special laws, act, city charters, decrees, executive orders, proclamations and administrative regulations or parts thereof which are inconsistent with any of the provisions of the Code are hereby repealed or modified accordingly. This clause partakes of the nature of a general repealing clause. 7 It is certainly not an express repealing clause because it fails to designate the specific act or acts identified by number or title, that are intended to be repealed.8 Was there an implied repeal by Republic Act No. 7160 of the MERALCO franchise insofar as the latter imposes a 2% tax "in lieu of all taxes and assessments of whatever nature"? We rule affirmatively. We are mindful of the established rule that repeals by implication are not favored as laws are presumed to be passed with deliberation and full knowledge of all laws existing on the subject. A general law cannot be construed to have repealed a special law by mere implication unless the intent to repeal or alter is manifest 9 and it must be convincingly demonstrated that the two laws are so clearly repugnant and patently inconsistent that they cannot co-exist. 10 It is our view that petitions correctly rely on the provisions of Sections 137 and 193 of the LGC to support their position that MERALCO`s tax exemption has been withdrawn. The explicit language of Section 137 which authorizes the province to impose franchise tax "notwithstanding any exemption granted by any law or other special law" is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws. Sec. 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise provided in this Code, tax exemptions or incentives granted to or presently enjoyed by all persons whether natural or juridical, including government-owned or controlled corporations except 1) local water districts, 2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and educational institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the exemptions to the three enumerated entities. It is a basic precept of statutory construction that the express mention of one person, thing, act, or consequence excludes all others

as expressed in the familiar maxim expressio untus est exclusio alterius. 11 In the absence of any provision of the Code to the contrary, and we find no other provision in point, any existing tax exemption or incentive enjoyed by MERALCO under existing law was clearly intended to be withdrawn. Reading together Sections 137 and 193 of the LGC, we conclude that under the LGC the local government unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual receipts for the preceding calendar year based on the incoming receipts realized within its territorial jurisdiction. The legislative purpose to withdraw tax privileges enjoy under existing law or charter is clearly manifested by the language used in Sections 137 end 193 categorically withdrawing such exemption subject only to the exceptions enumerated. Since it would be not only tedious and impractical to attempt to enumerate all the existing statutes providing for special tax exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of such exemptions or privileges. No more unequivocal language could have been used. It is true that the phrase "in lieu of all taxes" found in special franchises has been held in several cases to exempt the franchise holder from payment of tax on its corporate franchise imposed of the Internal Revenue Code, as the charter is in the nature of a private contract and the exemption is part of the inducement for the acceptance of the franchise, and that the imposition of another franchise tax by the local authority would constitute an impairment of contract between the government and the corporation. 12 But these "magic words" contained in the phrase "shall be in lieu of all taxes'' 13 have to give way to the peremptory language of the LGC specifically providing for the withdrawal of such exemption privileges. Accordingly in Mactan Cebu International Airport Authority vs. Marcos. 14 this Court held that Section 193 of the LGC prescribes the general rule, viz., the tax exemption or incentives, granted to or presently enjoyed by natural or juridical persons are withdrawn upon the effectivity of the LGC except with respect to those entities expressly enumerated. In the same vein, We must hold that the express withdrawal upon effectivity of the LGC of all exemptions except only as provided therein, can no longer be invoked by Meralco to disclaim liability for the local tax. Private respondents further argue that the "in lieu of" provision contained in PD 551, Act. No. 3648 and RA 2340 does not partake of the nature of an exemption, but is a "commutative tax". This contention was raised but was not upheld in Cagayan Electric Power and Light Co. Inc. vs. Commissioner of Internal Revenue 15 wherein the Supreme Court stated: . . . Congress could impair petitioner's legislative franchise by making it liable for income tax from which heretofore it was exempted by virtue of the exemption provided for in section 3 of its franchise . . . . . . Republic Act No. 5431, in amending section 24 of the Tax Code by subjecting to income tax all corporate tax payers not expressly exempted therein and in section 27 of the Code, had the effect of withdrawing petitioner's exemption from income tax . . . Private respondent's invocation of the non-impairment clause of the Constitution is accordingly unavailing. The LGC was enacted in pursuance of the constitutional policy to ensure autonomy to local governments 16 and to enable them to attain fullest development as self-reliant communities. 17 Thus in Mactan Cebu International Airport Authority vs. Marcos, supra, this Court pointed out, in upholding the withdrawal of the real estate tax exemption previously enjoyed by the Mactan Cebu International Airport Authority, as follows:

Note that as reproduced in Section 234 (a) the phrase ''and any government-owned or controlled corporation so exempt by its charter" was excluded. The justification for this restricted exemption in Section 234(a) seems obvious: to limit further tax exemption privileges, especially in light of the general provision on withdrawal of tax exemption privileges in Section 193 and the special provision on withdrawal of exemption from payment of real property taxes in the last paragraph of Section 234. These policy considerations are consistent with the State policy to ensure autonomy to local governments and the objective of the LGC that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. It may also be relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to government-owned or controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, and there was a need for these entities to share in the requirements of development, fiscal or otherwise, by paying the taxes and other charges due from them. 18

The Court therein concluded that:

nothing can prevent Congress from decreeing that even instrumentalities or agencies of the Government performing governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisdom. 19

The power to tax is primarily vested in Congress. However, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution. 20 Thus Article X, Section 5 of the Constitution reads: Sec. 5 Each Local Government unit shall have the power to create its own sources of revenue and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the Local Governments. The important legal effect of Section 5 is that henceforth, in interpreting statutory provision on municipal fiscal powers, doubts will have to resolved in favor of municipal corporations. 21 There is further basis for tire conclusion that the non-impairment of contract clause cannot be invoked to uphold Meralco's exemption from the local tax. Escudero Electric Co. was originally given the legislative franchise under Act. 3648 to operate an electric light and power system in the City of San Pablo and nearby municipalities. The term of the franchise under Act. No. 3648 is a period of fifty years from the Act's approval in 1929. The said law provided that the franchise is granted upon the condition that it shall be subject to amendment, or repeal by the Congress of the United States. 22 Under the 1935. 23 the 1973 24 and the 1987 25 Constitutions, no franchise or right shall be granted except under the condition that it shall be subject to amendment, alteration or repeal by the National Assembly when the public interest so requires. With or without the reservation clause, franchises are subject to alterations through a reasonable exercise of the police power; they are also subject to alteration by the power to tax, which like police power cannot be contracted away. 26

Finally, while the matter is not of controlling significance, the Court notes that whereas the original Escudero franchise exempted the franchise holder from all taxes levied or collected "now or in the future" 27 this phrase is noticeably omitted in the counterpart provision of P.D. 551; that said omission is intended not to foreclose future taxes may reasonably be deduced by statutory construction. WHEREFORE, the instant petition is GRANTED. The decision of the Regional Trial Court of San Pablo City, appealed from is hereby reversed and set aside and the complaint of MERALCO is hereby DISMISSED. No pronouncement as to costs. SO ORDERED.

MANILA ELECTRIC COMPANY, petitioner vs. PROVINCE OF LAGUNA and BENITO R. BALAZO, in his capacity as Provincial Treasurer of Laguna, respondents. DECISION
VITUG, J.:

On various dates, certain municipalities of the Province of Laguna including, Bian, Sta Rosa, San Pedro, Luisiana, Calauan and Cabuyao, by virtue of existing laws then in effect, issued resolutions through their respective municipal councils granting franchise in favor of petitioner Manila Electric Company (MERALCO) for the supply of electric light, heat and power within their concerned areas. On 19 January 1983, MERALCO was likewise granted a franchise by the National Electrification Administration to operate an electric light and power service in the Municipality of Calamba, Laguna. On 12 September 1991, Republic Act No. 7160, otherwise known as the Local Government Code of 1991, was enacted to take effect on 01 January 1992 enjoining local government units to create their own sources of revenue and to levy taxes, fees and charges, subject to the limitations expressed therein, consistent with the basic policy of local autonomy. Pursuant to the provisions of the Code, respondent province enacted Laguna Provincial Ordinance No. 01-92, effective 01 January 1993, providing, in part, as follows: Sec. 2.09. Franchise Tax. There is hereby imposed a tax on businesses enjoying a franchise, at a rate of fifty percent (50%) of one percent (1%) of the gross annual receipts, which shall include both cash sales and sales on account realized during the preceding calendar year within this province, including the territorial limits on any city located in the province[1] On the basis of the above ordinance, respondent Provincial Treasurer sent a demand letter to MERALCO for the corresponding tax payment. Petitioner MERALCO paid the tax, which then amounted to P19,520,628.42, under protest. A formal claim for refund was thereafter sent by MERALCO to the Provincial Treasurer of Laguna claiming that the franchise tax it had paid and continued to pay to the National Government pursuant to P.D. 551 already included the franchise tax imposed by the Provincial Tax Ordinance. MERALCO contended that the imposition of a franchise tax under Section 2.09 of Laguna Provincial Ordinance No. 01-92, insofar

as it concerned MERALCO, contravened the provisions of Section 1 of P.D. 551 which read: Any provision of law or local ordinance to the contrary notwithstanding, the franchise tax payable by all grantees of franchises to generate, distribute and sell electric current for light, heat and power shall be two per cent (2%) of their gross receipts received from the sale of electric current and from transactions incident to the generation, distribution and sale of electric current. Such franchise tax shall be payable to the Commissioner of Internal Revenue or his duly authorized representative on or before the twentieth day of the month following the end of each calendar quarter or month, as may be provided in the respective franchise or pertinent municipal regulation and shall, any provision of the Local Tax Code or any other law to the contrary notwithstanding, be in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on earnings, receipts, income and privilege of generation, distribution and sale of electric current. On 28 August 1995, the claim for refund of petitioner was denied in a letter signed by Governor Jose D. Lina. In denying the claim, respondents relied on a more recent law, i.e., Republic Act No. 7160 or the Local Government Code of 1991, than the old decree invoked by petitioner. On 14 February 1996, petitioner MERALCO filed with the Regional Trial Court of Sta Cruz, Laguna, a complaint for refund, with a prayer for the issuance of a writ of preliminary injunction and/or temporary restraining order, against the Province of Laguna and also Benito R. Balazo in his capacity as the Provincial Treasurer of Laguna. Aside from the amount of P19,520,628.42 for which petitioner MERALCO had priority made a formal request for refund, petitioner thereafter likewise made additional payments under protest on various dates totaling P27,669,566.91. The trial court, in its assailed decision of 30 September 1997, dismissed the complaint and concluded: WHEREFORE, IN THE LIGHT OF ALL THE FOREGOING CONSIDERATIONS, JUDGMENT is hereby rendered in favor of the defendants and against the plaintiff, by: 1. Ordering the dismissal of the Complaint; and

2. Declaring Laguna Provincial Tax Ordinance No. 01-92 as valid, binding, reasonable and enforceable.[2]

In the instant petition, MERALCO assails the above ruling and brings up the following issues; viz: 1. Whether the imposition of a franchise tax under Section 2.09 of Laguna Provincial Ordinance No. 01-92, insofar as petitioner is concerned, is violative of the non-impairment clause of the Constitution and Section 1 of Presidential Decree No. 551. 2. Whether Republic Act. No. 7160, otherwise known as the Local Government Code of 1991, has repealed, amended or modified Presidential Decree No. 551. 3. Whether the doctrine of exhaustion of administrative remedies is applicable in this case.[3] The petition lacks merit. Prefatorily, it might be well to recall that local governments do not have the inherent power to tax[4] except to the extent that such power might be delegated to them either by the basic law or by statute. Presently, under Article X of the 1987 Constitution, a general delegation of that power has been given in favor of local government units. Thus: Sec. 3. The Congress shall enact a local government code which shall provide for a more responsive and accountable local government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and referendum, allocate among the different local government units their powers, responsibilities, and resources, and provide for the qualifications, election, appointment and removal, term, salaries, powers and functions, and duties of local officials, and all other matters relating to the organization and operation of the local units. x x x xxx xxx

Sec. 5. Each local government shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the local governments. The 1987 Constitution has a counterpart provision in the 1973 Constitution which did come out with a similar delegation of revenue making powers to local governments.[5]

Under the regime of the 1935 Constitution no similar delegation of tax powers was provided, and local government units instead derived their tax powers under a limited statutory authority. Whereas, then, the delegation of tax powers granted at that time by statute to local governments was confined and defined (outside of which the power was deemed withheld), the present constitutional rule (starting with the 1973 Constitution), however, would broadly confer such tax powers subject only to specific exceptions that the law might prescribe. Under the now prevailing Constitution, where there is neither a grant nor a prohibition by statute, the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. The basic rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broad tax powers. Nevertheless, the fundamental law did not intend the delegation to be absolute and unconditional; the constitutional objective obviously is to ensure that, while the local government units are being strengthened and made more autonomous,[6] the legislature must still see to it that (a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions; (b) each local government unit will have its fair share of available resources; (c) the resources of the national government will not be unduly disturbed; and (d) local taxation will be fair, uniform, and just. The Local Government Code of 1991 has incorporated and adopted, by and large the provisions of the now repealed Local Tax Code, which had been in effect since 01 July 1973, promulgated into law by Presidential Decree No. 231[7] pursuant to the then provisions of Section 2, Article XI, of the 1973 Constitution. The 1991 Code explicitly authorizes provincial governments, notwithstanding any exemption granted by any law or other special law, x x x (to) impose a tax on businesses enjoying a franchise. Section 137 thereof provides: Sec. 137. Franchise Tax Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized, within its territorial jurisdiction. In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereof, as provided herein. (Underscoring supplied for emphasis) Indicative of the legislative intent to carry out the Constitutional mandate of vesting broad tax powers to local government units, the Local Government Code has effectively withdrawn under Section 193 thereof, tax exemptions or incentives theretofore enjoyed by certain entities. This law states:

Section 193 Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. (Underscoring supplied for emphasis) The Code, in addition, contains a general repealing clause in its Section 534; thus: Section 534. Repealing Clause. x x x. (f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. (Underscoring supplied for emphasis)[8] To exemplify, in Mactan Cebu International Airport Authority vs. Marcos,[9] the
Court upheld the withdrawal of the real estate tax exemption previously enjoyed by Mactan Cebu International Airport Authority. The Court ratiocinated:

x x x These policy considerations are consistent with the State policy to ensure autonomy to local governments and the objective of the LGC that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of local government units for the delivery of basic service essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. It may also be relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, and there was a need for these entities to share in the requirements of development, fiscal or otherwise, by paying the taxes and other charges due from them.[10] Petitioner in its complaint before the Regional Trial Court cited the ruling of this Court in Province of Misamis Oriental vs. Cagayan Electric Power and Light Company, Inc.;[11] thus: In an earlier case, the phrase shall be in lieu of all taxes and at any time levied, established by, or collected by any authority found in the franchise of the Visayan

Electric Company was held to exempt the company from payment of the 5% tax on corporate franchise provided in Section 259 of the Internal Revenue Code (Visayan Electric Co. vs. David, 49 O.G. [No. 4] 1385) Similarly, we ruled that the provision: shall be in lieu of all taxes of every name and nature in the franchise of the Manila Railroad (Subsection 12, Section 1, Act No. 1510) exempts the Manila Railroad from payment of internal revenue tax for its importations of coal and oil under Act No. 2432 and the Amendatory Acts of the Philippine Legislature (Manila Railroad vs. Rafferty, 40 Phil. 224). The same phrase found in the franchise of the Philippine Railway Co. (Sec. 13, Act No. 1497) justified the exemption of the Philippine Railway Company from payment of the tax on its corporate franchise under Section 259 of the Internal Revenue Code, as amended by R.A. No. 39 (Philippine Railway Co vs. Collector of Internal Revenue, 91 Phil. 35). Those magic words, shall be in lieu of all taxes also excused the Cotabato Light and Ice Plant Company from the payment of the tax imposed by Ordinance No. 7 of the City of Cotabato (Cotabato Light and Power Co. vs. City of Cotabato, 32 SCRA 231). So was the exemption upheld in favor of the Carcar Electric and Ice Plant Company when it was required to pay the corporate franchise tax under Section 259 of the Internal Revenue Code as amended by R.A. No. 39 (Carcar Electric & Ice Plant vs. Collector of Internal Revenue, 53 O.G. [No. 4] 1068). This Court pointed out that such exemption is part of the inducement for the acceptance of the franchise and the rendition of public service by the grantee.[12] In the recent case of the City Government of San Pablo, etc., et al. vs. Hon. Bienvenido V. Reyes, et al.,[13] the Court has held that the phrase in lieu of all taxes have to give way to the peremptory language of the Local Government Code specifically providing for the withdrawal of such exemptions, privileges, and that upon the effectivity of the Local Government Code all exemptions except only as provided therein can no longer be invoked by MERALCO to disclaim liability for the local tax. In fine, the Court has viewed its previous rulings as laying stress more on the legislative intent of the amendatory law whether the tax exemption privilege is to be withdrawn or not rather than on whether the law can withdraw, without violating the Constitution, the tax exemption or not. While the Court has, not too infrequently, referred to tax exemptions contained in special franchises as being in the nature ofcontracts and a part of the inducement for carrying on the franchise, these exemptions, nevertheless, are far from being strictly

contractual in nature. Contractual tax exemptions, in the real sense of the term and where the non-impairment clause of the Constitution can rightly be invoked, are those agreed to by the taxing authority in contracts, such as those contained in government bonds or debentures, lawfully entered into by them under enabling laws in which the government, acting in its private capacity, sheds its cloak of authority and waives its governmental immunity. Truly, tax exemptions of this kind may not be revoked without impairing the obligations of contracts.[14] These contractual tax exemptions, however, are not to be confused with tax exemptions granted under franchises. A franchise partakes the nature of a grant which is beyond the purview of the non-impairment clause of the Constitution.[15] Indeed, Article XII, Section 11, of the 1987 Constitution, like its precursor provisions in the 1935 and the 1973 Constitutions, is explicit that no franchise for the operation of a public utility shall be granted except under the condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the common good so requires. WHEREFORE, the instant petition is hereby DISMISSED. No costs. SO ORDERED.

G.R. No. 119122

August 8, 2000

PHILIPPINE BASKETBALL ASSOCIATION, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS, AND COMMISSIONER OF INTERNAL REVENUE,respondents. PURISIMA, J.: At bar is a petition for review on certiorari under Rule 45 of the Rules of Court seeking a review of the decision1 of the Court of Appeals in CA-G.R. SP No. 34095 which affirmed the decision of the Court of Tax Appeals in C.T.A. Case No. 4419. The facts that matter are as follows: On June 21, 1989, the petitioner received an assessment letter from the Commissioner of Internal Revenue (respondent Commissioner) for the payment of deficiency amusement tax computed thus: Deficiency Amusement Tax Total gross receipts 1987 P19,970,928.00 =========== 15% tax due thereon Less: Tax paid Deficiency amusement tax Add: 75% surcharge 20% interest (2 years) 2,995,639.20 602,063.35 P2,393,575.85 1,795,181.89 1,675,503.10 P5,864,260.84 Total Amount Due & Collectible ===========

On July 18, 1989, petitioner contested the assessment by filing a protest with respondent Commissioner who denied the same on November 6, 1989. On January 8, 1990, petitioner filed a petition for review2 with the Court of Tax Appeals (respondent CTA) questioning the denial by respondent Commissioner of its tax protest. On December 24, 1993, respondent CTA dismissed petitioner's petition, holding: "WHEREFORE, in all the foregoing, herein petition for review is hereby DISMISSED for lack of merit and the Petitioner is hereby ORDERED to PAY to the Respondent the amount of P5,864,260.84 as deficiency amusement tax for the year 1987 plus 20% annual delinquency

interest from July 22, 1989 which is the due date appearing on the notice and demand of the Commissioner (i.e. 30 days from receipt of the assessment) until fully paid pursuant to the provisions of Sections 248 and 249 (c) (3) of the Tax Code, as amended."3 Petitioner presented a motion for reconsideration4 of the said decision but the same was denied by respondent CTA in a resolution5 dated April 8, 1994. Thereafter and within the reglementary period for interposing appeals, petitioner appealed the CTA decision to the Court of Appeals.
ALF

On November 21, 1994, the Court of Appeals rendered its questioned Decision,6 affirming the decision of the CTA and dismissing petitioner's appeal. Petitioner filed a Motion for Reconsideration of said decision but to no avail. The same was denied by the Court of Appeals in a Resolution7 dated January 31, 1995. Hence, this petition.
1wphi1.nt

Undaunted, petitioner found its way to this Court via the present petition, contending that: "1. Respondent Court of Appeals erred in holding that the jurisdiction to collect amusement taxes of PBA games is vested in the national government to the exclusion of the local governments. "2. Respondent Court of Appeals erred in holding that Section 13 of the Local Tax Code of 1973 limits local government units to theaters, cinematographs, concert halls, circuses and other places of amusement in the collection of the amusement tax. "3. Respondent Court of Appeals erred in holding that Revenue Regulations No. 8-88 dated February 19, 1988 is an erroneous interpretation of law. "4. Respondent Court of Appeals erred in giving retroactive effect to the revocation of Revenue Regulations 8-88. "5. Respondent Court of Appeals erred when it failed to consider the provisions of P.D. 851 the franchise of Petitioner, Section 8 of which provides that amusement tax on admission receipts of Petitioner is 5%. "6. Respondent Court of Appeals erred in holding that the cession of advertising and streamer spaces in the venue to a third person is subject to amusement taxes. "7. Respondent Court of Appeals erred in holding that the cession of advertising and streamer spaces inside the venue is embraced within the term 'gross receipts' as defined in Section 123 (6) of the Tax Code. "8. Respondent Court of Appeals erred in holding that the amusement tax liability of Petitioner is subject to a 75% surcharge." The issues for resolution in this case may be simplified as follows: 1. Is the amusement tax on admission tickets to PBA games a national or local tax? Otherwise put, who between the national government and local government should petitioner pay amusement taxes? 2. Is the cession of advertising and streamer spaces to Vintage Enterprises, Inc. (VEI) subject to the payment of amusement tax?

3. If ever petitioner is liable for the payment of deficiency amusement tax, is it liable to pay a seventy-five percent (75%) surcharge on the deficiency amount due? Petitioner contends that PD 231, otherwise known as the Local Tax Code of 1973, transferred the power and authority to levy and collect amusement taxes from the sale of admission tickets to places of amusement from the national government to the local governments. Petitioner cited BIR Memorandum Circular No. 49-73 providing that the power to levy and collect amusement tax on admission tickets was transferred to the local governments by virtue of the Local Tax Code; and BIR Ruling No. 231-86 which held that "the jurisdiction to levy amusement tax on gross receipts from admission tickets to places of amusement was transferred to local governments under P.D. No. 231, as amended."8 Further, petitioner opined that even assuming arguendo that respondent Commissioner revoked BIR Ruling No. 231-86, the reversal, modification or revocation cannot be given retroactive effect since even as late as 1988 (BIR Memorandum Circular No. 8-88), respondent Commissioner still recognized the jurisdiction of local governments to collect amusement taxes. The Court is not persuaded by petitioner's asseverations. The laws on the matter are succinct and clear and need no elaborate disquisition. Section 13 of the Local Tax Code provides: "SECTION 13. Amusement tax on admission. The province shall impose a tax on admission to be collected from the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement . . ." The foregoing provision of law in point indicates that the province can only impose a tax on admission from the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement. The authority to tax professional basketball games is not therein included, as the same is expressly embraced in PD 1959, which amended PD 1456 thus: "SECTION 44. Section 268 of this Code, as amended, is hereby further amended to read as follows: 'Sec. 268. Amusement taxes. There shall be collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, Jai-Alai, race tracks and bowling alleys, a tax equivalent to: '1. Eighteen per centum in the case of cockpits; '2. Eighteen per centum in the case of cabarets, night or day clubs; '3. Fifteen per centum in the case of boxing exhibitions; '4. Fifteen per centum in the case of professional basketball games as envisioned in Presidential Decree No. 871. Provided, however. That the tax herein shall be in lieu of all other percentage taxes of whatever nature and description; '5. Thirty per centum in the case of Jai-Alai and race tracks; and '6. Fifteen per centum in the case of bowling alleys of their gross receipts, irrespective of whether or not any amount is charged or paid for admission. For the

purpose of the amusement tax, the term gross receipts' embraces all the receipts of the proprietor, lessee or operator of the amusement place. Said gross receipts also include income from television, radio and motion picture rights, if any. (A person or entity or association conducting any activity subject to the tax herein imposed shall be similarly liable for said tax with respect to such portion of the receipts derived by him or it.) 'The taxes imposed herein shall be payable at the end of each quarter and it shall be the duty of the proprietor, lessee, or operator concerned, as well as any party liable, within twenty days after the end of each quarter, to make a true and complete return of the amount of the gross receipts derived during the preceding quarter and pay the tax due thereon. If the tax is not paid within the time prescribed above, the amount of the tax shall be increased by twenty-five per centum, the increment to be part of the tax. 'In case of willful neglect to file the return within the period prescribed herein, or in case a false or fraudulent return is willfully made, there shall be added to the tax or to the deficiency tax, in case any payment has been made on the basis of the return before the discovery of the falsity or fraud, a surcharge of fifty per centum of its amount. The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the falsity or fraud, in which case, the amount so assessed shall be collected in the same manner as the tax." (emphasis ours) From the foregoing it is clear that the "proprietor, lessee or operator of . . . professional basketball games" is required to pay an amusement tax equivalent to fifteen per centum (15%) of their gross receipts to the Bureau of Internal Revenue, which payment is a national tax. The said payment of amusement tax is in lieu of all other percentage taxes of whatever nature and description. While Section 13 of the Local Tax Code mentions "other places of amusement", professional basketball games are definitely not within its scope. Under the principle of ejusdem generis, where general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned.9 Thus, in determining the meaning of the phrase "other places of amusement", one must refer to the prior enumeration of theaters, cinematographs, concert halls and circuses with artistic expression as their common characteristic. Professional basketball games do not fall under the same category as theaters, cinematographs, concert halls and circuses as the latter basically belong to artistic forms of entertainment while the former caters to sports and gaming. A historical analysis of pertinent laws does reveal the legislative intent to place professional basketball games within the ambit of a national tax. The Local Tax Code, which became effective on June 28, 1973, allowed the province to collect a tax on admission from the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusement. On January 6, 1976, the operation of petitioner was placed under the supervision and regulation of the Games and Amusement Board by virtue of PD 871, with the proviso (Section 8) that ". . . all professional basketball games conducted by the Philippine Basketball Association shall only be subject to amusement tax of five per cent of the gross receipts from the sale of admission tickets." Then, on June 11, 1978, PD 1456 came into effect, increasing the amusement tax to ten per cent, with a categorical referral to PD 871, to wit, "[t]en per centum in the case of professional basketball games as envisioned in Presidential Decree No. 871 . . ." Later in 1984, PD 1959 increased the rate of amusement tax to fifteen percent by making reference also to PD 871. With the reference to PD

871 by PD 1456 and PD 1959, there is a recognition under the laws of this country that the amusement tax on professional basketball games is a national, and not a local, tax. Even up to the present, the category of amusement taxes on professional basketball games as a national tax remains the same. This is so provided under Section 12510 of the 1997 National Internal Revenue Code. Section 14011 of the Local Government Code of 1992 (Republic Act 7160), meanwhile, retained the areas (theaters, cinematographs, concert halls, circuses and other places of amusement) where the province may levy an amusement tax without including therein professional basketball games. Likewise erroneous is the stance of petitioner that respondent Commissioner's issuance of BIR Ruling No. 231-8612 and BIR Revenue Memorandum Circular No. 8-8813 both upholding the authority of the local government to collect amusement taxes should bind the government or that, if there is any revocation or modification of said rule, the same should operate prospectively. It bears stressing that the government can never be in estoppel, particularly in matters involving taxes. It is a well-known rule that erroneous application and enforcement of the law by public officers do not preclude subsequent correct application of the statute, and that the Government is never estopped by mistake or error on the part of its agents.14 Untenable is the contention that income from the cession of streamer and advertising spaces to VEI is not subject to amusement tax. The questioned proviso may be found in Section 1 of PD 1456 which states: "SECTION 1. Section 268 of the National Internal Revenue Code of 1977, as amended, is hereby further amended to read as follows: 'Sec. 268. Amusement taxes. There shall be collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, Jai-Alai, race tracks and bowling alleys, a tax equivalent to: xxx xxx xxx

of their gross receipts, irrespective of whether or not any amount is charged or paid for admission. For the purpose of the amusement tax, the term gross receipts' embraces all the receipts of the proprietor, lessee or operator of the amusement place. Said gross receipts also include income from television, radio and motion picture rights, if any. (A person, or entity or association conducting any activity subject to the tax herein imposed shall be similarly liable for said tax with respect to such portion of the receipts derived by him or it.)" (emphasis ours) The foregoing definition of gross receipts is broad enough to embrace the cession of advertising and streamer spaces as the same embraces all the receipts of the proprietor, lessee or operator of the amusement place. The law being clear, there is no need for an extended interpretation.15 The last issue for resolution concerns the liability of petitioner for the payment of surcharge and interest on the deficiency amount due. Petitioner contends that it is not liable, as it acted in good faith, having relied upon the issuances of the respondent Commissioner. This issue must necessarily fail as the same has never been posed as an issue before the respondent court. Issues not raised in the court a quo cannot be raised for the first time on appeal.16 All things studiedly considered, the Court rules that the petitioner is liable to pay amusement tax to the national government, and not to the local government, in accordance with the rates prescribed by PD 1959.

WHEREFORE, the Petition is DENIED, and the Decisions of the Court of Appeals and Court of Tax Appeals dated November 21, 1994 and December 24, 1993, respectively AFFIRMED. No pronouncement as to costs.
1w phi1.nt

SO ORDERED.